China’s ongoing power crisis and steel output curbs are weighing on domestic graphite electrodes (GE) prices.
SteelMint’s price assessment shows that 600mm UHP grade electrodes prices in China have dropped by 13% against the highs of Apr’21 and are currently being assessed at RMB 21,500/t ($3,335/t) whereas 450mm HP grade electrode prices have fallen by 19% and are assessed at RMB 16,500/t ($2,560/t), ex-factory basis.
China’s steel output curbs
China had announced steel production cuts for the first half of CY’21 to meet carbon emission norms. The country needs to limit crude steel output to 332 mn t during Sept-Dec’21 to achieve its full-year target for 2021.
China produced 364 mn t crude steel in Sept-Dec’20, and thus it would have to push for crude output cuts of 32 mn t, or 8.7%, for the rest of the year. Subsequently, the country’s steel output cuts gathered pace in September, adversely impacting GE demand from EAF units along with prices.
China’s daily crude steel output averaged 1.86 mn t per day over 1-20 Sept’21, down 2% from August and 15% lower y-o-y, according to the China Iron & Steel Association.
Power outages impacting steel mills
In addition to this, the recent power outages in the country due to the thermal coal shortage has forced many small EAF units to temporarily shut operations.
The country’s power crunch has had a ripple effect across provinces leading to thermal power supply shortage and tightening of energy consumption targets.
China introduced the energy targets in early 2021 as part of plans to achieve ambitious carbon goals, which include hitting peak carbon emissions by 2030. After missing the targets in the first half of the year, 18 provinces and regions are now enforcing power rationing, impacting both steel production and demand.
The curbs are impacting steel mills in 12 of those 18 provinces or regions, including Heilongjiang, Inner Mongolia, Shandong, Jiangsu, Zhejiang, Sichuan, Guizhou, Yunnan, Guangdong and Guangxi.
Needle coke
The only factor that is limiting any dramatic fall in GE prices in the ongoing chaos is the escalated needle coke price. The average needle coke price (oil-based and coal-based) in the country is currently assessed at RMB 9,000-11,000/t ($1,400-1,700/t) ex-factory basis.
What lies ahead?
China’s crude steel output is expected to trend downward in the remainder of 2021. The slowdown in property construction as a result of tightened credit to this sector may lead property steel demand to a y-o-y decline in the second half, and also dent engineering machinery manufacturing. It also remains unclear when power rationing will ease in China. Subsequently, GE demand from EAF units would remain subdued creating pressure on electrodes prices.
The only factor that would support GE prices in the country would be supply cuts in line with steel output curbs that would balance out the demand-supply dynamics for electrodes in the country.
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