Market Trends: U.S. Refractories Demand to Slow
Despite sluggish overall demand, the market for advanced refractories will provide some opportunities.
Demand for refractories in the U.S. is forecast to increase 3.3% per year through 2019 to $3.1 billion, representing a deceleration from robust 2009-2014 gains as iron and steel production in the U.S. slows. Sales will also be limited by moderating output in a number of other durable goods manufacturing industries, many of which use refractories to at least some extent. In addition, a shift in demand toward better-performing refractories, while providing an initial boost to sales due to their premium prices, will cause market growth to slow in the long run as replacement cycles are lengthened.
On the positive side, continued increases in the price of raw refractory materials will support value gains. In addition, the nonmetallic minerals industry segment, which is expected to record the fastest market advances, utilizes some of the highest cost refractories, boosting overall dollar growth. When measured in volume terms, demand increases will be much more sluggish, averaging under 1% per year through 2019, when sales will total 2.3 million tons.
Improvements in refractory designs have enabled end users to use less material per ton of output. Among specific markets, nonmetallic minerals will record the fastest demand gains, supported by an acceleration in output of cement and mineral products. Overall refractory market advances will be limited by only modest increases in iron and steel production in the U.S. The health of the iron and steel industry, which accounts for the largest share of refractories demand by volume, has a major impact on the total market.
Demand for nonclay refractories will increase at a faster rate than clay refractories through 2019, a reversal from the 2009-2014. Nonclay refractories typically offer a number of performance advantages that boost their use in more demanding applications, and nonclay refractory prices will rise faster than those for clay products, boosting value gains. However, the lower cost of clay refractories ensures that they will continue to be utilized, especially in settings where the performance advantages of nonclay refractories are not required.
The U.S. is both a significant importer and exporter of refractories products. In 2014, more than 25% of U.S. refractory demand was satisfied by imported products, with the majority originating in China, Mexico, and Germany. One-fourth of the country’s domestic output was exported, with Canada and Mexico the two leading destinations. The U.S. typically imports lower cost commodity-type products, while exporting higher value, advanced refractories.
Through 2019, shipments of refractories are expected to grow 2.7% annually to $3.1 billion, with volume output increasing less than 1% per year to 2.3 million tons. As is the case with demand, refractory production increases will be limited by the modest gains anticipated for iron and steel production in the U.S. Domestic manufacturers of refractories will also continue to face competition from low-cost sources of supply, notably China and Mexico. Despite this, the technological advantage that U.S. refractories producers have will continue to offer opportunities for growth, as the global trend toward use of better-performing refractories will have a positive impact on output by U.S. producers.
In 2014, nine firms (HarbisonWalker International, Minerals Technologies, Magnesita, Saint-Gobain, RHI, Vesuvius, Morgan Advanced Materials, Imerys, and Resco) combined to supply two-thirds of total finished refractories sales in the U.S. Four of these companies (Magnesita, Imerys, RHI, and Saint-Gobain) are also sizable suppliers of refractory raw materials.
The market report entitled “Refractories” (published June 2015) is available for purchase from The Freedonia Group, Inc. Additional details are available at www.freedoniagroup.com.