Faced with overcapacity in steel industry and the current economic situation, what should refractories enterprises do? Therefore, Refractories Window made an exclusive interview with Mr. Octavio Pereira Lopes, CEO of Magnesita Refratarios S.A..
Refwin: How do you comment on the current situation of refractories industry in America?
Mr. Lopes: We are one of the leading refractory companies in all the Americas, having not only production facilities in North (USA) and South America (Brazil and Argentina) but also sales offices in most countries in both regions.
In our view, the performance of both refractory producers and steel producers - by far the largest consumer of refractories - has not been homogenous for the last couple of years.
While there is a clear trend of growth and recovery in North America, South America may still face some tough years ahead with little or no growth and cost pressure, but still no decline thus far and no sign of it.
We also believe that the global excess capacity in the steel industry is affecting steel and refractory producers in both continents (as it is in the rest of the world).
Nevertheless, we have been able to sustain growth in our business in all Americas, taking advantage of our strong footprint in the continent, unique raw material sources, and being proximity with clients and high quality products.
Refwin: What developments have you planned for Magnesita Refratarios S.A?
Mr. Lopes: We continue to be very focused on our strategy, which is based on 4 pillars:
I - Ensure leadership in our core markets;
II - Grow selectively and aggressively;
III - Expand industrial minerals base;
IV - Maintain a global low cost production base.
Following that, we have not only been able to grow our business in our core markets (mainly Americas and Europe), but we have also increased our global presence. We recently acquired a plant in Dalian which can produce up to 80,000 tons of refractory bricks (mainly magnesia carbon), we opened a new sales office in the Middle East, and we expect to continue expanding our footprint in Asia.
Moreover, we will continue to invest and focus on our own raw materials, in particular our magnesite mine at Brumado, Brazil, which gives us a unique competitive advantage.
Refwin: What are the key factors for Magnesita to keep growing?
Mr. Lopes: We have been in this business for more than 100 years. We believe we have built a great combination of several factors that have been able to sustain our growth, such as, among others: (i) our own high quality raw materials sources, (ii) total focus on the client; (iii) wide-range of state-of-the-art products; (iv) strong technical assistance to the customers; and (v) right strategy.
Refwin: What is the biggest challenge faced by the global refractories industry?
Mr. Lopes: I believe that like several other manufacturers, the little growth outside of China and the overall situation in the global economy are per se a challenge.
On top of that, as I mentioned, our clients in the steel industry are facing a challenging scenario which is the global excess capacity. In 2013 alone, China has added around 56 million tons of steel to their already huge capacity (over 900million tons).
Aside from this global economic scenario and the overcapacity in the steel business, the global refractories industry is also facing tightening rules and regulations in respect of the environment, which especially affects companies like ours that are also very focused on mining its own raw materials.
Refwin: Where do you see as the markets with growth potential?
Mr. Lopes: We continue to be very optimistic with respect to our core markets in the long term (Americas and Europe). Nevertheless, following our strategy, we also see good opportunities in the Middle East, the CIS countries and some countries in South East Asia. We should take into account that China will always play a very import role in this industry.
Refwin: How do you expect for refractories in next 5 years?
Mr. Lopes: We believe that the industry will become more and more global (many clients already globally purchase their refractories), and as a consequence, there is a trend for consolidation, as it is still a very fragmented industry.
Nevertheless, competition in this industry will continue to be very strong. On one hand, I believe that companies like ours that are constantly focusing on quality, innovation and on the client’s needs, capable of delivering a wide range of products and are operating everywhere in the world; on the other hand, small and medium refractory companies will have difficulties in sustaining their business.
Refwin: Thanks very much for sharing your opinions!