Refractory maker looking at initial growth of 6% CAGR provided steel fundamentals stay strong

By NIRMALYA DEB

Softening steel prices and sluggish sentiments prevail in the European and US markets – dampening spirits of investors sniffing growth opportunities. The emerging markets of South Asia and the MENA region are beckoning industry bigwigs. RHI Magnesita (RHIM) is no exception. The global supplier of high-grade refractory products, systems and solutions, which are indispensable for industrial high-temperature processes exceeding 1,200°C in a wide range of industries, is eyeing growth prospects in India.

The reasons are not far to seek: unprecedented growth in infrastructure and construction, the government’s Make-in-India campaign and the unbounded potential for expansion of capacity and consumption make India the one-stop destination of global investors.

RHIM At A Glance

RHI Magnesita serves industries as diverse as steel, cement, non-ferrous metals and glass. With a turnover of Euro 3.1 billion, 35 production sites and 14,000 employees, the refractory behemoth serves more than 10,000 customers globally. Its shares have a premium listing on the London Stock Exchange and are a constituent of the FTSE 250 index.

Refractory products are used in all the world’s high-temperature industrial processes. Without them, the steel, cement, lime, non-ferrous metals, glass, energy, environment and chemical industries wouldn’t exist. Refractories defy the most hostile conditions to stay strong and stable at temperatures of 1,200 °C and much higher. Refractories are used to contain materials safely while they are burned, melted, blasted, fired, fused, and shaped as well as to protect equipment such as furnaces and kilns against thermal, mechanical and chemical stress. A refractory manufacturer’s job is to provide answers to these extreme challenges. RHI Magnesita produces over 120,000 products ranging from bricks and lining mixes to flow control products such as slide gates, nozzles and plugs. Their service lives range from a few cycles within a day to as long as 10 years. The base materials the company uses are magnesite and dolomite – materials which require skilful handling: the melting point of fused magnesia is above 2,800 °C.

PARMOD SAGAR, MD and CEO, RHI Magnesita India

Growing Footprint In India

RHI Magnesita has been operating in India through its three subsidiaries – the BSE/NSE-listed Orient Refractories Ltd, RHI Clasil Pvt Ltd and RHI India Pvt Ltd. Together, they provide refractory products and refractory management services to many large and mini steel plants in India. The company is in the process of integrating its Indian subsidiaries to form one listed entity in India, which would emerge as the largest single refractory solutions platform in India offering the industry’s most comprehensive product portfolio. The merger scheme is currently under NCLT hearings and is expected to be completed before the end of the calendar year.

Moreover, as part of its 2022 strategy, the company is looking at inorganic growth in the Indian market with above-average level of investments. The refractory services provider has recently made a small acquisition of a metallurgical equipment manufacturing company in Mumbai. Further, it has inked an asset purchase agreement to acquire a plant and certain other assets of another Indian refractory maker in Cuttack, Odisha. RHI Magnesita India MD and CEO, Parmod Sagar, was in Kolkata recently and in conversation with Steel 360 dwelt at length on the company’s technological offerings, its business developments in India and the challenges it is likely to confront.

Rapid Strides Towards Growth

“RHI Magnesita plans to strengthen its footprint in India at a time when steel capacity enhancement and unprecedented rise in steel consumption have turned India into the rising star of the global steel industry. We have already acquired two companies in the country. One is a small Mumbai-based metals company that manufactures slide gate-handling mechanisms. So, there is a refractory and there is another machine that operates that refractory. This company is currently a 100% subsidiary of Orient Refractories Ltd,” Sagar informed. “This year,” he continued, “we have also concluded an asset purchase agreement with Manishri Refractories & Ceramics Pvt Ltd. This plant is in Cuttack. As part of the agreement we have acquired the land, building and equipment of the said company. As it is an asset deal, we haven’t acquired the company’s business. And we are planning to put up a magnesia carbon production facility at the plant. It will be the company’s first such production facility in India.” Dwelling on the refractory market in India and RHIM’s valued customers, Sagar said: “Almost all the integrated steel manufacturers are our customers like the JSPL Group and the Tata Group. Earlier, Bhushan Steel was a valued customer until it was acquired by the Tata Group.”

Market Leader In Technology

Responding to a query as to how competitive the Indian market is for RHIM, Sagar commented: “There are two distinct segments in the market. First is the high-end product segment that calls for the utilisation of high-end technology. We don’t have many competitors in this segment and we are the market leader in technology. However, in the commodities segment the competition is stiff. There are Chinese traders and a lot many small players competing for space. However, we are hopeful that the merger of our Indian subsidiaries would definitely be a big boost to our business. We will have a bigger product portfolio, be in a position to offer full line solutions to our customers and manage resources far more efficiently.” Speaking about RHIM’s focus on the South East Asian markets, Sagar observed: “We have a strong presence in the emerging South East Asian markets and would like to consolidate our position further. Many RHIM products from India are exported to other parts of the region.” Commenting on the company’s thrust on technology, Sagar said: “We have a state-of-the-art manufacturing facility in Vishakhapatnam and a state-of-the-art R&D centre is coming up in Bhiwadi, an industrial township. RHIM has two global R&D centres in Leoben, Austria, and Contagem, Brazil. The third is coming up in Bhiwadi. It will take about one-and-a-half years to be fully functional. The technology centre will streamline our R&D operations in India.” Highlighting the company’s mining operations that are spread across the globe, Sagar said: “There are not much refractory raw material reserves in India. There are some bauxite reserves and small reserves of magnesia which are basically low-grade, unsuitable for RHIM’s high-end products.”

“India and China are our two major markets due mainly to their strong steel fundamentals. Prices are softening in the US and Europe and end-demand remains weak. However, our look-east policy has not been adopted to offset that loss. We are looking at cementing our position in the growth hubs of the global steel industry. We know which are the global growth hubs of the steel industry and are focusing on those regions. In China, for example, the revival of the dolomite plant in Dalian will contribute in a big way to boosting our sales volumes,” he said.

Dwelling on the technological services the company provides to steel makers, Sagar said: “We have expertise in flow control technology. Most big steel plants in India and across the globe have adopted our slide gate mechanism to regulate flow control. We also offer state-of-the-art services in tundish metallurgy. RHI Magnesita already has a strong presence in the long steel segment and we are strengthening our presence in the flat segment. We are evenly spread in the alloy, construction and stainless steel markets.” “As global refractory leaders,” continued Sagar, “we are in a position to drive positive change in our industry and the industries that rely on us. We offer a complete product and services portfolio for all steel industry processes, ranging from reduction up to reheating furnaces, through steel making and ingot casting. A global sales and service network ensures the best and most reliable service in the industry. From basic and non-basic bricks and mixes, slide gate plates, isostatic products and prefab components to special machinery, mechanisms and repair systems, our products and customised services are delivered to customers worldwide.”

RHI Magnesita’s main client base is the global steel industry. Sagar said: “Around 85% of our customers are from the steel industry. The rest are from non-ferrous industries like cement, chemicals and glass. Now, we all know the importance of recycling in the steel industry and its impact on sustainability. As a leading global supplier of refractory materials we understand the importance of recycling and reusing materials. As an eco-friendly manufacturer, we focus on increasing the share of secondary raw materials in manufacturing.”

Expressing optimism about RHIM’S growth prospects in India, Sagar averred: “Initially, we are looking at growth of around 6% CAGR if steel fundamentals remain strong. With the government’s focus on increasing per capita consumption of steel in the country, we are hopeful of growing at a rate of around 7% per annum.”