URC: A private eye on global refractories

By Kasia Patel
Published: Wednesday, 26 August 2015

While some refractories producers are seeing revenue decline, Pittsburgh, US-headquartered United Refractories Co. is maintaining its sales. Kasia Patel, North American Editor, spoke to the company about its strategy of creating new product blends according to customer requirements and remaining diverse in a number of markets.

It is no secret that recent worldwide refractories demand has been shrinking, due in part to deteriorating consumption of steel and cement in mature markets like Europe and the US, while emerging growth centres, such as China and South America, have come off the boil.

The increasing strength of the US dollar has also had a ripple effect on other currencies and made US imports more expensive for overseas buyers.

As a result, suppliers of refractory products are working tirelessly to keep costs down and offer customers more in order to maintain market share. 

In this fiercely competitive market, United Refractories Co. (URC) has managed to keep its year-on-year (y-o-y) sales largely stable, through a combination of customisation of its products to end user needs and growing its relationships with local and international companies via licencing and distribution agreements. 

With its headquarters in Pittsburgh, US, the privately-owned business runs a manufacturing facility in Brookville, Indiana, where it manufactures products which are then sold domestically or exported to customers all over the world, including in Canada, Mexico, South America, Europe and China.

While the strengthening of the dollar may have hindered sales for some US refractories manufacturers, URC has sidestepped this barrier by having qualified international licensees manufacture its products in several global locations. This representation in over 20 countries in four continents allows it to maintain market share, even when demand slows.

"Because the dollar is so strong, we can no longer export many products. Fortunately we have licence agreements throughout the world where those products are now being made," URC’s CEO, Doug Niesen, told IM.

URC1  

URC manufactures refractory products at its plant in Brookville,
Indiana. (Source: URC)

Industries

To help sure up its demand profile, URC targets a number of industries, rather than focusing on one sector. The company’s vice president, customer and product development, Jim Caprio, estimates that around 45% of URC’s business is dedicated to foundries, 25% focuses on the steel sector, while the remaining 30% falls under contractors, accounting for end uses such as power, cement and petroleum plants and incinerators. 

Within the foundry industry, the company’s sales are split between supplying steel melting furnaces and iron melting furnaces. One of the niche foundry products URC focuses on is dry vibratables. 

"The world market is very interested in our products because of our dry vibratables. They’re used in coreless induction furnaces and are being installed all over the world to produce iron and steel. They used to be mostly used in foundries, but that type of furnace is now being used in mini steel mills, especially in places like India and China, and that’s why the world is showing interest," Caprio told IM. "Only a handful of companies around the world have this kind of technology and we’re one of those companies."

URC supplies steel companies in an indirect way, offering pre-cast pieces or products for companies to make their own pre-cast shapes, which Caprio says is another niche area URC has developed. 

A further speciality offering from URC is its low cement technology, which, according to Caprio, is seeing an increase in popularity among contractors in various industries.

"The kinds of products that we specialise in are low cement shotcretes, gun mixes and pumpables – as one of our focus areas is low cement technology," he explains, adding that this specialism is another enticement for international licencing.

New mixes

While low cement technology may not be a new customer requirement, URC is also seeing growing interest in cement-free technology, which Caprio says offers cost and performance advantages in certain applications.

Although URC cement-free products are becoming more popular in certain applications because of their special properties according to Caprio, there is room for both low cement and the cement-free products, because cost effectiveness requirements vary between customers.

"We customise [these products] with aggregates like silicon carbide, or different materials that might help with the performance, whether it’s abrasion resistance, thermal shock resistances or other properties," Niesen adds. 

In total, the company produces around 30,000 tpa refractories, including those supplied via its licence holders. However, rather than concocting its own recipes and selling these off the shelf, URC prefers to move with its customers’ requirements, changing its offering according to their needs.

Cupola melting furnaces tend to use large amounts of silicon carbide products and carbon-type additives, "because these are non-wetting to slag, and they help the performance of the refractory," Niesen outlines. "But using a lot of silicon carbide or a lot of carbon isn’t necessarily good, because it may not be cost effective or it may not be as strong, so the trick is in using the right amount."

URC offers around 150 products containing silicon carbide. These are often customised for various applications to improve performance and the company prides itself on its "URC4U" offering, tailored to specific needs. As well as being ISO-9001 certified, URC says it tests every single batch to ensure the product is exactly what the customer ordered. 

The raw ingredients

The base components for around 50-60% of URC’s mixes are similar to those offered by most refractories producers; alumina-based or tabular, white or brown fused alumina (WFA or BFA), bauxite or mullite grains. 

"All refractory folks are using similar raw materials – it’s just how you put them together, that is the magic," Caprio told IM.

URC sources its raw materials from China, the US, South America, Mexico or Europe, with sourcing dictated by cost-effectiveness for the best quality. "The cost of a refractory is usually dictated by the raw material costs, so the prices of the raw materials are critical to what profit you make," Caprio outlined.

In terms of raw material prices, URC has seen a softening in bauxite and calcined alumina prices, while the costs of some specific raw materials have seen an increase, according to the company’s purchasing manager, Kimberly Sweder.

 "There hasn’t so much been a softening of WFA in the market, but there have been a lot of changes in the supply chain, in terms of where producers are importing feedstock. This has mixed up the market," Sweder told IM.

Meanwhile, the rapid rise and fall of oil and gas prices and the subsequent slowdown in drilling activity over the last two years have had a knock-on effect in other industries, with silicon carbide prices seeing a decline. 

"The thing you have to remember is that most of our key raw materials prices are controlled by other industries. For example, fracking drives sand and alumina demand, while bauxite is impacted by the aluminium industry. Fumed silica is considered a waste product. But we’re never the number one industry that controls raw material prices," Caprio told IM.

While a decline in raw materials prices may seem like a cause for buyers to celebrate, according to Sweder, all this means for URC is that the supply chain is finally starting to balance out. The company made some small price increases in January this year to cover costs, but refused to raise them when raw materials prices were increasing, in order to maintain its customer base and market share.

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Within the foundry industry, URC supplies products for steel 
and iron melting furnaces. (Source: URC)

"We took that hit and now the softening of raw material prices means that the situation is finally stabilising for us and prices are balancing out," Caprio added. 

Relationships

URC keeps up to date on the latest product and technology developments in refractories through a network of global partnerships.

"Through these relationships around the world and our technology transfers, we always know what’s going on. We have that global feel but we’re a privately-owned company that has a personal relationship with most of our customers," Caprio told IM.

URC’s model means it can assist smaller firms that don’t necessarily have the scope of global manufacturers, helping them to remain competitive despite their size. "These are niche companies. They may just service foundry or cement industries; they may need some technology which we have, and since we have no intention of building a plant in these places ourselves, the relationship is a win-win," Caprio said.

The technology that URC licences to companies – including operators in China, Taiwan, Japan and India – enables smaller firms to compete with global peers. With international sales accounting for around 25-30% of URC’s overall activity, this diversification enables it to ride out downturns, when activity in one region is falling. 

Despite bumps in the global economic recovery, Niesen told IM that the company is confident in its outlook, as URC has so far managed to keep sales at the same pace as in 2014.

"We feel good about our approach because we’re not just focused on North America. We have niches in these other countries that are allowing us to expand," Niesen said. "So even though China’s business is slow, we found a good niche there and we’re expanding in China."

However, while flat sales are comforting during a downturn, this isn’t enough for URC. The company is aiming, through a focus on its base domestic foundry market, to expand in new industrial business areas, such as cement and power, as well as growing its international segment through transfer technology and building relationships.

"Our goal for our partners is to help them to build and improve, transfer our technology, and have them running and profitable as quickly as possible. If we can’t do that for them, why would they want to use our technology?" Niesen says.

URC is well aware of the potential pitfalls of licencing technology in China, infamous for copycat products, but Niesen argues that such concerns should not place a limit on opportunities.

"We guard our technology, but fear can’t stop us – it would be ridiculous to allow that, because then you just stop yourself," Niesen said, adding that being able to service and improve the technology is key to keeping it your own. 

Rare products in the industry, Caprio told IM, are few and far between, so rather than choosing to focus on purely developing technology that cannot be replicated, URC is committed to becoming a knowledge source to complement its product offering.

"20 or 30 years ago, plants used to have more refractory experts on hand, but now they can’t afford that. There aren’t a lot of refractory experts around and the furnace jobs constantly turn over. So what we’re trying to do is be the knowledge source to our customers."

Motivation to innovate

While the slowdown in the economy hasn’t left URC completely untouched – the company admits that sales have slowed in
the last month and, like everyone else, it is feeling the strain of pricing pressures – slimming margins in the refractories business are driving it to innovate.

"Our customers are demanding more – like our US customers and international partners – they need us to help them become more cost effective and more profitable," Niesen said. 

According to Niesen, an innovative approach doesn’t necessarily hinge on new products, but could refer to technology transfers as a solution to shipping product around the world, instead producing it locally. It could also mean a different approach to installing an existing product, or even re-evaluating the supply chain. 

"In a stable economy, customers ask for that. In an economy that’s sluggish, they demand it. Because there is so much pressure on them, the pressure comes back on us," Niesen said. 

Niesen adds: "It does make it exciting –
it makes us better and we’re excited about that. We don’t welcome slow economies, however, we do get much better because of them."