Updated Situation of China’s Refractory Industry after COVID-19

Key Points:

  • Brief review of China’s Refractories Industry in 2019

  • Demand change of Refractories Market after COVID-19

  • Industry perspective from Xu Dianli, former President of The Association of China Refractories Industry, who is now a life-long adviser

Brief review of China’s Refractories Industry in 2019

According to the data from the association of china refractories industry, the China’s refractories production was 24.31 million tonnes (Mt) in 2019, an 3.65% increase compared to 2018, which included the production of refractory raw materials.

Dense shaped refractories production was 13.41 Mt, an increase of 1.05% compared to 2018.

Insulating refractory production was 0.59 Mt, up by 8.87% in 2019.

Monolithic refractory production was 10.30 Mt in 2019, an 6.93% increase compared to 2018.

In the matter of export, the annual export volume of China’s refractories was 5.96 Mt, a decrease of 6.25% in 2019. Meanwhile, refractory raw material export volume was 4.29 Mt in 2019, down 5.66% on y-o-y. Other refractory materials export volume was 1.67 Mt, down 7.74% on y-o-y.

The total annual export turnover of China’s refractories was USD 3.53 billion, down by 15.46% in 2019.

The refractory raw material export value was USD 1.92 billion, and the export value of refractory products was USD 1.60 billion, decreasing by 16.25% and 14.50% respectively.

The reason for the decline of export value was not only because the deduction of export volume, but also because of the continually reducing of product price.

By 10th July 2020, Liaoning ex-works average prices were reported as FM97 at RMB 3100/tonne (USD 443/t) from Anshan, Haicheng; FM96 at RMB 2100/tonne (USD 300/t) from Haicheng. DBM97 at RMB 2200/tonne (USD 314/t) from Dashiqiao; DBM95 at RMB 1800/tonne (USD 257/t) from Dashiqiao. CCM (MgO≥90%) at RMB 780/tonne (USD 111.42/t) from Haicheng (please see Chart 1-3).

According to the statistics of the National Bureau of statistics, China’s refractory enterprises above designated size (around 1958 companies) gained total annual revenue from their main business operation was RMB 206.92 billion yuan in 2019, down by 3.05% on a y-o-y basis, which included the turnover of refractory raw materials, and about 260 companies reported loss in the year end of 2019. The total profit from their main business operations was RMB 12.8 billion yuan and export value was RMB 11.47 billion yuan.

In recent years, industrial concentration ratio of refractory industry has been increased, and more and more enterprises carry out vertical integration. In 2018 and 2019, it was a dramatic improvement that was more than 15 enterprises with more than RMB 1 billion yuan annual revenue in China’s refractory industry, which include some big companies who can achieved much higher revenue, around RMB 4 billion yuan, such as Puyang Refractories Group Co. Ltd (PRCO; also referred to in English as “Punai”).

Demand change of Refractories Market after COVID-19

1. Domestic demand in China

After review on all the news from China, there is almost no impact on refractories industry. All downstream markets are growing, except for the cement industry. But, in China, there is not much refractories have been consumed by cement industry, so was not much affected.

2. Global Crude Steel Production

The World Steel Association (worldsteel) released its Short Range Outlook (SRO) for 2020 and 2021 on 04/06/2020.

In 2020 worldsteel forecasts that steel demand will contract by 6.4%, dropping to 1,654 Mt due to the COVID-19 crisis. In 2021 steel demand is expected to recover to 1,717 Mt, an increase of 3.8 % over 2020.

More details please see "worldsteel Short Range Outlook June 2020"

Mr Al Remeithi, Chairman of the worldsteel Economics Committee said, “because of the COVID-19 crisis, there are many steel companies and relevant industry have been hit by a general freeze in consumption, by shutdowns and by disrupted supply chains. We therefore expect steel demand to decline significantly in most countries, especially during the second quarter. With the easing of restrictions that started in May, we expect the situation to gradually improve, but the recovery path will be slow.”

According to the data from worldsteel, world crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 443 million tonnes (Mt) in Q1 2020, an 1.4% decrease compared to Q1 2019. The rest of world (excluding China) produced 209 Mt of crude steel in Q1 2020, down by 2.3% on Q1 2019.