Are U.S. Tariffs Going to Impact Graphite Electrode Prices?
...
The prices of Graphite electrode (GE) which are already on a roll since the latter half of 2017 are expected to continue its rising trend in the second half of 2018 due to U.S. import tariffs announcement on steel.
U.S. domestic steel demand to increase after tariffs
After the Trump government announced steep trade restrictions on steel imports in the month of Mar'18, the country's domestic demand for steel is all set to increase. As U.S. promotes usage of EAFs (Electric arc furnaces) amid increasing consciousness towards environment (about 60% of its steel comes from EAFs) the country's steel facility operations will also rise leading to increased demand for GE which is a key raw material for EAFs.
Currently, the spot prices for Graphite electrode are trending in the range of USD 18,000/MT to USD 22,000/MT which is almost six times higher than the prices seen last year. Along with the boost to EAFs usage for steel production, the rising demand for needle coke, a main raw material for GE production and also a crucial raw material in lithium-ion secondary battery anodes has led to hike in graphite electrode prices globally.
Japan's announcement to increase GE prices in Apr'18
The GE market is controlled by 7 major players across the world with Japan controlling 53% stake in the total global production capacity. According to market reports, domestic GE prices in Japan also are approaching the high levels that are seen internationally. In De'17, Tokai Carbon Company, a major Japanese GE producer announced that from this Apr'18 it would be revising its price for 18-24 inch GE products, a mainstay product for the company, to 900,000 yen/MT (USD 8,415 per ton). As Japan is a key GE producer in the world, Japanese prices also define the GE prices in the international market.
Increased usage of EAFs in China
Although China is also one of the key graphite electrode producing countries in the world, the country saw a shift in EAFs usage for steel production as a part of its structural supply-side reforms. In 2017 the country's electric furnace steel production totalled to around 70 MnT and is expected to reach 100 MnT this year. This will lead to increased demand for GE in China also which a largest steel producing nation in the world.
The crackdown of illegal steel in the country meant that steel intended for export has to be made available for domestic consumption which means that importing countries will have to increase their operation of electric furnaces to replace the imported steel demand, contributing to increase in graphite electrode demand globally.
Clarity awaited on needle coke prices
The supply of needle coke is still in tight position and therefore decisions have not yet been reached with electrode manufacturers regarding needle coke contract prices for the second half of 2018. With its supply still a constraint, it is expected that needle coke prices will continue to rise further resulting in higher electrode costs.
Demand-supply mismatch
Now although demand for GE is increasing rapidly at a global scale, its supply is expected to remain tight till the international GE producers make capacity additions and needle coke supply become stable until few years. This situation means supply-demand imbalance and subsequent hike in GE prices.
