Chinese graphite electrodes prices fall; will these make way to India?

China's steel production has risen by 12% y-o-y in H1'21 at 216 million tonnes (mn t) amid robust domestic demand, whereas, the country's steel exports are up by 30% y-o-y, according to customs data.

This increase in steel demand boosted the country's graphite electrodes (GE) requirement, also making its average price go up by 45% in the first half (Jan-Jun'21).

However, starting July, due to environmental and other policy goals, China moved swiftly to curb steel production. Adding to it, the Chinese government also announced tariff hikes on certain steel products to cut exports, which came into effect in early August.

Subsequently, China's domestic GE demand got affected and its prices registered a fall of RMB 4,000/t ($620/t) in August, against the highs of early July.

At present, China's UHP grade electrode price for 600mm is assessed at RMB 23,000/t ($3,500/t). Whereas, the 450mm HP grade GE is at RMB RMB 17,000/t ($2,600/t).

Moreover, market participants informed SteelMint that currently majority of GE manufacturers are producing electrodes on-demand-basis, barring a few major producers that are operating at full capacity.

In terms of raw material, domestic needle coke prices in China are going up due to the surged coal and crude oil prices, exerting pressure on GE units' profitability. The price for oil-based needle coke is currently assessed at RMB 10,500/t ($1,625/t). On the other hand, coal-based needle coke is at around RMB 7,750/t ($1,200/t), up by 28% against the average price in Jan'21.

Will Chinese GE exports make way to India?

Amid the price correction in Chinese GE prices, there was growing speculation that Chinese electrodes would once again start making their way to India. However, this seems unlikely in the near-term because of escalated freight rates and also because of strict Covid restrictions being followed at Chinese ports, impacting exports from the country.

"There is vessel shortage at Chinese ports amid Covid restrictions at a few ports. Vessels are being rerouted to other ports creating difficulties in transportation and uncertainty which is why exports have become a tedious process, especially for small and mid-sized manufacturers," revealed a GE trader based in China.

Currently, Indian GE price for 600mm UHP grade is assessed at $4,680/t and price of 450mm HP grade is assessed at $3,690/t.

Outlook

Some electric-arc-furnace (EAF) steelmakers will suspend their production partly in September, following the new campaign of environmental inspections launched by China's Ministry of Ecology and Environment (MEE) on 25 Aug'21. The MEE is searching out illegal high energy-consuming and heavy polluting projects, any production facilities (including those for steel) that should have been dismantled but which have been secretly restarted, or any violations of environmental protection rules and regulations.

This would further impact the country's electrodes demand from the EAF units. However, already escalated needle coke prices would restrict any sharp correction in domestic GE prices.