Global refractories manufacturers
were forced to defend decisions to invest heavily in upstream
raw materials capacity at IMs annual
MagMin conference in Budapest in June.
Speaking during a panel discussion
about the refractories industrys reliance on Chinese
magnesia, Vasili Nicoletopoulos, director of US headquartered
Premier Magnesia LLC, challenged decisions made by companies
including RHI AG and Magnesita to mine their own minerals
rather than import Chinese raw materials.
Nicolotopoulos said that these
costly upstream investments were based on assumptions that
Chinese refractory minerals would go up in cost and down in
In my opinion, Chinese
magnesia has not declined in quality and it has not gone up in
price - in fact, prices have weakened, Nicolotopoulos
The real issue is
reliability, he added, pointing out that the refractories
industry outside China could not be certain of securing
supplies of magnesia from the country indefinitely.
Nicolotopoulos also questioned
whether new mines in places like Turkey, where RHI has recently
invested in additional dead burned magnesia (DBM) capacity, and
Brazil, where Magnesita has a magnesium oxide (MgO) operation
in Brumado, are better placed to serve manufacturers than those
in China, which benefit from established shipping routes and
low cost production processes.
Bernhard Goliasch, head of group
raw materials supply for Austria-based RHI AG, responded to
Nicolotopoulos that although magnesia prices may currently be
in decline, this situation could not be expected to
Exports might be down at the
moment, but when exports [and demand] go back up, so will
prices, he said.
For vertical integration, we
need to have a long brief. In the long run, China will not keep
prices down - I am 100% certain, Goliasch added.
He also warned that the industry
needed to be prepared for sudden supply chain disruption in the
future. We all remember 2008 [when prices spiked]. I do
not know when it will come again, but I am sure it
He also noted that RHI has been
producing raw materials in Turkey for over 50 years, so further
capacity expansion in the country was a practical move for the
In response to the question of
whether the industry needs to source better quality magnesia,
Jim Piraino, vice president for industrial sales at the
Brazilian manufacturer Magnesita, said that his companys
mine in Brumado, Brazil, was justified by its capacity to
produce superlative material.
We believe that our DBM is
better than any of the Chinese MgOs (...) and for a large part
of the world, it makes sense to bring material from
Brazil, he said.
This point was bolstered by the
argument put forward by Fotis Kandianis, managing director of
Magnacom SA, who pointed out that there is a shortage of high
Chinas goal is to
achieve high quality steel and the goal in the rest of the
world is to achieve very high quality, clean steel; this
requires high grade raw materials, he said.
Kandianis cautioned, however, that
even the highest quality magnesia products could not expect to
command significantly inflated prices in the current
Raw material demand in China
at the moment is moderate. It is weak (...) [Todays]
magnesia demand does not justify higher prices, excepting that
production costs are increasing, he said.
Pedro Munroz Rodriguez, MgO sales
manager for the Mexican company, Servicios Administrativos
Penoles, noted that the major driving force behind designations
of criticality for magnesia was supply concentration in
He agreed with Nicoletopoulos that
supply security was a major justification for creating new
sources of magnesite outside China, highlighting the importance
of both Turkey and Brazil as increasingly important
However, as Kandianis pointed out,
the industry should not expect supply diversity to be
accompanied by cheaper production or shipping costs, warning
that these are likely to increase in future.
There is a big difference in shipping costs between
shipping from the Far East to Europe and shipping back the
other way, he said. This is because the containers
are going back empty (É) freight rates are unlikely to
go down, it is more probable that they will go up, he