China's GE exports rise 28% in 2021; decarbonisation to drive future volumes

China's graphite electrode (GE) exports are likely to rise almost 28% to touch 0.43 million tonnes (mnt) in calendar 2021, compared to 0.34 mnt seen in 2020, as per SteelMint's estimates.

In Jan-Nov'21, volumes rose almost 31% to 0.39 mnt compared to 0.30 mnt in the same period of 2020, revealed the data. On a m-o-m basis, volumes were up 60% to 48,568 tonnes (t) in Nov'21, against 30,354 t in Oct'21.

China is the world's largest supplier of GE, accounting for over 65% of the total global exports. GE is a material which acts as a conductor for large electrical currents needed to melt ferrous scrap in an electric arc furnace (EAF). GE is invested with high thermal conductivity and heat-resistance properties making it an ideal component in EAF steel-making.

Data reveals that Russia (39,440 t), Malaysia (20,891 t) and Turkey (37,327 t) were the highest importers of GE from China over Jan-Nov'21. These three are also traditionally the top three importers.

Factor fuelling China's GE export shipments

China's GE exports took off sharply from 2018, when volumes touched 0.32 mnt, rose further to 0.40 mnt in 2019 but dropped off to 0.34 mnt in 2020. Steel output and demand were hit in 2020 due to the Covid-19 outbreak. Steel output dipped to 1,877.50 mnt in 2020 against 1,880 mnt in 2019. Production in Jan-Nov'21 was at 1,752.5 mnt. In 2021, except mainly for China, most steel producing geographies are expected to report an increase in output volumes. This has fuelled China's GE exports.

"The steel sector performed well globally in 2021 since demand was good as countries returned from Covid-induced lockdowns of 2020. This in turn increased the demand for graphite electrodes," reasons a source.

Exports to Azerbaijan up

Apart from Russia, Turkey and Malaysia, exports to Azerbaijan have taken place since a couple of years, which has further fuelled the exports growth. Exports to this country in Jan-Nov'21 alone touched 14,000 t compared to 18,500 t for entire 2020. The buzz is that a substantial volume to Iran is being re-routed through Azerbaijan although SteelMint was unable to confirm this news from market sources. With USA's economic embargo on Iran sustaining for years, many countries have eyed exports to this Middle-Eastern country through other geographies, it is rumoured.

Turkey's imports buoyant

Turkey is another country much dependent on the EAF route of steel-making and thus its GE requirements are high. It buys in considerable volumes from China and India both. Its crude steel production in Jan-Nov'21 was up 13% y-o-y to 36.7 mnt and is projected to touch 38 mnt by end of 2021. Consumption is expected to reach 35 mnt. Turkey has thus shown an increasing propensity for GE imports.

Russia's demand high

Russia has been importing GE in large volumes because its crude steel production has been headed northward. In Jan-Nov'21, crude steel output rose 7% y-o-y to almost 7 mnt. While the country's key domestic GE producer, Energoprom's production capacity is pegged at around 60,000 tonnes per annum, the Chinese GE have been available at competitive rates against the domestic produce, making Russian EAF mills to opt for imports.

Outlook

Crude steel production is slated to increase as the world learns to live with the pandemic. As countries are avoiding blanket lockdowns, it is expected that demand for steel will remain buoyant in the current calendar. This would augur well for China's GE exports.

Moreover, as countries become more carbon-conscious and clamp down on polluting industries, there will be an increasing shift towards EAFs, the more eco-friendly route of steel-making compared to the blast furnace-basic oxygen furnace - which makes judicious use of carbon components. This too spells good news for GE exports.

However, one key red flag is the rising coal costs. A key input for GE manufacturing is needle coke, whose prices in China had risen sharply to around RMB 11,000/t ($1,732/t) in Sept-Oct'21 from RMB 7,000/t ($1,102/t) levels at the beginning of 2021. But prices have climbed down since then.