India has rapidly emerged as a major sourcing hub for refractory products.

- Sameer Nagpal

MD and CEO, Dalmia-OCL

Can you elaborate on the evolving market for refractory materials in India?

At this moment, there are two megatrends that we can see in the refractory industry. First is consistent and robust growth in the production of steel and cement in the country combined with preference for Made in India products.

This is driven by an increased global demand of Indian steel, as well as the emphasis that the Government of India lays on infrastructure and manufacturing. Additionally, there is the clarion call for products made in Atma Nirbhar Bharat.

The second mega trend is the global de-risking of China as the preferred supplier for both refractories as well as raw material. The recent geo-political developments have put the spotlight on India as an alternative source to China for cost-effective and high-quality refractories.

Both these trends together are good news for refractory makers since it has led to a higher demand for refractory, both at the domestic and the global fronts. Subsequently, the consumption of Indian refractory is on an all-time high.

This means if India can resist the temptation to procure Chinese refractory as a commodity again; and can invest in capacities and R&D, ensure local and cost-effective supply of raw material, we can easily see unprecedented growth in refractory industry. This might even make us the leading global player over the next few years.

What are the major applications of refractory materials?

Of the total refractory that is produced, steel accounts for almost 60-65 per cent of the overall consumption of the refractory that is produced. The next largest consumer of refractory materials is the cement industry. Together, these two industries account for 80-85 % consumption of the total refractory output. Refractory is also used in other industries like glass, copper, and for processing of lead, zinc, and other metals.

Irrespective of which process and which stage the steel production is at, refractory is used in manufacturing. This includes melting of the ore, purification and its conversion to steel, transfer of the molten metal, and other steps of the process of manufacturing steel. From furnaces, kilns, ovens, ladles, etc, almost all equipment need to be lined with refractory.

How is local manufacturing of refractory materials faring basis the demand trends?

Historically, the correlation between demand trends and supply of refractory hasn't been very strong in India. Refractory was originally simply an in-house unit of steel and cement manufacturing. However, over time, as steel and cement manufacturing and other metallurgical industries have evolved in their manufacturing processes; refractory has bloomed into an entirely independent and significant industry of its own accord.

Despite this changing trend, conventionally there has been a strong preference for Chinese refractory, as a cost-efficient commodity. Hence, historically, refractory manufacturing in India has not been a very strong and independent industry.

However, with increasing global and domestic emphasis on refractory Made-in-India, this correlation has become stronger. Steel and cement industries have not only started favouring India-made refractory, but also investing in strengthening and supporting the refractory businesses. Now, whenever there is a growth in the steel and cement industry, there is also a clear increase in the demand of refractory.

As a result, any player like the Dalmia-OCL, who is capable of investing in capacities and R&D; has access/ownership to local and affordable raw material; and has good business relationships with key steel and cement businesses; will be able to step up to meet this demand, and create great growth.

However, in order to be able to keep up with the demand trend, and for consumer industries to not revert back to the older trend of buying Chinese refractory, the Indian refractory industry will have to up their game!

It is very important that we adopt the latest technological innovations to meet industry 4.0 demands. Digitisation, consolidations, R&D, capacity building, and access to cheap and local raw material will become a key differentiator.

Please share your view on India as the major sourcing hub for refractory products.

China currently produces 65 per cent of the world's refractory materials. It has a strategic and cost advantage because of its easy access to raw materials such as magnesite and bauxite. However, post-Covid, India has rapidly emerged as a major sourcing hub for refractory products and as an alternative to China. This is because of the global trend to de-risk China as a supplier of both manufactured refractories as well as raw material.

As this trend continues, and the Indian consumers start shifting towards Made-in-India refractory, India will keep benefiting from the increasing demand of low-cost, high-quality refractories.

India is also preferred because it is the second biggest producer of steel and cement. However, it's not a bed of roses. Indian refractory industry will need to make sure that they invest in world-class R&D, capacity building, and a strategic and cost-based advantage by increased dependency on local raw material. 

Once we can solve these challenges and enhance our capacity as well as quality, India can certainly be one of the global leaders when it comes to refractory; and become a preferred alternative for China.

What are your plans for expansion in India and from exporting perspective?

Today, Dalmia-OCL has one of the biggest manufacturing footprints for a refractory company that is headquartered in India. Currently, we have 5 manufacturing units in India, one each in China and Germany. We have a strong total manufacturing capacity of 345,000 MT.

We own mines which generate bauxite, quartzite  and dolomite. Another mine in Salem is in the works, which will begin to supply magnesia soon. This will turn out to be a key competitive advantage for us, as we move into the future.

We're not heavily clustered in a particular geography, but are strategically spread out. This gives us proximity to Indian customers. Our plant and presence in Germany give us access to Europe, while our unit in China gives us critical capability for production.

Currently, we dominate the alumina brick market with 65% share. We are an equally strong player in cement with a market share of 50-55%. We also aspire to increase our share significantly in basic bricks. Similarly, we are also working on expanding our castables portfolio.

We have launched new products in the cement applications, have expanded our portfolio, and tested new products that have succeeded in European market.

Our plans include heavy investment in modernisation and expansion of our presses and kilns, equipment for making better quality products, all of which is helping us grow our order book. We are also planning to accelerate capex, allocate larger resources to R&D and quicken digital transformation. Our recent merger into single entity is also aimed at strengthening our financial standing, increase investment capabilities, expand our talent base, and continue being a trustworthy and long-term partner for our customers.

At Dalmia-OCL, we are confident that not just in the Indian market, but also globally, we will emerge as a key supplier of refractory materials, in order to meet the changing demands of the industry. While all refractory makers in India are bound to gain the recent market trends, at Dalmia-OCL, the hunger is greater. We have set ourselves a goal of being a one billion dollar global refractory business by 2030.

What are your views on future of refractory products and the market?

At this moment, the refractory industry is on an upward curve. The Indian refractory industry is doing well at the moment because of both the domestic, as well as global factors. However, currently we are manufacturing refractory with imported raw material. As the industry grows and stabilises, we will see a shift from global raw material to Indian raw material.

The second trend that we will witness will be of significant R&D and a change in the manufacturing process of refractory. Due to the environment and safety considerations, globally steel manufacturing is undergoing process transformation. We might soon see use of hydrogen for production. This will need the refractory industry to adapt accordingly. We are already exploring such futuristic innovations with our European counterparts.

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