IREPAS 78 WARSAW: Graphite electrodes ‘no longer a commodity but a strategic material’

The graphite electrodes used in electric-arc furnace (EAF) steelmaking have changed from being a commodity to a strategic material, with prices surging last year amid drastic changes in market conditions, an industry conference has heard.

Dr Mark Shujun Ma, the vice-chairman of the China Association of Small & Medium Enterprises, was speaking at the 78th meeting of the International Rebar Producers & Exporters Association (Irepas) in Warsaw, Poland, earlier this month.

In January 2017, the price for ultra-high power electrodes in China was $2,000 per tonne ex-works, but it reached a peak of $30,000 per tonne by the beginning of the fourth quarter of the same year, he said.

This in turn had a negative effect on steelmaking costs globally because the production of 1 tonne of steel consumes 3-4kg of electrodes. Market participants noted that the current cost of production for 1 tonne of steel includes around $30 per tonne in electrode expenses.

One of the major reasons for the surge in the price of graphite electrodes was the reduction of manufacturing capacities across the world in recent years, but particularly in China, influenced by national policies on environmental protection.

According to Ma, global graphite electrode capacities excluding those in China have been reduced by little more than 200,000 tonnes per year over the past five years, falling to 808,000 tonnes in 2017.

But China’s current total effective capacity is 530,000-630,000 tpy. This is around 40% less than its nominal capacity of 1.1 million tpy, with 473,000 tpy of capacity idled and other units working to production limits.

At the same time, demand for graphite electrodes has increased in the country following a widespread and significant reduction in induction furnace capacities.

“From the beginning of this year, steelmaking by induction furnace has been under a thorough clampdown, resulting in steel plants being forced to shift from induction furnaces to EAFs,” Ma said. He added that about 30-50 million tpy of long steel production from induction furnaces had been idled.

Meanwhile, China’s EAF-based steelmaking capacities totaled 61 million tpy in 2017, against 51.7 million tpy in 2016, Ma said, adding that by the end of this year the figure is expected to reach 82 million tpy.

At such a pace of development, the percentage of EAF steel production in China, against other production methods, is expected to rise to 14% by 2020 from the current 6%.

Against this background, local graphite electrode output in 2017 went up by 25% year-on-year to around 630,000 tonnes, against 500,000 tonnes in 2016.

Of this total, around 400,000 tonnes were consumed domestically (up by 14.28% year-on-year from 350,000 tonnes in 2016), while the remaining 230,000 tonnes (up by 53.33% year-on-year, against 150,000 tonnes in 2016) were exported.

As well as growing demand, another factor influencing the rise in graphite electrode prices was the reduced availability of raw materials such as needle and petroleum coke.

Demand for needle coke increased sharply, Ma explained, because a significant quantity is used in the production of electrode materials for the lithium battery industry.

Taking this into account, graphite electrode prices are expected to remain high this year, but without the major fluctuations that were seen in 2017.

Ma forecast that the price of Chinese ultra-high power electrodes would increase by the end of the year to $27,000 per tonne from the current $23,000 per tonne.

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