1. August 2009
Refractory Industry in India
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2. Refractory – Concept
VALUE CHAIN
• Refractory is a class of materials which are produced from non-metallic
minerals. They are the primary materials used in the internal lining of industrial
furnaces and possess capability to withstand heat and pressure, and are used
in steel, aluminum, glass, cement, petrochemicals, non-ferrous metals, thermal
power plants and ceramic industries. These are produced in Special Shapes
and are Custom made to suit the requirements of the various industries.
• Refractories are classified on the basis of their chemical composition, end use,
and manufacturing method. They can be classified as acidic, basic, and neutral
refractories. A small range of high melting point materials like magnesia,
bauxite, fireclay, and silica are used to produce refractories.
2 Source: IRMA, various database & News article

3. Global Refractories Market – An Overview
• By 2009, refractories market of the world will reach $ 14.7 billion (Rs 705.6 billion) in
value terms and 25.5 million metric tons in volume terms
• In volume terms, forecast to increase 3.5 % per year to 45.2 million metric tons in 2012.
• In value terms, global demand for refractories is projected to advance 4.5 % per annum to $28.5
billion (Rs 1,368 billion) in 2012
‒ main driver of this growth is the rapid industrialization of Eastern Europe, Asia-Pacific, and Latin America
‒ Growth will be supported by the increasing use of better performing, more expensive refractories, which will
bolster demand in value terms
‒ Iron and steel is expected to remain the leading market for refractories in 2012 with demand of 20.7 million
metric tons. However, growth in this market will be restrained by slowing steel production and decreased
refractory use per ton of steel produced
• In the short term, demand will be negatively impacted by the effects of the global
economic downturn that began in 2008, although recovery is expected by 2012.
• Over the recent years the EU refractories market has seen considerable consolidation. To
consolidate their position globally, the two largest groups in the industry have made some
significant acquisitions.
• The Asia-Pacific region is the leading consumer of refractories, and will be the fastest-
growing region in the world through 2012. While China will account for much of the
region's gains, India will exhibit advances above the world average as well. Eastern
Europe will present opportunities, as steel manufacture increases to keep pace with the
region's industrialisation.
3 Source: Freedonia industry study „WORLD REFRACTORIES to 2012

4. Sources of Raw materials available
India imports most of its raw materials from China, as India does not produce sufficient quantities of
equivalent quality of brown fused alumina
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5. Refractory Industry in India – An Overview
• The Refractory industry is fragmented with more
Output Usage
than 150 players, of which, 15 to 16 are major 3% 4%
players while the remaining are small private 6%
players
• Production capacity of refractories in India 12%
currently around 2 million tons (mt)
• Production stood at 1.3 mt in 2007-08, against
1.08 mt in 2006-07, up around 17 percent. 75%
• The organised refractory industry had recorded a
Steel Industry Cement Industry
turnover of Rs 3,000 crore ($ 625 million) in Non-ferrous Industries Glass Industry
2007-08, against Rs 2,370 crore ($494 million) in Other Industries
the last fiscal
• Growth in sales was driven by growing demand from
sectors like steel, cement, aluminium, sponge iron and
others.
• Currently the companies in this industry operating at
around 60 - 80% capacity utilisation
• Exports during 2007-08 were Rs 452 crore ($ 94.2
million), up from Rs 314 crore ($65.4 million) in
the previous fiscal
• India currently exports around 10 percent of its
production
5 Source: IRMA, various database & News article

6. SWOT Analysis for Refractory Industry in India
STRENGTHS WEAKNESSES
• Introduction of the concept “Total Refractory • India has to depened heavily on China for raw-material
Management” (TRM) to ensure quality and proper imports
service, and also to decrease the cost
• Scarcity of raw-materials across the globe
• India is having superior engineering skill, high quality
technology and equipment from Germany and Italy, • Technological changes in Steel industry resulting in
access to superior quality raw materials and all these lowering consumption of refractories per tonne of steel
factors is resulting in superior quality refractory output
• The growth of Indian Steel industry is extremely crucial
• Increasing credibility of Indians in the global market, to analyze the future status of Indian Refractory
where price realisation is relatively better industry
OPPORTUNITIES THREATS
• Refractories still have many areas in various sectors to • With the increasing price of crude oil and other
enter in such as monolithics and special petroleum products, the price of coal is also
increasing having a direct impact on the input cost
• Growing demand from other sectors like sponge iron
and cement • China dumping sub-standard quality outputs in India
at very low prices (China‟s export integrated pricing
• Indian products are sailing all across the globe, strategy)
primarily to EU, Middle East, South Africa and Far
East including Malaysia and Indonesia • Payment delays by the Steel manufacturers
• Expansion of Steel industry in India • Slowdown in Chinese refractories market
6 Source: IRMA, various database & News article

7. Business Concerns & Future Outlook
Business Concerns
• Industry dependent on raw material imports from China. Use of synthetic raw materials is driving prices
higher
• In the event of continued high prices for crude oil and other petroleum products, hardening of the coal
prices the prices of the inputs of refractory industry are increasing
• Raw material prices have moved up 80 to 85 % but prices of finished products have just appreciated
18 to 30 % resulting in erosion of bottom lines of the refractory companies
• Affected by slow down in the economy
• In industries like steel - trend towards lower refractories consumption per tonne of steel. Usage of new
technology processes leads to reduction in refractories consumption
• The industry is going through an exciting and complex phase. On one hand, refractory makers are
adding capacities with the hope that demand from the steel sector will rise at a fast pace. On the other
hand, none of the major announced Greenfield steel projects are yet to get off the ground.
Future Outlook
• While overall market for refractories may decline, a shift is foreseen towards usage of specialised
refractories
• Post China Olympics, industry is hopeful that raw-material prices may see some relaxation
• Raw material imports to continue
• Demand from other sectors like sponge iron and cement, will rise
• Monolithics (powder) are projected to grow at an above-average pace than bricks and shapes
• Clay refractories are expected to outperform Non-clay refractories through 2012
7 Source: IRMA, various database & News article

8. Indian Refractories – Challenges ahead
• China, with its cheap production cost
• Negotiation power of refractories makers is poor, who are
squeezed between raw material suppliers and steel makers
• Raw material and fuel prices on fire
CHALLENGES
• Unavailability of adequate qualified and competent AHEAD
workforce
• Marketing and packaging tailor-made products for their
clients
• Demand-Supply mismatch
8 Source: IRMA, various database & News article

9. Indian Refractory Makers – Way Forward
Become Export oriented unit
with higher end of the product chain /
superior quality refractory output
Price war with the Chinese Manufacturers
in which case
they would bleed severely
as margins are already thin
INDIAN REFRACTORY
MANUFACTURERS
Meet the domestic demand
9 Source: IRMA, various database & News article

10. Consolidation in Refractories Industry
Revenue
Year Acquirer Target Stake (%) Deal size ($ Mn) Multiple
IFGL Refractories Hofmann Ceramic
2008 Limited GmbH, Germany 96% Undisclosed
2006 RHI AG, Austria Clasil Refractories Ltd 51% Undisclosed
IFGL Refractories Monocon International
2005 Limited Refractories Limited, UK 16.68
ACE Refractories (from
2005 Calderys, France ICICI VF) 99% 136.5 1.7 X
2004 Sarvesh Group VRW Refractories Undisclosed
2004 Sarvesh Refractories Raasi Refractories Undisclosed
Saint Gobain Group
1996 France Grindwell Norton Ltd 51% Undisclosed
10 Source: IRMA, various database & News article

11. Major Players in Refractories in India
# Refractories are located primarily near steel plants - Orissa, West Bengal, MP, Bihar and Tamil Nadu
¤ Orient Abrasives (Refractories div)
¤ Frontline Corp (Refractories div) ¤ Maithan Ceramic
¤ Burn Standard Co.
¤ Ace Calderys (UK) ¤ Vesuvius India (UK)
¤ Bharat Refractories
¤ Vishva Vishal Engineering
¤ OCL India Major Steel Players like
¤ Tata Refractories
Posco, Arcelor Mittal, SAIL,
¤ IFGL Refractories
¤ Raasi Refractories Tata Steel, Essar Steel,
Sterlite, Bhushan and
Jindal are investing
¤ Government Owned ¤ Grindwell Norton (France)
¤ MNCs
¤ Carborundum Universal
¤ Shri Nataraj Ceramic
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12. Market Share of Refractories in India
Market Share for Refractories in India (%)
6.6
16.6
23.3
7.3
5.6
5.5
2.8
19.1 2.0
7.8 0.9 1.4
1.3
Tata Refractories OCL India IFGL Orient Abrasives
Maithan Ceramic Carborundum Universal Shri Nataraj Ceramic Raasi Refractories
Vishva Vishal Govt. Owned MNCs Imports
Others
 MNCs include Ace Calderys, Vesuvius India, Grindwell Norton, Morganite Crucible (India)
 Govt. owned refractories include Bharat Refractories and Burn Standard Company
 Others include more than 40 small and medium units
12 Source: IRMA, various database & News article