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.
For the first 5 months of 2020, the world crude steel production for the 64 countries was 729 Mt, down by 5.2% compared to Jan-May of 2019.



Consequently, because of the COVID-19 pandemic around the world, most steel companies have been impacted and cut down on production, which means the demand of refractory materials around world (excluding China) was decreased in H1 2020.
Meanwhile, the forecast from worldsteel assumes that most countries’ lockdown measures continue to be eased during June and July, with social distancing controls remaining in place, and that the major steelmaking economies do not suffer from substantial secondary waves of the pandemic.
Industry perspective from Xu Dianli
Xu Dianli is the former President of The Association of China Refractories Industry who is now a life-long adviser.
At 2020 Global Magnesium Refractory Cloud Conference and Industrial Internet Promotion Conference organised by Northeast Asia Magnesia Exchange on 09/07/2020, Xu Dianli presented about Analysis of the domestic refractory market situation in China and provided suggestions to local refractories companies.

- Focus on domestic demand
Mr Xu advised local enterprises to focus on domestic demand and market, because there is a huge demand of refractories in China. He said: “China is the one of biggest country in the world, as well as it's a big refractory material produce and consumption country. Even if there is no calculation of GDP for financial year of 2020 in China, however, the rapid resumption of work and production, after the COVID-19 pandemic, has made a stable growth of domestic economy in the second quarter of 2020.”
In terms of refractories demand, China will be the biggest consumption country, most downstream industries consumed a large proportion of world refractories production.

- Following with the changing of global market
According to the data from The Association of China Refractories Industry, the export volume of China’s refractory raw material was 2.46 Mt between January and May of 2020, an increase of 1.39% compared to the first 5-month of 2019. The export value of refractory raw material was USD 1.29 billion for the first 5-month of 2020, down by 16.34% y-o-y.
Furthermore, in the first 5-month of 2020, the export volume of refractory products was 0.64 Mt in China, a decrease of 7.38% compared to the first 5-month of 2019, and the export value of refractories was USD 0.55 billion, down by 20.24% on y-o-y.
The decline export value of refractory products is mainly because the continual reducing of Chinese refractories price, plus the influence of COVID-19 pandemic worldwide.
Therefore, the export companies in China should try to make the product prices more stable, and follow up on the change in international market trend.
Meanwhile, along with most countries’ lockdown measures continue to be eased during July to September 2020, steel demand in the developed economies is expected to recover, and steel production may be increasing which will get benefit from the supporting of government policy or economic recovery plan, especially in Europe and Japan.
For example, UK PM Boris Johnson has announced the most radical reforms to our planning system since the Second World War, making it easier to build better homes where people want to live. According to BBC news, Boris Johnson has said now is the time to be "ambitious" about the UK's future, as he set out a post-coronavirus recovery plan. The PM vowed to "use this moment" to fix long standing economic problems and promised a £5bn "new deal" to build homes and infrastructure.
- Biggest challenge for China’s refractory industry
Excess manufacturing capacity is the biggest challenge of refractory industry, which caused the disorder of refractories industry in China and price war between competitors for more than ten years.
Besides, rampant excessive capacity persists in China and is a hindrance to the high-performance development of refractory industry.
The Chinese government has taken numerous steps to address this problem, but it’s still continues. In industrial economies, excess capacity is generally a short-term condition that is self-correcting. However, the severity and persistence of excess capacity in China’s manufacturing sectors suggest that there are deeper, more fundamental issues within the Chinese economy. These problems also have significant implications for international trade, given the growing influence of China in the global marketplace (Investopedia, 2020).
Mr Xu suggested refractories enterprises: “please stop to mine and produce without plan, we need to know the real demand before doing. Price war is not a good idea, the best way is to become a win-win situation that finds a reasonable profit margin together and keep the price stable.”
The overall contract business model also promotes the shift of refractory material market to large-scale key enterprises in China. At present, the market competition is mainly among large-scale key enterprises, but unfair competition behaviours of competing for price still remains.
Industrial Thinking of China’s Magnesia
Along with the technology development of industry and the improvement of industry 4.0, some problems should be sorted out in China’s magnesia industry.
- The quality of China’s magnesite
Recent years, it seems alarmist to hear that there are fewer and fewer high-quality (super grade and grade-1) magnesite, and even say that the high-grade magnesite is about to be mined out.
According to the proven magnesite reserves released by Liaoning Provincial Department of land and resources in 2000, the total reserves of magnesite are 2.69 billion tons in Liaoning Province.
Since 2000, the average mining volume of magnesite was about 20 million tpa. If the calculation is based on 20 years, the mining amount is about 400 million tons, and there are still more than 2.2 billion tons of undeveloped ores, which definitely include a large part of first-class and super grade magnesite.
In China, the mining technology has been developed slowly, and mineral miners always pick the high value ores up and just explore and develop the magnesite on the earth’s surface. In fact, there may be a lot of high-quality magnesite that has not been mined under the surface.
- Magnesite ore beneficiation
Because of the improvement of technology, the demand of high purity magnesia (MgO≥98%) is increasing, and the production capacity has been raising as well. Besides, how to utilise resources comprehensively and upgrade the grade of low-grade ore is another challenge for Chinese suppliers.
At the end of 1970s, beneficiation of magnesite was listed in the national "sixth five-year plan" scientific and technological research project. Finally, the sinter magnesia with MgO ≥ 98% and BD ≥ 3.30g/cm3 was produced by two-step calcination process after special beneficiation with low Cao, Al2O3 and Fe2O3 content.
If in need of higher purity, we can only choose the ore with low Fe2O3, Al2O3 and Cao, and remove SiO2.
If the comprehensive utilization of resources and upgrading of grade are considered, the flotation of high silica ore would be the best option.
In the first half of 2019, Jiachen Group, a famous magnesium enterprise in Yingkou China, has successfully developed and put into production ultra-pure magnesium, with a MgO ≥ 98% and a density of 3.42g/cm3. The process of "Jiachen ultra-pure magnesium" with natural magnesite as raw material has also become the first in the world.
The Jiachen ultra-pure magnesium is made by beneficiation and purification of waste or low-grade magnesite, followed by flash evaporation, ball press and high-temperature calcination. The physical and chemical properties of the products are able to compare with the performance of synthesis of magnesia from NEDMAG, the leading company of world class high purity magnesia.
- High-purity magnesia in China
How big is the market demand for magnesia with MgO ≥ 98%?
The variety and structure of refractory raw materials should meet the demand structure of downstream markets.
China is not only a big supplier of magnesia in the world, but also a big consumption country of refractories. But the demand for high purity magnesia in China is not that much.
For example, looking at the demand of steelmaking converter process, the high-purity magnesia with MgO ≥ 98% only be used in the two sides of the trunnion and slag line parts of converter, and there is no need to be used high-purity magnesium refractories in other areas.
In terms of application, magnesia with the higher the purity will be with the less the binding phase and will cause performance instability. It may be not able to be used to make refractory materials. Therefore, in deciding whether to increase production or not, we should consider the market demand and market situation objectively and rationally.
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