Insight into the Rebound of the Refractory Industry

Refractory materials generally refer to inorganic non-metallic materials with a refractoriness above 1580℃, which includes natural ore and various products made through a certain process according to certain purpose requirements. It has certain high-temperature mechanical properties and good volume stability, which is a necessary material for various high-temperature equipment.

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Refractory materials are widely used in metallurgy, chemical industry, petroleum, machinery manufacturing, and power. There are many types of refractory materials, which can be subdivided into different types according to different classification methods.

The refractory industry in China has formed a mature system of research, design, production, and application to contribute to the whole industrial development. Though the domestic refractory industry showed a slowing increase due to the depressed downstream market in recent years, it has picked up in 2018 and 2019, driven by the downstream applications at home and aboard after a 4-year decrease. The output of refractory products in China was 24.31 million tons in 2019, a year-on-year increase of 3.66%.

In 2019, China's dense shaped refractory products were 13.414 million tons, an increase of 1.1% year-on-year, accounting for 55.18%; thermal insulation refractory products were 589,000 tons, an increase of 8.9% year-on-year, accounting for 2.42%; unshaped refractory products were 10.305 million tons, a year-on-year increase of 6.9%.

The Industry Affected by the Epidemic the First Half of 2020

From January to June this year, the output of refractory products decreased by 13.75% year-on-year. Except for the slight increase in thermal insulation products, the output of other varieties has decreased to varying degrees, in which the clay bricks, high-alumina bricks, and magnesia bricks all dropped significantly, down by 23.54%, 25.22% and, 24.97% respectively, except for silica bricks in dense shaped products; the types of expendable refractories are less affected by the epidemic, and refractories are used for infrastructure construction. Enterprises are more and more directly affected by the epidemic.

From a regional perspective, Zhejiang, Jiangsu, and Shandong are less affected by the epidemic. The main reason is that the variety structure of the local traditional advantageous industries and customer quality is better, and the competitiveness is stronger. Companies in other production areas are more affected by the epidemic.

On the whole, the production of refractory materials in most regions and enterprises in the first half of 2020 are relatively affected by the epidemic.

Refractory Raw Material Production Capacity Continues to Be Released, And Prices Fluctuate Greatly

Due to the new wave of price hikes in refractory raw materials in 2017, social capital has invested in the refractory raw materials industry for its high profit. Therefore, the release of raw material production capacity in 2019 has significantly increased, leading to the price of main refractory raw materials. Except for bauxite clinker, prices of other products declined, in particular, the prices of fused magnesia and sintered magnesia have dropped significantly, by about 18% and 25% respectively. The rapid decline in raw material prices is an important feature of the industry in 2019, which will continue to show in 2020.

The victim of the serious overcapacity and disorderly expansion is in the refractory raw materials industry is the enterprises. Under the premise of ensuring market demand, it is necessary to strictly control the mining volume of ore and the total production volume of refractory raw materials, which can be effective under market economic conditions to ensure the relative stability of product prices.

Steel and Building Materials Are Facing Complex and Changeable Situations in 2020

In 2019, downstream applications such as infrastructure construction and real estate were operating stably. The apparent domestic crude steel consumption reached 940 million tons, an increase of 8% year-on-year. China's crude steel output hit a record high in 2019, reaching 990 million tons. Due to the rapid increase in steel output and the price of raw materials such as iron ore, the economic benefits of iron and steel enterprises have fallen sharply.

It is predicted that in 2020, the automobile, construction machinery, and construction have been affected by the new crown pneumonia epidemic. Although the country will take some countermeasures to eliminate the negative effects, it is estimated that crude steel production in 2020 will not rise, which will force refractory materials and other upstream industry products to reduce prices, further increasing the operating pressure of refractory companies. In 2020, the refractory industry will face not only the impact of the entire macroeconomic level at home and abroad, but also the complex and changeable market situation of upstream and downstream industries.

Rich Resources of Domestic Refractory Materials

China has relatively abundant refractory raw materials resources, mainly including high bauxite, magnesite, and graphite, all of which have large reserves, high grades, and easy exploitation. The refractory raw materials in China have achieved remarkable results in the aspects of selection, purification, homogenization, synthesis, modification, high-temperature calcination, expansion of varieties, and quality improvement. Therefore, China has unique resource advantages in producing refractory materials.

The Replacement of Steel Plant Capacity May Have Some Positive Effects on the Refractory Market

Following relevant regulations of the steel industry, the Ministry of Industry and Information Technology continues to carry out the dynamic adjustment of steel standard enterprises. After enterprise self-examination, a preliminary examination by local industrial authorities, and verification by experts, 13 enterprises meet the requirements and are planned to be included in the list of regulated enterprises; 7 enterprises have failed the local preliminary examination and all smelting equipment is planned to be shut down and withdrawn, which is proposed to revoke the regulatory announcement; 13 companies have environmental protection and safety issues, which is proposed to order rectification. According to the information released and updated by the MIIT, 76 steel companies have replacement projects due to the above reasons. The proposed steel project has a crude steel production capacity of nearly 200 million tons, which is undoubtedly a major benefit for refractory companies.

Pay Attention to Refractory Materials for Steelmaking Electric Furnaces

China's scrap steel market has undergone major changes in 2019. According to statistics, the amount of domestic scrap produced and used has reached a new level of 200 million tons, with a scrap ratio of 20%. The operating rate and capacity utilization rate of steelmaking electric furnaces continued to rise.

The demand for refractories for electric furnaces will gradually increase. Due to the introduction of slag splashing technology for converter steelmaking, the furnace age is high and stable, but the steelmaking electric furnace age is relatively low, generally about 600-700 furnaces. Therefore, enterprises pay attention to the refractory materials for electric furnaces for their quality improvement, product renewal, and technological development.

Under the conditions of overcapacity, the refractory industry has become a trend to transform. And the attack of the epidemic is undoubtedly a heavy blow to the industry. However, this does not mean that the refractory market will not pick up and companies will lose development opportunities. Companies can rely on resource advantages to regain new opportunities in the development of steel plant capacity replacement and steelmaking electric furnaces.


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