Japan's Tokai Carbon Increases Graphite Electrodes Prices for H1 2019

Japan, Graphite electrodes (GE) producer, Tokai Carbon has raised its electrodes contract prices by about USD 3,700/MT for the first half of 2019 (Jan-Jun'19).

The company's GE offers have been increased from 1,200,000 Yen per tonne (USD 11,066/MT) in Jul-De'18 to 1,600,000 yuan per tonne (USD 14,755/MT) in Jan-Jun'19, a surge of 400,000 Yen/MT (USD 3,690/MT). Whereas During Jan-Jul'18, the company's electrodes prices had been fixed at 1,400,000 Yen per tonne (USD 12,910/MT) which means on H-o-H basis, there is an increase of 200,000 Yen/MT (USD 1,845/MT).

Moreover, the company is contemplating to introduce formula pricing for its clients. It is an arrangement where a buyer and seller agree in advance on the price to be paid for a product delivered in the future, based upon a pre-determined calculation. This system will look at factors such as such as raw material purchase costs over a certain period of time to automatically adjust prices for the following period. This will help to stabilize graphite electrode profits by ensuring that higher costs for needle coke, a material used to manufacture the product, are passed on in the price of the electrodes. Apparently, it is expected that 15-20% of the company's total sales volumes would move toward this method.

In terms of demand, while Tokai Carbon's head of GE sales expects a hike in electrodes prices to continue over next 4-to 5 years, the GE users are of the opinion that the tight demand-supply situation in global GE market won't last for five years as Chinese graphite electrodes makers are increasing production. However, with regards to this the company's management believes that neither the quality nor the consistency of Chinese GE is comparable to international products and in most cases for large, direct current EAFs in the West international graphite electrodes cannot be replaced with Chinese products.

The company's needle coke contract prices (which is a key raw material for GE) for Jan-Jun'19 have been settled at USD 4,300-4,500/MT, an increase of USD 700-1,000/MT against needle coke prices in Jan-Jun'18. The management is of the opinion that due to the long lead-time of the product, higher raw material prices would only show up in H2 CY19, and the company would benefit from higher ASP (Average selling price) in H1 CY19.

Tokai Carbon is one of the leading suppliers of electric steel furnace graphite electrodes in Japan, and Germany, via an acquisition in 2006. It is also enjoying the largest share in tire-use carbon black in the domestic market, providing raw materials to Japanese tire manufacturers from three plants in Japan, Thailand, and China.