- Further weakness expected
- Inventory levels kept low
- "Hand to mouth" purchasing
Owing to bearish macroeconomic conditions
affecting the main markets - including Europe, parts of Asia
and China - refractories producers expect to see further
weakness in the performance of their end markets, whether in
steelmaking or industrial.
Sourcing for raw materials will adapt to these
conditions, delegates in Japan told Fastmarkets, and this will
involve destocking and small-volume orders.
"The uncertainty in end markets mean that buyers
will not want to commit to high volumes," one seller of
refractory feedstock said. "Only the volumes they know they
will consume will be purchased."
Until they see evidence of conditions in their end
markets improving, refractories producers will keep inventory
levels at a minimum to contain costs.
"We expect only hand to mouth purchasing [from our
clients] - nothing larger than that," a raw materials
An additional issue that refractories producers
face is that their customers - steelmakers and foundry plants -
already have high stocks of material on hand. And because these
stocks also include finished steel products, plant output has
slowed, thereby further reducing demand for refractories.
This means that the destocking phase is not only
taking place on the raw materials side, but extends downstream
to finished refractories products and steel products.
One consumer did acknowledge that conditions on
the pricing front could be favorable to more long-term
inventory plans, but conceded that there are many risks around
"This could be the right time to go long on some
raw materials, such as high-purity fused magnesia, for
instance, because the price has gone down.
"But it’s a gamble right now
[because] it’s hard to justify a re-stocking at
this phase of the cycle," the buyer said.
The Fastmarkets’ price assessment for
magnesia, fused, 97% MgO, Ca:Si 1:1, lump, fob China fell to
$650-750 per tonne on September 24, compared with $1,000-1,100
per tonne at the start of 2019 and $1,400-1,600 per tonne in
"You could get it right, or you could get it very
wrong," he added.