Amid increasing consciousness towards environment, China’s clampdown of thousands of induction furnaces producing low-quality steel last year as a part of supply side structural reforms has compelled the country’s steel manufacturers to shift their focus to EAFs (Electric Arc Furnace) for steel production.
Graphite electrodes (GE) are used as key raw material to melt scrap in EAFs to produce new steel. Now, as China has tightened the screws on polluting industrial plants, about 30% of its graphite electrode production capacity had been shut and some provinces had restricted output. This has resulted in demand-supply mismatch of GE leading to significant increase in its prices.
As per the market reports, graphite electrode spot prices in China have increased nine-fold in 2017. This surge in prices can also be attributed to shortage of needle coke, a key raw material used for manufacturing of GE.
Currently spot prices of Graphite Electrodes in China’s domestic market are being heard in the range of USD 25,000-30,000/MT for UHP grade. These prices will further include VAT of 17%.
Now sources have informed SteelMint that the Chinese steel manufacturers are seeking out Indian market to procure graphite electrodes as there is parity between China’s domestic prices and export offers from India.
Indian players are currently offering Graphite Electrode (UHP grade) at spot prices in the range of USD 20,000-25,000/MT. Also, although Chinese government has imposed import duty of 8% and a VAT of 17% on imported Graphite Electrode, procuring the same from the Indian market will still be feasible to the Chinese buyers. However, in the Indian market also the supply of Graphite Electrode is quite tight and the suppliers have very limited quantity to offer. Thus, it remains to be seen how much Chinese requirement of Graphite Electrode will be met from India.
With the surge in Graphite Electrode prices, steelmakers that typically bought Graphite Electrode on yearly contracts have to go for short-term quarterly contracts or buy in the spot market as suppliers are not willing to bind by long-term contracts in the volatile price environment amid uncertainties of Needle Coke prices and availability.
China’s Graphite Electrode Imports
In 2017, China imported about 2,597 MT of graphite electrode, out of which about 51% imports (1,317 MT) were made from Japan followed by 806 MT from Malaysia and 139 MT from India.
Over past two months of Jan and Feb’18, China has imported about 355 MT of Graphite Electrode, with 186 MT coming from Philippines and 96 MT from Japan.
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