51% price increase! How long can graphite electrode resist?

In 1955, Jilin Carbon Factory, China's first graphite electrode enterprise, was officially put into operation with the assistance of technical experts from the former Soviet Union. The word "China" appeared in the development history of graphite electrode.

Graphite electrode, a high temperature resistant graphite material, has excellent properties of conducting current and generating electricity, mainly used in the production of steel.

In the background of commodity general rise, this year's graphite electrode is not idle. The average price of mainstream graphite electrode market was 21393 yuan/ton, up 51% from the same period last year. Friends who pay attention to the power industry know that under the iron fist of double control of temple energy consumption, industries with high energy consumption and high pollution have stopped production. As a double high enterprise, steel plants must also play an exemplary role, especially in Hebei, a large iron and steel province. It is reasonable to say that with less steel production, the demand for graphite electrode will also decline. You can think of it with your fingers, and the price of graphite electrode will also have to drop.

Does it mean that the principles of economics have to be revised? Take it easy. It doesn't need. Listen to the analysis of this wave of market slowly.

01

Electric arc furnaces really don't work without graphite electrodes

To understand graphite electrode in more detail, you need to open the industrial chain and have a look. From the upstream, the graphite electrode is prepared from petroleum coke and needle coke through 11 complex processes. 1 ton of graphite electrode requires 1.02 tons of raw materials, the production cycle is more than 50 days, and the material cost accounts for more than 65%.

Just now, graphite electrode can conduct electricity. According to the allowable current density, graphite electrodes can be further divided into regular power, high power and ultra-high power graphite electrodes. Different kinds of electrodes have different physical and chemical properties.

Looking down, graphite electrode will be used in electric arc steelmaking furnace, production of industrial silicon and yellow phosphorus. Steel making consumption generally accounts for about 80% of the total consumption of graphite electrode, and the recent price is mainly due to the iron and steel industry. In recent years, with the increasing number of ultra-high power electric arc furnace steel with better cost performance, the inverted graphite electrode is also developing towards ultra-high power, which has better performance than regular power. Whoever has mastered the ultra-high power graphite electrode technology will lead the future market. At present, the world's top 10 ultra-high power graphite electrode manufacturers account for about 44.4% of the world's total output of ultra-high power graphite electrodes. The market is relatively concentrated, and the main leading country is Japan.

To better understand the following, here is a brief introduction of the way of making steel. Generally speaking, steel smelting is divided into blast furnace and electric arc furnace: the former smelts iron ore and coke into pig iron, and then blows a large amount of oxygen in the converter to decarbonize the molten iron into liquid steel. The other is to use the excellent conductivity and thermal conductivity of graphite electrode to fuse the scrap steel with this high-temperature arc, and finally make it into steel.

Therefore, the graphite electrode for electric arc furnace steelmaking, just like PVDF for lithium anode, the need is not much (1 ton of steel consumes only 1.2-2.5kg graphite electrode), but it really can't do without it. And no substitute can be found in a short time.

02

A fire of double carbon extinguished the productivity of graphite electrode

Not only steel, graphite electrode production is also a high energy consumption and high emissions industry, and the prospect of capacity expansion in the future is not optimistic. The production of one ton of graphite electrode consumes about 1.7 tons of standard coal. If converted by 2.66 tons of carbon dioxide per ton of standard coal, a single ton of graphite electrode will emit about 4.5 tons of carbon dioxide to the atmosphere. It is a good proof that Inner Mongolia will no longer approve the graphite electrode project this year.

Driven by the double carbon goal and the theme of green environmental protection, the annual output of graphite electrode also showed a downward trend for the first time in recent four years. In 2017, the global electric arc furnace steel market recovered, driving the demand for graphite electrode. Graphite electrode players increased production and capacity one after another. China's graphite electrode showed a rapid growth trend from 2017 to 2019.

Global graphite electrode supply

The so-called cycle: “the upstream drinks wine and eats meat, the downstream turns off the lights and eats noodles”.

Because of the excessive investment and production of graphite electrode in the industry, resulting in too much stock in the market, opened the downward channel of the industry, inventory clearance has become the main theme. In 2020, the overall global output of graphite electrode decreased by 340,000 tons, a decrease of as much as 22%. China's output of graphite electrode also decreased from 800,000 tons to 730,000 tons. The actual output this year is expected to decrease but not increase.

“One night back before liberation.”

The production capacity is not going up, and there is no money to make (low gross profit), and the price of raw materials is also rising. Petroleum coke and needle coke have increased by 300-600 yuan/ton in the last week. The combination of the three reasons gives graphite electrode players only one way to live, that is to raise the price. Regular, high-power and ultra-high-power graphite electrode products increased their prices. According to reports, even if the price rises, China's graphite electrode market is still in short supply. Some manufacturers have almost no graphite electrode inventory, and the operating rate continues to rise.

03

Steel plant transformation opens imagination space for graphite electrode

If production limits, rising costs and unprofitability are the driving forces behind the price rise of graphite electrodes after the cycle bottomed out, the transformation of the steel industry opens up imagination for the future price rise of high-end graphite electrodes.

At present, about 90% of domestic crude steel output comes from blast furnace steelmaking (coke), with large carbon emission. In recent years, with the national requirements for transformation and upgrading of iron and steel production capacity and energy conservation and carbon reduction, some iron and steel manufacturers have shifted from blast furnace to electric arc furnace steel making. The relevant policies issued last year also pointed out that the proportion of EAF steel output in the total crude steel output should be increased to more than 15%, and strive to reach 20%. As mentioned above, because graphite electrode is very important to electric arc furnace, it also indirectly improves the quality requirements of graphite electrode.

It is not groundless to increase the proportion of EAF steel. Five years ago, the percentage of EAF steelmaking in the total output of crude steel in the world reached 25.2%, and that of the United States and the European Union 27 countries  were 62.7% and 39.4% respectively. Our country still has a lot of room for progress in this regard, so as to boosting the demand for graphite electrodes.

Therefore, it can be simply estimated that if the steel output of electric arc furnace accounts for about 20% of the total crude steel output in 2025, and the crude steel output is calculated according to 800 million tons/year, the demand for graphite electrode in China will be about 750,000 tons in 2025. Frost Sullivan predicts that there is still some room for growth in graphite electrodes at least in the fourth quarter of this year.

It can be said that the graphite electrode rises rapidly, all by the leading of electric arc furnace.

04

Conclusion

In conclusion, graphite electrode has strong periodic properties, single application scenario and is greatly affected by the downstream iron and steel industry. After experiencing the upward cycle from 2017 to 2019, it fell to the bottom last year. This year, with the superposition of limited production, low gross profit and high cost, the price of graphite electrode hit the bottom and rebounded, and the operating rate continued to rise.

In the future, with the green and low-carbon transformation requirements of the iron and steel industry, electric arc furnace steel will become an important catalyst to drive the rising demand for graphite electrode, but the transformation and upgrading will be a long process. Soaring prices for graphite electrodes may not be so simple , if you have any inquiry contact us.