Faced with a huge decline in orders from the European markets, the Rs 3,500 crore Indian refractory industry expects about 25 per cent decline in exports during the current financial year. The shipment, however, is likely to recover in the second half of 2009-10 when global steel demand resumes.
Refractory is a non-metallic material that retains its strength even at high temperatures and is widely used for manufacturing structures of steel, aluminium and other metals.
Steel demand is directly proportional to refractory consumption with each tonne of steel manufacturing consumes between 10-12 kgs of refractory materials. Because of technology innovations, refractory consumption has declined significantly from 30 kgs per tonne of steel production a decade ago. “European demand has declined dramatically in the last five months, beginning November. Orders have suffered because of global financial turmoil and the trend is likely to continue for some more months,” said Anirban Dasgupta, executive director of Indian Refractory Makers Association (IRMA).
Presently, India exports around 10 per cent of its production to the tune of 1 million tonnes primarily to European Union, West Asia, South Africa and Far East including Malaysia and Indonesia. However, Indian products are yet to enter the American markets in large volumes because of the un-competitive pricing owing to higher freight cost.
India exported supreme quality refractory materials to the tune of Rs 452 crore during 2007- 08, witnessing a rise of 44 per cent from Rs 341 crore in the previous fiscal year.
Elaborating the trend, Dasgupta said, “Orders remained okay during April - September period as the sentiment in steel industry was favourable. But, the orders started declining from October 2008 and plunged almost to “nil”, now.”
According to the latest report by Eurofer, the European steel industry lobby group, steel demand in Europe has declined 30 per cent in the first quarter of 2009 on falling manufacturing activities in the region. Steel consumption has “collapsed” since the fourth quarter of last year, with order levels down almost 60 per cent, the Brussels-based group said in its March newsletter.
Meanwhile, the industry has squeezed between sky-rocketing raw material prices and stagnant realisation from user industries.
Prices of the benchmark DBM-93 has surged from Rs 10,181 per tonne in April 2007 to Rs 33,375 per tonne in December 2008 while calcined bauxite almost trebled to Rs 29455 per tonne from Rs 10,334 per tonne in the aforementioned period. The price rise was, however, less severe in graphite that surged to Rs 27,321 per tonne in December 2008 from Rs 20,525 per tonne in April 2007.
China, which has a virtual monopoly in raw materials, has continuously raised prices for exports to India. Additionally, the country has also made India a dumping ground and therefore, imports in India is estimated to rise significantly from Rs 818 crore during the last financial year.
According to industry sources, installed production capacity is roughly around 2 million tonnes per annum of which the industry has been utilising hardly 50 per cent. But, with the estimated revival in steel production and demand, the refractory demand is expected to touch 1.2 million tonnes per annum by 2010.
