India has entered a new phase of development. During this phase, we will see significant growth in infrastructure, thanks to the political focus on the sector. For example, the Union’s budget for the financial year 2022-23 set out the roadmap for growth in the creation of infrastructure, which focuses on roads, public transport, logistics, housing, mobility and commercial real estate, among others. Hence, this growth will create a beneficial intersectional ripple effect across multiple industries and different segments.
To understand the true picture of this growth, it is important to understand the role of refractory as a key enabler in the manufacture of steel, cement and, by extension, construction and infrastructure construction.
Let’s look at some numbers for a clear picture. India’s steel capacity is targeted at 300 MT by 2030 in line with India’s steel policy. Production is expected to reach 230 MT by then, compared to 118 MT in FY22. The cement industry is expected to grow by 12% against a CAGR of 6% historically.
This means that an unprecedented need is waiting to be filled by the refractory industry. Growth like never before exists as a possibility, right in front of us.
However, this growth falls on “Refractory”, a critical but less known component for the operation of Steel and Cement plants. Refractories are the essential lining materials used for the working interfaces and relief area of furnaces throughout iron and steelmaking. Likewise, they line up the kiln and other equipment used in the cement manufacturing process. The same applies to a glass furnace or a copper furnace.
In other words, no steel, cement, glass, aluminum, copper or for that matter any metal or non-metal requiring a high temperature process, can be produced without refractory.
Historical industry trends
In the past, India’s cement and steel industries relied heavily on imported refractories, mainly from China, treating them like a commodity. China produces 65% of the world’s refractory and is endowed with the main raw materials necessary for its production. This gives China a huge cost and strategic advantage. India, on the other hand, had a fragmented refractory industry, producing mostly low-end refractories, as there was no way to compete with Chinese-made products.
However, this “cheap” refractory comes at a long-term cost, as all stakeholders have realized in recent years. The changing policy framework in China has impacted the availability of refractories for the Indian steel and cement industries. This change, coupled with occasional strains in the Sino-Indian relationship, ended up creating enormous uncertainty for refractory-consuming industries, providing a wake-up call to all stakeholders.
Initiative of the government of Atmanirbhar Bharat and better understanding of the criticality of refractories for the manufacture of steel and cement; has caused a mindset shift in consumer industries. There is now a higher demand for products made in India and some preference given to them.
Another major trend is that companies around the world, who have built their supply chain around China, now want to reduce China-related risks. This trend accelerated considerably after the Covid. As a result, most countries are now actively seeking alternative suppliers to reduce their heavy reliance on China for both raw materials and finished products.
This created a significant opportunity for India to intervene. India’s refractory industry must now respond not only to increased domestic demand, but also worldwide.
What else does this mean for the Indian refractory industry?
In 2019, the Indian refractories market was valued at around Rs 9,000 crore, approaching Rs 10,000 crore. However, these two megatrends – India’s own projected growth in core sectors and China’s move away from the global supply chain; offer a unique opportunity to the Indian refractory industry and allow it an opportunity for exponential growth.
What must be done to unleash the full potential?
We must be aware that this growth depends on the long-term vision that customers take.
It is very easy to move towards buying cheaper refractory in case Chinese players decide to lower prices to directly affect Indian capacities, which they have already done well in other parts of the world. Resisting this temptation will be consumer industries’ greatest contribution to this cause.
Second, only local manufacturing may not be the long-term solution, although it is an important starting point. It is also important that the local raw material comes from the manufacture of the refractory. Once refractory begins to be produced from local materials, it will be truly independent of outside influence. There is an “urgent case for action” to develop appropriate policies to discover local raw materials through in-depth exploration
At the same time, investments must be made in R&D. India still relies on Europe as its main source of refractory technology. As India will continue to be the number one steel and cement producer outside of China, it is imperative that we also become a hotbed for refractory technology. This will require the creation of an ecosystem between user industries, refractory manufacturers, raw material suppliers and universities.
If we continue on a path with a long-term view, we are bound to see consolidation, better capacity utilization and competitive manufacturing in all sectors, which will meet the increased demand. By lowering import duties on raw materials, we will encourage domestic production, further supporting the creation of this industry.
This will not only have a multiplier effect on the economy, but will also stimulate demand, create jobs (for skilled and semi-skilled workers in areas where refractory factories are located) and encourage private investment.
India is already on an accelerated pace towards development with its recent strategies and formulations, which aim to put us on the map as far as resources, infrastructure and business are concerned. Therefore, incentivizing resisters to develop deep roots in India will be a key step towards this goal.
This will give a major boost not only to the refractory sector, but also create a ripple effect in the cement and steel industries, thus causing significant infrastructure growth.
India’s refractory industry has grown exponentially as a key to the growth of infrastructure in the country.
The opinions expressed above are those of the author.
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