Chinese refractories sector consolidation is positive for the wider industry, says Magnesita chief

By IM Staff
Published: Thursday, 28 May 2015

With overall and specific consumption of refractories in the steel industry on a downward trend, producers of refractory and raw materials are keeping a keen eye on potential pockets of growth and wider trends in the market. IM spoke to Octavio Pereira Lopes, CEO of leading Brazilian refractory materials producer, Magnesita, to discover his views on the industry. Josie Shillito, Reporter

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Magnesita’s CEO, Octavio Pereira Lopes,
believes that reform within China’s refractories
sector will benefit the wider industry and could
also lead to higher prices for some raw materials
if supply falls. 

Magnesita recently noted growth coming from the North American mini mills market. Why does the company anticipate higher demand from this area specifically? 

Magnesita continues to believe that North America presents great potential, as we are local producers, have excellent products and are highly integrated in terms of raw materials. 

Moreover, we have a business model focused on performance that fits very well with the American business culture. 

We believe that our dolomite mine in York, Pennsylvania, is one of the best in the world, if not the best. 

We also see great opportunities in the integrated mills, as our share is still beyond our potential, and also in the electrical mills, that use dolomite-based products. 

We do believe we have the best portfolio of products in terms of quality and, given our local presence, we have a significant advantage. 

What is your outlook for magnesia supply and demand? 

Regarding deadburned (DBM) and fused magnesia, we believe that supply and demand will remain generally stable. 

Despite the world economic situation, steel production will most likely remain stable as well, therefore refractory consumption should not change significantly. 

However, there is a chance that new or recent DBM or electrofused magnesia (EFM) projects will be postponed or cancelled. If that happens, we could expect some increase in prices.

What effect do you think the consolidation of the Chinese refractories sector will have on magnesia demand? 

The consolidation of Chinese refractories producers as well as the complete shutdown of some marginal providers that are not able to comply with the renewed environmental and safety standards are very positive for the industry.

These trends, of course, could put some pressure on low-grade DBM demand, but that will be mitigated by consolidation and adoption of better environmental standards among DBM and EFM producers.

Higher-grade demand should remain solid, regardless, as industrial and steel customers are increasingly demanding higher performance refractories and prime resources are becoming scarcer.

What do you think the impact of the consolidation will be on China’s role as world’s biggest magnesia producer? 

Unless there are major changes either in supply or demand, which we do not believe will occur in the short term, we don’t expect major changes. 

On one hand, demand may drop due to the consolidation, but on the other hand, the supply may also be reduced due to the new and tighter environmental regulations that China has recently imposed. So it is likely that the market may remain stable.