12 Things We Learned from China's 9th Needle Coke and Application Market Summit Forum

The 9th Needle Coke and Application Market Summit Forum was organised by IC Carbon in China last week where many industry leaders and experts from China and abroad expressed their opinions on issues such as Chinese and global needle coke and graphite electrode industry development, future development of industrial chain, technology differences at home and abroad, and future market supply-demand scenario. We have listed below the key takeaways from this conference.

1. China's Graphite Electrode (GE) output in first eight months of 2018 has risen by about 14.82% y-o-y (year-on-year) basis to 416,392 tonnes. Out of the total production RP grade GE stood at 106,876 tonnes, an increase of 9.46% y-o-y basis, HP grade graphite electrode edged down by 0.37% to 145,198 tonnes and UHP grade GE output surged by 35.47% to 164,317 tonnes (against the corresponding period of previous year).

2. China's GE exports during Jan-Aug'18 grew by 30.48% y-o-y basis. Among them the exports of UHP grade graphite electrodes exports were 55,893 tonnes, up 54.23% y-o-y basis.

3. China's current GE capacity is around 750,000 tonnes which is likely to increase to 1.15 MnT within next 3-5 years. The capacity of top four GE producing provinces that includes Henan, Hebei, Liaoning and Shanxi is 685,000 tonnes.

4. In 2016, China's steel production via EAF (Electric arc furnace) route was 51.7 MnT, in 2017 the same was 77.49 MnT. The projections for the same in 2018 is about 95 to 100 MnT, in 2020 it is expected to reach to 140 MnT whereas in 2025 to 2028 the EAF steel output is expected to surpass 200 MnT.

5. About GE prices although market participants are still not clear on prices, big players are worried that small GE producers in China are set to increase their production that may negatively impact its prices in the coming months. Industry experts also believe that the current abnormal margins from the sale of GE cannot be sustained for long and users will come with some innovations (increased output and good quality GE) to overcome this challenge.

6. In case of GE exports from China post removal of ADD (Anti-dumping duty) by India in the month of August, market participants have informed us that some exports of GE from China (especially small diameter) have started from the month of Sep'18 and may increase in the coming months as Chinese players are currently exploring their options to once again enter the Indian market.

7. China's needle coke demand for per tonne of graphite electrode is 1.05 to 1.08 tonnes. The country's current domestic needle coke capacity is 350,000 tonnes per annum and is expected to reach 650,000 tonnes by 2020. The country's current needle coke production is forecasted to touch 600,000 tonnes by 2020.

8. Needle coke demand of China for anode is 1.2 to 1.4 per tonne and is increasing constantly. By 2020 the country's demand for needle coke will touch about 500,000 tonnes. As needle coke is not the sole choice for the anode, it can be replaced with other artificial graphite electrode when price is high.

9. China's needle coke supply during 2017 via domestic production was 16.7 MnT and via imports was 17 MnT whereas for 2018 it is estimated that country's needle coke supply via domestic production will be 30 MnT and via imports the same will be 17 MnT, as per IC Carbon data.

10. According to IC Carbon data, as of October 2018, the planned needle coke capacity in China has reached up to 1.4 MnT of which 860,000 tonnes has been newly added. Liaoning, Henan and Shandong have the largest growth in new capacities.

11. One of the major challenges for China's needle coke industry is that in 2018-2020 if existing needle coke manufacturers do not take this time of period to work on improving product quality, they will be weeded out two years later as by then a bitter price war will be unavoidable despite the growing demand given the rapid growth of good-quality needle coke capacity.

12. The average domestic needle coke prices in China is currently ranging from USD 3,800 to 4,100 tonnes whereas imported prices is currently trending at USD 4,600 t 4,900 tonnes.