|
The refractories
sector gathered in Aachen for the
60th edition of the International
Colloquium. |
Scarcity in the supply of raw materials and ongoing
consolidation are among the leading concerns at present for
players active in refractories, IM heard as
the industry got together for its annual gathering in Germany
this week.
At the 60th International Colloquium on
Refractories held in Aachen on 18-19 October, attendees in
conversation with IM highlighted how operators
feel they are being squeezed by appreciating raw materials
while, at the same time, the industry is evolving in its
composition with fewer, and bigger, companies.
"On the one hand you have raw materials that are getting
more expensive and shorter on the ground," one attendee
commented. "On the other you have large players joining forces,
which is also a cause of concern for reasons of
competition."
The much talked-about M&A activity this year included
the merger of equals between Austrian refractory group RHI and
Brazil’s Magnesita, which is due to be completed
as the new company – RHI Magnesita – starts trading on the
LSE on 27 October.
The other main deal of 2017 to date was Imerys’
buyout of alumino-silicate cement maker Kerneos, which was concluded in
July.
"Small and middle-sized players are worried they will feel
new pressure after these takeovers," a refractory maker told
IM. "Large companies getting larger means it
will be harder to compete to secure deals."
RHI and Magnesita are bringing together a pool of over 50
facilities globally, with a strong presence in the Americas,
Europe and Asia, as well as direct access to own raw materials
such as magnesia and dolomite.
For its part Imerys, already one of the largest players on
the market, will be strengthening further its role in the
speciality cement end businesses, which requires large and
consistent volumes of calcined bauxite, among other
materials.
A second delegate said: "[As large companies expand
further,] it could mean that, at times of shortage of raw
materials, the smaller buyers are left dry, unable to source
and thus to operate fully."
Others see a degree of opportunity in the situation,
however.
At the recent UniteCR 2017 refractories conference, another
source commented on this topic: "There are also opportunities
for the smaller ones. While the big guys are busy integrating
and getting their operations together, we can be faster to
respond to customers and do business."
Either way, consolidation and vertical integration are also
seen as crucial to secure stable access to raw materials.
Another delegate in Aachen said: "Only a year or so ago, not
many were thinking this could happen and we would all suddenly
run around to source material. Now it’s happening
and [this issue] will be with us for some time.
"If you can cover your requirements through own deposits,
this can solve a few problems."
|
| Attendance was high
this year, with over 500 delegates. |
The Chinese affair
And then, of course, there is China.
The situation in the country as regards both aspects
– raw materials and industry consolidation –
is a major source of concern at the moment, IM
was told at the German event.
Many markets where China is a main supplier are now facing
shortage and higher prices. Some examples include bauxite, alumina, magnesia and graphite, to name a few.
Shortage in these markets is creating a need to find
alternative sources, with indirect consequences for the supply
chains of other minerals.
Attendees questioned where future supply will come from if
China is unable or unwilling to supply the volumes it used to.
In magnesia, its yearly exports of CCM, DBM and FM were over 1m
tonnes.
In graphite, China accounts for over 60% of global supply,
and it has a major role in bauxite and fused alumina materials,
particularly brown-fused alumina (BFA).
Consolidation in the Chinese
magnesia industry is one development to look out for. Local
governments in magnesia-producing areas are seeking to reduce
the number of scattered players by setting up a
government-controlled consortium of companies that will control
mining output and processing. This is also aimed at
facilitating a more orderly exploitation of deposits, ensuring
longer mine lives.
Several local companies are said to have signed up to the
initiative, although actual numbers vary widely depending on
who you ask.
As reported by IM throughout 2016, several bauxite mining
operations and processing facilities were shut, many of those
for good. With restrictions to dynamite use in mines, new
production is intermittent. BFA availability is even shorter,
pending Beijing’s ongoing environmental
inspections and deadlines to companies.
The current situation is unlikely to improve much in the
coming months, according to sources, who cited the ongoing
National Congress in Beijing, the imminent winter season during
which mining reduces or is temporarily halted, and the Chinese
New Year holiday period in early 2018.
"I have been going to church every day lately," one delegate
quipped. "We look to 2018 and we hope."