Refractory makers face insolvency process under NCLT 

18 September 2017

Refractory makers, who supply critical raw material worth Rs 7,000 crore to steel, power, cement companies are in a quandary, stuck with dues that amount to half of their profits, with a number of steel firms facing insolvency process under National Company Law Tribunal (NCLT). This comes on top of an average 40 per cent hike in cost of raw material almost half of which is imported from China leaving the industry struggling to meet its costs.

“We are facing the problem of unpaid dues of Rs 130-140 crore, following NCLT proceedings on some of the iron and steel companies. It is almost half the industry’s profitability. This is posing a huge challenge for our industry since steel industry consists of 70 per cent of our customer base,” Hakiumddin Ali, chairman of Indian Refractory Manufacturers’ Association (IRMA) said. NCLT has already begun processing cases involving Essar Steel, Bhushan Steel and Electrosteel Steels. Ali who represents French MNC, Imerys, is managing director of Calderys India added, “Since our customers include cement and power companies too hence we apprehend this problem may get bigger in the days ahead.”

This comes on top of an average 40 per cent hike in cost of raw material in last nine months almost half of which is imported from China. Crackdown by Chinese authorities on polluting units in steel and other industries has drastically cut down supplies. Back home, with the steel industry in poor shape, refractory makers said they are unable to get remunerative rates for their products. Some 25 per cent of finished products in refractory sector come from China where prices have also shot up. “We are stuck with 3 to 4-year long-term contracts with our customers who typically pay us per tonne of steel produced,” Ali added. The industry is dominated by 10-12 large layers like IFGL Refractories, Bharat Refractories, Vesuvius, besides Calderys. It is now operating at 60 per cent of capacity or at 1.2 million tonne (mt) out of its total capacity of 2 mt.

“The sector is small but critical and its needs have to be addressed keeping this in mind,” Sameer Nagpal, CEO of Bharat Refractories said. Nagpal who heads Advocacy at IRMA said it is only recently that the industry has realized the need for raising its voice to be heard by policy makers. Refractory spends usually account for 2-3 per cent of steel industry expenses but without it the latter cannot operate.

Refractory products are vital element in all high-temperature processes such as making metals, glass and ceramics, production of cement and petrochemical processes. India currently imports 40 per cent of its refractory raw material including graphite, fused and calcined alumina and high-grade clays from China in addition to magnesite, a critical input for refractory bricks.

“Domestic steel output can be increased by 10-15 per cent through use of good quality refractory material. We would request the steel ministry to formulate a National Refractory Policy within the National Steel Policy to provide a road map for the industry and classify it as a critical component,” Nagpal said.
Source-ET