Refwin: What do you see as the fundamental trends in the refractories industry?
Mr Soumyadip Roy: (a) Reduction in Specific consumption per MT of Steel will come down. (b) The demand for “Reliability in equipment availability & productivity” on a total cost of ownership basis would be sought by the end customers. (c) Technology leaders would outpace cost based leadership companies in refractory as a result on the above two. (d) Work has been progressing to be self-depended on raw materials & re-use of recyclable products & beneficiation of raw materials.
Refwin: What do you see as the key issues in the refractories market today and in 5-10 years time?
Mr Soumyadip Roy: (a) Sluggish demand from the metallurgical industry coupled with pressure on reducing prices. Capacity additions are on hold from the steel makers. (b) Continuous increase of raw materials price & over dependency on China. (c)Exponential increase of fuel, electricity price, Substantial increase in labour cost in China. (d) Over capacity of refractory industry compared to market demand leading to a situation that input cost increase is not compensated by the increase in net realisation from market. In the 5- 10 years time, the situation is likely to change due to the following factors:
<a> BRIC countries should enhance capacity for steel on account of more demand for inhouse consumption for infrastructure developments.
<b> Cost of refractory production from China / India & other developing countries to increase.
<c> Added to the above factors will be the shortage of prime quality raw materials.
<d> Shortage of well qualified human resource/ (professional).
<e> More Merger & Acquisitions to take place.
Refwin: What do you see as the opportunities and threats in the market?
Mr Soumyadip Roy:
Opportunities: (a) New capacity addition is likely to continue in BRIC. (b) Taiwan, Turkey are also emerging as the big steel making area. (c) Number of new Aluminum smelters and steel plants are coming up in the Gulf region.
Threats: (a) Crisis on natural resources -Availability of prime raw materials. (b) Strict environmental norms. (c) Chinese refractory player might start sending products into other countries on account of lower domestic demand in China.
Refwin: What do you see as the levers of competitive advantage and will these be different in the future (5-10 years time)?
Mr Soumyadip Roy: Levers for competitive advantage: (a) Raw material security – long term lease over mines / owning mines. (b) Technology of making synthetic raw materials. (c) Continuous innovation. Companies with technology support would get advantage. (d) Lean organisation.
Refwin: Do you see increasing or reducing capacity? What do you anticipate at a global level and how will this vary by region?
Mr Soumyadip Roy: Since refractory industry is already with over capacity, may be there will not be significant increase in the total global capacity .However at the regional level specially in Asia and Latin America capacity expansion will be there to take care of the enhanced steel production in this region.
Refwin: Do you see the pace of innovation and the frequency of change, speeding up or slowing down, in the future?
Mr Soumyadip Roy: In the last two decades, the steel industry has undergone some fundamental changes. BF –BOF route is being replaced by EAF / Finex / ITMK-3 route majorly in the developing countries. In future the steel making routes are likely to undergo more rapid changes in order to tackle different kind of raw materials, meet more stringent specification of finished product and to comply to strict environmental norms .Processes like Finex, Hismelt / ITM K -3, etc will become more popular.To cope with this, there will be demand of changes in refractory usage pattern.
Refwin: Will cost trends inevitably rise and if so, can these be mitigated by R&D and innovation or will they have to be passed onto the customer?
Mr Soumyadip Roy: Due to scarcity of prime raw materials and increasing trend of fuel price the input cost of refractory makers will definitely increase however there will be pressure from market to harness the cost as the market may not be able to support the entire hike .R &D and innovation and continuous process improvement will have to tame the major part of hike in input cost.
Refwin: Do you anticipate continued market consolidation and M&A activity?
Mr Soumyadip Roy: Refractory industry is highly fragmented specially in countries like India, China etc .In the last decade, there were some major consolidation & M & A activities in North America & Europe .Last few years the same trend is observed in Indian market eg Krosaki Harima & Calderys taking major stake in the two largest refractory companies in India. Due to intense competition, long list of smaller plantsare likely to shrink.
Refwin: Will it be easier or harder for new players to enter the market?
Mr Soumyadip Roy: It will be difficult for an upstart to make an entry to the market because establishing itself will take a long time.
Refwin: Will the top 10 (in terms of size) refractories producers still be the same in 10 years time?
Mr Soumyadip Roy: It is likely to remain without much change however some Chinese companies are likely to become the key players due to competitiveness. Somespecialised players may also take away chunk of business for their specialised area from current big 10 players in the world market.
Refwin: Will the refractories industry be more or less profitable in the future?
Mr Soumyadip Roy: Profitability of refractory companies will remain under pressure as it will have to survive in sand witch like situation between the supplier & its customers whose size of industry are much bigger thanrefractory industry .However lean enterprises with high agility and innovative approach will continue to make profit in future .
Refwin: Do you see the future as a buyers or a seller’s market?
Mr Soumyadip Roy: It is likely to remain as a buyers market because huge over capacity of refractory industry.