‘Anti-China sentiment an opportunity to improve our Indian operations’

By: |
July 15, 2020 8:58 AM

Parmod Sagar, MD & CEO–India, shares RHI Magnesita’s plans in the current context with Surya Sarathi Ray. Excerpts:

Domestic refractory makers,, Anti China sentiment, Chinese import policy, LSE, Chinese imports, JSW, tata steel, SAIL, JSPLParmod Sagar, MD & CEO–India, shares RHI Magnesita

Domestic refractory makers may find it difficult to keep pace with steel firms’ no Chinese import policy since they source around 40% of their inputs from China. Around 10-12 kg refractory material is required to make one tonne steel. LSE-listed, world leader RHI Magnesita is the number one player in the Rs 10,000-crore refractory market in India through three subsidiaries, including BSE-listed Orient Refractories. Parmod Sagar, MD & CEO–India, shares RHI Magnesita’s plans in the current context with Surya Sarathi Ray. Excerpts:

Steel companies are adopting a ‘no Chinese import’ policy. As a critical input provider to steel industry, how do you react to it?

There are two aspects to Chinese imports — one is raw material required to make refractory products and other is the import of finished refractory products. On the finished products front, if our customers demand, we can deliver quality products with zero imports from China. We are the largest refractory products and solutions provider in the world with a network of best-in-class plants spread across the globe.

We are better placed than most of our competition to supply products sourced from our plants located in countries other than China. We have a well-knit global supply chain network to quickly deliver to our Indian customers’ products like furnaces, converters, ladles and also mixes sourced from our plants in countries like Brazil, Austria, Germany, Ireland and Turkey. This is in addition to the products we already are supplying to the domestic customers from our facilities in India. Some of our customers like JSW, Tata Steel, JSPL and SAIL, have already been in discussion with us on exploring such possibilities.

On the raw material import front, we have our own mines in Brazil, Turkey and Europe, and also have other sources to get the raw materials from countries. With our own mines, we are better positioned in raw material sourcing than compared to most of our competitors. We have already been sourcing most of our raw materials from domestic and markets other than China for some of our products which we are making for our Indian customers.

How much is your own dependence on imports from China?

There is basic-shaped refractory segment regarding which we currently import from our Chinese plants to supply to our customers in India. Almost 70% of it is being imported from China. In fact, in order to reduce our dependence on Chinese imports, we have set up a plant at Cuttack in Odisha to produce magnesia carbon bricks. We look forward to expand capacity of the plant as we go forward.

More than 40% of the raw materials for refractory companies in India are sourced from China. However, due to our better access to raw material sources in other countries and sourcing from our own mines, at RHI Magnesita, Chinese imports constitute only about 20-25% of the total value of raw materials purchased by us. This can be reduced drastically by sourcing from alternate sources like Brazil, Turkey and Europe, if we can arrive at a mutual consensus on this with our customers.

So, is the anti-China sentiment a blessing in disguise for you?

From a business perspective, we really see this as an opportunity to improve our Indian operations. The current situation creates an opportunity for us to work more closely with our customers in India to innovate, manufacture and supply some of the products which our customers have been importing from China so far or we have been importing from our Chinese plants for them. However, this is easier said than done. This would require a concerted collaborative effort by us and our customers. Together, we can definitely do it.

How do you define your growth agenda in India in a post Covid situation? What are your growth plans?

Even in a post Covid-19 era, the situation will remain very fluid for the next 6-12 months. However, the overall outlook for our India business is positive on long-term basis. We are also working on an organisational restructuring which would make us more agile and customer-centric. We expect this exercise to get concluded by next month. By the end of 2021, we are looking forward to complete the task of setting up a R&D centre in India which would serve our customers, specifically in India and APAC markets. While we continue our organic growth and investment here, we would also continue to pursue our inorganic growth plans as part of our larger business strategy in the country.

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