Tokai Carbon Ltd, a leading graphite electrode (GE) manufacturer in Japan has decided to introduce ‘surcharge system’ that will move the selling price of graphite electrodes as per the fluctuations in raw material prices.
This surcharge is an additional charge and is being introduced as a result of increasing needle coke prices – a key raw material for graphite electrodes. Needle coke, a crude oil derivative, accounts for 40-44% (depending on the year) of the cost to produce one metric ton of electrodes.
The selling price of the graphite electrodes rose dramatically in the latter half of 2017 due to its tight supply and increasing demand and the rise of main material needle coke. Needle coke prices increased from USD 450/ton to USD 3,200/ton in one year.
However, as per the company sources, while deciding the surcharge the company will take into consideration both needle coke and electricity charges.
With the introduction of the surcharge system, Tokai Carbon wants to secure stable profit without being influenced by market conditions and fluctuations in raw material prices. The company is likely to introduce this ‘surcharge system’ from January 2019. Tokai Carbon has the graphite electrode production capacity of 98,000 tonnes per year.
The outlook for global needle coke prices
In China which a leader in coal-based needle coke production, a crackdown on illegal steel is causing a maintained shift toward electric furnace use. Since this involves a switch from operations using molten iron to those using iron scrap, there is significant demand targeting electrodes for high-durability, high-quality products.
With the increased requirement for graphite electrodes, the demand for its raw material- needle coke is also increasing which is further supporting the global needle coke prices.
Going forward, it looks likely that market prices of needle coke will stay high. While the Chinese market for needle coke is calming down to a level of USD 3,500–USD 4,000 following a period of overactivity, international prices are seeing signs of an upward trend, with one major U.S. firm announcing contract prices of USD 3,000 for July onward. With regard to Japanese companies, C-Chem Co. Ltd. is setting out an increase to its prices, while other manufacturers appear to be moving ahead with their own discussions aimed at price adjustments.
Graftech already follows surcharge system on GE selling price
Graftech, one of the leaders in graphite electrode production, prices graphite electrodes to their customers along two parameters:
Base price, which tends to vary in a range depending on the graphite electrode diameter and properties.
Energy surcharge, which includes the volatile changes of raw materials, utilities, freight and manufacturing costs. This surcharge changes depending on crude oil prices. If Brent crude oil climbs above USD 90/barrel, then a surcharge goes into effect for each dollar above the USD 90 barrel level.
There is petroleum-based needle coke and coal-based needle coke, and either can be used to produce graphite electrodes. ‘Pet coke’ is a by-product of the oil refining process, while coal-based needle coke is made from coal tar which appears during coke production and GrafTech’s most recent annual report specifically states that one of its U.S. facilities produces petroleum needle coke.
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