Global Slowdown weighs down Graphite Electrodes Prices in India

The escalating trade war between two key economies U.S. and China and increasing trade restrictions by various countries have taken a toll on the global steel demand, not sparing India's domestic steel industry.

Along with the global factors, the slow pace of infrastructure and construction activity in the ongoing monsoon season, and the auto sales continuing to contract in India, steel demand in the country has suffered dramatically resulting in the GE requirements, of the very few EAF facilities in the country taking a hit, and subsequently affecting its domestic prices.

The GE prices in India of size 600mm, UHP grade are currently trending at INR 500,000/MT (USD 6,900/MT) and that of 450mm are also being offered at the same rate. The prices of HP grade electrodes of size 450mm are being heard at INR 190,000 - 200,000/MT (USD 2,650-2,785/MT). However, as per the market participants, the steel mills are pressurizing the electrodes manufacturers to further lower down their prices by another INR 50,000/MT (USD 700/MT). Bur whether the GE producers will give in to the demands of buyers - given the fact that at present the latter have the bargaining power remains to be seen.

Apart from this, further adding to the anxiety of Indian GE manufacturers is the rising imports of cheaper Chinese electrodes in the Indian market due to the removal of anti-dumping duty on GE imports last year. According to the customs data, India's GE imports in first six months of 2019 (Jan-Jun) have more than doubled against last year and is recorded at 6,550 tonnes. Although, the majority of imports in India are that of non-UHP grade electrodes, but there is a strong possibility that if Indian manufacturers do not lower their UHP grade prices, they may face tough competition from their Chinese counterparts in this segment too.

Domestic GE manufacturers who used to have only 10-12 days' inventory are currently sitting on a stock of about 1-2 months as steel mills are delaying procurement in the hope of a further fall in prices. On the other hand, GE manufacturers are already dealing with the burden of rising needle coke (NC) costs. The contracts for petroleum-based needle coke (ex-China) for the second half of 2019 have been settled at USD 4,000-4,500/MT. Now, if GE prices fall further then electrode producers' margins will see a sharp fall in the coming months.

Given the gloomy outlook for steel sector (both domestic and global) for the remaining months of 2019 coupled with unrestricted influx of cheap electrodes from China, any upswing in the Indian electrodes prices seems unlikely.