Steely determination: The revival of India’s refractories sector

By IM Staff
Published: Friday, 30 August 2019

Indian refractories output rebounded in 2018, after three successive years of decline. Sunder Singh analyzes what was behind the shift in the industry’s fortunes and hears reasons for both optimism and consternation, from some of the market’s key participants.

Volume growth in refractories production in India was in positive figures for the first time in three years in the financial year ending March 31, 2019, with output rising to 1.2 million tonnes, a 9% increase on the previous year, making it one of the sector’s strongest years on record.

The data showed a welcome rebound for an industry that had been struggling against tough foreign competition and wider market pressures.

Buoyed by the turnaround, major domestic and international refractory producers operating in the country were optimistic about demand growth in the years ahead, led by an expected expansion in steelmaking and other refractory-consuming sectors.

Dipankar Banerjee, marketing and technology director at Vesuvius India, said that although India has seen growth in non-ferrous, non-metallic and niche applications for refractories over the past decade, ferrous metal production continued to underpin India’s consumption of refractory materials.

"The iron and steel industry is our biggest market in India, but a few years ago we made a move into the country’s cement sector," he said, adding that the company was "trying to enhance our presence in these markets, with a specific focus on new and state-of-the-art technologies."

Market participants reported improvements in capacity utilization last year, albeit only by a few percentage points, which helped to raise profitability after several years of flat-to-weak utilization rates, which dragged margins down.

India’s refractory industry is served by around a dozen large-scale, 30 medium-sized and about 200 small-scale producers, so it continues to be crowded and competitive.

Despite India’s large and generally healthy steel market, which is the main consumer of refractories, the pricing power of Indian refractory producers is limited by the industry’s fragmented structure.

This is compounded by surplus capacity and competition from imported refractories, which offer an easy and often cost-effective option for many refractory consumers, due partly to the low import duties imposed by India’s government.

Refractories manufacturers also complain of persistent problems with the availability of domestic raw materials, with relatively few refractory minerals produced in significant volumes in India.

This is one factor which, if it were addressed, many in the industry believe could revolutionize India’s refractories sector.

Major construction and infrastructure modernization activity
is driving steel and cement demand in India.
Ninara, via Flickr 


Demand recovery

A revival in Indian steel production was the main driver of stronger refractories consumption in the country in 2018.

India replaced Japan as the world’s second-largest steel producer in 2018, registering crude steel output of 106.5 million tonnes, up by nearly 5% from the 101.5 million tonnes it produced in 2017, data from the World Steel Association (Worldsteel) showed.

In contrast, Japan produced 104.3 million tonnes in 2018, down by 0.3% from the year before.

After steel, India’s second-largest consumer of refractories is the cement sector, and it also grew strongly last year, by almost 70%, to 502 million tonnes in 2018-19 from 297.6 million tonnes in 2017-18. This new volume ranked India as the second-largest cement producer globally after China, with capacity expected to hit 550 million tonnes per year in 2020.


Competition from imports

India’s refractories imports in 2017-18 jumped by 40% to 25.3 billion rupees ($351 million*) from 18 billion rupees the year before.

Hakim Uddin Ali, a former chairman of Indian Refractory Makers Association (IRMA), said that the lack of domestic raw materials for Indian refractories companies was one of the main reasons for rising import volumes.

"Domestic refractory producers have to import raw materials," he said. "Even finished refractory products are being imported because, at times, importing is cheaper than manufacturing in India."

Indian refractory producers were highly dependent on imports of key raw materials such as high-grade alumina, bauxite, magnesite and silicon carbide, with the majority coming from China.

Kamal Sarda is chief executive officer of Kolkata-based IFGL Refractories, which has manufacturing facilities in Odisha state and various locations globally, including the UK, China, the United States and Germany. He said that his company imports close to 40% of its raw material needs from China.

"Raw material availability is not currently a challenge, but price fluctuations can be," he said. "Prices have more or less stabilized, bar a couple of raw materials which have gone up and a few which have come down, so things are more or l

Ambivalence towards the development of domestic mining
in India is regarded by some as a barrier to industrial self-sufficiency.
Environmental Change and Security, via Flickr 

New market entrants

Responding to the gap in India’s refractory raw materials supply chain, some companies have moved in to capitalize on the opportunity.

In 2018, Germany’s Almatis, a world leader in alumina-based products, started constructing a new tabular alumina facility in Falta, West Bengal, to serve the Indian refractories market.

The company is betting on rising demand for tabular alumina in India because companies are increasingly opting for longer-life products, which use premium alumina.

Even more companies have moved in to take advantage of downstream opportunities, and the past two years have witnessed the largest ever expansion in Indian refractories capacity.

In May 2019, Dalmia Seven, a joint venture between the Dalmia Bharat Group and Slovenia-based Seven Refractories, began commercial production on a monolithics production line at its facility in Madhya Pradesh.

According to Dalmia Seven, the plant is the first of its kind in India, with a high level of automation, which enables precision dosing of raw materials for efficient high-grade refractory production.

The plant takes Dalmia Seven’s refractories capacity in India to 45,000 tpy, making it a significant local market participant.

Sameer Nagpal, CEO of Dalmia Bharat’s refractory business, said that investing in state-of-the-art technology was an important statement for the company while it seeks to capture an increasing share of India’s refractories market.

"Our approach addresses the increasing demand for clean steel production in India," he said, pointing to government aspirations to reduce emissions from Indian industry, while simultaneously ramping up infrastructure development.

In January 2019, Dalmia Bharat Group acquired the refractory business of Germany’s GSB Group, a speciality refractory manufacturer, for €15 million ($16.7 million).

Mark Runge, managing director of GSB, said that becoming part of an Indian company would enable it to bring German production standards to a receptive and growing market.

"We built the GSB Group with a vision to service its customers with world-class efficiencies and best-in-class talent. I am confident that, with the experience and legacy of Dalmia, we can take this vision to the next level," he said.

Local companies were also investing in organic capacity growth.

IFGL was in the process of setting up a new greenfield manufacturing facility in Visakhapatnam in the eastern coastal state of Andhra Pradesh, and expanding a manufacturing facility at the Kandla Special Economic Zone in the northwestern state of Gujarat.

Another major local market participant, Orient Refractories, expanded its installed capacity of isostatic pressed products at its facility in Bhiwadi, Rajasthan, by 2,400 tpy last year, to 11,700 tpy.

Indian steel companies are investing in capacity expansions,
but have had problems with low utilization rates
Ken, via Flickr 

Growing EAF capacity

India’s steel industry consumes around 75% of the country’s domestic refractories output – 10% higher than the global average, illustrating the dominance of steel as a market for Indian refractories companies.

In the past five years, India has surpassed other large steelmaking countries such as the US, Russia and South Korea in terms of capacity and output. This growth has been partly facilitated by the expanding use of scrap-fed electric-arc furnaces (EAFs) in place of traditional basic oxygen furnaces (BOFs) which produce steel from iron ore and coking coal and other raw mineral inputs.

Around 60% of India’s installed steelmaking capacity is electrical – meaning, EAF- or induction furnace (IF)-based, although output from these mills only makes up around 35-40% of the country’s total steel production due to utilization problems and shortages of scrap steel.

Globally, EAFs account for around 25% steel output and induction furnaces about 28%, according to Worldsteel figures.

India overtook South Korea as the world’s second-largest ferrous scrap importer in the first half of 2019, trade data showed, placing the country behind Turkey, the world’s leading scrap consumer and EAF operator.

Indian scrap imports surged by 35% on-year to 3.9 million tonnes between January and the end of June 2019, sourced mainly from the UAE, the UK and the US, while the country’s crude steel production for the period rose by 5% to 56.96 million tonnes, Worldsteel data showed.

Indian steel output was expected to increase by 7.1% year-on-year in 2019 and by a similar amount next year, supported by higher government spending on infrastructure, robust manufacturing and rapid urbanization.

The country’s National Steel Policy, published in May 2017, has a target for domestic installed steel capacity of 300 million tpy by 2030, with EAF capacity expected to make up the majority of this, although the exact proportion was under discussion.

EAFs are favored by the Indian government because they are cheaper to build and considered to be more efficient and less polluting than BOFs, although some still favor the quality of steel which can be produced using traditional methods as opposed to recycling scrap.

In June this year, India published its draft Steel Scrap Policy intended to promote scrap processing, to supply the projected shift toward EAF- and IF-based steelmaking, amid predictions of a widening shortage of domestic scrap supply.

India’s railways industry is one of the biggest domestic
consumers of steel.
Navaneeth Kishor, via Flickr 

Effect on refractories

The drive toward increased EAF capacity has implications for India’s refractories industry.

According to Anirbandip Dasgupta, executive secretary at IRMA, the increase in EAF numbers will not significantly alter overall demand for refractories in the Indian steel industry, but the nature of the products required will change.

"The refractory needs for EAFs are slightly different from blast furnaces, but the overall the dynamics of the market should not change significantly," he said.

RK Pradhan, senior manager at the refractory unit (IFICO) of Indian state-run steel producer Steel Authority of India Ltd (Sail), believes that increased EAF capacity will drive greater consumption of refractory products.

"Both refractory production and consumption in India will see a further boost, as a result of these smaller units," he said.

IFICO is one of Sail’s four integrated refractory-producing units. Located at Ramgarh, in the state of Jharkhand, IFICO has an installed capacity of 42,000 tpy, producing alumino-silicate refractories and various other special products.

"EAF utilization in India’s steel industry is expected to rise to nearly 40% by 2030," Arjun Jain, executive director of the Delhi-based Steel Furnace Industry Association of India, said.

"This will probably result in higher overall consumption of refractories by the domestic steel industry. Consumption of high value-added products in EAFs is far higher compared with conventional BOF-route steel production," he added.

Jain said that changes in refractory demand would be driven more by the kind of steel Indian consumers want to use, rather than the methods employed to produce it.

The increasing preference for high-grade steels was generating more demand for better-quality refractory products, although this was being balanced to an extent by more efficient furnace designs which require fewer refractories for a given volume of steel.

"Total average consumption of refractories, in furnaces and secondary metallurgy vessels, depends significantly on the type of steel produced. Our experience is that, for carbon steels, approximately 12kg of refractory is needed for per tonne of steel produced," Jain said.

"For high-grade steels, such as alloyed and stainless steels, refractory consumption is in the range of 22-32kg per tonne. Average refractory consumption in the furnace itself amounts to 8kg per tonne of this," he added.

According to Sudipta Patra, senior executive with Jindal Stainless, a unit of India-based multinational Jindal Steel & Power, the development and use of high-performance EAFs in India will force shifts in the composition of refractory products required by steelmakers.

"There is a high degree of correlation between EAF life and the life of the furnace roof," Patra says. "With the rapid expansion of EAF steelmaking in India, larger capacities and the increase of unit power, the working conditions of the furnace roof become more demanding, which has resulted in a drastic change in the kinds of refractories used in EAFs."

Patra explained that the roofs of EAFs typically use high-alumina bricks with aluminium oxide (Al2O3) content ranging between 75% and 85%.

"Compared with silica refractory bricks, alumina bricks have high refractoriness, better slag resistance, thermal shock resistance and high compressive strength. Also, the life of high-alumina bricks is two to three times that of silica bricks," he added.

Given the lack of domestically produced refractory minerals supply in India, industry observers warned that this shift in demand was likely to drive an even greater reliance on imports, particularly for high-grade alumina from China, unless India’s government decided to link its steel policy to a more focused raw materials policy over the next decade.

In March this year, the Indian government published its updated National Mineral Policy, pledging greater support for exploration and development of domestic mineral resources with the aim of reducing the need for imports, while at the same time proposing stricter regulation of India’s mining industry.

"Minerals are a major resource for the core sectors of the economy. There is a huge demand for minerals in view of the rapid urbanization and the projected growth in the manufacturing sector," the policy stated.

"With the thrust on the Make in India initiative, the demand for minerals is likely to grow at a rapid pace. Extraction and management of minerals has to be guided by long-term national goals and perspectives, and integrated into the overall strategy of the country’s economic development," it continued.

Some have expressed dismay about the general terms of the policy, and particularly its failure to highlight plans for specific mineral segments.

None of the core refractory minerals, such as alumina, magnesite or clays, were mentioned specifically, raising doubts that mining for these products will be made a priority in the foreseeable future.

*Conversions made August 2019

India’s cement industry

Cement production is the second-largest consumer of refractories in India after steel, and the market is growing strongly.

A total of 210 large cement plants (77 of which are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu) together account for 410 million tonnes per year of installed capacity in the country, while 350 mini cement plants make up the rest.

Cement production in India increased from 230.49 million tonnes in 2011-12 to 297.56 million tonnes in 2017-18.

India’s leading refractories producers

TRL Krosaki Refractories

A subsidiary of Japan’s Krosaki Harima Corp (KHC), TRL Krosaki is the largest refractories producer in India.

It was established as Tata Refractories in 1958 as a joint venture between India’s largest steel producer, Tata Steel, and Germany’s Didier Werke, but the German partner exited in the 1960s.

In May 2011, Tata sold two-thirds (51%) of its majority stake in the company to KHC, followed by its remaining 27% share in 2018, giving KHC control of the business in India to add to its existing refractories operation in China, which mainly produces magnesite bricks.

TRL Krosaki has five manufacturing plants in India, at Belpahar (Orissa), Salem (Tamil Nadu), Jamshedpur (Jharkhand), Maya Pradesh and a site in Gujarat. Total installed capacity at the five plants is nearly 400,000 tonnes per year.

Besides producing refractory products for the steel, copper, cement, aluminium, glass, petrochemicals and other non-ferrous industries, TRL Krosaki offers refractory management and engineering services, is one of the largest manufacturers of dolomite refractories in the world, and is the leading global supplier of silica refractories for coke ovens and glass industries.

Orient Refractories

Established as Orient Abrasives in 1974, in 2010 this company underwent a demerger to spin out its refractories division into a separate business as Orient Refractories.

The leading global refractories manufacturer, Austria’s RHI, holds a 69.6% stake in Orient Refractories.

Orient’s manufacturing facility is located in Bhiwadi, south of Delhi, in Rajasthan, and is divided into three independent sub-divisions – one each for the production of slide gate plates, continuous casting refractories, and castables and pre-cast shapes.

The company has installed monthly capacity to produce 70,000 pieces of slide gate plate, 30,000 pieces of continuous casting refractories, and more than 2,000 tonnes of castables and mortars. It also has an allied plant in Salem, Tamil Nadu, which produces monolithics.

Vesuvius India

A subsidiary of UK-based Vesuvius plc, Vesuvius India currently operates four production facilities: at Kolkata in West Bengal, producing continuous casting refractories; Mehsana in Gujarat, making crucibles for the non-ferrous industry; and two at Visakhapatnam in Andhra Pradesh producing monolithics, along with a monolithics assembly facility at Salem.

The company is also contemplating further expansion in India to serve the country’s growing needs, and is evaluating the feasibility of a new manufacturing unit at Visakhapatnam.