MP fire-proof brick units face meltdown heat

Fire-proof bricks (refractory) units in Madhya Pradesh are quite literally facing the heat from the recession. The industry association has said that orders from Europe and the US have dropped by almost 50 per cent.

As many as 35 small and medium refractory manufacturing units are already facing financial strain on account of increased expenses on coal supply. Jabalpur and Katni regions of Madhya Pradesh make refractory for large industries like steel, aluminum, and cement and copper. “Orders from domestic industries have also gone down since a number of projects of sponge iron and cement have been kept on hold. Consequently, the demand for refractory has gone down,” Arvind Gugalia, president, Madhya Pradesh Refractory Manufacturing Association said.

Another industry source said the buyers were waiting for rates of the product to go down. “Refractory rates vary from Rs 5,000 per tonne to Rs 25,000 per tonne but we can’t slash rates by 15 per cent as our raw material suppliers have not reduced the rates. The units who were playing on higher margins before October are suffering the most,” owner of a refractory unit from Katni told BS telephonically.

Each unit requires at least 150 tonnes of coal per month. But coal companies have discontinued coal-linkage of units which failed to lift the allocated stock. Now the units have resorted to participation in costlier coal auctions.

To tide over the coal shortage, refractory unit owners are now using furnace oil after the cut in petroleum products. The rates of furnace oil have gone down from Rs 35 per litre to Rs 15 per litre. “We are better off using furnace oil, instead of coal,” said the unit owner.

However, according to Gugalia, units are still facing coal supply problems. The cost of coal has also gone up and has increased by Rs 1,000 per tonne and thus the units are losing profitability by 7-8 per cent.

Most of the unit owners said sponge iron and steel project should be given clearances otherwise refractory units will be making huge losses and will be in very big trouble. “As of now, future prospects of refractory units depend on new sponge iron and cement units, if they will be blocked all refractory units will be in trouble,” Sunil Mishra, owner, Jamuna Refractory Katni said adding: “the demand from Gulf countries has also gone down.”

The Mahakaushal refractory units employs approximately 4,000 people and another 2,000 under indirect jobs. But none of the units has cut jobs. “In fact, we are looking to increasing the marketing staff to explore every plave where our product can be used,” Gugalia added.