Production and Operation of National Refractory Industry in 2021 and Forecast Analysis of Refractory Market in 2022

Author: China Refractory Industry Association Li Yongquan

Overall Operation of Industries Above Designated Size in 1.

In December 2021, industrial value added above designated size grew by 4.3 percent in real terms year-on-year (Figure 1, the following value added growth rates are all real growth rates net of price factors), up 11.9 percent from the same period in 2019 and 5.8 percent on average over the two-year period. From a month-on-month perspective, in December, the added value of industries above designated size increased by 0.42 over the previous month. In 2021, the added value of industries above designated size increased by 9.6 percent over the previous year, with an average two-year growth of 6.1 percent.

1. In 2021, industrial enterprises above designated size achieved operating income of 127.92 trillion billion yuan, an increase of 19.4 percent over the previous year; operating costs incurred were 107.12 trillion billion yuan, an increase of 19.1 percent; and the operating income margin was 6.81 percent, an increase of 0.76 percentage points over the previous year. In 2021, the country's industrial enterprises above designated size achieved a total profit of 8709.21 billion billion yuan, an increase of 34.3 percent over the previous year (on a comparable basis), an increase of 39.8 percent over 2019, and an average two-year increase of 18.2 percent.

2. At the end of 2021, the operating income of industrial enterprises above designated size per 100 yuan of assets was 95.4 yuan, an increase of 7.7 yuan over the previous year; the per capita operating income was 1.72 million yuan, an increase of 284000 yuan over the previous year; the inventory turnover days of finished products were 16.8 Days, a decrease of 0.9 days from the previous year; the average payback period of accounts receivable was 49.5 days, a decrease of 2.0 days from the previous year.

3. In 2021, the mining industry achieved a total profit of 1039.08 billion yuan, an increase of 1.91 times over the previous year; the manufacturing industry achieved a total profit of 7361.22 billion yuan, an increase of 31.6; the electricity, heat, gas and water production and supply industry achieved a total profit of 308.92 billion yuan, a decrease of 41.9.%.

Production and Operation of Refractory Industry in 2. 2021

1. Production and operation in 2021, the output of refractory products in the industry remained stable. According to the statistics of the same caliber of the association, the national output of refractory products was 24.0267 million tons, down 3.04 from the same period last year. Among them, 13.2051 million tons of dense shaped refractory products, down 3.68 from the same period last year; 609800 tons of thermal insulation refractory products, down 1.98 from the same period last year; and 10.2118 million tons of unshaped refractory products, down 2.26 from the same period last year. The yield of main varieties is shown in Figure 2.

Figure 3 is the output of the main refractory producing provinces (cities) in 2021. Among them, Beijing's production data mainly comes from Beijing Lear (002392), Ruitai Technology (002066), Jinyu Tongda and United Rongda and other enterprises. The production plants of the above-mentioned enterprises are mainly distributed in Henan, Jiangsu, Anhui and other places, and some overlapping data associations have been sorted according to statistical caliber. The output of Jiangsu Province increased on the high side due to the expansion of statistics. Due to the deviation of the statistical sample, the year-on-year change data show large fluctuations and changes, but the overall data maintain good consistency.

2. Import and export trade of refractory raw materials

In 2021, the national import and export trade of refractory raw materials totaled US $4.832 billion billion, an increase of 51.56 percent over the same period last year. Among them, the export trade volume was 4.554 billion US dollars, up 54.39 percent year-on-year; the import trade volume was 0.278 billion US dollars, up 16.60 percent year-on-year. The total export volume of refractory raw materials nationwide was 7.3692 million tons, an increase of 37.27 percent over the same period last year; the export volume of refractory raw materials was 5.6023 million tons, an increase of 41.24 percent over the same period last year; and the export volume of refractory products was 1.7669 million tons, an increase of 26.02 percent over the same period last year.

(1) Export of refractory raw materials

In 2021, the export volume, export trade volume and average price of refractory raw materials increased significantly, by 41.24, 74.93 and 23.85 respectively. This is mainly due to the restorative growth of the foreign steel industry, especially the growth rate of export trade volume is 33.69 percentage points higher than that of export volume. Among them, the growth rate of magnesium raw materials and corundum raw materials was significantly higher than that in previous years, and the export volume of fused magnesia increased by 64.1. The export situation of main varieties is shown in Table 1.

(2) Export of refractory productsThe export volume of refractory products and export trade volume also increased significantly, with a year-on-year increase of 26.02 and 26.25 respectively, especially the export volume of alkaline refractory products and aluminosilicate products increased by 24.04 and 31.93 respectively, and the export trade volume increased by 33.81 and 19.16 respectively. The growth rate of export trade of refractory products was 0.23 percentage points higher than that of export volume. Another phenomenon is that the volume increase does not increase, and the average price of total exports increased by only 0.18 per cent year-on-year. Specifically, the average export price of alkaline refractory products increased by 7.88 year-on-year, and the average export price of aluminosilicate refractory products dropped by 9.68. The export situation of each variety is shown in Table 2.

3, a brief analysis of the operation of key enterprises.

According to the survey of the operation of 92 key refractory enterprises in 2021, the output of refractory materials is 14.9936 million tons (including some refractory raw materials), which is 14.69 percent higher than that of the same period last year; the sales revenue is 69.695 billion yuan, up 13.32 percent from the same period last year; the profit is 4.322 billion yuan; and the tax paid is 3.608 billion yuan, down 0.11 percent from the same period last year.

There are 17 refractory enterprises with sales revenue of more than 1 billion yuan, including 5 enterprises with income of more than 3 billion yuan, 2 enterprises with income of 30-2 billion level and 10 enterprises with income of 20-1 billion level.

The sales revenue of the top 10 enterprises was 31.772 billion yuan, an increase of 5.679 billion yuan over the same period last year, an increase of 21.77 percent over the same period last year.

The tax payment of key enterprises is 3.608 billion yuan, and the tax payment of the top 9 enterprises (over 100 million yuan) is 1.654 billion yuan, accounting for 45.84 of the total tax payment of key enterprises. In the reported data of enterprises with sales revenue exceeding 1 billion, the output and sales revenue of some enterprises include a part of the output of raw materials and their sales revenue, which is also the business characteristics of some domestic refractory enterprises for many years. The data in Figure 4 are ranked completely according to the reported data of enterprises.

In order to better provide peers with the annual output and sales revenue changes of refractory products enterprises, so that colleagues can compare more intuitively and clearly, the association will report the raw material production of enterprises to carry out the same caliber division, and then compare the output of the products and their sales revenue, the results are listed in Figure 5.

In terms of operation, the profits of 92 key enterprises in 2021 are 23.4 percent lower than the average profit growth of industrial enterprises above the national scale. The profit margin of operating income was 6.20 percent, 0.51 percent lower than that of the same period last year, and 0.61 percentage points lower than that of industrial enterprises above the national scale. If the refractory raw material part is divided, the sales profit margin of refractory products enterprises is close to 5.0.

On the export side, refractory exports hit another record high in 2021. The total export trade of the top 14 enterprises in the trade volume is 5.073 billion billion yuan, accounting for 83.01 percent of the total export trade volume of key production enterprises. Puyang Punai ranks first, with an export trade volume of 0.999 billion billion yuan, and its leading position in export has been continuously strengthened.

Among the key enterprises, there were 8 loss-making enterprises, with a loss of 8.70 per cent. At the end of 2021, the total accounts receivable of key enterprises was 19.572 billion billion yuan, up 11.83 percent year-on-year; accounts receivable rose by 52 enterprises, up 56.52 percent. Among them, 28 enterprises rose by more than 20 per cent, with an increase of 30.43 per cent. What is more serious is that the accounts receivable of 12 production enterprises increased by more than 50% year-on-year, and the financial pressure of refractory enterprises was greater, which promoted the rise of financial costs.

Production and Operation of Main Downstream Industries in 3.

Operation of (I) Iron and Steel Industry

1. Production and operation of China's steel industry

According to the National Bureau of Statistics, the country's pig iron production in 2021 was 0.869 billion tons, down 4.3 percent year-on-year; crude steel production was 1.033 billion tons, down 3.0 percent year-on-year; and steel production was 1.337 billion tons, up 0.6 percent year-on-year. The output of each month is shown in Figure 7.

From the crude steel production point of view, the fourth quarter of 2021 steel production policy is very strong, especially in the fourth quarter of the main steel-producing provinces have taken many hard measures, the annual total output does not exceed the national control target of 2020 finally achieved. But at the same time, it should be noted that steel, as the main raw material for national urban filling and industrialization, the total base of steel production in China is still very large at this stage, and the total demand for refractory materials has not changed much. The development of industry reduction should be a long and slow process.

2, the world steel industry production.

According to the World Steel Association, in 2021, global (64 countries and regions combined) crude steel production was 1.912 billion tons, up 3.6 percent year-on-year; China accounted for 54.03 percent of global crude steel. The world's major steel-producing regions (countries), with the exception of China, have grown to varying degrees, and the recovery of the global economy after the new crown epidemic has created strong demand for steel. Crude steel production in major steel-producing countries and regions is shown in Table 3 and Figure 8.

Production and Operation of (II) Building Materials Industry

In 2021, the national cement output was 2.363 billion tons, down 1.2 percent from the same period last year, up 1.6 percent from the previous year, and the commercial concrete output was 3293.3 million cubic meters, up 6.9 percent, up 4 percentage points from the same period last year. Flat glass production 1.017 billion weight box, an increase of 8.4, an increase of 7.1 percentage points.

Production and Operation of Non-ferrous Metals Industry in (III)In 2021, the national output of ten non-ferrous metals was 64.54 million tons, an increase of 5.4 percent over the same period last year, and the growth rate dropped by 0.1 percentage points year-on-year. Among them, the output of copper was 10.49 million tons, an increase of 7.4 percent, and the growth rate was basically the same as that of the previous year; the output of electrolytic aluminum was 38.5 million tons, an increase of 4.8 percent, a decrease of 0.1 percentage points; the output of lead was 7.37 million tons, an increase of 11.2 percent, an increase of 1.8 percentage points; and the output of zinc was 6.56 million tons, an increase of 1.7 percent, a decrease of 1 percentage point. The output of alumina was 77.48 million tons, an increase of 5% or 4.7 percentage points.

Operating characteristics of major downstream industries in (IV)

1. Small increase in production

In 2021, with the exception of steel and cement, which declined slightly year-on-year, glass and non-ferrous metal production increased to varying degrees. The increase in glass production is related to the rapid development of the photovoltaic industry in recent years, and the demand for non-ferrous metals has increased, indicating that my country's industrialization is still developing rapidly.

2. Economic benefits

In addition to the decline in cement profits in the main downstream industries, the operating income and profits of steel and glass increased significantly year-on-year. Among them, the profit of the steel industry reached the highest level in history.

4. Industry Operation Forecast and Outlook in 2022

1. Main features of industry operation in 2021

In terms of overall demand, my country is still in the critical stage of urbanization and industrialization. A new development pattern is being brewing and constructed. High-temperature industries such as steel, building materials, non-ferrous metals, and electric power are huge, and the demand for refractory materials is still strong. In addition, the export volume of refractory raw materials and products in 2021 has resumed rapid growth, so the total output of refractory raw materials and refractory products in 2021 is at a historically high level.

High cost operation of refractory products enterprises in 2021. In the first half of 2021, the prices of coal and electricity rose and other reasons contributed to the sharp rise or fluctuation of prices of bulk raw materials such as brown corundum, white corundum, silicon carbide and fused magnesia in different months. The power cut in September had a significant impact on the market price of alkaline raw materials. The price of magnesia, especially fused magnesia, rose more. It can be said that the price of refractory raw materials rose more in 2021 than in 2019 and 2020, it is also a good year for refractory raw material production enterprises, and of course it is a year of high cost for refractory products production enterprises.

2, industry profits under pressure, the quality of industry operation is not high.

The price transmission mechanism of the refractory industry is very fragile, and the price increase of raw materials is difficult to be transmitted to downstream users in a benign and reasonable manner. In the first half of 2021, the regional contract price of refractory materials of iron and steel enterprises, under the condition of high raw material prices, the overall decline rate still reached 5-10%, one of the important reasons is that refractory enterprises bargain with each other. Since the fourth quarter, the price transmission effect formed by the price increase of raw materials has begun to appear. Some steel mills have accepted the request of refractory enterprises to raise prices, and some steel mills have accepted a certain price adjustment range. However, with the restoration of power supply in magnesia producing areas in the fourth quarter, steel mills in turn require refractory enterprises to reduce prices. The price increase of raw materials can not form a reasonable cost transmission, the cost of the industry in the fourth quarter is high, the profit level of the industry has declined seriously, affecting the data of the whole year, and the operation of enterprises is under pressure.

The Association statistically analyzed the production, sales revenue and tax payment of refractory materials in the main refractory production areas of the country from January to September 2021. These areas are Yingkou and Haicheng in Liaoning Province; Xinmi, Gongyi and Yichuan in Henan Province; Zibo in Shandong Province; Xiaoyi and Yangquan suburbs in Shanxi Province; Changxing in Zhejiang Province; Yixing in Jiangsu Province, etc. The statistical results reflect the profits and taxes of the above-mentioned regions with an output of about 14.35 million tons in the first three quarters, and the data are well representative. From January to September, the sales revenue of the above-mentioned regions increased by about 34% year-on-year, but the tax revenue only increased by 11%. There was a phenomenon that the output and sales revenue increased at a high rate, but the tax payment increased much less than the growth rate of output and sales revenue. Industry profits fell further in the fourth quarter of 2021, with sales revenue 129.76 billion in the main producing areas for the year, total tax revenue 5.81 billion, tax revenue increased by only 10.3 percent, and sales margins of about 5.97 percent, which also include profits from the sale of raw materials and taxes. If the raw materials are excluded, the sales profit margin of the products is lower, which objectively reflects the reality that the operation quality is not high. Over the years, the industry concentration is low, the competition in the same industry is extremely fierce, and the current situation of low-price competition that plagues our industry has not changed.

3, refractory raw materials exports hit a record high

2021 is a bumper year for the export of refractory raw materials, and the export volume has reached a record high. From January to September 2021, the average export price of refractory raw materials increased by about 21.03 per cent, but the average export price of products was -0.81 per cent, and the export profit of products was under pressure. The normal profits of export enterprises have been eroded by the rise in domestic raw material prices and international sea freight. Export prices of products increased in the fourth quarter and international logistics improved. In the whole year, the export volume of alkaline products increased by 24% to 1.0056 million tons, and the price increased by 7.8. The export volume of aluminum and silicon products increased by 31.9, and the average export price decreased by 9.68. Although the resumption of world steel production capacity growth has brought new opportunities for domestic enterprises to export, due to the rise in logistics costs, export enterprises have not made more money.

4, 2022 full-year business outlook.

On the macro side, the global central bank monetary policy differentiation is expected to increase, the Federal Reserve to raise interest rates soon, China is facing the triple pressure of demand contraction, supply shock, expected weakening, domestic macro policy force appropriate forward policy expectations are gradually landing. From February 7 to 9, 2022, the Macroeconomic Research Department of the Development Research Center of the State Council and Shanghai Steel Union (300226) conducted a "Questionnaire Survey on the Resuming of Work and Production after the Spring Festival". The survey shows that about half of the enterprises are optimistic about the prospects of the commodity industry in 2022. More than 40% of the enterprises expect their operating income to grow in the first quarter of 2022, and nearly 60% of the enterprises are optimistic about the economic prospects in 2022.

The proportion of enterprises in the refractory industry that are cautious about the prospect of the industry in 2022 is slightly higher. The main point is that due to the adjustment trend of the real estate industry, it is believed that there will be no obvious new growth in the downstream industries of refractory materials such as steel, building materials and nonferrous metals in 2022, and the demand for refractory materials may be less than that in 2021. At the same time, the competition in the refractory industry has gradually evolved from the competition between small enterprises and large enterprises, and is gradually evolving into the competition between large enterprises. The operating pressure of enterprises in 2022 will increase, which can be seen from the changes in corporate profits in the fourth quarter of 2021. There are also views that 2022 steel, non-ferrous and other metal production will not shrink by a large proportion compared to 2021, the country's steady growth policy is expected to be strong, infrastructure may have a certain degree of recovery growth compared to 2021, so the total demand for refractory materials market will not be too bad, the outlook is cautiously optimistic.

In terms of raw materials, the new crown epidemic has had a great impact on the global supply chain in the past two years. The switch-off and power restriction in September 2021 caused great fluctuations in the prices of refractory raw materials, and the prices of some refractory raw materials rose by a large margin. However, with the restoration of power supply in the fourth quarter of 2021 and the improvement of the supply chain, prices gradually returned to rationality. During the Spring Festival, light burned magnesium and reburned magnesium sand in Liaoning region have stopped production, and some of fused magnesium production, in addition, before the festival, enterprises in the industry realized that the Spring Festival factor and the shutdown factor of the Winter Olympics had a certain amount of stock stock. The price of magnesia refractory raw materials was generally stable, and the price of magnesia, especially fused magnesia, went out of the bottom of the market price in 2019. At present, the market price of magnesia slightly upward trend.

In terms of aluminum raw materials, the price of electrolytic aluminum futures and in stock has risen significantly before and after the holiday, driving the price of industrial alumina. According to the tracking of websites such as Yinnailian, white corundum has been affected by the continuous price increase of industrial alumina. Some enterprises in Shandong have adjusted their selling prices, and some enterprises in Henan also plan to make price adjustments in the near future. At present, Guizhou region brown corundum enterprises to resume production more, production sentiment is positive; Shanxi region brown corundum enterprises under environmental control, some enterprises will continue to limit production; Henan region all parties control the most stringent, brown corundum enterprise production basically stagnated. Brown corundum market as a whole remains flat, no obvious market fluctuations.

In the first quarter of 2022, Xiaoyi's bauxite clinker production was basically shut down due to the environmental protection control of the Winter Olympics. Clinker crushing production is also limited, and enterprises rely solely on the sale of inventory products to maintain supply. Considering the cycle characteristics of bauxite clinker production, it is estimated that the short time will not have an impact on the market supply. At present, the price of bauxite clinker is relatively close to the production cost, the profit level per ton of products is between 100-200 yuan/t, the sales price of reburned magnesia is also close to the cost line, and the profit level per ton is between 100-200 yuan/t. Basic refractory raw material manufacturers have little profit to speak of, which shows that the prices of aluminum and alkaline basic raw materials have no room for further decline, forming strong support for refractory product prices.

The prices of other non-oxide raw materials such as silicon carbide and graphite have not changed much before and after the Spring Festival, and the market prices are relatively stable.

In terms of refractory products, the Association has investigated and found that the production situation of key refractory products enterprises is normal now, and some of the key enterprises surveyed have relatively full production tasks. After the festival, the price negotiated between refractory materials enterprises and steel mills has a high demand for price increases, and most of them expect to increase. The demand for refractory materials is generally stable.

In terms of exports, the recent Russian-Ukrainian war has had a huge impact on China's refractory exports. The stagnation or cessation of steel production activities in conflict areas, logistics restrictions, exchange rate changes, sanctions and other factors are linked together, seriously affecting the current stage of export business.

Looking ahead to 2022, similar to the development environment faced by other basic raw materials industries, first, the global economy is moving towards a post-epidemic era, with the gradual recovery of economic activity from the neo-crowning pandemic, and the demand side bringing a certain recovery, especially in the major customer industries of the steel industry, such as automobiles and home appliances, showing a significant recovery. This in turn led to a recovery in steel demand. The second is the soaring prices of various resources, especially the rapid rise in oil and gas prices brought about by the recent war between Russia and Ukraine, and the trend of "inflation" is likely to continue in 2022. All walks of life are facing the challenge of how to absorb the rising costs. The third key factor depends on the domestic real estate market recovery and infrastructure power transmission effect.

Recently, the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Ecology and Environment jointly issued the "Guiding Opinions on Promoting the High-quality Development of the Iron and Steel Industry" (hereinafter referred to as the "Opinions"). The "Opinions" specifically deployed 12 major tasks headed by enhancing innovation and development capabilities, and directed the way to promote the construction of a new pattern of high-quality development in my country's steel industry in the new development stage. The tasks that are more directly related to the refractory industry are: to enhance the ability of innovation and development and deepen the transformation of green and low carbon; To accelerate the merger and reorganization and enhance the industrial concentration, the industrial concentration of steel mills may strive to reach 60%; To promote the development of electric furnace steel in an orderly manner, the proportion of electric furnace steel may be increased from about 10% to 20%, etc. At the national level, the definition of high-quality development goals for the steel industry during the "14th Five-Year Plan" period is very clear and worthy of our careful study.

The steel industry is the main service object of the refractory industry. As a resource-dependent and energy-dependent refractory industry, it closely follows the new situation of the development of the steel industry, based on the new development stage, and implements the new development concept completely, accurately and comprehensively. It is the original intention and mission of refractory people to handle the relationship between "industry interests" and "enterprise interests" at this stage, and to promote the high-quality development of the industry as a whole. In 2022, we must recognize the situation and tasks, gather the surging forces of industry development, and actively participate in building a new pattern of industry development. Learning history, consciously practicing the original intention and mission, in the interaction between "industry interests" and "enterprise interests", improve our position, innovate development ideas, contribute our strength to changing the current situation of the industry, and welcome the party with excellent results. The "20th National Congress" was successfully held to jointly create a better tomorrow for the industry.

Source: China Refractory Industry Association