China’s carbon industry which includes various products such as graphite electrodes (GE), prebaked anode and cathode, carbon block, carbon paste, and special carbon are set to face severe overcapacity from the second-half of 2020, after producers rushed to expand overcapacity amid increased demand and high-profit margins, an official from China Carbon Industry Association (CCIA) said last week.
CCIA’s general secretary Sun Qing said in a recently held industry conference that “Extravagant profits over last one and a half year have lured companies that were shut down in bleak years to resume operations and even expand capacity whereas some of those companies that didn’t have carbon capacity are planning to launch new production line”.
China’s aggressive environmental protection measures since the latter half of 2017 have tightened supplies of low-quality carbon products and has led to the promotion of EAFs (Electric arc furnace) for steel production which emits less toxic air as compared to blast or induction furnaces.
In 2017, China had an effective GE capacity of 900,000 tonnes and a production capacity of 630,000 tonnes (including exports and non-member enterprises) and in 2018 it is expected to produce 700,000 tonnes of GE (including exports and non-member enterprises).
According to Sun, China is expected to have graphite electrode capacity totaling 1.5 MnT by 2020, up 67% against 2017. With the increase in electric furnace steel, the demand for graphite electrodes will also rise, but the current utilization rate of graphite electrodes is only 53.33%. By 2020, the production and sales of graphite electrodes in the country will not exceed 800,000 tonnes (including exports and including non-member enterprises) which will be less than the total GE capacity of 1.5 MnT, thus resulting in overcapacity.
CCIA statistics reveal that by December 2018, the newly added capacity of graphite electrode in China was 600,000 tonne (this includes new processes which are already under construction or are being designed to start construction soon). From Jan to Aug’18, the output of graphite electrode in China was 416,392 tonne, up 14.18% y-o-y basis.
Unlike China’s steel and coal industry whose capacity is strictly controlled by the central government, carbon producers do not need to acquire approvals from authorities to add new capacity as long as they are able to meet environmental standards.
Limited needle coke supply
The only area of concern for China’s GE producers will be the tight supply of high-quality key raw material, Needle coke that is required to produce ultra-high power (UHP) graphite electrodes.
Sun Qing has added that as China depends upon imports of good quality needle coke for the production of UHP grade GE, country’s carbon industry should give high importance to research activities, scientific and technological innovation and co-operation of upstream and downstream units to improve the quality of supply chain. To control overcapacity, the country shall give importance to emission levels as a part of environmental protection measure, shall be vigilant about the addition of low-quality redundant capacities, shall focus on producing high-quality products, shall give importance to coordination between demand-supply, and shall avoid aggressive competition by the following self-discipline.
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