China: GE Major Fangda Carbon's Profitability takes a Major Hit in 2019
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Chinese graphite electrodes producer, Fangda Carbon has recently released its 2019 results and it seems that company's operating income and profits have taken a major hit during the year due to the dramatic drop in product prices and increased competition in the domestic market.
In 2019, Fangda Carbon achieved an operating revenue of 6.75 billion yuan (USD 953 million), registering a drop of 42% y-o-y basis whereas its net profits plunged by 64% y-o-y basis and stood at 2.02 billion yuan (USD 285 million) during the year. The annual report disclosed that the company's carbon product gross profit margin in 2019 has dropped by 35% y-o-y, but has remained at the level of 40.7%.
The annual report shows that the company produced 171,800 tonne of graphite electrodes and 21,600 tonne of carbon bricks in 2019. It is reported that with the gradual resumption of production activities, the operating rate of domestic electric furnace steelmaking in China has now reached about 80% and the demand for graphite electrode procurement has begun to show a gradual upward trend.
Company's market share set to increase
It is being understood that that Fangda Carbon's GE output maintained a market share of about 25% in the total electrodes produced in the country. Now, Baosteel Chemical and Fangda Carbon's joint project with a capacity of 100,000 tonne UHP grade GE is which is already under construction coupled with Fangda's project of producing 50,000 tonne of ultra-high-power graphite electrodes and special graphite annually will take the company's total GE capacity to about 330,000 tonne per year by the end of 2020, accounting for half of the domestic GE market share.
What future holds?
The market experts in the country are of the opinion that in post COVID-19 phase, the demand for graphite electrodes at home and abroad will gradually return to normal levels by the end of August 2020. It is also noteworthy that the company has maintained full production since the beginning of the year and has stocked up about 30,000 tonne of graphite electrodes to meet market demand in the third and fourth quarters. While many small GE producers in the country are currently struggling to maintain their profits amid poor demand and high cost of production - an adverse impact of COVID-19, Fangda Carbon has an opportunity to increase their sales in the coming months given its high inventory and strong financials.