Indian Needle Coke Imports from China Sees Substantial Growth in 2018

Needle coke demand in India is on the rise as Graphite Electrode manufacturers in the country are trying to augment production against the backdrop of sky-high prices and increased demand.

According to customs data, India's needle coke imports have been recorded at 565,589 tonnes in Jan-Aug 2018 a marginal increase of 1% y-o-y basis as the same stood at 560,230 tonnes in the corresponding period of previous year. During Jan-Aug'16, India imported about 644,014 tonnes of needle coke.

India imports the majority of its Needle Coke requirement from the U.S. and China. However, it has been observed that India's Needle Coke imports from China during Jan-Aug'18 increased dramatically by 42% y-o-y basis as the same stood at 260,969 tonnes in 2018 and 184,147 tonnes in 2017 (Jan-Aug).

In case of U.S., India imported India imported about 245,508 tonnes of needle coke during Jan-Aug'18, an increase of 13% y-o-y basis.

However, it is being anticipated that India's needle coke imports from U.S. my decline in the coming time period amid the revival of their steel industry (due to steel import tariffs) which will lead to increased requirement for Graphite electrodes ultimately pushing needle coke demand. As a result to this, it is likely that India may resort to China to meet its needle coke requirements.

India imported a small quantity of needle coke - 34,737 tonnes and 19,858 tonnes from United Kingdom and Japan respectively. In 2016, India's needle coke imports for the entire year were recorded at 913,096 tonnes, whereas, in 2017 the same stood at 911,105 tonnes.

India's Needle Coke Import*

Quantity in Tonnes
*Calcined Pet Coke Imports also included

Needle coke prices in India and China

In India the two key GE producers are Graphite India and HEG Limited and thus majority of needle coke imports are being made by these two companies. The needle coke prices have increased dramatically in past one year. The contract prices of needle coke for December quarter in Indian market are being heard to be in the range of USD 3,500 to 4,000/MT, whereas spot prices are at around USD 5,000 - 6,000/MT.

In case of China, the raw coke prices are heard to be at RMB 13,500-16,500 per tonne (USD 1,940 - 2,385/MT) and calcined needle coke prices at RMB 26,000-31,000/MT (3,730 - 4,450/MT). The tax-inclusive prices for imported needle coke for graphite electrode are in the range of RMB 32,000 - 37,000/MT (USD 4,600 - USD 5,300/MT).

Needle coke demand and its future outlook

Needle coke is used as a key raw material in two segments: Graphite electrode and artificial graphite, which is used as a rechargeable battery anode material.

NC demand from GE sector: In 2017, global GE demand is estimated to have risen by 10% YoY. While GE demand from outside China is believed to have grown on the back of higher EAF steel production amid steel export contraction in China. Moreover, Chinese GE demand is also expected to have expanded in light of the increase in EAF utilization resulting from induction furnace decommissioning.

Thus in light of strengthening environmental regulations in China and rising trade barriers in the global market, China's steel exports are unlikely to rebound in the foreseeable future and it is being projected that the GE demand from outside China will expand 2% YoY, boosting demand for needle coke. In China, electrodes demand is forecasted to grow at a CAGR of 16% through 2025, amid tightening of environmental regulations - pushing up steelmaking through EAFs.

NC demand from lithium-ion battery sector: In case of needle coke demand in lithium-ion battery segment, the same is rising owing to the increase in demand for electric vehicles. The total demand for needle coke currently stands at around 70,000-80,000 tonnes from the battery industry and the same is projected to grow further in line with EV market growth.

The International Energy Agency forecasts the global EV market to grow to 9mn-20mn units in 2020, and 40mn-70mn units in 2025 (from nearly 2mn vehicles in 2016) and thus it is being forecasted by industry experts that the demand for needle coke for use in rechargeable battery anode materials will expand from nearly 60,000 tonnes in 2016 to 450,000 tonnes in 2020 and 1mn tonnes in 2025.

Sharp growth in needle coke supply unlikely

Given the surge in needle coke prices in 2017, the market appears to be in short supply. This is because setting up of Needle Coke plant is quite difficult as it will take at least four to five years for full-fledged expansion in needle coke supply to materialize, in light of:

1) The difficulty in obtaining approvals for new facilities due to tightened environmental regulations

2) Challenges in sourcing quality material

3) Delays to the actual startup of new facilities due to technical issues.

For example, PMC Tech (a joint venture of POSCO Chemtech and Mitsubishi Chemical) - one of the leading needle coke producers, it took nearly three years to complete the construction of new facilities and another four years for them to become operational. Given the time required to obtain needed approvals and technologies, it took nearly 10 years for new facility to come online.

Thus, India is likely to continue its dependency on imports to meet its requirements as no needle coke plant in coming up in India in the coming future.