by Joe Iorillo
March 1, 2018
In 2017, RHI, one of the leading global refractories producers, purchased a controlling interest in another leading player, Magnesita Refratários. The firms combined to form RHI Magnesita, a dominant force in the industry with revenues of nearly $3 billion and close to 15,000 employees. It was a marriage of complementary operations and products:
The merger was particularly advantageous to Magnesita, enabling the firm to bolster its competitiveness in the high-growth markets of China and India. China is the world’s largest steel manufacturer – and the steel industry is a huge consumer of refractories. Prior to the merger, less than 10% of Magnesita’s refractory sales were to China and other Asia/Pacific region countries. By contrast, more than 20% of RHI’s revenues came from this area. Although China plans significant short-term steel production cuts in order to curb pollution and reduce overcapacity, it will still be the single largest global steel producer, making it necessary to have a strong foothold in the country.
India, the third largest steel producer in the world, is poised to become even bigger, thanks to planned infrastructure investments over the next few years. These investments will boost demand for steel components, as well as for the refractories used to make the steel. Magnesita will thus benefit from the presence of two RHI refractory plants in India.
While the RHI/Magnesita merger has major benefits for the two component firms, the deal is liable to hurt smaller players in the refractories market. The newly formed RHI Magnesita has extensive captive raw material sources, a significant advantage given the rising costs and growing scarcity of such materials on the open market. This will hinder smaller firms, possibly making it harder for them to obtain the necessary magnesite, dolomite or other sources during shortages. Industry insiders are already concerned that China – a major refractory raw material supplier – is tightening its control over certain minerals such as magnesia and bauxite by shuttering mines and consolidating mining companies into government-controlled consortiums.
As the landscape of the refractories market changes, RHI Magnesita’s overwhelming size may ensure its viability, while many smaller suppliers will become increasingly at risk of drowning in its wake.
Need more information? For historical demand data and forecasts by refractory material, market, form and global region, see Global Refractory Markets, an industry study published by The Freedonia Group. This study also discusses market environment factors, industry structure, company market share, and leading companies.
Joseph Iorillo is a researcher and writer at The Freedonia Group where he contributes to studies on a wide array of topics, including consumer and industrial goods, chemicals, and packaging.
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