Source: China’s Customs
China’s graphite electrodes (GE) export numbers are out for the month of March and if we look at country’s GE exports for first quarter of CY18, the same are estimated to stand at around 0.06 MnT, up by 50% against the country’s GE exports in the corresponding quarter of the previous year 2017. In Q1 CY17, China’s GE exports stood at 0.04 MnT. In M-o-M basis, China’s GE exports increased from 0.01 MnT in Feb’18 to 0.02 MnT in Mar’18.
If we analyse China’s country-wise exports during Q1 CY18, highest exports were made to Iran that has percentage share of 19% in China’s total GE exports, followed by Russia (9%) and then U.S. (8%).
Considering Iran’s cheap energy costs there is increased demand for GE, a key raw material for EAFs (Electric Arc Furnaces) as electric furnaces are more efficient and less expensive steelmaking method as compared to blast furnaces. According to the market reports, about 70-75% of Iranian mills use EAFs.
China being the largest producer of GE in the world, Iran majorly procure its GE requirement from China followed by India. However, given the shortage of GE in the international market country’s GE imports and prices both are under pressure. Subsequently several Iranian companies have set up a joint venture to build Iran’s first graphite electrode manufacturing plant in light of the current shortage.
As per the reports, about 200 million will be invested by Novin Electrode Company, a joint venture between Iranian Mines and Mining Industries Development and Renovation Organization alongside Mobarakeh and Khorasan steel companies for the production of graphite electrodes.
In 2017, China exported about 0.20 MnT of GE with highest exports being made to same countries, Russia and Iran followed by U.S.
Will China’s GE exports dry up in coming months of CY18?
In 2017, China produced around 520,000 MT Graphite Electrode, out of which 201,695 MT was exported and the rest utilized for domestic consumption. However, this ratio of domestic consumption versus exports will be a thing of the past as the quantum of export volume will shrink substantially in 2018 due the increasing Graphite Electrode domestic consumption in China, which is expected to reach a mammoth level of around 532,000 MT this year.
China’s closure of inefficient induction furnaces and polluting blast furnaces are expected to be replaced by electric arc furnace. New policy measures announced in China ensures zero growth in steel capacity by requiring steel capacity replacement to be kept in ratio – 1.25:1 or 1:1 (regional differentiation).
China is rapidly increasing its Electric Arc Furnace capacities. About 56 new EAF furnaces are coming up by the end of the current year, with an aggregate capacity of 60-70 MnT, which is likely to come on stream within the next few months. Thus, Chinese production through EAF route is expected to rise from 5.2% (CY 2016) to about ~13% in 2018, thus indirectly impacting graphite electrodes availability for the foreign markets.
China has announced its intentions to produce about 20% of its steel through Electric Arc Furnace by 2020 which is 3times more than what it used to be only one year ago – which means that their domestic Graphite Electrode requirements could go up by as much as 3times over the next three to four years.
China’s domestic GE prices are on a downtrend
SteelMint has heard from its market sources that after remaining buoyant since the latter half of 2017, the domestic prices of graphite electrode in China are observing downtrend from the month of Apr’18.
The sources suggest that the GE buyers in China have gained some bargaining power as country’s domestic steel demand has slowed down and GE buyers have already stocked up enough material. Subsequently, there is a big difference between steel plants’ actual purchasing price and the prices quoted by electrode producers.
The latest prices heard in China for 450mm UHP grade graphite electrode are 75,000-80,000 yuan per tonne (USD 11,808 – 12,595/MT), 550mm UHP grade GE are being offered at 100,000 – 110,000 yuan per tonne (USD 15,745 – 17,320/MT) and 600mm GE is at 110,000 – 120,000 yuan per tonne (USD 17,320 – 18,895/MT), an average decline of 10,000 – 15,000 yuan per tonne (USD 1,575 – 2,360/MT).
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