Will China's Needle Coke Shortage Derail their Graphite Electrodes Production Plans?

With the supply side structural reforms in China which led to the promotion of electric furnaces, the demand for graphite electrodes used in EAFs increased significantly and so does the requirement for needle coke (a key raw material for graphite electrodes). Along with this, the growing importance of electric vehicles (EV) in China has also led to the increased demand for needle coke from EV segment.

However, one of the major areas of concern is that China is adding EAFs more quickly than coke or electrode capacity and is also making substantial investments into their EV industry. China has a limited capacity of petroleum needle coke (used for UHP grade GE) and their domestic sources of premium coal-based pitch coke for the manufacturing of high-grade electrodes have been eroded from the blast furnace capacity rationalization over the past several years.

China depends upon imports for its needle coke requirements

Chinese coke is generally pitch coke (from coal tar) or some anode grade calcined material that is being utilized in ladle electrode production. Given the fact that China produces almost as much steel from EAFs as the U.S., they are consuming electrodes, and the majority are sourced from pitch coke.

Pitch coke requires meaningfully longer bake and graphitizing time, which reduces effective capacity and also is a lower efficiency electrode. Lithium-ion battery producers use a mix of petroleum needle coke, owing to its high density and therefore longer driving ranges and battery life span.

In order to manufacture high-grade UHP, China has to import more of petroleum-based needle coke as compared to coal-tar pitch based one. According to China's customs data, China imported about 137,000 tonnes of petroleum-based needle coke in 2018, against 95,000 tonnes in the previous year. Out of the total imports, about 93,000 tonnes was imported from UK and about 9,207 tonnes from Japan. In the case of coal-tar pitch needle coke, China imported about 95,000 tonnes in 2018 with the highest volume of 65,000 tonnes coming from South Korea and 30,000 tonnes from Japan.

Although China has plans to add more needle coke capacity in the coming years ahead the plans are for pitch coke plants and face significant challenges of sourcing high-quality coal tar pitch and producing at consistent quality levels.