Tata Refractory planning big

December 11, 2009: By Arnab Mallick & Arusha Das: Leading refractory makers, Tata Refractories is firming up big expansion plans to make the best of the potential that is likely to emerge in future.

On one hand, TRL is planning its production unit near Vizag whereas on the other, the company is seriously exploring acquisition of units involved in production of synthetic raw materials.

Speaking exclusively to Steel Insights, Dr Arup Kumar Chattopadhyay, managing director, TRL said, "We are looking at a huge capex plan over the next five years. We are planning to have our second production hub near Vizag which will double the company's current production capacity at 300,000 tons per year (Belpahar unit)."

The company is also taking steps to secure their raw materials as much as possible and in this regard looking for inorganic growth path as well. The company has short listed names of potential companies which might be acquired in this regards. The deal could be to the tune of Rs 250 crore, he hinted. However, this is once again subject to the board's approval.

This is one of the most crucial move the company is likely to take to minimise the impact of rising import cost of raw materials from China which continues to be a major challenge and pain point for the Indian refractory makers.
A huge portion of critical raw material is sourced from China which continues to show a rising trend in terms of prices.

Prices are expected to even move up further once China comes out with its new export license early next year. "Raw material price might go up by another 10 percent once China comes out with its new EL (expected in January 2010). Indian steel makers will be requiring at least 7-8 percent increase in their product price considering this rise along with rise in furnace oil cost to just maintain the current scenario," he alarmed.

Industry analysts are of the opinion that it is unlikely to achieve any major price rise in the short term but noted that unless steel makers agree to share portion of the raw material cost, it would be extremely difficult for the refractory makers to bear the pressure from both sides.

Meanwhile, the company is expecting around 25% increase in its topline this year to be followed by similar percent growth, hinted Chattopadhyay. It was interesting to note that although there has been improvement in market demand, prices are yet to show any major improvement.

Source: Steel Insights