Business Report on Refractory Industry in India

What are Refractories?

"Refractory" items according to any Standard English dictionary are materials
which are hard to work with, and are especially resistant to heat and pressure.
In practical terms, refractories are products used for high temperature
insulation and erosion/corrosion and are made mainly from non-metallic
minerals. They are so processed that they become resistant to the corrosive
and erosive action of hot gases, liquids and solids at high temperatures, in
various types of kilns and furnaces.
Some typical specifications of Indian refractories commonly used in the
furnaces and kilns in steel, cement, non-ferrous metals and glass industries are
given below: High Alumina Silica
Basic
Castables/Monolithics
Special Products
Insulating Bricks
Industry Overview:Refractory is a term given to a class of materials which are produced from
nonmetallic minerals and possess capability to withstand heat and pressure.
These are products that confer properties like high temperature to corrosive
and erosive action of hot gases, liquids and solids at high temperatures in
various kilns and furnaces. The fortunes of the Refractory industry are very
much dependant on steel industry as almost 75% of the refractories produced
is consumed in steel industry. Steel consumption in India is expected to grow
significantly in coming years as per capita finished steel consumption is far less
than its regional counterparts. The growth in construction, infrastructure,
automobile and power sector will continue to create significant demand for
steel sector, which in turn will create demand for refractories.

The Indian refractory industry started its journey with first line of production in
Kolkata in 1874. Today, the industry comprises over 100 established units, with
11 large plants, 24 medium-scale units and the rest in the small-scale sector.
However, while the refractory industry in India took off in the late 19th century,
the real growth came in the late 1950s when the public sector steel plants
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Business Report on Refractory Industry in India

were set up and Tata Steel embarked upon its expansion plans. Currently, the
Indian refractory industry has an aggregate production capacity of 20 lakh
tonnes per annum. The capacity utilization, however, currently stands at
around 60 percent or 11.5-12 lakh tones per annum.
About 75 per cent of the refractories that are manufactured find
application in the steel industry, 12 percent in the cement industry, 5-6 per
cent in non-ferrous industries, three per cent in the glass industry and the
balance in other industries.

Refractories are used either where high temperature or high rate of

abrasion/corrosion/erosion is involved. Traditionally, refractories are made of
naturally-occurring minerals, such as bauxite, kyanite, magnesite, fireclay,
chrome ore, etc. Lately, however, the industry has been using man-made raw
materials, such as brown-fused alumina, tabular alumina, fused magnesia,
silicon carbide, magnesia alumina, etc. Refractory plays a dynamic role not
only for metallurgical but also for Shaping up chemical and petrochemical,
glass, ceramic, cement and limestone industries. Major research work has so
far been concentrated for the development of new refractory and also for its
reduction in consumption for steel industries. Indian refractory industry,
meanwhile, is required to upgrade their operations with global technologies
which need huge investment.
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Business Report on Refractory Industry in India

The Scope of the Industry:The size of the Indian refractory industry has been pegged at Rs 2,300 crore
and it is stated to be growing at 8-10 per cent per annum. Although the specific
consumption of refractories has gone down from 30 kg per tonne of steel about
20 years ago to 12-13 kg on an average for the steel industry as a whole and
as low as 7-8 kg in the case of some more efficient steel units, the scope for
growth is good in view of the continuing growth in the Indian economy and the
government's focus on infrastructure development. Despite downturn in steel
sector, the domestic refractory industry that supplies raw materials to steel
plants and industries, posted 21 percent growth in turnover at Rs 4,480 crore in
2009-10 against Rs 3,640 crore in 2008-09, when the growth was 16 percent
over 2007-08. The capacity utilization of the industry was 65 percent.

Business Concerns: Industry dependent on raw material imports from China. Use of synthetic
raw materials is driving prices higher
In the event of continued high prices for crude oil and other petroleum
products, hardening of the coal prices the prices of the inputs of the
refractory industry are increasing

Business Report on Refractory Industry in India

Raw material prices have moved up 80 to 85% but prices of finished
products have just appreciated 18-30% resulting in erosion of the
bottom lines of the refractories companies.
Affected by the slow down in the economy
In Industries like steel trend towards lower refractories consumption
per tone of steel. Usage of new technology processes leads to reduction
in refractories consumption
The industry is going through an exciting and complex phase. On one
hand, refractory makers are adding capacities with the hope that
demand from the steel sector will rise at a fast pace. On the other hand,
none of the major announced Greenfield steel projects are yet to get off
the ground.
Challenges for Industry:The Refractory Industry must upgrade itself to take benefit of increased
business from the steel industry stated R K Vijayvergia, Executive DirectorOperations, SAIL, at a recently held conference. In his special address,
Vijayvergia said, Steel industry forms the major end use segment for
refractories consuming around 70 percent of its total annual production. The
Refractory Industry has to keep pace with steel industry with regard to quality
and quantity demands. Meanwhile, with the changed business scenario more
and more customers are looking forward to total refractory management which
encompasses creation of value added service, responsive supply chain network
and understanding of customers' requirement. The major Indian refractory
manufactures need to gear up to cater the need of steel industry.
World leaders in refractories like RHI from Austria, Vesuvius from
Belgium,French giant Calderys, Pohang from South Korea etc have also made
their presence in India, which is a good sign for the industry. Recently SAIL has
taken over Bharat Refractories Ltd which is now named as SAILRefractorry Unit
(SRU). SAIL is in the process of augmenting and upgrading the facilities at SRU
for higherproduction to meet the quality requirement of SAIL. Refractory
producers in India have to rise to the occasion by providing ready, regular,
speedy and consistent supplies, Irani said. It would also be important for Indian
refractory manufacturers to focus on their raw materials security. Industry
insiders do acknowledge that raw materials security is a concern especially
with China imposing quantitative restrictions on export of raw materials and
also jacking up prices over the last year or so. Cheaper refractory imports from
China are also putting a pressure on the industry's margins. Hiring and
retaining skilled manpower is a major challenge that the Indian refractory
industry has to cope with.

Business Report on Refractory Industry in India

Major listed player on BSE as on August, 2013 :Company

Name

Location of
plant

Trade
price

Market
Cap (Rs.
in Cr.)

Sales
Turnover

Net
Profit

Margin
s (in %)

Total
Assets

SAIL
Group

Salem

47.5
5

19,640.
65

44,598.
26

2,170.
35

4.86

62,525.
21

Vesuviu
s India
Orient
Refract
HIL

Kolkata

720.31

563.79

55.76

9.89

343.25

300.35

360.58

41.39

11.48

87.78

215.67

5.85

557.55

Hyderabad

52.50

5.18

320.16

Bhagwanpu
r

202.99

1,037.2
5
1,014.1
3
695.79

60.64

Everest
Ind
Indian
Hume
Pip
Raasi
Refract
Visaka
Ind
IFGL
Refract
Source: -

354.
90
25.0
0
289.
00
138.
80
83.8
0

22.85

3.28

368.97

Hyderabad

8.13

3.83

35.74

- 1.99

-5.69

26.73

Vishakapatn
am
Odisha

75.7
5
28.0
0

120.30

914.80

50.69

5.54

596.36

96.91

307.03

17.06

5.56

189.25

Bhiwadi

Moneycontrol

210.83

Business Report on Refractory Industry in India

Major Players :1.)Tata Refractories Ltd. , Odisha :Established in 1958, TRL Krosaki Refractories Limited (formerly Tata
Refractories Limited) has pioneered refractory production in India. Today,
this ISO 9001 company is the No.1 refractory company in India with a wide
range of products like Basic, Dolomite, High Alumina, Monolithics & Silica
Refractories having a consolidated installed capacity of 3,04,760 TPA
(FY10). Its key customers are the Steel, Cement, Glass, Copper and
Aluminium industries. Its main Works is located at Belpahar in the district of
Jharsuguda in the State of Odisha, India. The company has two subsidiaries viz
TRL Asia Pvt. Ltd. (a Singapore based SPV) and TRL China Limited, 100%
subsidiary of TRL Asia Pvt. Ltd. During the year 2010-11, the Company has
achieved the distinction of being the first Indian refractories company to cross
Rs.1000 Crores consolidated turnover.
Particulars
Turnover
Profit before tax (PBT)
Profit after tax (PAT)

FY 12
(Figures in Cr.)
1,000
18
10

FY 11
(Figures in Cr.)
926
67
44

During first quarter of Financial Year 2011-12, Tata Steel Limited sold its 51%
equity stake out of total 77.46% equity stake in Tata Refractories Ltd. (TRL) to
Krosaki Harima Corporation, Japan. Consequently, Tata Steel and its
subsidiarys holding in TRL (now known as TRL Krosaki Refractories Limited)
has reduced to 26.62%. Accordingly, it has ceased to be a subsidiary and
became an associate.TRL Krosaki has maintained its leadership position in
refractories market in India, producing and supplying the full range of
refractories products required for Iron and Steel and other core industries. The
Companys performance was impacted by the economic downturn which
severely subdued the demand for industrial goods. Gross production at 222k
tonnes was lower by 5% as compared to 235k tonnes during Financial Year
2010-11.Similarly, sales volume was also lower by 6% at 299k tonnes as
compared to 318k tones during Financial Year 2010-11. Despite lower sales
volume, the Company was able to achieve higher revenue primarily due to
better product mix leading to a higher average realisation. Higher input cost of
raw materials, fuel and power along with increase in finance cost during
Financial Year 2011-12 resulted in 47% lower profit before tax (PBT) as
compared to Financial Year 2010-11.

Business Report on Refractory Industry in India

2.) IFGL Refractories Ltd.

It is a Kolkata based company, engaged in manufacturing of Specialized
Refractories mainly used in Steel industry. Company started its first plant of
slide gate refractories in 1984. During 2006, company acquired Monocon
group with production facility in many countries in the world. During 2008,
company acquired Hoffman group with manufacturing plant in Germany and
Czech Republic. Currently IFGL have manufacturing facilities in India, Brazil,
China, Czech Republic, Germany, UK and USA. IFGL Exports Ltd a subsidiary
company of IFGL Refractories Ltd, earlier associate company, has setup a
new Continuous Casting Refractories (CCR) plant in Kandla Special Economic
Zone in Gujarat. Being a technology provider to the company, Krosaki
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Business Report on Refractory Industry in India

Harima Corporation, a subsidiary of Nippon Steel Corporation Japan, has 20%
stake in IFGL Exports Ltd.
Financials Performance :-

Business Report on Refractory Industry in India

Indian Steel Scenario

India maintained its ranking as the 4th largest steel producer in the World with
a production of 71.3 million tonnes in 2011, registering a growth rate of 4.4%
over 2010, as per WSA. According to JPC estimates, domestic finished steel
consumption posted a growth of 6.8% during 2011-12 to 70.92 Million Tonnes.
The World Steel Association has projected a growth of 6.9% for steel
consumption for India during 2012, which is higher than the growth in steel
consumption projected for China (4%). In 2013, the growth rate is forecast to
accelerate to 9.4%. A growth rate of 8-9% in the next few years is expected to
be sustained mainly by factors such as the 1 trillion USD investment envisaged
for the infrastructure sector in the 12th Five Year Plan, greater emphasis on
increasing growth rate of the manufacturing sector, higher rates of
urbanization, rising middle class population and tapping the potential of the
rural market. Also, in terms of per capita consumption of finished steel, India at
57 kg lags behind the world average of 214.7kg, indicating a huge potential for
growth. In terms of imports and exports, India has become a net importer of
steel since 2007-08, with the net imports at 3 million tonnes during2011-12. An
important reason for the high level of imports has been the domestic nonavailability or limited availability of sophisticated/ specialized steel products.
Conclusion:Refractory business is a capital intensive industry which requires heavy
investment in technology and basic raw materials. The business is heavily
dependent on steel industry (nearly 75%) and on the contrary steel industry is
upgrading technology to reduce its dependence on refractories products. The
other industries where refractories can cater to are cement, sponge iron,
chemical, petrochemical, glass , ceramic and limestone industries. The
slowdown in the Indian economy has affected the steel industry resulting in
lower top lines in refractory industry. Also, the increase in cost of raw materials,
coals, petrol prices, etc. has affected the bottom lines. This is a highly
specialized industry and depending upon the production capacities, plant
location, technology implemented a competitive advantage can be structured
and better performance can be expected in future.
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Business Report on Refractory Industry in India

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