According to IC Carbon, U.S. based needle coke supplier, Phillips 66 has raised its needle coke (NC) offers to China by 24% for the first half of 2019 against its prices in last six months of 2018 (Jul-Dec’18) amid tight supply. Whereas if we compare the same against the corresponding period of the previous year (Jan-Jun’18) Phillips 66 needle coke prices have registered an increase of about 68% y-o-y basis.
The current offers of NC to China by the company are being heard at USD 4,200 – 4,600/MT. Needle coke is a key raw material used for the manufacturing of graphite electrodes.
With the supply-side reforms in China which have led to the promotion of electric furnaces (EAF) for steel manufacturing, the demand for graphite electrodes has increased significantly in the past one and a half year. The percentage share of EAFs in total steel manufacturing in China has increased from 7% in 2016 to 12% in 2018. Also is being forecasted that the GE demand in China will reach its peak during 2019-2020.
This has benefited the few needle coke manufacturers across the globe as the global NC market is oligopolistic in nature with the presence of just few players in the market.
Although China has its domestic needle coke manufacturing industry, the country has to rely on imports as it requires high-quality needle coke for the production of higher grade electrodes. The total quantity of needle coke imported by China in 2018 was about 220,000 tonnes out of which contribution of Phillips 66 in total imports was about 67%.
The GE prices in China have been falling especially since mid-November 2018 as during winter heating (from Oct-Mar), the Chinese government has ordered production cuts to the steel mills in an attempt to deal with rising level of smog and have clearer skies.
Subsequently, the Chinese GE manufacturers have to bear the brunt of both rises in raw material costs (Needle coke prices) and fall in electrodes prices. This also means that GE prices in China may not have a free fall in the coming days and that the rise in Needle coke prices will be ultimately passed on to the steel mills by the GE producers.
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