The worldwide cement, lime, non-ferrous metals, glass, environment, energy and chemical industries also remained subdued. Although the situation was not quite as harsh as in the steel industry, there was still a trend toward consolidation of producers. Many producers also increased their capacities in the newly industrialized and emerging economies in Asia (particularly China) and eastern Europe, where new plants are being built and many existing plants are being modernized.
All of these trends affected refractories producers, many of which posted flat to slightly lower sales for 2002. However, the situation appears to be changing as the economies in several key markets--notably the U.S. and western Europe--begin to improve. Many companies cited improved sales in the first and second quarters of 2003 and expectations that sales for the year would be higher overall.
According to Charles W. Connors, president and CEO of Magneco-Metrel in Addison, Ill., and chairman of the American Steel Coalition, which represents small and medium-sized businesses that support the steel tariff remedy, the tariffs are preserving more than 1.1 million U.S. jobs in both steel manufacturing and upstream processes--including the manufacture of refractories for the steel industry.
"My company, which is a steel industry supplier and customer (employing 143 people in Illinois, northern Indiana and eastern Ohio), came close to bankruptcy, losing $2 million in 2001 and $300,00 in January and February 2002. One more month with such losses and we would have been out of business," he said. He credits President Bush's Steel Program, launched in March of 2002, with the survival of his company and thousands like it, and urged the President to keep the steel safeguard in place until March of 2005 as promised.
University of Maryland Professor and former Director of Economics for the U.S. International Trade Commission, Peter Morici, said the tariffs are having their intended effect as U.S. steel makers are seizing on the three-year program by streamlining and revamping their operations to increase competitiveness.
"If you take away the tariffs now, a lot of the progress that has been made will be dashed, and consuming industries will be harmed," Morici said. "It is in the long-term best interests of steel consumers to have a healthy domestic steel industry. Otherwise, ready availability of steel products at affordable prices, as we now have, will not be the case."
The American steel industry was injured as a result of repeated surges of low-priced, subsidized steel imports dumped illegally on American shores suppressing domestic steel prices to unsustainable 20-year lows. Domestic producers were unable to compete with foreign producers subsidized by their respective governments. The President's Steel Program was implemented to give the domestic steel industry a much-needed period of relief from the flood of imports and to provide the industry with the opportunity to restructure and consolidate.
Despite what the tariffs' critics have said, many in the U.S. steel industry insist that maintaining the tariffs for the remaining 17 months is the best way to ensure the health of the domestic steel industry and the steel supplying businesses that depend on its existence. It is unclear what action, if any, the Bush Administration will take on this issue.
The Freedonia Group study notes that the massive rationalization and consolidation that has occurred in the U.S. refractories industry, and the decline in consumption per unit of output, has largely played itself out, and that consumers are unlikely to become significantly more efficient users of refractories for the foreseeable future. The widespread consolidation and this newfound stability in the rate of consumption means that refractory supply and demand are now more closely aligned than they have been for some time. As a result, the outlook for surviving refractory producers is much brighter than the relatively modest growth prospects might indicate.
Among the refractory forms, preformed shapes and castables are expected to see the best growth, while from a materials perspective, non-clay materials will outperform clay refractories. More specifically, the switch to better performing refractories will lead to the best opportunities for silicon carbide, zircon and zirconia refractories. However, similar to the industry as a whole, many individual refractory materials will not recover to 1997 levels until after 2007.
Among the various refractories markets, the Freedonia study forecasts that best growth opportunities in percentage terms will continue to be found in less traditional end uses, such as waste-to-energy generation and restaurants with in-house bakeries and stone ovens. However, given the small size of these markets, their impact on aggregate refractory demand will be minimal. Much more crucial to the overall health of the refractories industry will be the turnaround in U.S. steel production.
Due to the relatively long lifetimes of kiln furniture, the need for new kiln furniture is rather limited. However, the need to lower energy costs and improve productivity through faster firing cycles will continue to spur the growth of lighter weight kiln furniture, which consumes less heat and is therefore more fuel-efficient.
In recent years, the use of low-temperature firing cordierite kiln furniture--which is primarily used to fire products such as ceramic tableware--has been increasing rapidly in the Far East, including Taiwan, South Korea, the Philippines and India, as more ceramic production has been shifted to these lower-cost regions. A significant increase in automobile exports from South Korea in recent years has also increased that country's consumption of high-temperature alumina kiln furniture.
Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases, as well as from interviews with companies listed in the 2003 Refractories Giants (see http://www.ceramicindustry.com/FILES/HTML/CI_2003_CI_Giants/0,1067,,00.html). The information on the U.S. steel tariffs was obtained from the American Iron and Steel Institute (www.steel.org).
2. "RGB-273 Kiln Furniture," August 2003. The full report is available for $3350 from Business Communications Co., Inc., 25 Van Zant St., Norwalk, CT 06855; (203) 853-4266, ext. 309; e-mail email@example.com; or www.bccresearch.com.