What was the defining 2015 moment for
2015 was a challenging year for all refractories companies
as well as for their main end clients, such as steel and cement
makers, given the overall macroeconomic situation, the drop in
commodities prices, and China’s slower growth. But
I believe that it was a special year for Magnesita as we could
see that our diversification strategy, designed in 2012, is
proving to be beneficial. We have been gaining market share in
our core markets, as well as in markets outside South and North
America and Western Europe, where we historically have not had
a significant presence.
What is your outlook for the refractories market in
We believe that the outlook remains challenging, since
conditions are worsening in markets like Brazil and in large
parts of Western Europe. There is a big question mark regarding
the US, which has been attacked by [cheap] steel imports that
also affect refractory producers.
What are your plans for business
Our growth strategy is based on consolidating our position
where we already have market leadership and growing in markets
where our presence is below target. Additional focus will be
given where our service-intensive business model and our
integration through our Brazilian Brumado magnesite mine gives
us a competitive advantage to secure further revenue.
Where do you see attractive opportunities in select
market growth areas?
We believe growth opportunities will come from markets where
our presence is still modest, like the Middle East, Africa,
integrated steels mills in North America and Southeast Asia. We
also see significant growth worldwide in cement, since we have
the highest quality product line and a significant cost
advantage, due again to our unique high grade magnesite
reserves in Brazil.
We expect cement demand will be strong, but in steel we see
a challenging year ahead due to global excess capacity and the
growth of exports coming from China.
What is your outlook for magnesia supply and demand
We see a situation similar to 2015, with stable prices.
When do you expect the steel sector to start picking
Not [in 2016] on a global basis. There is a lot of
uncertainty as to whether China will be cutting capacity or
not. Nevertheless, countries like the US, Brazil and EU
countries are considering imposing antidumping and
countervailing duties against China and other countries, which
could change the scenario for their local steel industries, as
demand remains stable.
In operational terms, what is the most important
focus for you this year?
We believe operational efficiency will be the most important
for 2016 because it is the only thing that you can control in
the short term.
Difficulties in your Chinese business hurt
Magnesita’s earnings in Q3 2015. What is your
position on China now?
In spite of the difficulties in the Brazilian economy, our
Brazilian operations remain very strong, since they serve our
clients worldwide and are very competitive.
Our recurring profitability actually increased significantly
in 2015, with 27% growth in recurring EBITDA* year-to-date to
September. Our reported net income was impacted by some
non-cash and non-recurring expenses.
In regards to China, we continue to operate very
successfully through our plant in Dalian, a city based in
China’s northeastern Liaoning province, which
serves the external market. On the other hand, we have largely
exited the internal Chinese market that was never significant
to us and is largely unprofitable.
What do you think about the consolidation of the
Chinese refractories sector?
We believe that, together with Chinese refractories
consolidation, there will be a consolidation in magnesia
production too, maintaining the balance between supply and
What is Magnesita doing to innovate and find new
Our global research and development team continues to
develop and create new products and to improve the efficiency
of our current portfolio. We also have the strongest technical
assistance team in the industry. This team is constantly
developing new solutions that enable our clients to reach the
highest performance with the lowest cost. We are also very cost
conscious and have several ongoing initiatives to improve our
What will you be doing for your customers this
We believe that our customers’ main priority
for 2016 will be cost control. In times like these,
our cost per performance (CPP) model, under which
refractories producers and steel makers foster a partnership
towards greater efficiency, is the right solution. With
Magnesita’s CPP solutions, our interests and the
interests of our clients are aligned towards the delivery of
the highest performance with the minimum refractory cost per
tonne of steel produced.
*Earnings before interest, taxes, depreciation and