RHI Magnesita to increase sales prices, expects raw material costs to rise again

By Davide Ghilotti
Published: Monday, 29 April 2019

The producer cited pressures on refractory raw material costs once the current phase of high stocks and falling prices, in markets such as magnesia, has passed.

RHI Magnesita will raise all its product prices by 5% because it expects raw material prices to settle higher despite recent signs of decline in magnesia prices.

Citing the effect of China’s environmental regulations on the production of refractory minerals including magnesia, graphite, bauxite and alumina,  the refractory products supplier said that "global scarcity of raw materials is still evident."

Despite a recent decline in some raw material prices such as magnesia, though, the long-term price trajectory remains bullish, it added.

"What we saw in 2017 was a structural change in raw materials pricing and dynamics, driving prices up. [The latest price declines] is not a structural change but is related to overstocking in some markets," chief sales officer Gustavo Franco told Fastmarkets IM.

"We believe that, once the high stocks are sold, the market would go back to where it started, and should settle a bit higher than where we are today," he added.

The trend in refractory mineral prices in 2019 to date has been inconsistent, with some commodities remaining high while others starting to lose value.

In the case of magnesite-based minerals, prices of magnesia grades out of China - especially dead burned (DBM) and fused (FM) - are in a bearish phase at present due to weak demand and growing inventories.

Fastmarkets IM’s assessment of the price of FM 97% MgO (Ca:Si 1:1) was at $850-950 per tonne fob China on Tuesday April 23, down from $1,000-1,100 per tonne in January.

The price assessment for DBM, 97.5% MgO lump fell to $850-1,050 per tonne fob China on Tuesday April 24 from $1,100-1,300 per tonne in January. 

The prices of bauxite and fused alumina, in contrast, have been effectively flat so far in 2019.

The Fastmarkets IM price assessment for BFA refractory grade has held at $780-800 per tonne fob China since the start of the year, while calcined bauxite, 85% refractory grade, at $400-420 per tonne fob China is down by just $10 from January. Both rose by double-digit levels against 2017.

"We are applying a long-term strategy and focus on the value we add to our customers. This makes us more resistant to what happens in the raw material market," Franco added.

RHI Magnesita will apply its price increases to customers globally, across both the steel and industrial divisions of the company. It is also motivated by pressure on operating, manufacturing and environmental costs the company has been facing.

All products including basic (magnesia and dolomite based) and non-basic products will be subject to the price increase, which averages 5% but ranges from 3% to as much as 20%.

Demand patterns 'flat’
Franco described refractory consumption as "flat" for this year, dismissing what other participants have described as evident weakness for 2019 following a strong 2018.

"The rise in demand last year was driven by the perception that there could be a shortage. This led to [panic buying] in raw materials and also in refractories," he said. "We all oversold last year. But high sales do not necessarily mean high consumption, as those sales may turn into stocks. The market is overstocked now."

This contrasts what other market participants have been telling Fastmarkets IM over the past few months - they pointed to weakening demand in markets including Europe.

Franco clarified that RHI Magnesita saw falling demand in Europe and the Middle East but that this was compensated by growth in North America and Latin America.

Importers across Europe pointed to weak demand underpinning refractories a whole, citing alumina, bauxite, magnesia, graphite and silicon carbide.

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