REFRACTORIES REVIEW<br>What Happened in 2001?

The U.S. Department of Commerce statistics for the refractories industry in 2001, published in the “Current Industrial Report MA327C(01)-1,” were issued in November 2002, along with revised data for 2000. (The refractories report for 2002 will be issued sometime late in 2003.) As in the previous five years, market values and production levels decreased.

The refractories industry continues to be negatively impacted by the problems and demands of its customers—the traditional manufacturing industries—as well as legal issues, cash flow and retirement/benefit payments. The decline is also partly the result of the industry’s great success in providing longer-lasting refractories to its customers, which results in reduced demand and a declining market.

Market Values Decline

The 2001 report detailed the annual refractories market values for 1997 through 2001, as shown in Table 1. The total market value in 2001 decreased 7.6%, compared with 2000 levels, to the lowest annual total since 1987. The market decline has continued for five years, with the 2001 market value being 26% less than the peak market value in 1997. The refractories decline in 2001 paralleled the 11% decrease in production by the steel industry, the major customer of the refractories industry.

From 1997-2001, the overall market value for all categories of refractories has decreased each year, as shown in Table 2. Nonclay refractories comprised 60% of the annual market value in 2001, compared with 57%, 59%, 57% and 58% in the preceding four years.

Production Levels Vary

The changes in production in 2001 compared with 2000 for several specific categories of refractories are shown in Table 3. While the production of most categories of refractories decreased in 2001, a few categories did experience increased production. For nonclay plastics and ramming mixes, increased production was accompanied by a 42% increase in market value. These refractories are one class of monolithic (unshaped) refractory, which as a group have generally been less affected by the decreasing demand than fired bricks/shapes, as indicated in Table 2. However, despite increased production, the market value of MgO-carbon bricks/shapes decreased 43% compared with 2000, an indication of the pricing pressure that is being applied by the steel industry and other users to reduce their costs.

Through the first nine months of 2002, steel production in the U.S. was 2% less than that of 2001. This would indicate that the refractories market should be relatively flat in 2002. Although there might be some rebound from the larger decrease that occurred in 2001, there is no current indication of coming market demands or changes that might boost the refractories industry and reverse the continuing decline in production or reduce the need for further consolidation and downsizing.

By contrast, the Chinese refractories industry should be very strong and busy, because that country’s steel production increased 12% in 2001 and 24% through the first nine months of 2002. The striking difference between the steel production trend in these two countries seems to reflect the difference between China’s young, new economy—and the world’s largest population (with huge infrastructure and transportation needs)—and the older, more stable economy of the U.S., which is growing at a slower pace.

Refractories are essential for the traditional industries to efficiently and profitably continue their manufacturing endeavors, so the need for refractories will definitely continue for decades, and even longer. The refractories industry has already changed significantly, through consolidation and downsizing, in response to the decreasing market size. More changes can be expected, with additional restructuring, further reduction of production capacity and more international collaboration, for the industry to function more efficiently—and profitably—in the global marketplace.