Sameer Nagpal, CEO, Dalmia-OCL
How is the overall refractory market growing in India over the past 5 years? What is the future prospect of growth of demand? Please tell us how you segment the refractory market for analysis.
Major consumer of refractories are iron and steel, cement, glass, non-ferrous metals, petrochemicals and hydrocarbons. Growth of the Indian refractory market is directly linked to the growth in these segments. And the impetus that the government is giving to infrastructure development, including low cost housing, augurs well for the refractory industry. Overall, we expect a growth rate of 6 per cent for the industry.
What is the trend of imports of refractory into our country? Are we importing mostly from China or from other countries as well? Are the imports happening because of lower prices or better technology? What are your plans, if any, to substitute these imports? Are you, as an industry body, recommending any hike of import duties to protect the domestic manufacturers?
Thirty per cent of refractories consumed in India is imported, significant quantum of which is from China. The primary driver for these imports is the abundant availability of raw material there, especially magnesite. To that extent, we cannot wish away the role of China and this is also the reason why refractory companies have set up plants in China. However, what we need to do on a war footing is to strengthen the domestic refractory industry.
As the recent raw material crisis in China (due to change in environmental policies forcing raw material plants to shut down) has shown, overdependence on China is not conducive for India in the long run as it can disrupt supply of this critical product needed to make steel and cement. If domestic manufacturing gets a fillip, it will also enable them to source and secure raw material from other countries.
As a member and key player of the Indian refractory industry, we have been asking for support to 'Make in India' including cutting down import duties on raw material to 0 per cent.
Talking now specifically about the cement industry, how big is cement industry as a consumer of refractory, vis-a-vis others such steel, fertilisers/chemicals, etc., in the Indian Marketplace? Do you see growth in both projects and replacement demands in cement sector? How can we compare these two different demand segments, in terms of price and quality expectations of customers? What is your view about the future growth possibilities in the cement industry?
The cement industry consumes about 12-15 per cent of the total refractory produced, while steel is the biggest consumer at 65-70 per cent; and other industries make up the rest.
In cement, cycle time (for refractory replacement) typically is 8-12 months (compared to as low as 30 days for certain steel applications) and that constitutes 80-90 per cent of cement refractory demand. With overall cement demand growing at about 6 per cent, new projects, which are very few and far in between, constitute the remainder of refractory demand.
In terms of quality of refractory products, customers generally begin with regular qualities of refractory at project stage and as kiln and production stabilizes they go for higher, value-added products over time.
With the government's focus on smart cities, housing and other infrastructure projects, the future looks bright for cement industry. India is the world's second largest cement market, both in production and consumption but lags behind in per capita cement consumption (India average at 200 kg per person v/s world average of 500 kg per person) and therein lies the scope for growth.
Do you observe any major shifts happening in the applications market, such as for example, castables, chrome-free, magnesia, zircon, etc.? What are the latest technology trends in cement kiln refractory in the world, and how is India keeping pace?
As cement demand picks up and capacity utilisation goes up, cement manufacturers want to minimise the down time for replacing refractory lining. This is giving rise to demand for higher performing bricks with higher life and shorter application time. Techniques like gunning and shotcreting using monolithic refractory, which is in powder form and takes shape after being applied, instead of using pre-fired bricks, is also gaining currency.
Also, Indian cement makers use a lot of alternative fuels, which puts tremendous thermochemical pressure on refractory. Hence second or third generation spinels, hybrid refractories are coming up to take care of the increased thermochemical loads. Another trend is the effort towards reduction of thermal losses by introducing energy-saving refractories. New concepts are also coming up on thermal insulation of pyro system.
What are your new product offerings for the cement sector currently, and what are your future plans to introduce new items into the market in near future?
We have formed a joint venture with a leading European refractory company for bringing to India the latest in gunning and shotcreting products. We are setting up India's most modern monolithic plant in Katni, Madhya Pradesh and we will be in a position to offer best-in-class monolithic refractories to Indian cement industry. Basic bricks is another area where so far refractory consumers had been completely dependent on imports, which leads to longer lead times and large inventory. This is another area where we have made a breakthrough by being the only company to offer 'Made in India' basic bricks to India's cement makers! Availability of these bricks in India will solve the problems of emergency requirements and inventory carrying cost. Further, in the area of basic, chrome-free magnesia-based basic bricks have been developed by us in India. We have also researched and developed zirconia additives for improvement of hot strength of basic products.
Another area our research teams are working on, is reducing thermal losses. We have introduced a range of bricks 'ALITE' that has received great encouragement from the market for successfully cutting down thermal losses. Several other new products are in the offing, which are being designed to address production-related challenges of customers.
Given that application of refractory has a great impact on quality of installation, do you directly take part in application work at your customers' sites, or do you partner with other application service providers?
A good refractory installed badly is as good as a bad refractory. It is in our interest to see that our refractories are properly installed and we take end-to-end responsibility for the materials we supply. We have made investments in equipment and machinery for speedy execution and in systems and processes for correct installation. We have our own installation team and we partner with other installation companies in some cases.
Refractory Products are a classic example where total life cycle cost or TCO should determine purchasing decisions, and not the procurement price per se. This is particularly true for the cement kilns. Do you see the Indian cement plant managers are sensitive to total cost of ownership in making these procurement calls?
Yes, in our experience we have noted that Indian decision makers are sensitised to choosing better quality refractories that offer longer life. The advantage we have over other manufacturers is the full range of products û from regular high alumina bricks, special quality alumina bricks, basic bricks, monolithic products, etc. which helps us optimise and provide the right solution for our customers.
Now we are working on next stage of optimisation, which will be through remote monitoring of kiln performance but this is still some time away.
If you were to recommend a few actions to be taken by our government in order to help promote growth of the refractory industry, can you please share the top three or four such recommendations with our readers.
The criticality of refractories rests in its function as not a ton of cement or steel can be produced without refractories. Given this criticality of refractories in supporting India's infrastructure growth vision, we are actively pursuing with the government to support this sector on these key issues:
1)Need to boost local refractory manufacturing;
2)Reduction of duties on raw material import;
3)Enabling mining policies for minor minerals like bauxite, quartzite, magnesite, etc., which are critical refractory raw materials. This will ensure over time that India is not dependent on external factors for raw material;
4)Support to refractory and ceramics R&D to boost local innovation
Is the Indian Refractory manufacturing industry globally competitive? Are we, as a country, able to tap into the global/regional market? More specifically, what is your company's export performance?
Exports constitute 15 per cent of our revenue, backed by a network of representatives spread across the world. Due to its low-cost and highly skilled workforce, India is a competitive market for refractory manufacturing and is also a sourcing base for Americas and Europe. With India marching ahead as the world's second largest steel and cement producer, as a country we should also be a leading refractory producer to support these industries.
Indian companies have the wherewithal to emerge as a globally competitive player and that's why we feel it is time indeed for an Indian multinational to emerge in the refractory industry. At Dalmia-OCL, we are actively pursuing this vision of being a strong global player and looking at acquisitions in Europe to help us build scale and access latest technologies, all of which will come back to support the growth of the Indian cement and steel industry.