Indian Graphite Electrodes Contracts Likely to Plunge in the Upcoming Months

If reliable sources are to be believed, it seems increasingly likely that Indian Graphite Electrode manufacturers are likely to lower the UHP grade electrode price by INR 50,000/MT (USD 710/MT) for the ongoing month of Mar'19.

Subsequently, the price of UHP grade Graphite Electrodes of size 600mm is likely to be around INR 850,000/MT (USD 12,055/MT). In case of lower grade electrodes, the price of 400-450mm HP grade Graphite Electrode is estimated to be INR 500,000/MT (USD 7,100/MT). The plunge in lower grade electrode price is higher (almost by USD 2,000/MT) compared to higher grade ones. Apart from this, for the next month, the electrodes prices are expected to fall further and the prices of UHP grade GE of size 600mm is estimated to be in the range of 750,000-800,000 tonnes.

Market participants have informed us that instead of entering into the quarterly contracts like before, GE buyers have started negotiating for prices contracts on monthly basis. However, no one has confirmed that if this trend of monthly negotiations will continue in the future also. With GE exports not being made to Iran due to sanctions there is ample availability of graphite electrodes in the Indian market and buyers are maintaining inventory of just 10-12 days which was earlier kept for 30 to 40 days.

Lower Grade Graphite Electrode Prices under more Pressure

According to market sources, Indian Graphite Electrode manufacturers are facing tough competition from Chinese imports of lower grade HP (High Power) and RP (Regular Power) Graphite Electrodes which has forced them to revise their HP/RP grade prices.

This is because the production of lower grade electrodes in China is increasing and, amid sufficient availability, prices too are falling. In a period of just four months from Nov'18 to Mar'19, China's HP grade Graphite Electrode price of size 450mm has plunged by 60% and is currently RMB 30,000 (USD 4,470/MT).

"With the removal of the anti-dumping duty, importing Chinese Graphite Electrode has become quite feasible and given the current HP grade electrodes price in China, importing the same even after including all the duties is still proving to be cheaper for us compared to buying Indian products. Thus, Indian Graphite Electrode producers have no option but to revise their prices," said a GE buyer from India.

Why the Plunge in Indian Graphite Electrode Prices?

The fall in Indian Graphite Electrode prices can be attributed to the ongoing downtrend in Chinese Graphite Electrode prices since the start of the winter heating season from mid-November 2018. During this season (Nov-Mar), steel demand in China takes a beating and the country imposes production cuts in the steel sector that indirectly affect Graphite Electrode demand (which is a key raw material in steel production via the electric furnace route).

China is a major Graphite Electrode producing and exporting country and its price trends usually affect global Graphite Electrode prices. Thus, Indian producers need to take into account the prices in the Chinese market while finalizing their quarterly contracts.

Another key factor that poses a threat to Indian Graphite Electrode manufacturers is the removal of the anti-dumping duty on Graphite Electrode imports from China announced in August last year. This elimination of trade restrictions on Indian imports of Chinese Graphite Electrodes has increased the risk of Chinese electrodes freely entering the Indian market.

In fact, Indian EAF steel producers are anticipating further fall in Graphite Electrode prices, as according to them importing China's UHP grade Graphite Electrodes will be cheaper compared to Indian electrodes. The price of China's 600mm UHP grade Graphite Electrode is currently RMB 70,000/MT (USD 10,400/MT) and importing the same to India, even including customs duty, still makes it cheaper by USD 800-1,000/MT against India's domestic Graphite Electrode price.

Indian Producers at the Receiving End

India imported 7,242 tonne of Graphite Electrodes in 2018 out of which imports from China was 55% at 4,018 tonne. In 2017, India's total Graphite Electrode imports stood at 3,871 tonne and China's contribution to total imports was only about 14%. This clearly shows the impact of the lifting of the anti-dumping duty on Chinese imports.

In case of other countries such as Japan and the US, Graphite Electrode contracts are usually locked for six months and prices have been fixed at USD 14,000 per tonne till June 2019.

Amid falling Graphite Electrode prices, Indian manufacturers are troubled by rising needle coke costs, the contract for which has been fixed at USD 4,200-4,500/MT, an increase of USD 1,000 per tonne. This indicates that Indian manufacturers' margins may suffer in the upcoming quarter.

To find out how much Graphite Electrode capacity is China adding in 2019 and 2020, hit the road with SteelMint to gather a more holistic view of the Graphite Electrode and Needle Coke plants in China at the 'International Graphite Electrodes & Needle Coke Roadshow - China', to be held from 8 to 12 April, 2019.