【Graphite Electrodes】Soaring by 979%! How Will the Positive Real Estate News Impact Graphite Electrodes?

"Recent policies have significantly boosted market expectations. Coupled with low construction steel inventories and shortages in some regions, market sentiment has surged, driving up both futures and spot prices in the steel sector," says Chen Weichang, head of black commodities at Zhonghui Futures.

However, there are some industrial concerns. Steel mill profits have fully recovered, with immediate profits for long-process rebar in East China approaching RMB 400/ton, and North China hot-rolled coil profits near RMB 50/ton (higher in other regions). Electric arc furnace (EAF) steel profits have also rebounded, with EAF profits in Central and East China exceeding RMB 100/ton. Stimulated by higher profits, steel mills are resuming full production, which could ease the previous tight supply of construction steel. Additionally, iron ore inventories at ports remain at around 150 million tons, the highest in years, while coking coal production has continued to recover, pushing coking coal inventories to higher-than-normal levels. If steel mills continue to ramp up production, downstream demand might struggle to absorb the supply increase. On the other hand, if steel mills maintain low output, raw material pressure could result in negative feedback across the supply chain.

In October, domestic downstream demand for steel is expected to accelerate its recovery, driving a continuous increase in crude steel production. This is particularly true for electric arc furnace (EAF) steel mills, which experienced significant production cuts in the third quarter; their demand for ultra-high-power graphite electrodes is expected to see a marked increase.

From a macro policy perspective, sustained policy efforts have provided strong support for the sharp rise in steel prices. This surge in steel prices has triggered a restocking demand for graphite electrodes by steel mills. With smooth inventory reduction and improved profits at the mills, the graphite electrode market has seen significant positive effects, and demand is expected to continue growing.

Key Insights into the Graphite Electrode Market:

1. Rising Demand from the Construction Industry

   With the National Day holiday approaching, the construction industry may experience a rush in projects, leading to a short-term increase in steel demand. Additionally, recent real estate policy adjustments, such as lowering existing mortgage rates and reducing down payment ratios for second homes, have effectively boosted the real estate market's recovery. This recovery, in turn, drives up the demand for construction materials like graphite electrodes.

2. Increased Demand from the Manufacturing Sector

   Mechanical manufacturing, automotive production, and other key steel-consuming industries are also seeing growing demand. Particularly, the expansion of the automotive industry, including the electric vehicle sector, is providing strong support for rising steel prices, which fuels further demand for graphite electrodes.

3. Significant Rebound in Exports

   In August, China's graphite electrode exports reached 29,400 tons, a month-on-month increase of 60.13% and a year-on-year increase of 22.43%. As overseas steel mills conclude their summer shutdowns and prepare to resume production, demand for graphite electrodes has surged.

4. Optimistic Market Sentiment

   Investors and market participants are increasingly optimistic about the future of the steel industry. This positive sentiment is spreading throughout the market, attracting more capital into the steel sector. The influx of funds is further driving up steel prices, which in turn boosts the demand for graphite electrodes.

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