Chinese Graphite Electrodes prices rise amid increased demand and high raw material costs

Chinese Graphite electrodes prices that had faced a downtrend last year due to COVID-induced lowered demand are once again gaining traction in 2021. In last four months domestic while UHP grade GE prices have moved up by 25%, HP grade is up by 32%.

The prices for 600mm UHP grade electrodes are assessed at RMB 25,000 - 25,500/t whereas 450mm HP grade is at RMB 19,000-21,000/t. The key factors responsible for the rise in Chinese GE prices are as below:

Increased demand from downstream sector

Till last year, China had imposed stringent steel output cuts was in the "winter heating season" of Nov-Mar, when utilization rates were rolled back by up to 50% in Hebei and other provinces.

However, this year, the environmental policies regarding steelmaking have been more piecemeal and shorter-term, with more autonomy had been given to cities and provinces to implement measures. In many cases, the measures were not strictly enforced and the impact on overall steel production was fairly marginal.

Flat steel prices have been soaring and are expected to continue rising, while downstream demand for rebar is also increasing as warmer weather aids construction activity, leading to increased GE demand from domestic steel market.

Surged raw material costs

The pressure on the production cost of electrode manufacturers still exists, and high raw material (needle coke) costs is one of the main reasons for the continued upward trend of electrodes. The needle coke prices have moved up by 42% in last four months.

The coal-based needle coke price is currently trending at RMB 7,000 - 9,500/t whereas petroleum-based needle coke is at RMB 9,000 - 12,000/t.

The supply for needle coke is still tight because of increased demand from electric vehicles segment in China and the situation is likely to remain so for next few months, informed market participants.

Rise in export demand

China's customs data shows that country's GE exports have moved up by 34% between Jan-Mar'21. With major economies back to pre-pandemic consumption levels, demand for steel had improved and so does the electrodes requirements from the EAF-based steel units.

The country majorly exported electrodes to countries like Malaysia, Turkey, South Korea, and Vietnam and while Iran is continuing to face U.S. sanctions, Chinese manufacturers are exporting electrodes via other countries like Malaysia and Turkey.

Outlook

While, China's domestic steel demand is likely to improve further in the summer season, its export demand would suffer due to high chances of cut in export rebates from 13% to 9%. Thus, the country's GE demand and prices are likely to get support from domestic steel market while prices are also likely to remain elevated because of the rising needle coke prices.