changes in refractory consuption

Abstract lIndustrial manufacturing processes with higher temperatures (> 600°C) are not possible without ceramical refractory products. Thus, the production of refractory material is linked right from the beginning with the development of key industries such as iron, steel, non-ferrous metals, cement, lime, glass, chemistry, energy and environmental technology. Production took place next to the buying industries resp. next to available raw materials and transportation routes. Depending on changes, progress within the production technology of the buying resp. the refractory industry, adjustments due to production factors, such as availability of raw material, lifetimes, energy and transport costs, manpower etc. the production of refractory material was and will continue being subject to a constant change. Technical progress will increase the impact on e.g. the specific usage per tonne of produced steel, cement etc. Key industries using refractory material add, withdraw or shift capacities. This paper describes the influence of these changes on the supply chain Changes in refractories consumption worldwide and Consequences for the raw material availability, production and supply chain seen from the point of view of the leading refractories manufacturer Changes in Refractories Consumption B. Kull, January 2007 page 18 THE REFRACTORIES ENGINEER March 2007 Issue IRE March 07 15/2/08 16:36 Page 18 Changes in Refractories Consumption and how the leading refractories manufacturer is dealing with it. Introduction RHI Refractories Headquarter VIENNA, Austria In 1987 RHI AG emerged from the American General Refractories Co. as a result of a management buy-out. Since then RHI Refractories developed into the world‘s biggest refractories manufacturer and technology leader.This position is based on decades of successful research and development work, of course, including the knowhow of formely well known companies like VEITSCH, DIDIER, RADEX, THOR CERAMICS, MW AKEN, DOLOMITE FRANCHI etc. Today, the groups R&D activities are concentrated at the technology center in LEOBEN, Austria. RHI Refractories supplies 1.7 million tonnes of refractories of nearly all types and grades for nearly all industries, more than 50 % based on own raw material sources and is the global refractories partner for 4.000 customers at 7.000 locations in more than 150 countries on all continents. Refractories based on Highly developed technology and Innovation Supply Chain Changes and Consequences are the key words in this paper. Fig. 2 symbolizes the whole supply chain from mining to installation of refractories. Contrary to the past this chain more and more covers the globe. Refractories Consumption Refractory consumption is a necessary information for any sourcing or production related decision. The market volume according to consumption March 2007 Issue THE REFRACTORIES ENGINEER page 19 IRE March 07 15/2/08 16:36 Page 19 - by industry - by refractory products - by geography is shown in: Fig. 3 (specific and total refractory consumption by industry) Specific usage figures concerning refractory material for the various industries are in individual cases easily to determine for the particular units / furnaces to be relined, however they vary considerably depending on the particular furnace, industry or country. Also, the allocation to the purchasing industries is not that easy, e.g. steel (rolling mills), foundries, EEC, others. Furthermore the material used for the relinings cannot always be classified „refractory material“ with respect to forseeable market developments, e.g. concrete mixes from fire clay granulation and portlandcement, burnt bricks (red or low alumina fire clay) for back-up‘s or burning kilns and heat treatment furnace linings etc. The values and details brought into play in this article aim in fact at the assumption of market developments (from the manufacturer‘s point of view), less at a most exact depiction of actual usages. and Fig. 4 (refractory products split) These figures (3 and 4) show that steel industry accounts for about Changes in Refractories Consumption page 20 THE REFRACTORIES ENGINEER March 2007 Issue IRE March 07 15/2/08 16:36 Page 20 March 2007 Issue THE REFRACTORIES ENGINEER page 21 NEW IRE March 07 15/2/08 16:36 Page 21 60-65 % of refractory consumption and magnesite based products for about 45-50 % of refractory consumption The geografical split of the refractories consuming industry is shown in Fig. 5. Raw Materials Currently many raw materials are either of short supply or deteriorating in quality. Fig. 6 highlights some important ones. As an example we will focus on fused magnesia. Fig. 7, 8 and 9 deal with magnesite raw material, resources, production of caustic calcined, sintered and fused magnesia. Obviously resources of magnesite are ample, however China produces more than 50 % of magnesia. Although fused magnesia accounts for only 7 % of the total, it is responsible of nearly 100 % of our headache (for the time being). China has managed to gain more or less a monopoly situation today. Controlling the production of fused magnesia and / or macarbon bricks made of fused magnesite is one thing, to „waste“ limited (or undervalued) electric energy for products manufactured with only a small number of workers longterm is another (set aside the environmental point of view). Shift of Refractory Production The refractory industry is and has been part of the industrialization. Fig. 10 and 11 outline the trend due to decline of specific consumption, basic industries production, improved refractory and consuming industry production processes in Germany as an example. The recent annual IRE conference in York, GB (8/9 June 2006) did give an overview on statistical figures about the European Refractories Industry – development of labour costs, production and shipping quantities, capacity utilisation, workforce, products split, etc. Trend of Demand Apart from the a.m. changes in Changes in Refractories Consumption page 22 THE REFRACTORIES ENGINEER March 2007 Issue IRE March 07 15/2/08 16:36 Page 22 March 2007 Issue THE REFRACTORIES ENGINEER page 23 Changes in Refractories Consumption refractory consumption it is vital to closely monitor the trend of demand of individual refractory products (Fig. 12). Sourcing Strategies / Supply Chain Fig. 13 illustrates the supply chain again with reference to included costs. From the consumers point of view it is only the production unit‘s costs that counts. For a refractory supplier the whole supply chain should stay or become a value creating chain. Although SAP and others software systems are widely used, most companies, either supplying or consuming refractories and related services do not have corresponding adequate costing systems, to work out the „real total costs“ of their refractory related decisions. Considering general trends as in Fig. 14 and asking whether there are refractory adequate sourcing strategies? The following example (Fig. 15) shows that there is no simple answer. Fig. 16 outlines the range of total refractory and refractory related costs of a BOS steel plant. These costs are the result of many parameters influencing the total costs (see Fig. 17) and are more or less subject of daily discussions between steel shop managers and suppliers representatives. In general the purchasers show mainly 3 very different ways of behaviour (Fig. 18). Obviously this paper can‘t deal with all individual aspects but if it comes to TCO or FLS you shouldn‘t discuss it with customers of typ „A“. The refractory industry in principle can adopt the following strategies, see Fig. 19. Depending on the way of purchasing in the supplied industries the refractory landscape could look like Fig. 20. These things not only will happen but IRE March 07 15/2/08 16:36 Page 23 Changes in Refractories Consumption March 2007 Issuepage 24 THE REFRACTORIES ENGINEER IRE March 07 15/2/08 16:37 Page 24 Changes in Refractories Consumption THE REFRACTORIES ENGINEER page 25March 2007 Issue have happened. Fig. 21 shows changes in market shares for Mag- carbon working linings of BOS vessels in RHI Sales Region 1 (GB, NL, L, D) since 1990 as an example. RHI Refractories as a part of the Supply Chain and in the Center of Changes As mentioned before in this paper, besides the already discussed changes it is important to closely monitor and follow the shift of the global production of refractories consuming industries (Fig. 22) and especially the crude steel production and growth rate (Fig. 23 and Fig. 24). 1,7 million tons of refractory materials are produced at 29 locations on four continents. Moreover, 50 sales and service locations as well as a large number of mobile RHI service engineers offer customers on all continents optimal service and short reaction times. RHI Refractories has hopefully taken the right direction as Fig. 25 and 26 illustrate. IRE March 07 15/2/08 16:37 Page 25 March 2007 Issuepage 26 THE REFRACTORIES ENGINEER Changes in Refractories Consumption IRE March 07 15/2/08 16:37 Page 26 Changes in Refractories Consumption THE REFRACTORIES ENGINEER page 27March 2007 Issue Fig. 18: Fig. 19: IRE March 07 15/2/08 16:37 Page 27 March 2007 Issue Changes in Refractories Consumption page 28 THE REFRACTORIES ENGINEER Fig. 20: Fig. 21: Fig. 22: IRE March 07 15/2/08 16:37 Page 28 March 2007 Issue THE REFRACTORIES ENGINEER page 29 Changes in Refractories Consumption Fig. 23: Fig. 24: IRE March 07 15/2/08 16:37 Page 29 March 2007 Issuepage 30 THE REFRACTORIES ENGINEER Spencroft Road, Newcastle-under-Lyme, Staffordshire ST5 9JE, England Tel: 44(0) 1782 383000 Fax: 44(0) 1782 636982 e-mail: invest@hoben.co.uk website: www.hoben.co.uk I N T E R N A T I O N A L To support your business in an increasingly difficult environment we offer inorganic chemical analysis. From high % levels to low ppm. For further details contact: Helen Speakman – Laboratory Business Manager Tel: 01709 833731 Fax: 01709 830391 Email: hspeakman@lsm.co.uk Paul Hurditch – Chief Chemist Tel: 01709 828500 Fax: 01709 830391 Email: phurditch@lsm.co.uk LSM Analytical Services, London & Scandinavian Metallurgical Co. Ltd., Fullerton Road, Rotherham, South Yorkshire S60 1DL Changes in Refractories Consumption Fig. 25: IRE March 07 15/2/08 16:38 Page 30 THE REFRACTORIES ENGINEER page 31March 2007 Issue Conclusion From the perspective of a leading refractory supplier such as RHI Refractories it is vital to offer the following characteristics in the current market environment to remain competitive and successful and to be a strong partner for the refractory consumer industry. The first requirement is a clear, strategic focus with a corresponding limitation to the company‘s strengths. The definition of the value chain a company wants to serve must match the expertise of the in-house employees. This is the only way to efficiently address processes and create the sufficient added value that the customer is willing to pay. Certainly, the size of a company in terms of economy of scale and competitive cost structures also plays a decisive role. The pressure to lower costs through innovation, increased efficiency, and rationalizing investments will remain a constant reality. Large companies with backward integration all the way into mining operations have the best chance of success. In such an environment traders will only have a limited scope for future activities. RHI Refractories is one of the companies that is able to avoid a complete dependency on China due to its own raw material sources, the expertise in the area of logistics (SCM) and risk management, constant research and development to secure product and process innovation as well as innovative services with the aim of process partnerships to create significant added value for our customers. Yes, our refractory industry faces changes and challenges not only now but also in future. It is our job to constantly discuss possible consequences and answer the questions arising. RHI as the leading refractories manufacturer is convinced of having taken the right direction. Changes in Refractories Consumption Fig. 26: IRE March 07 15/2/08 16:38 Page 31