Indian Graphite Electrode Contracts Signed at Higher Rates

SteelMint has heard from its market sources that a major graphite electrode consumer in India has booked its quarterly contract (Apr-Jun'18) for Graphite Electrode (GE) of size 450-550 mm at the price of INR 900,000 (USD 13,783) per tonne. Although, it is expected that the company may get further discounts on this price, but the exact amount of discount on the contract price could not be confirmed by the organisation.

What factors are driving GE prices?

GE prices across the globe have risen significantly by almost six times since the latter half of 2017. The key reason being increased preference to use EAFs (Electric Arc Furnace), a more environment-friendly route to manufacture steel and closure of polluting steel and graphite electrode manufacturing units in China as a part of its structural supply-side reforms.

It is worthwhile noting, that before this price hike happened, the GE producers across the globe used to get into long-term contracts of half-yearly or annual contracts. However, in the current scenario as prices have become quite volatile no one prefers to commit to today's prices for a year.

Another reason that can be attributed to an upsurge in GE market is an increment in needle coke prices, a key raw material for graphite electrodes which accounts for nearly 40% of the electrode cost. Being oligopolistic in nature, players in the global needle coke market have an upper hand to increase its prices at their discretion. Also in China, where most of the needle coke is made from metallurgical coke, stricter environmental rules have closed a lot of factories thus affecting its availability.

Besides this, needle coke is also used to make lithium-ion batteries used in phones and cars, further tightening its availability for the steel sector.
The spot prices for GE from China, UHP grade (600mm) are heard in the range of RMB 130,000 to 140,000/MT (USD 20,678 - 22,269/MT) while from Japan and Russia GE spot offers are in the range of USD 18,000 - 22,000/MT.

India's GE Import and Export

In a recently held Q&A round in Loksabha, Shri Vishnu Deo Sai, the minister of State for Steel gave out the import and export numbers of Graphite Electrode by Indian firms in last three years which are as follows:

Source: DGFT, Ministry of Commerce

He also said that as steel sector is in India is deregulated, the impact of prices on steel manufacturers depends on commercial arrangements with graphite electrode suppliers and the situation in the spot market. The government has made a provision for imposing an export duty of 20% on graphite electrodes by bringing in the appropriate amendment in the Finance Bill 2018.