The 2017’s supply-side structural changes in China that led to sudden increase in its prices directly impacted its raw material, Needle Coke prices that also surged dramatically by almost 300% in times span of two years. However, while the GE prices have been falling since the start of 2019, Needle coke prices (ex-China) have not shown any signs of plunge so far.
The global needle coke industry (ex-China) is oligopolistic in nature due to the presence of only four manufacturers. The combined capacity of high-grade needle coke used for UHP grade electrodes production (ex-China) is 750 thousand tonnes. With no additional capacities coming up in the needle coke industry due to huge investments involved coupled with simultaneous increase in its demand from lithium-ion battery segment, the concern hovering in the minds of industry participants is that will these factors result in needle coke shortage for UHP grade electrodes and further increase its prices? Thus, in this article let us uncover the possibilities of the above concerns:
Needle coke’s various applications
In the past, almost all of the needle coke demand emanated from graphite electrode industry. However, due to the cyclical nature of the industry and a low demand situation, the leading needle coke manufacturers explored alternative applications for needle coke which now finds its usage in lithium-ion battery segment.
Presently, about 75-80% of all needle coke supplies are absorbed by the graphite electrode industry, while the remaining is being consumed by the lithium-ion battery manufacturers and speciality carbon industry. However, these industries generally keep swapping between natural graphite and synthetic graphite (made from needle coke). Whereas, graphite electrode manufacturers are solely dependent on the needle coke to manufacture UHP grade electrodes.
Any alternative raw material for battery segment?
As mentioned above lithium battery segment can make use of synthetic or natural graphite. With the increased needle coke costs, synthetic graphite has become a costlier option for the battery manufacturers as compared to natural graphite which is in abundance globally (estimated international reserves of natural graphite exceeds 800 MnT). As the lithium-ion battery industry is targeting for a widespread acceptance of its batteries world over with its aim to make battery prices more competitive, the natural graphite has become a favoured source of raw material for the industry. Apart from this, a continuous use of synthetic graphite under the current prices will result in an erosion of margins for battery manufacturers or this will lead to a jump in the prices of lithium-ion batteries prices.
Thus, given the above factors, it is likely that the diversion of needle coke to lithium-ion battery manufacturing industry will be curtailed in the near-term as sharp spikes in needle coke prices have made it less lucrative in relation to the natural graphite. Along with natural graphite, research is also going on to utilise graphene (a derivative of natural graphite) for batteries which is expected to improve its capacity and output potentially.
Needle coke prices to see significant increase?
Subsequently, given the above factors, it can be inferred that natural graphite’s use in the battery industry would outpace needle coke-based synthetic graphite use in the future, resulting in decrease in the demand for needle coke from the lithium-ion battery industry going forward. This is likely to free up needle coke supplies, which are extremely tight at the moment for the graphite electrode industry, thus limiting chances of dramatic surge in needle coke prices in the near future.
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