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Procurement Challenges Facing Buyers in the Refractory Market

Mar 21, 2018

Refractories are inorganic, non-metallic materials that retain their strength at high temperatures of more than 1000°F. A refractory is used to line hot surfaces that are found in most industrial processes as it is more heat-resistant than metals. Additionally, refractories can also withstand physical wear and corrosion caused by chemical agents. Refractories find application in furnaces, kilns, incinerators, and reactors. The increasing production capacity in the iron and steel industry has given the global refractories market a boost. These end-user industries account for 70% of the global consumption of refractories. (SpendEdge Procurement Market Intelligence Report) The APAC region is one of the largest contributors to the demand and supply, accounting for about 70% of the global spend. It is essential for buyers to procure a quality refractory at a competitive price to survive in the market. However, they are posed with specific procurement challenge in the process.

Request Free SampleProcurement challenges in the global refractory market

Selecting between precast and monolithic refractories

Precast and monolithic mixtures are the two basic types of refractories which offer unique advantages. For instance, precast shapes are faster to install; whereas, monolithic refractories are low-priced. Such issues pose a significant procurement challenge for buyers in the refractory market as they have a hard time deciding on their requirement. To tackle such issues, buyers must evaluate the TCO including the cost of material, labor costs, and maintenance costs of using either type of refractory.

Handling and storage challenges

Refractory handling and storage is a big challenge for companies as improper handling may cause alteration of physical and chemical properties of refractories, rendering them unusable. Companies usually invest marginally in material handling and material storage of refractories as it only accounts for 2%-3% of the overall costs and lists low on their spend category. One way to effectively combat such issues is to look for third-party service providers that have competency in logistics and storage of refractory materials.

Raw material price fluctuations

Alumina and silica are prime raw material required for the manufacturing refractories. The same material has high demand across other end-user industry as well. Consequently, there is high price volatility due to the imbalance between demand and supply. As a result, buyers study price fluctuations, as suppliers are forced to pass on the loss to buyers. To protect themselves against such price fluctuations, buyers can engage in forwarding contracts for material pricing ensuring consistent pricing over a period of time.

Pressure on industry to reduce material and energy consumption

Refractory manufacturing has a high environmental impact, putting it under the radar of regulatory bodies such as EPA. As a result, buyers have to monitor the volumes of refractories used in their production process and strive to reduce the material used. Also, buyers are often required to report material usage and reduce material consumption for per ton production of end-product. Additionally, they must also engage in reuse and recycling practices to reduce material usage and engage with suppliers who can customize a refractory, based on their requirement.

For more information on the top procurement challenges in the refractories market along with supply market insights, procurement best practices, pricing models, and supplier selection criteria in SpendEdge’s upcoming report on the global refractories market.

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