There Is A Gap In The Graphite Electrode Market, And The Pattern Of Short Supply Will Continue

The graphite electrode market, which declined last year, has made a big reversal this year.
“In the first half of the year, our graphite electrodes were basically in short supply.” As the market gap this year is about 100,000 tons, it is expected that this tight relationship between supply and demand will continue.

It is understood that since January this year, the price of graphite electrode has been rising continuously, from about 18,000 yuan/ton at the beginning of the year to about 64,000 yuan/ton at present, with an increase of 256%. At the same time, needle coke, as the most important raw material of graphite electrode, has become in short supply, and its price has been rising all the way, which has increased by more than 300% compared with the beginning of the year.
Demand of downstream steel enterprises is strong

Graphite electrode is mainly made of petroleum coke and needle coke as raw materials and coal tar pitch as binder, and is mainly used in arc steelmaking furnace, submerged arc furnace, resistance furnace, etc. The graphite electrode for steelmaking accounts for about 70% to 80% of the total consumption of graphite electrode.
In 2016, due to the downturn in EAF steelmaking, the overall efficiency of carbon enterprises declined. According to statistics, the total sales volume of graphite electrodes in China decreased by 4.59% year-on-year in 2016, and the total losses of the top ten graphite electrode enterprises were 222 million yuan. Every carbon enterprise is fighting a price war to keep its market share, and the sales price of graphite electrode is much lower than the cost.

This situation has been reversed this year. With the deepening of the supply-side reform, the iron and steel industry continues to pick up, and the “strip steel” and intermediate frequency furnaces have been thoroughly cleaned and rectified in various places, the demand for electric furnaces in steel enterprises has increased sharply, thus driving the demand for graphite electrodes, with an estimated annual demand of 600,000 tons.

At present, there are more than 40 enterprises with graphite electrode production capacity exceeding 10,000 tons in China, with a total production capacity of about 1.1 million tons. However, due to the influence of environmental protection inspectors this year, graphite electrode production enterprises in Hebei, Shandong and Henan provinces are in a state of limited production and production suspension, and the annual graphite electrode production is estimated to be about 500,000 tons.
“The market gap of about 100,000 tons can not be solved by enterprises increasing production capacity.” Ning Qingcai said that the production cycle of graphite electrode products is generally more than two or three months, and with the stocking cycle, it is difficult to increase the volume in the short term.
Carbon enterprises have reduced production and shut down, but the demand of steel enterprises is increasing, which leads to graphite electrode becoming a tight commodity in the market, and its price has been rising all the way. At present, the market price has increased by 2.5 times compared with January this year. Some steel enterprises have to pay in advance in order to get the goods.

According to industry insiders, compared with blast furnace, electric furnace steel is more energy-saving, environment-friendly and low-carbon. With China entering the scrap depreciation cycle, electric furnace steel will achieve greater development. It is estimated that its proportion in the total steel output is expected to increase from 6% in 2016 to 30% in 2030, and the demand for graphite electrodes is still large in the future.
The price increase of upstream raw materials does not decrease

The price increase of graphite electrode was quickly transmitted to the upstream of industrial chain. Since the beginning of this year, the prices of major raw materials for carbon production, such as petroleum coke, coal tar pitch, calcined coke and needle coke, have risen continuously, with an average increase of over 100%.
The head of our purchasing department described it as “soaring”. According to the person in charge, on the basis of strengthening market pre-judgment, the company has taken measures such as purchasing at a low price and increasing inventory to cope with the price increase and ensure production, but the sharp rise of raw materials is far beyond expectations.
Among the rising raw materials, needle coke, as the main raw material of graphite electrode, has the biggest price increase, with the highest price rising by 67% in one day and more than 300% in half a year. It is known that needle coke accounts for more than 70% of the total cost of graphite electrode, and the raw material of ultra-high power graphite electrode is completely composed of needle coke, which consumes 1.05 tons per ton of ultra-high power graphite electrode.
Needle coke can also be used in lithium batteries, nuclear power, aerospace and other fields. It is a scarce product at home and abroad, and most of it depends on imports in China, and its price remains high. In order to ensure the production, graphite electrode enterprises snapped up one after another, which led to the continuous increase of needle coke price.
It is understood that there are few enterprises producing needle coke in China, and people in the industry believe that price increase seems to be the mainstream voice. Although the profits of some raw material manufacturers have greatly improved, the market risks and operating costs of downstream carbon enterprises are further increasing.

Post time: Jan-25-2021