Feb. 26, 2024 - In the dynamic landscape of the refractory industry, RHI Magnesita stands tall as the global leader, providing top-notch refractory products, systems, and solutions crucial for high-temperature processes across diverse sectors. Recently, the company made significant strides in the Indian market with the completion of two strategic acquisitions: Dalmia OCL and the refractory division of Hi-Tech Chemicals.
In this interview,
Parmod Sagar, CEO & MD, of RHI Magnesita sheds light on RHI Magnesita’s recent milestones, the company’s strategic vision for the future, and the evolving landscape of the refractory industry in India and beyond.
The Indian refractory market is poised for significant growth in the coming years. What are the key challenges and opportunities that the industry is facing?
The booming infrastructure sector and the nation’s economic goals are the main factors driving the Indian refractory market’s potential for significant growth. With India aiming to achieve a crude steel production of 260 million tonne by 2030 and striving for a $7 trillion economy by the same year, the consumption of refractory materials and products is expected to grow significantly. Additionally, the increasing demand for cement to support infrastructure and construction activities will further fuel the demand for refractories.
Moreover, the increase in demand for aluminium across various sectors, including construction, automotive (for EVs), packaging, and power generation, will contribute to an increased consumption of refractories in the aluminium industry. Despite these promising prospects, the industry faces several challenges, which include cost overshooting due to volatile commodity prices, high dependency on imports for raw materials, and limited domestic sourcing due to geological and technological constraints. However, amidst these challenges, the Indian refractory industry stands to capitalise on the growth opportunities presented by the expansion of end-use industries. By leveraging favourable market conditions and addressing the above-mentioned challenges through strategic planning and innovation, the Indian refractory industry can navigate its way towards sustained growth in the years ahead.
The refractory industry plays a crucial role in the growth of India’s manufacturing prowess. How can refractories contribute to the country’s manufacturing ambitions?
India has set domestic manufacturing and infrastructure development targets for each year. The demand for Indian steel on a global scale has increased, and the Indian government is putting more of an emphasis on manufacturing and infrastructure, which are both driving the refractory industry’s upward trajectory. By providing essential materials for high-temperature processes across various sectors like steel, cement, glass, non-ferrous metals, and petrochemicals, refractories serve as the backbone of industrial operations. They are essential at every stage of steel production, cement manufacturing, and glassmaking, ensuring the efficiency and quality of the final products.
Initiatives such as Atmanirbhar Bharat highlight the importance of self-reliance; however, the refractory industry continues to depend heavily on raw material imports. Post-Covid, India has rapidly emerged as a major sourcing hub for refractory products. As the industry continues to grow, there will likely be a shift from global to Indian raw materials, providing a significant boost to domestic manufacturing. This shift will not only enhance self-sufficiency but will also strengthen India’s position as a manufacturing powerhouse on the global stage.
The refractory industry’s crucial role in meeting the demands of India’s manufacturing ambitions is undeniable. With the government’s push to increase steel capacity and substantial investments earmarked for infrastructure development, the refractory sector stands at the forefront of India’s manufacturing narrative. By ensuring the smooth functioning of high-temperature processes and supporting the expansion plans of key industries, refractories contribute directly to India’s manufacturing ambitions, fostering sustainable growth and bolstering the nation’s industrial competitiveness on a global scale.
RHI Magnesita has been at the forefront of the industry, driven by innovation and advancements. Can you share some key innovations or technologies that have helped the company maintain its leadership position?
Through a steadfast commitment to innovation and technological advancements, RHIM has always been at the forefront of the industry. Recently, we have introduced significant innovations that underscore our dedication to serving our customers with cutting-edge solutions. One notable innovation that we have commissioned is a new purge plug-making unit at our Bhiwadi plant in India. The unit has been developed through a technology transfer arrangement with our Urmitz plant in Germany, and this unit enhances our capabilities in producing high-quality purge plugs, a critical component in various industrial processes. This initiative demonstrates our proactive approach to adopting advanced technologies to meet the evolving needs of our customers.
Furthermore, we have operationalised a state-of-the-art R&D centre in Bhiwadi, Rajasthan. This marks the fifth R&D facility in RHI Magnesita’s global network after Leoben (Austria), Contagem (Brazil), Dalian (China), and York (United States). It is strategically positioned to cater to the specific requirements of our Indian customers. The centre is equipped to provide faster service delivery, facilitate the development of alternate raw material mixes for sustainable production, and create new products tailored to the Indian market. By leveraging this centre, we aim to drive innovation, enhance product customisation, and deliver greater value to our customers.
These key innovations represent our persistent pursuit of excellence and our commitment to staying at the forefront of the industry. Through continuous investment in technology and research, we remain assured to address the challenges and opportunities of tomorrow while ensuring that our customers receive best-in-class solutions that drive efficiency, sustainability, and success.
RHI Magnesita India has recently completed the acquisition of two leading refractory manufacturers in India. What was the rationale behind these acquisitions, and how will they contribute to the company’s growth strategy?
The recent acquisitions by RHI Magnesita India mark a pivotal move in our growth strategy. The rationale behind these acquisitions stems from the recognition of the immense potential within the Indian refractory sector. By integrating two leading refractory manufacturers into our operations, we are strategically enhancing our presence and capabilities in key regions of India. This consolidation not only bolsters our production capacities but also facilitates significant network optimisation synergies, thereby enhancing operational efficiency and competitiveness.
Moreover, these acquisitions underscore our commitment to our service. By integrating the acquired businesses into our network, we aim to reinforce our reputation for delivering high-quality products and exceptional service, further solidifying our position as the leading player in the region. The decision to pursue these acquisitions reflects the strong commitment of our senior management to fortify our operations in India and expand our footprint in the region.
RHI Magnesita India has also announced the closure of qualified institutional placements (QIP) to raise INR 900 crore. Can you elaborate on the purpose of this fundraising and how the funds will be utilised?
The closure of the qualified institutional placement (QIP) by RHI Magnesita India, aimed at raising INR 900 crore, represents a strategic move to fortify our position as a market leader.
The proceeds from the QIP have mainly been utilized to finance debts against recent acquisitions. While a smaller part of the proceeds is being used for general corporate purposes like working capital funding. This transaction demonstrates the confidence and support of high quality international and domestic institutional investors in the business and financial model of our company.
What are the key focus areas for RHI Magnesita India in the coming years? Are there any specific markets or segments that the company is targeting for growth?
In the coming years, RHI Magnesita India has identified several key focus areas to drive growth and solidify its position as a leading player in the refractory market. The primary focus remains on achieving the production targets, intending to double production to almost 3,00,000 tonne per year by 2026.
Leveraging synergies derived from recent acquisitions, RHI Magnesita India aims to ramp up its market share to 40% within the next four years. India is the world’s largest producer of direct reduced iron (DRI), and the pellet-making industry has witnessed substantial capacity additions in recent years. A new business vertical has been set up to service the Indian iron-making industry, aimed at supporting the industry to jointly work on key challenges such as decarbonisation, domestic refractory supply reliability, productivity, and performance improvement of the iron-making plants. With India emerging as the second-largest steel producer globally, there is immense growth potential in these sectors.
Sustainability is a growing concern across industries. How is RHI Magnesita India addressing sustainability in its operations and product offerings?
At RHI Magnesita India, sustainability is more than a commitment; it’s a cornerstone of our ethos. We are proud to lead the charge in addressing sustainability within the refractory industry. As part of the global initiative by RHI Magnesita GmbH, we’re setting new standards by disclosing the CO2 emission data for all 200,000+ products in our portfolio. This transparency underscores our dedication to accountability and empowers our stakeholders to make environmentally conscious choices.
Our focus on sustainability extends beyond disclosure. We’re actively reducing our carbon footprint through investments in technology and championing a circular economy approach. In FY 2022, we achieved an average recycling share of 14 per cent, demonstrating our dedication to waste reduction and optimising resource utilization. To spearhead our recycling efforts, we’ve established a dedicated function within our organization. This team is instrumental in driving our emissions reduction agenda and ensuring that sustainability remains at the forefront of our operations.
As the global leader in refractories, RHI Magnesita India leverages its extensive network and vertically integrated supply chain to deliver the most innovative and reliable products and services. Our steadfast commitment to both quality and sustainability not only distinguishes us but also ensures that we consistently exceed the expectations of our customers and stakeholders alike.
The refractory industry is known for its cyclical nature. How does RHI Magnesita India navigate these cycles and ensure long-term growth and profitability?
Cyclical fluctuations are inherent to the refractory industry, but at RHI Magnesita India, we’ve honed a strategy that ensures resilience and sustained growth amidst these dynamics. Our outlook is positive as India’s growth trajectory continues to be strong thanks to rising domestic demand and sizable government investments in infrastructure.
The recent interim budget’s allocation of Rs 11.11 lakh crore for infrastructure underscores the nation’s commitment to development, which inevitably will have a positive effect on our industry. With a remarkable 11.1 per cent increase in capital expenditure allocation from the previous fiscal year, the stage is set for enhanced investments across various sectors, including refractories.
At RHI Magnesita India, our approach to navigating cyclical fluctuations is multifaceted. Firstly, our deep-rooted integration within the global parent company provides us with substantial support, especially in times of market volatility. This ensures stability and consistency in our operations, allowing us to weather downturns more effectively.
Furthermore, we continuously innovate and optimise our processes to enhance efficiency and adaptability. By investing in research and development, we stay ahead of industry trends, offering innovative solutions that meet evolving customer needs. Moreover, our focus on building strong relationships with our clients, particularly steelmakers, remains unwavering. Through reliable backward integration support, we provide tailored solutions that not only address their immediate challenges but also foster long-term partnerships.
Are there any upcoming projects or developments that RHI Magnesita India is particularly excited about?
At RHI Magnesita India, we will continue to be part of India’s economic growth and are committed to contributing to the Make in India initiative. Our focus on sustainability and investment in cutting-edge technology underscores our dedication to supporting our customers both domestically and in export markets.
Looking ahead, we are excited about several upcoming projects and developments. These include initiatives aimed at enhancing our manufacturing capabilities to meet the evolving needs of our customers, as well as the introduction of innovative solutions that promote sustainability and efficiency. Additionally, we are actively exploring opportunities to expand our footprint in key markets, further strengthening our position as a trusted partner in the refractory industry.
Overall, we are optimistic about the future and remain committed to driving positive change while delivering value to our stakeholders.
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