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Indian refractory makers Vesuvius to position itself as niche solutions provider
December 31 2007
By Arnab Mallick The Indian steel sector is on a massive expansion drive Nearly all players in the
sector have announced expansion plans irrespective of size or origin Some of the projects are on
ground and some yet to take off
Riding on this boom the raw materials industry of steel making is also going through a very
exciting phase and refractory is no exception
Arnab Mallick of Steel Insights had a lively interaction with the managing director of Vesuvius India
Tanmay Ganguly The company is part of the Vesuvius group one of the largest global players in
this segment Ganguly spoke in detail about the changing dynamics of the Indian refractory market
Excerpts from the interview
The Indian steel sector is poised to grow at a very fast pace What kind of change in
market dynamics are you expecting against this backdrop
The next five years can be clearly divided into two phases During the next three years steel output
is likely to grow at an annual rate of 9 to 10 percent But there would be a significant change after
that from 2011-12 onwards Then we might see a high double digit growth in the Indian steel
sector Market dynamics would surely change for the refractory makers as well
What are the major areas of concern for Indian refractory makers
The Indian refractory manufacturers are squeezed between the raw material suppliers and steel
makers The negotiating power of refractories makers is very poor mainly due to its size as it is
catering to an industry far bigger in size primarily steel Raw material prices are on fire But unlike
steel makers it is difficult for refractory manufacturers to pass on the burden of increasing raw
material prices Even for us who operate in high end technology segments the real price rise in the
last two years has been actually negative Margins are under severe pressure
Moreover refractory usage is improving significantly Specific consumption would be going down
and with upgraded technology demand for high quality product would rise Indian refractory
makers need to address these issues
How is China impacting the Indian refractory market
China is surely a threat for domestic refractory makers A lot depends on Chinas export integrated
pricing strategy If they want to continue the price bleeding game it would severely hurt domestic
refractory makers
But when it comes to the higher end of the product chain China is surely not a threat for leading
refractory makers in the country Chinese products may find their way into lower end of the Indian
refractory markets Meanwhile many players are sourcing raw materials from China Ultimately the
lowest cost solution provider is bound to find its way through any barrier
As far as Vesuvius is concerned what would be your focus segments in this changing
environment
We will not focus on the major volume driving segments like general purpose refractory castable and
bricks Instead we will operate as the niche integrated solutions provider to steel makers We have
high market share in the segments where we operate With superior quality of our product we have
been able to provide our customers increased refractory performance and better throughput among
other things And this is the area where we would like to maintain our position as superior solutions
provider At the moment 80 percent of our revenues are from the steel industry itself
At what capacity are you operating at the moment
Vesuvius India has three plants in India After a recent doubling of capacity the Vizag units current
production capacity of monolithic refractories is at 60000 tons per annum (tpa) Production capacity
of engineered refractory Precast Shapes will be 9000 to 10000 tpa against 3600 tpa previously
The expansion of the Mehsana plant for foundry crucibles and clay graphite products is also
complete Currently it has a production capacity of 2400 tpa
The Kolkata unit produces around 800 pieces per day of tundish flow control refractories An
expansion project is underway and will be completed by Q1 2009 The augmented production
capacity will become 1500 pieces per day
We are now getting into a new segment Tap Hole Clay for Blast Furnace The Vizag plant has added
a new line for this segment It is a high technology product which is expected to bring in significant
benefits to our customers
What kind of growth is the company expected to clock over the next few years In this
tight price scenario how is Vesuvius planning to maintain its healthy financials
In value terms if the steel industry grows at say 10 percent CAGR for the next five years then we
would expect to grow at a higher rate
Our focus is to leverage our access to the high end technology We will continue to provide superior
quality solution to our clients and design some of our major contracts on tonnage of liquid metal
handling And owing to superior quality of the product the required replacement would be less But
even after that it is a fact that margins are severely under pressure
Are you planning to expand your product basket significantly
There will not be any significant addition of product offering in India in the next five years except
Tap Hole Clay which we mentioned earlier Rather we will focus more on maintaining our market
share and providing customers with high end solution offers
Do you think Indian refractory makers have the potential to tap overseas markets
How is Vesuvius India planning to export its products
There are enough price pockets where Indian players can go and make money In fact some of the
leading players are actually doing it But in this changing market scenario the lowest cost solution
provider will be able to sustain I think every single market will be dominated by local players as it is
no longer a mere supply of product
Customers are looking forward to long term service to be provided as well Vesuvius group is a
global corporation with units in each local market So our export initiative is determined by the
group in terms of the markets we are required to cater to as opposed to other Indian companies
who can approach any market of their choice
How do you see the future of Indian refractory makers
The potential is surely good on back of expected robust demand But a major area of concern is
availability of adequately qualified competent work force In the emerging new trend customers are
looking for a complete solution wherein refractory makers need to source trained manpower to
service their products
These issues have to be given primary importance The raw material scenario is getting tight and
very challenging We are thus focusing on constant differentiation and excellent value addition in all
our solutions
Source Steel Insights
Customer Speak
metaljunction will continue to scale greater heights
Mr Amitabh Panda - Chief of Procurement TATA Steel
Case Studies
bull An EPS Success Story bull An ARC Success Story
Advertisement
bull Advertisement 1 bull Advertisement 2
Copyright copy2005-2008 mjunction Services Limited
refractory markets Meanwhile many players are sourcing raw materials from China Ultimately the
lowest cost solution provider is bound to find its way through any barrier
As far as Vesuvius is concerned what would be your focus segments in this changing
environment
We will not focus on the major volume driving segments like general purpose refractory castable and
bricks Instead we will operate as the niche integrated solutions provider to steel makers We have
high market share in the segments where we operate With superior quality of our product we have
been able to provide our customers increased refractory performance and better throughput among
other things And this is the area where we would like to maintain our position as superior solutions
provider At the moment 80 percent of our revenues are from the steel industry itself
At what capacity are you operating at the moment
Vesuvius India has three plants in India After a recent doubling of capacity the Vizag units current
production capacity of monolithic refractories is at 60000 tons per annum (tpa) Production capacity
of engineered refractory Precast Shapes will be 9000 to 10000 tpa against 3600 tpa previously
The expansion of the Mehsana plant for foundry crucibles and clay graphite products is also
complete Currently it has a production capacity of 2400 tpa
The Kolkata unit produces around 800 pieces per day of tundish flow control refractories An
expansion project is underway and will be completed by Q1 2009 The augmented production
capacity will become 1500 pieces per day
We are now getting into a new segment Tap Hole Clay for Blast Furnace The Vizag plant has added
a new line for this segment It is a high technology product which is expected to bring in significant
benefits to our customers
What kind of growth is the company expected to clock over the next few years In this
tight price scenario how is Vesuvius planning to maintain its healthy financials
In value terms if the steel industry grows at say 10 percent CAGR for the next five years then we
would expect to grow at a higher rate
Our focus is to leverage our access to the high end technology We will continue to provide superior
quality solution to our clients and design some of our major contracts on tonnage of liquid metal
handling And owing to superior quality of the product the required replacement would be less But
even after that it is a fact that margins are severely under pressure
Are you planning to expand your product basket significantly
There will not be any significant addition of product offering in India in the next five years except
Tap Hole Clay which we mentioned earlier Rather we will focus more on maintaining our market
share and providing customers with high end solution offers
Do you think Indian refractory makers have the potential to tap overseas markets
How is Vesuvius India planning to export its products
There are enough price pockets where Indian players can go and make money In fact some of the
leading players are actually doing it But in this changing market scenario the lowest cost solution
provider will be able to sustain I think every single market will be dominated by local players as it is
no longer a mere supply of product
Customers are looking forward to long term service to be provided as well Vesuvius group is a
global corporation with units in each local market So our export initiative is determined by the
group in terms of the markets we are required to cater to as opposed to other Indian companies
who can approach any market of their choice
How do you see the future of Indian refractory makers
The potential is surely good on back of expected robust demand But a major area of concern is
availability of adequately qualified competent work force In the emerging new trend customers are
looking for a complete solution wherein refractory makers need to source trained manpower to
service their products
These issues have to be given primary importance The raw material scenario is getting tight and
very challenging We are thus focusing on constant differentiation and excellent value addition in all
our solutions
Source Steel Insights
Customer Speak
metaljunction will continue to scale greater heights
Mr Amitabh Panda - Chief of Procurement TATA Steel
Case Studies
bull An EPS Success Story bull An ARC Success Story
Advertisement
bull Advertisement 1 bull Advertisement 2
Copyright copy2005-2008 mjunction Services Limited
Do you think Indian refractory makers have the potential to tap overseas markets
How is Vesuvius India planning to export its products
There are enough price pockets where Indian players can go and make money In fact some of the
leading players are actually doing it But in this changing market scenario the lowest cost solution
provider will be able to sustain I think every single market will be dominated by local players as it is
no longer a mere supply of product
Customers are looking forward to long term service to be provided as well Vesuvius group is a
global corporation with units in each local market So our export initiative is determined by the
group in terms of the markets we are required to cater to as opposed to other Indian companies
who can approach any market of their choice
How do you see the future of Indian refractory makers
The potential is surely good on back of expected robust demand But a major area of concern is
availability of adequately qualified competent work force In the emerging new trend customers are
looking for a complete solution wherein refractory makers need to source trained manpower to
service their products
These issues have to be given primary importance The raw material scenario is getting tight and
very challenging We are thus focusing on constant differentiation and excellent value addition in all
our solutions
Source Steel Insights
Customer Speak
metaljunction will continue to scale greater heights
Mr Amitabh Panda - Chief of Procurement TATA Steel
Case Studies
bull An EPS Success Story bull An ARC Success Story
Advertisement
bull Advertisement 1 bull Advertisement 2
Copyright copy2005-2008 mjunction Services Limited