After the National Day Holidays, it was being anticipated that the Graphite electrodes (GE) demand in China may observe an uptick with the production suspensions and restrictions being lifted up and the production capacity being released.
However, the situation in China’s domestic steel market continues to remain grim as the smaller scale Chinese electric arc furnace (EAF) steelmakers have slashed their production primarily because of tight raw material, scrap supply and its resulting high prices.
Stricter emission standards have driven Chinese basic oxygen furnace (BOF)-based mills to increase their average scrap charge rate to 20%. A further increase in steel production and Beijing’s encouragement to boost electric arc furnace (EAF)-based steel production capacity has also helped China to increase scrap usage, resulting in its tight supply.
This coupled with weakening of finished steel market has seen the EAF mills’ production costs rise and their margins narrow. As a result, the Chinese arc furnace makers are struggling to cut costs, and are opting for cut in their bid prices for electrodes as one of the options.
The current price of 450mm HP grade GE are heard to be in the range of RMB 13,000 – 15,000/MT (USD 1,825 – 2,100/MT) whereas that of UHP grade electrodes of size 500mm are in the range of RMB 15,000 – 22,000/MT (USD 2,100 – 3,090/MT)and 600mm are in the range of RMB 42,000 – 53,000/MT (USD 5,900 – 7,400/MT).
The rise in scrap prices and the impact this is having on steel production costs may force more EAF mills to conduct production suspensions for overhauls resulting which the market demand would worsen further adversely impacting the domestic graphite electrode market.
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