Indian Graphite electrodes prices surge amid reduced Chinese supplies and increased steel output

The Graphite electrodes (GE) prices in India that witnessed sharp downcycle over CY19 - H1CY20 seems to be reversing now, amid an uplift in steel demand across many regions.
The 450mm HP grade electrodes prices have moved up by 76% y-o-y basis and is trending at INR 225,000/t ($3,020/t) whereas 600mm UHP grade prices have rallied by 25% and is currently at INR 300,000 - 320,000/t ($4,030 - 4,300/t).

Reduced Chinese GE supplies

The rise in small sized HP grade electrodes prices is much higher as compared to UHP grade electrodes, as the supplies from China (that offered HP grade electrodes at competitive rates) to India have turned quite minimal. The reason being, escalated political tensions between the two countries last year and increased GE requirement in China from its downstream sector.

Showa Denko cuts its capacity

Along with this, the global electrode supplies rationalized as Showa Denko closed down its 40,000 MT capacity in Germany in 2020, giving Indian GE manufacturers opportunity to increase their electrodes exports.

Increased steel production and prices

The higher global steel output and strength in global steel prices has also provided support to Indian GE prices. During January-February 2021, global steel production was at 315 mn t, up 6.6% YoY. Whereas, domestic hot rolled coil (HRC) prices (ex-Mumbai) have moved up by 77% to INR 64,750/tonne from the lows of INR 36,500/tonne in July'20.

This has in fact improved the GE manufacturers margins and has also led to sharp uptick in their capacity utilizations to 65-70% in Q3 FY21 vs 35-40% in Q1 FY21.

What lies ahead?

Amid rising covid cases that has led to lockdowns in various states coupled with oxygen shortage compelling various steel plants to suspend their operations, demand for electrodes is also likely to suffer, adversely impacting its prices.

However, in the long-run, electrodes demand and prices would increase as China has announced cancellation of tax rebate on steel products giving opportunity to Indian steel manufacturers to enhance their presence in the export market.