Both supply and demand of graphite electrode market are weak: what is the trend in 2023?

In 2022, the overall performance of the graphite electrode market was flat, with production running at low load and downstream demand weak. Overall market supply and demand are weak. 

In 2022, graphite electrodes price rose first and then fell. The average price of HP500 was 22,851 yuan/ton, the RP500 was 20,925 yuan/ton, the UHP600 was 26,295 yuan/ton and the UHP700 was 31,053 yuan/ton. From March to May this year, graphite electrode showed an upward trend, mainly due to the rebound of downstream enterprises in spring, the purchase of raw materials in stock, and a positive market trading environment supported by purchasing power. On the other hand, the price of raw material needle coke and low sulfur petroleum coke continued to rise, which played a bottom supporting role in graphite electrode price. However, since June, graphite electrode market has shown a downward trend, and the weak supply and demand situation has become the main performance in the second half of the year. The downstream steel plants' operating rate is insufficient,  graphite electrode production is in deficit, and most enterprises are closed. By November, graphite electrode market had rebounded slightly, mainly because the rebound in steel plant construction promoted the improvement of graphite electrode demand. Manufacturers took the opportunity to push up market price, however, due to the limited demand in the terminal market, the price of graphite electrode has great resistance to rise.

In 2022, UHP graphite electrode production gross profit was 181 yuan/ton, down 68% from 598 yuan/ton last year. Since July, UHP graphite electrode production profit has been reversed, and even the loss per ton in August reached 2009 yuan/ton. Under the low profit mode, most graphite electrode manufacturers have stopped production or switched to graphite crucible and graphite cube since July. Only a few mainstream enterprises adhere to low-load production.

In 2022, China's graphite electrode average operating rate was 42%, down 18% year on year, which is also the lowest in the past five years. During this period, only the operating rate in 2020 and 2022 was lower than 50%. In 2020, due to the impact of the global epidemic, crude oil prices plummeted, downstream demand was depressed, and production profits were inverted. The average operating rate last year was 46%. However, due to the repeated epidemic, the low operating rate in 2022, the great downward pressure on the global economy, and the downturn in the steel industry, it is difficult to support the market demand for graphite electrodes. Therefore, graphite electrode market is affected by the demand of the downstream steel industry from the perspective of the low operating rate in two years.

In the next five years, graphite electrode will maintain stable growth. It is expected that the production capacity will reach 2.15 million tons by 2027, with a compound growth rate of 2.5%. Under the background of the gradual release of scrap steel resources in China, electric furnace has great development potential in the next five years. China encourages the use of scrap steel and short-process steelmaking, and encourages enterprises to replace electric furnace process capacity without adding new capacity. The total output of electric furnace steelmaking is also increasing year by year. The proportion of electric furnace steel in China is about 9%. The Ministry of Industry and Information Technology issued the Guidelines on the Development of Short-process Electric Arc Furnace Steelmaking (Draft for comments), which proposed that by the end of the "14th Five-Year Plan" (2025), the proportion of electric furnace steelmaking output would increase to about 20%, and there is still room for growth of graphite electrode capacity.

Looking at 2023, steel industry may continue to be depressed. The relevant association released data forecast that steel demand will recover by 1.0% in 2023, and the recovery of the overall market is limited. Although epidemic prevention and control policy is gradually released, economic recovery still needs time. Graphite electrode market is expected to recover slowly in the first half of 2023, but the resistance to price rise still exists. Graphite electrode market may start to recover in the second half of the year. Welcome to contact us for the latest news of graphite electrode market.