Global heavy industry, and hence demand for steel and non-ferrous metals, is set for a fourth consecutive year of decline with the construction sector stagnating as China shifts from a supply-and-volume based economic model to one focused more on demand and quality, according to the head of global refractory supplier RHI Magnesita.
"China's financing, regulations, the mindset of the investors, the approvals, the permits, everything has to be adapted to make this deep structural change happen," RHI Magnesita's CEO Stefan Borgas told Platts, part of S&P Global Commodity Insights, in a recent interview.
"In such a large economy, you can no longer build a [metals] plant and wait till somebody takes the product: China has to think of what the value proposition is before it puts in any new plant," he said.
The country has a steelmaking capacity of some 1.25 billion mt/year against around 1 billion mt/year of demand, so until it eliminates the surplus, the rebalancing will hurt other markets. While local authorities assess which plants need to close and which should be rebuilt to higher standards, the plants keep casting as much as possible, Borgas noted. As a result, in 2024 China exported over 110 million mt of steel, its second-highest volume ever.
China's excess steel goes into foreign markets, where it reduces demand for refractories and other related products. India is a good example: the country's steel demand grew by 8% last year but production by only 4% -- because of Chinese imports, according to Borgas.
While steel mills need a constant supply of refractories to keep running, and sales to the sector bring RHI Magnesita around 65-70% of its profit, the non-ferrous metals industry use them less regularly: refractories are part of the investment cycle, and go into the revamping of furnaces and the construction of new plants, but many such projects were completed in 2024.
There are very few new copper, nickel or aluminum plants under construction, although existing copper capacity is well utilized, and producers are planning for expansions. However, those projects will not go ahead for a couple of years, and RHI Magnesita expects its nonferrous business to weaken considerably in 2025.
Refractory-grade magnesite is critical
The company continues discussions with the EU, and regulators in other regions, to have refractories recognized as part of the critical materials chain.
"Without refractories, you cannot refine critical minerals; if somebody controls your refractories, they can stop you from making copper. That's why they are critical too," said Borgas.
The EU Critical Raw Materials list will be revised by 2026, and RHI Magnesita is positive about the likelihood of refractory-grade magnesite being added.
The company needs that incentive to build a mine to extract additional reserves in Austria, where its old mine will be depleted in the next seven to eight years, Borgas said.
The fast lane through permitting that having CRM status opens for such capital-intensive projects can partly compensate for Europe's notorious cost drivers -- CO2 pricing, structurally higher energy costs and expensive labor.
Reflecting on the existing advantages of expanding in Europe, Borgas said he likes the principle of carbon pricing. "Ascribing cost to emissions is clever, it drives innovations," he said, mentioning RHI Magnesita's technology to capture carbon and convert it into products for the cement and paper industries.
"The best place in the world to build such a plant is Europe," he said.
Borgas also believes Europe is ahead of the world in general recycling, which it is now developing from a largely logistical activity -- with the infrastructure to collect, sort and transport waste already in place -- towards a technology-driven endeavor looking to develop better technologies to decompose waste.
"How do you sort a refractory block into aluminum, zirconia, magnesium so that you can use the minerals again? We are now getting to this point," said Borgas.
With Norwegian and German partners and a grant from the European Innovation Fund, RHI Magnesita has built a laser-based, robotics-supported unit that is meant to increase the precision of sorting and may build 10-15 of these for its sites all over the world if tests are successful.
The company currently sources 14.5% of its refractory inputs from secondary materials, so has almost achieved its 15% target; it now aims for 20% by 2030, but its recycling in Europe is already close to that share.
Further integration into alumina
Aside from efforts to get magnesite on critical materials lists, alumina sourcing has become a point of concern too, after recent acquisitions boosted RHI Magnesita's needs for the raw material; alumina and magnesite refractories now form equal parts of its portfolio, close to the global market average, which is 60% alumina-based and 40% magnesite-based.
The company's 10% self-sufficiency in alumina supply (versus 70% in magnesite) provided by captive fireclay mines would not have been an issue without last year's price spikes, which made alumina a significant cost burden. Greater backward integration into alumina through partnerships or acquisitions now looks a possibility, according to Borgas.
Alumina prices more than doubled last year from $350/mt FOB Australia at the beginning of 2024 to a peak of $785-$787/mt in the second half of November, although they have since subsided to $470/mt as of March 3, according to Platts assessments.
Questioned on any expected distortions from US President Donald Trump's love of tariffs, he said the company -- which has assets all over the world including in the EU, China and Canada -- has a global supply chain setup that is flexible enough to deal with the challenge, but adapting raw materials supply to the expansion of tariffs would be trickier.
"The raw materials can only be produced where they can be found," Borgas said, noting that the US currently imports almost all of its magnesite needs for the refractory industry from China.
