Graphite electrode prices have risen sharply recently, impacting both the steel and aluminium industries. Graphite electrode prices and their input materials have risen sharply this year; needle coke prices have reportedly increased to about USD 3,200/MT from USD 450/MT, in 2017.
A perfect storm of several supply factors have combined to result in sharp price rises. To produce 1 tonne of steel around 2-3 kgs of Graphite Electrode is used in the Electric Arc Furnace.
Graphite electrode suppliers are pushing for quarterly or monthly contracts from annual, and some electrode producers have already renegotiated prices, given the steepening costs.
Besides, there is a wide demand and supply gap; with demand overtaking supply. There are only two producers in India–Graphite India Ltd and HEG Ltd, with a combined production capacity of 180,000 MTPA, which is close to 25% of world production capacity.
There are normally two grades of electrodes – UHP (Electric Arc Furnace) and RP (Ladle Furnace Refining). Spot prices of the UHP went up to USD 35,000/MT; but on the other hand, there was a reversal in the increase in the prices of RP—dropping to USD 10,000/MT from the highs of USD 18,000-20,000/MT, on recent increased availability in China.
China’s campaign for clearer skies has closed thousands of mills producing Steel and Aluminum, resulting in reduced demand for Graphite Electrode. However, Graphite Electrode production is also severely impacted as it too is a high polluting industry.
In a recent development Graphite India sent out a clarification with regards to China ramping up graphite electrode capacity for the lithium ion battery sector, having no co-relation with their manufactured graphite electrodes used by steel manufacturers through the Electric Arc Furnace route. They also added that demand/supply situation for graphite electrodes remain unchanged from the last couple of months.
A Japan based electric arc steelmaker said, “There is a possibility for the Needle Coke prices to treble to around Yen 900,000 per ton (USD 8040/MT) in 2018 from Yen 300,000 per ton in 2017 (USD 2680/MT) — although, Graphite Electrode contract prices for Q2 CY18 are under negotiations and could go up to Yen 3,000,000 per ton (USD 26,800/MT), even though Needle Coke prices are yet to be decided.
While some mills still have annual supply contracts running, the majority are negotiating on a quarterly or spot-basis. For each tonne of steel produced, the electrode cost has soared from USD 10 to around USD 80 per tonne.
The smaller diameter size graphite electrode of 100 mm of UHP grade is being traded for quarterly contracts at around INR 900,000/MT (USD 13,850/MT) and that of 750 mm diameter electrode at around INR 2,000,000/MT (USD 30,770/MT).
Indian billet prices are also down at around USD 450/MT FOB India, from USD 520/MT in Sep’17. As a consequence, it is likely that Graphite Electrode buyers will negotiate for lower prices.
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