As the impact of economic crisis gradually fades, global refractories industry ushers in a new stage of development, but it still faces some challenges besides potential opportunities. Refractories Window is pleased to interview Mr. Franz Struzl, CEO of RHI AG, to share his points of view with us on the development of global refractories industry.
RefWin: What is the global development strategy of RHI?
Franz Struzl: The RHI Group currently operates 33 production sites, of which 21 are located in Europe and 12 outside of Europe. RHI also has three production sites in China and a raw material site with a participating interest in a magnesite mine. Another seven raw material sites, where primarily magnesite is mined, are located in Europe. The self-sufficiency level with magnesite amounts to roughly 80% and makes RHI practically independent of the volatile raw material markets. This backward integration remains an important cornerstone in RHI’s strategy.
RHI currently generates some 57% of its total revenues of roughly 1.8 billion euros in markets outside of Europe. Our strategic orientation aims at gradually increasing this share to 70% in the coming years.
Although RHI has strong roots in its home country Austria, we will advance the company’s globalization in the years to come. We closely monitor the market and continuously search for raw material sources and production options.
RefWin: How do you comment on the market supply and demand in Europe?
Franz Struzl: Unfortunately, the European market is still falling short of expectations. We have surplus capacities in several customer industries, for example in steel or glass. This has a negative impact on demand in the refractory industry. In Europe, we are currently confronted with a generally subdued investment climate and a rather pessimistic atmosphere, which is increasingly paralyzing business life. As a result, the economy in Europe is faltering and even the economic engine Germany is threatening to lose momentum. Therefore, concerns about a “triple dip”, i.e. fears that the economy may slide into recession for the third time after 2008 and 2012, are growing.
In contrast, when I travel through China, I see a much more optimistic general attitude in business, even if the growth momentum has also slowed down here. Moreover, the attitude towards industry is much friendlier in China than in Europe. So it is no great surprise that many European companies currently want to position themselves more strongly in the growth markets outside Europe.
RefWin: Which countries do you see as the markets with growth potential?
Franz Struzl: India is currently one of the most interesting growth markets from RHI’s point of view. In the financial year 2013 we acquired a majority interest in the company Orient Refractories Ltd. Consequently, we now have two production sites in India and feel well equipped to accompany the further growth of the Indian steel industry. So far, India has imported roughly 35% of its steel products, but intends to become largely self-sufficient in the years to come. That is why this country is definitely a future market for us as a refractories specialist. Currently, India is our second largest single market in terms of revenues after the USA and ahead of Germany.
I also expect further growth in Russia, especially in the steel sector. Russia currently produces some 70 million tons of steel and is likely to increase this volume to an estimated 100 million tons in the next few years. Therefore, Russia will remain a promising market for the refractory industry despite the political controversies with Ukraine. Of course China and Brazil are also attractive markets for RHI with great growth potential, but I also think that we should not underestimate emerging economies in Africa and the Middle East.
RefWin: What are the challenges faced by global refractories industry in the next years?
Franz Struzl: I assume that the refractories industry will have to deal with three major trends in the next few years:
First of all, the globalization of our industry will continue to advance, with a further consolidation bound to occur in the medium to long term.
After several customer industries of the refractory sector have already undergone phases of massive consolidation, this wave will sooner or later also come rolling in on the refractories industry.
Secondly, climate protection policy will increasingly also become an issue outside of Europe as a result of the changing values in our society. For example, the European Union will exercise more pressure on other countries to also make a significant contribution to reducing greenhouse gas emissions. This will not be without consequences for energy-intensive industries, and the refractory industry is without doubt one of them.
Thirdly, the standards required by refractory customers in terms of quality, performance and innovation will continue to grow. Here I not only refer to refractory products as such, but the entire package consisting of products, installation and service. R&D and innovation management will thus become a key success factor for the refractories industry.
RefWin: What exactly do you mean by innovation management?
Franz Struzl: A good idea will only turn into an innovation if it fulfills a genuine benefit for the customer. Companies which launch successful innovations in the market follow their customers’ business logic.
Therefore, it will be more important than ever for the refractory industry in the future to anticipate problems and requirements of customers correctly and at an early stage. Those who think innovatively, not only have new products in mind, but also process innovations, value added structures and service packages. This is especially true for suppliers that want to establish themselves in a sophisticated market niche. Here, comprehensive understanding of innovation and a systematic innovation process will ultimately decide who will prevail in the long term in an ever increasing competition.
RefWin: Thank you very much for sharing your viewpoints with us.