Refractories: Demand Forecast And Risk Analysis

The refractories industry might not be the most noticeable, but it certainly is quite widespread. Refractories are materials designed to withstand extremely high temperatures of over 500°C. They are usually made from ceramics, as they have higher heat-resistant properties than metals, which tend often to melt. Due to this heat resistant property, and also because they can withstand other physical wear and corrosion, refractories are used to line the extremely hot surfaces which are found in a large number of industrial processes. For some processes, they are absolutely essential, such as the refining of gasoline, as well as the manufacture of petrochemical products.

Refractories and refractory products broadly fall into either one of two categories: unformed compositions or preformed shapes. The former is often also referred to as monolithic or specialty refractories since they continue a certain rustic tradition. Bricks and related shapes have been the most used form of refractories, and for this reason, they have historically accounted for a majority of all refractory production. After this, we also have refractory ceramic fibers, which provide similar properties to residential insulation as bricks do, but which insulate at significantly higher temperatures.

Refractories come various types of shapes as well as sizes and serve multiple purposes, spread out across industries. They can be molded or pressed together to be used in floors and walls, creating interlocking patterns. Or they can be curved so that they can be worked into the sides of ladles and boilers, to take another relatable example. Specific industries across the globe utilize refractories for specific purposes.

Take a look at our analysis of the intricate refractories market.

Demand Forecast

China to Dominate the Market

There are many key markets in the refractories segment, of which China is the most dominant, both in terms of consumption and production. This is largely due to the local availability of important minerals like magnesite and alumni. Moreover, these materials are available at low costs, when compared to the cost of other producers. For the most part, it is the iron and steel industry that consumes the biggest part of refractories – this is true for both China as well as the globe. As a result of recently restructured industrial spaces, in addition to the lowered consumption rate of refractories for every ton of steel, the net demand for refractory products has been significantly altered in China. However, owing to the prevailing initiatives taken by the government, as well as a massive consumer base, China’s chemical manufacturing sector is expected to increase steadily, and with it, the scope of refractories too is predicted to rise.

Demand hike due to the Iron & Steel Industry

Over 70% of the market is accounted for by the iron and steel industry, as it is the biggest end-user sector for refractories, across the globe. The iron and steel industry demands materials which have the capacity to withstand extremely high temperatures, without losing any major physical properties. The refractories used by the iron and steel industry go in service of internal linings of furnaces that are used to make iron and steel, or for heating steel before it gets further processed. The refractories are also used in vessels that hold and transport slag and metal, and in stacks or flues through which hot gasses are conducted, to name just a few industrial applications.

Regional Analysis

The Asia-Pacific region, including countries such as India, China, Japan, Malaysia, and more, is currently the largest consumer of refractories as well as refractories products in the world. They do so primarily in the iron and steel industry. Closely following them are Europe and North America. In the European Union, there is a slightly higher demand for steel now, as economic conditions and investment opportunities come increasingly to the fore. Due to the unfortunate political climate regarding Brexit, there were some risks, but regardless, the demand for refractories is expected to stabilize over time. In North America, owing to President Trump’s insistence on local production, the U.S. is predicted to witness the highest rate of growth in the consumption of refractories within the iron and steel industry. The conditions of the various regions are predicted to be more or less stable, growing with the global market, if not making a progressive growth (such as China in the APAC region and the U.S. in North America).

Demand: What will drive growth?

1. Non-mining Sectors

The chemical sectors, as well as energy and glass, are expected to further drive the demand for refractories in the near future. In 2018, 40 percent of the refractory demand was contributed by these sectors. Their net market share is expected to grow by 4-6 percent overall in the near future.

2. Demand for Cement

Given that the demand for both lime and cement is ever-increasing – due to the increased requirement for infrastructure in developing countries – the demand for refractories too increases proportionally, as it plays an important role in cement processing.

3. Mineral Processing Output

The demand for refractory usage increases with the heightened demand of steel, as well as other non-ferrous and mineral output processing. Moreover, the growing demand for the commodities which make use of these materials also drives forward the demand for refractory usage.

Risks Analysis

1. Specific Consumption Drastically Reduced

While in the last 5 years, the specific consumption of refractories was close to 15–20 kgs to produce 1 ton of steel, this number has been altered significantly. Due to the development of thermally-resistant factories, as well as increasing cost pressure, the specific consumption of refractories is estimated to go down to as much as 5kg to produce 1 ton of steel.

2. An Increasingly Monopolized Market Share

The refractory market is evaluated to be close to 46 MMT, but a point of concern is the supply market, which is completely fragmented. The top 20% of the market share is controlled by just the top 15 players. The negligible differences in the annual revenues of these top players increase the competition among them, and may even result in the normalizing of prices, which investors should be wary about. In this context, suppliers who have a stable research facility will stay ahead of the curve.

Conclusion

Refractories play an essential role in multiple industries and as such, the demand is unlikely to abate any time in the near future. However, considering the large size of the industry, it’s important to conduct a thorough risk analysis before investing in the refractories market.