Graphite Electrode Market Gathers Momentum – Part 1

Graphite Electrode Market Gathers Momentum – Part 1

May. 22, 2019

There appears to be no stop in sight for the international price surge in graphite electrodes
used in electric furnaces. Once China’s shift to electric furnace steel became apparent, prices
for the needle coke from which graphite electrodes for those furnaces are made began to
rise.

Electric furnace steel, which imposes a lower burden on the environment, accounts for a
growing percentage of the steel produced worldwide. However, in China, where plans to
invest in graphite electrodes are surfacing, many take the view that problems with the
quality of the graphite electrodes produced will be a hurdle preventing the tight supply and
demand balance from being remedied.

The primary ingredient in electric furnace steel is scrap iron, which is melted down, refined
and rolled to make new products. This iron manufacturing process is better suited to energy
conservation than using a blast furnace to reduce iron ore.

In 2017, China announced its intention to completely eradicate substandard steel, triggering
moves to manufacture electric furnace steel instead. However, a shortage of graphite
electrodes — used in electric furnaces to melt down the scrap and recycle it into steel — soon
emerged.

The boom in demand for graphite electrodes also extended to the needle coke from which
they are made. International prices for needle coke are currently believed to be in the range
of $4,000–$4,500 per ton. This represents a six-fold increase in just two years, up from
around $700 per ton in the first half of 2017. Needle coke is also used as anode material in

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 Graphite Electrode Market Gathers Momentum – Part 1

lithium-ion batteries (LiBs). Growing demand in that field is another factor tightening the
supply and demand balance.

In China, which is leading the rise in demand, increased capacity and the restart of
mothballed facilities are expected to result in needle coke production growing by 600,000
tons year-on-year to 1 million tons in 2019. However, the general opinion is that, due to the
obstacle posed by quality problems, this increase will not be sufficient to eliminate the supply
shortage.

Needle coke for ultra-high power (UHP) graphite electrodes needs to be durable and of high
quality. Observers suggest that Japanese, European and U.S. electrode manufacturers are
unlikely to use low-quality needle coke, as they could end up losing market share.

The increased output from China is therefore expected to be utilized in LiB anode material,
for which quality requirements are relatively low. The market is certain to remain bullish, as
the limited capacity to supply high-quality needle coke is set to continue. Another factor
behind the rise could possibly be Russian and Indian electrode manufacturers, which are the
primary drivers of spot demand as they struggle to increase operating rates due to
procurement difficulties. Some Japanese electrode manufacturers say that the price of needle
coke could increase by anywhere in the range of $500–$1,000 per ton.

Part 2 in this series coming soon.

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