The Chinese graphite electrodes prices that have been falling since the start of 2019 seems to be now taking a toll on its raw material – Needle coke also.
After the sudden spurt in GE demand in the latter half of 2017, the needle coke prices also recorded a significant surge given the limited needle coke supply in the country. Due to the rapid rise of the downstream graphite electrode market, the needle coke industry has an annual growth rate of more than 200% and in 2018 its market size was close to 6 billion yuan.
As China’s needle coke demand is highly correlated with GE, the country’s domestic needle coke production capacity is growing rapidly. According to industry experts, it is expected that in Q4 2019, needle coke capacities will be released in large quantities and the supply constraints will be eased further. In 2018, China has added capacity of 270,000 tonnes which is expected to reach 750,000 tonnes and 1.1 MnT in 2019 and 2020 respectively.
At present, with the construction and commissioning of more needle coke enterprises in China, needle coke capacity is moving towards becoming surplus. From the downstream point of view, the lithium battery anode industry demand is stable, while the graphite electrode market continues to remain weak resulting which chances are that few needle coke companies may start incurring losses. China’s domestic needle coke prices that have been falling over past few months are thus unlikely to rebound unless there is a national policy by the government (at a very fast pace) to develop electric furnace steel that may once again shoot up the GE demand and so does needle coke requirement also.
Further, it is being anticipated that the needle coke prices will decline in the second half of 2019, and there may be a large plunge in the fourth quarter. In next year, the number of participants in the Chinese needle coke industry will be increased resulting which it may even lead to price wars and like GE, needle coke enterprises will even start incurring considerable losses. Also according to the industry experts, as the quality of domestic needle coke in China still does not matches the global standard, the companies manufacturing higher grade electrodes will continue the trend of importing needle coke, thus resulting in excess in the domestic market.
According to customs data, in the first four months of 2019 China imported about 46,400 tonnes of petroleum-based needle coke, up by 108% against the corresponding period of the previous year. In terms of coal-tar pitch based needle coke imports, the same have been recorded at 27,800 tonnes during Jan-Apr’19, recording a plunge of 21% y-o-y basis.
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