The refractories industry is estimated to currently consume
about 40m tpa of industrial minerals and has more than doubled
in size in the decade between 2000 and 2010, mainly due to
rapid industrialisation in China.
Major markets for refractories are the production of steel,
cement and glass and the processing of minerals. The steel,
cement and lime industries are estimated to account for about
85% of the total refractory market.
Construction markets therefore drive about 50% of overall
refractory demand and automotive and other transport markets
account for another 15%.
In 2016, The World Economic Form envisaged the next
industrial revolution and the "emergence of technologies that
have the power to drive a whole new cycle of global economic
activity". More recently, the Organisation for Economic
Co-operation and Development (OECD) talked about the next
production revolution, which "will occur because of a
confluence of technologies" and will involve new materials and
new processes and will transform production.
Emerging technologies include smart factories and
automation, robotics, 3D printing and contour crafting and
driverless and electric vehicles (EVs).
Environmental concerns and advances in technology are driving
a shift in the global energy mix. In its Energy Outlook 2017,
major oil producer BP forecast that thermal coal consumption
will peak in the 2020s. Oil and gas, together with coal, are
expected to remain the main sources of energy, accounting for
more than 75% of total energy supply, in 2035, but this will
be down significantly from their 86% market share in
Meanwhile, renewables are projected to be the
fastest-growing fuel sources over the same period, expanding at
a compound annual growth rate (CAGR) of 7.6%.
Data collected by Bloomberg suggest that solar and wind will
dominate new electricity installations and account for nearly
50% of installed capacity by 2040. Many large corporations are
actively promoting decarbonisation and renewable energy
For example, Dutch paints company AkzoNobel NV is attempting
to be carbon neutral and use 100% renewable energy by 2050,
while US brewing firm Anheuser-Busch is aiming to purchase 100%
of its electricity from renewable sources by 2025.
BP estimate that electric car sales will increase from 1.2m
in 2015 to around 100m in 2035 (around 5% of the global car
fleet), representing a CAGR of 25%. India is aiming for sales
of all new vehicles to be electric after 2030, France has
announced that petrol and diesel new car sales will be banned
after 2040 and the UK has said that all new car sales must be
for electric models after the same date.
Other forecasters expect that by 2030, the cost to store
energy in batteries will reach parity with the internal
combustion engine, which will deliver a huge boost to EV
Implications for refractories
The growth of large scale renewable energy projects will
require significant quantities of durable, corrosion-resistant
coated steel. However, growth in the market for steel in
automobiles is expected to slow, due to the requirement for
lighter and stronger components. Advanced high-strength steel
alloys are also expected to face increasing competition from
plastic composites and lightweight metals, such as
South Korean steelmaker POSCO has estimated that the steel
intensity of a many steel-consuming industries will
substantially decrease in the next 20 years (see Table 1). In
particular, the company estimates that the steel intensity of
the automobile industry will decline by 20%, while that of the
construction industry will decline by about 16%.
In the long run, global GDP is a good indicator for both
steel and cement demand, with a 97% correlation between 2000
and 2016 (see Figure 1).
Global economic growth has slowed in the last decade and
macro political risks are increasing. In the absence of global
shocks, global GDP is expected to be 2-4% on a purchasing power
parity (PPP) measure in the short term, with higher growth in
China, India and the Association of Southeast Asian Nations
(ASEAN) are expected to remain relatively high growth regions
with GDP expansion of 5-7% and are expected to account for 60%
of global growth. By 2050, Indonesia is expected to join China
and India as one of the world’s largest economies,
with Vietnam and the Philippines making the greatest gains in
In the short term, China remains the major global economic
driver, although the recent downgrade of China’s
sovereign credit rating on debt concerns has raised questions
over its future growth prospects. At China’s 12th
National People’s Congress in March 2017, the GDP
growth target for 2017 was set at 6.5%.
Reducing pollution and moving industry from low-value to
high-value manufacturing have become short-to-medium term
priorities. These trends have already adversely impacted demand
for refractories, as well as the supply of certain refractory
raw materials in China.
Production of steel, cement and flat glass in China, the
dominant global producer of these materials, has been
relatively stagnant for a few years (see Figure 2).
Refractory raw materials and China
China provides the majority of the raw materials used for its
own refractory production and for about a quarter of the raw
materials needed for refractory production outside China. In
particular China is a global leader in the supply of
refractory bauxite, brown fused alumina (BFA), fused magnesia
(FM) and dead burned magnesia (DBM).
It is no wonder that recent events in China are causing some
concern with refractory producers relying on raw materials from
China is estimated to produce about 69% of the
world’s magnesite and 63% of the
world’s magnesia and supply 44% of the
world’s magnesia exports.
Earlier in 2017 pollution inspection teams were said to have
effected output in about 95% of magnesia producers in
Liaoning province. Production was reduced and prices
Combined production of Chinese DBM and FM was down about 55%
y-o-y in June 2017 and nearly 30% for the first half of 2017.
Refractory production in China was also down about 15% in the
first six months of 2017. In the same period, prices of FM and
DBM rose at a rate of around 90%, according to the
IM Pricing Database. For both DBM and FM the
highest increases were for higher purity products.
More recently, it has been reported that consolidation of
the magnesia industry is planned in Liaoning with
almost 80% of national production to be controlled by China
Magnesite Mining Co. which will be 51% owned by
Haicheng Magnesite Factory.
In Shanxi province similar environmental inspections and
restrictions have affected the supply and prices of refractory
grade bauxite and fused alumina. Prices of calcined bauxite
have increased by about 25% in 2017 according to
IM Pricing Database. Graphite electrodes which
are used in fused mineral production are also in tight supply
and have experienced large price increases of over 300% which
is adversely affecting Chinese and global fused mineral
In a separate development it has been reported that 73
Chinese titanium dioxide (TiO2) feedstock plants are being
permanently closed by the government due to failure to meet
anti pollution requirements.
There is no expectation that the supply of Chinese raw
materials will improve at least in the short term. There are
now strong indications that the long term outlook is no better.
China has been the world’s biggest commodity
manufacturer since 2010 but the "Made in China 2015" programme
calls for China to be more self-sufficient in advanced
manufacturing and the dominant global producer by 2049. If
successful, this will reduce the economic requirement for
Chinese production of commodity products such as steel and
cement and will reduce the domestic demand for refractory raw
materials. Combined with stricter environmental controls, it is
not hard to see continuing increases in the costs of Chinese
refractory raw materials.
It would appear that export of industrial minerals from
China will be more difficult in the future and the age of cheap
Chinese raw materials is or will be now over. Development of
non-Chinese industrial mineral raw materials will become more
important and a necessary strategy for non-Chinese customers of
refractory and industrial minerals.
The World Steel Association (worldsteel) is predicting 1.3%
growth in global steel production in 2017 and 0.9% in 2018.
Growth outside China is expected to be higher, at 2.4% in
2017 and 3.1% in 2018.
However, these projections are currently looking too modest.
In the first six months of 2017, world crude steel production
was 836m tonnes, an increase of 4.5% compared to the same
period in 2016. Global steel production would have to be 3.1%
lower in the second half of 2017 compared to the same period in
2016 to match worldsteel’s projection of a 1.3%
increase this year.
POSCO has made longer-term projections of global steel,
demand based on four main considerations: slowing consumption
growth, in line with decreasing steel intensity (see Table 1);
a need for more advanced steel products; steelmakers upgrading
to eco-friendly and smart steel making processes; and moves to
create value using the Internet of Things (IoT), big data and
Taking account of these trends, POSCO forecasts that global
steel demand will grow at a CAGR of 1.2% between 2016 and 2025
and at a CAGR of 0.9% between 2025 and 2035.
These projections are broadly in agreement with the latest
estimates from the Australian Chief Economist, which point to
global steel production and demand growth of about 1.1% between
2016 and 2019 (see Table 2).
The Australian government expects steel production in China
to fall and settle below 800m tpa, while demand is forecast
to remain below 700m tpa and progressively decline. The
growing number of trade restrictions, including tighter US
protectionist measures, may further restrict Chinese steel
exports and production.
Industry bodies the China Iron and Steel Association and the
China Metallurgical Industry Planning and Research Institute
are forecasting even greater declines in steel demand to below
600m tpa by 2020 and to about 490m tpa by 2030.
In stark contrast, some iron ore producers have predicted
that steel production in China will in fact increase and peak
at about 950m tpa in the mid 2020s.
Compared to steel, the outlook for global cement production
is more positive. Even though growth slowed and overcapacity
increased between 2010 and 2016 (see Table 3), most large
cement producers are forecasting a CAGR of 2-4% between 2017
and 2019. High growth areas include sub-Saharan Africa, India,
Indonesia, the Philippines and parts of the US.
The major issue facing the Western cement and lime industry
is decarbonisation. According to the European Cement
Association, for the industry to reach the European
Commission’s target of 80% carbon dioxide (CO2)
reduction in cement production by 2050, "breakthrough
technology" will be required.
|The refractories industry is estimated to currently
consume about 40 million tonnes pa of
industrial minerals and has more than doubled in size in
the decade between 2000 and
2010 mainly due to the rapid industrialisation in
Refractories production and trade
Sales revenues of some of the major global refractory
companies, together with the refractory divisions of other
broader manufacturing business, have been stagnant or
declining in recent years (see Table 4).
In US dollar terms, overall revenue decline in 2016 was about
The 52 major Chinese refractory companies recorded a 3.7%
decline in revenue in 2016 (see Table 5). Profit margins
improved slightly, but were still only around 3% on average.
Total Chinese refractory production dropped almost 9% to 23.9m
tonnes last year and apparent domestic consumption shrank by a
similar amount to 21.9m tonnes in 2016.
Refractory brick production and consumption both fell by
about 13%, which was more than double the decline of 5-6% in
monolithic refractory production and consumption. The decline
was recorded across almost every province (see Figure
Both production and consumption of refractories in China in
2016 were down by about 27% from the peak in 2006.
Global refractory trade has grown at a CAGR of 1.7% between
2005 and 2016 (see Figure 4). However, refractory brick trade
has been declining at a CAGR of about -0.9%, while monolithic
trade has been growing relatively strongly at a CAGR 5.7%.
Consequently, monolithic trade has risen from about one third
of total trade in 2005 to about half in 2016.
The top 10 exporters of monolithics account for about 60% of
total monolithic trade, with most growth in exports coming
from Austria, UAE, China and Malaysia. Significant growth has
mainly been in Oman, India, and the ASEAN countries of
Singapore, Indonesia and Vietnam. (see Figures 5 and 6).
Refractory consumers are facing a range of issues, including
but not limited to, weak market growth, decarbonisation,
reduced application intensity, alternative fuels, competition
from substitutes, pollution restrictions, overcapacity and low
The modest growth outlook for the major refractory markets in
the next decade point to subdued expansion in demand for
refractories. In this low growth environment, a further round
of mergers and takeovers is likely to occur in the refractory
industry, including perhaps Chinese refractory companies
expanding further into global markets.
The rapid growth in, and persistently high level of, global
refractory production between 2000 and 2010 was to a large
degree caused by inefficiencies in Chinese steel production,
combined with readily available domestic supplies of refractory
Specific refractory consumption of about 40kg/tonne of steel
in 2000 has progressively declined to an estimated 15kg/tonne
in 2016. Specific consumption in China is expected to decline
even further to reach the rest of the world’s
average standard of about 10kg/tonne in the next decade, due to
improved steel production efficiencies together with the
increasing use of recycled steel.
The combination of the above factors is expected to result in
the global refractory market remaining at about 34-35m tpa
for a number of years as the drop in production in China is
balanced by steady growth in the rest of the world (see
*Richard Flook is the Managing Principal at Mosman
Resources. He has worked for both suppliers and consumers of
minerals with global companies including, Steetley plc, Anglo
American, Commercial Minerals (now Sibelco), Normandy Mining
Ltd, Omya AG and Shinagawa Refractories. Richard is a Fellow of
the Australasian Institute of Mining & Metallurgy (FAusIMM
(CP)), the Australian Institute of Company Directors (FAICD)
and the Australian Institute of Energy (FAIE). He is a graduate
of Sydney University (BSc First Class Honours, PhD) and the
University of NSW (Master of Commerce). Since 2014,
Richard’s has been the Managing Principal of
Mosman Resources, a private consulting business, specialising
in the production and marketing of industrial minerals and
Refractories for Glass Production
Global annual glass production is estimated to be about 210m
tonnes. Refractory demand for glass production is estimated
to be around 500,000 tpa or about 2.4 Kg of refractory per
tonne of glass.
Fused-cast refractories are a major category of refractory
used in glass production (100,000 tpa). The second major group
is basic refractory for regenerator packages which is almost
the same or perhaps slightly more (about 120,000 tpa). Other
refractory types are silica wedges for crown (about 80,000
tpa), generic silico-alumina, alumina, zircon and insulating
firebrick (IFB) for all other applications (about 200,000 tpa
SEPR Saint-Gobain is by far the major fused-cast refractory
producer, with a total of seven plants worldwide. They
represent about 55% of western, or about 43% of total world
production. Alumina-zirconia-silica (AZS) fused cast
refractories are still the major product group followed by
aluminas and specialties. Globally speaking the major raw
material is calcined alumina (about 63%) together with zircon
sand (about 28%), synthetic zirconia (about 6%) and sodium
carbonate (about 3%).
On a global basis flat glass production is slowly growing
(about 2% pa), container glass production is flat and fibre
glass is slowly growing. Low volume display glasses for
computers and smartphones are growing at much higher rates but
volumes are small and therefore related refractory usage is
In general, glassmakers are facing similar issues to those
for other refractory customers such as production
overcapacity, energy consumption, pollution and
*Dr Ratto has over 35 years experience in the fused cast
refractories industry www.fusedcast.com