The sharp price rise of graphite electrode recently, impacting the steel has sent a rippling effect to the industry and the Iranian steel industry is feeling the heat too as it is largely based on electric arc furnace steel making and concern about electrode supply has grown in recent weeks. Because the prices are sky-rocketing, propelled by severe supply constraints and the prices have jumped almost five times this year.
The increasingly limited supply of graphite electrode directly impedes the growth of the Iranian steel industry. Graphite electrode is an indispensable material used in electric arc furnace steel making, which, considering Iran’s cheap energy costs, is the more efficient and less expensive steel making method compared to blast furnaces. About 70-75% of Iranian mills use EAF.
According to Hossein Ahmadi, managing director of Khorasan Steel Company “Unreasonable graphite electrode price hikes due to limited supply are one of the main challenges facing the steel industry today”. He also added that “Iran sources electrodes mostly from India and China, but imports are under pressure now as a result of a shortage in the international market”.
The important Reasons for price rise of Graphite Electrodes are:
a. China closing down of graphite electrode capacity : China was a large exporter of low grade electrodes to the rest of world and it has many small plants & these small plants are disintegrated and many of the plants were closed down due to environmental reasons thus led China from being the exporter to becoming an importer of all types of electrodes.
b. Constrain in Supply of Raw Material: Needle coke is one of the major raw materials used in the production of graphite electrodes, which represents approximately 70% of the input costs of graphite electrode production. The upward momentum to the prices of graphite electrodes is also triggered by the sharp price rise of needle coke & global supply for the coke is also shrinking.
c. Consolidation: The graphite electrode industry went through a tough cycle in the past 4-5 years as the share of EAF in total steel production declined from 32% in CY06 to around 25% in CY16. The graphite electrode industry has limited players with the top 5 companies controlling around 84% of total capacity excluding China. In May 2015, GrafTech – the world’s largest graphite electrode manufacturer – was acquired by Brookfield Asset Management Inc. All these consolidation directly affects the production and supply world over.
Statistics determined that growing electrode prices have added a 1,500-rial (USD 0.03) cost to each kilogram of steel made using EAF, to bring the total cost to 5,000 rial (USD 0.12).
Ahmadi also noted that several Iranian companies have set up a joint venture to build Iran’s first graphite electrode manufacturing plant in light of the current shortage.
He said that “Some 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” .
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