Graphite Electrode prices are sky-rocketing, propelled by severe supply constraints
– Chinese exports have halved to around 100,000 metric tons last year
– Steel production has been hit across the world, with some mills having brief outages
– Significant cutback in production of key raw materials in China
Mills around the world are facing a quadrupling in the price of graphite electrodes, a critical part of steel production. Globally,the prices multiplied by more than two-fold on massive capacity cuts in the key producing region.
Following the global trend, the prices in India have risen by three to four folds within this year. The prices shooted up to INR 600-900/KG, taking an adverse toll on the steel and aluminum manufacturers—the main end-users.
As a matter of fact, the electrodes are used in the manufacture of steel and ferro alloys in Electric Arc Furnaces. The method scores over the manufacture through Induction Furnaces in terms of environmental friendliness.
Adding to the woes of the Indian users, supplies from China have almost stopped. The Chinese government has actuated a drive to shut-down all electrode manufacturing units that produce in environmentally unsafe ways.
This has led to the closure of around 150,000 MT of electrode capacity, turning China into a net importer from an exporter. As fallout of the capacity cuts, spot prices have escalated to around USD 11,000/MT in July’17 from around USD 7,000/MT in Jun’17.
In addition to the supply cut, the upward momentum to the prices of Graphite Electrodes is also triggered by the sharp price rise of Needle Coke. Akin to the supply situation for the electrodes, global supply for the coke is also shrinking, resulting in abrupt price rises.
This year prices of the coke has moved up to around USD 3,200/MT from USD 450/MT, registering an abrupt jump of 611%.
The pertinent question in the matter under consideration is: will the high Graphite Electrode prices be sustainable in the long-term?
Given the nature of the Graphite Electrode market, and the future supply outlook; there is no prospect for the prices to correct downwards. With the massive supply cuts in the oligopolistic market, which is sustaining strong demand, the prices will remain under the influence of strong demand that will restrict any downward movement in the prices.
Besides, there is a wide demand and supply gap in India; with demand overtaking supply. There are only two producers in the country–Graphite India Ltd and HEG Ltd, with a combined production capacity of 180,000 MTPA.
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