【Graphite Electrodes】Bearish Factors Dominate, Graphite Electrode Market Trading Weak

Currently, the graphite electrode market is primarily experiencing a downward trend in prices. As of May 15, 2023, the mainstream prices for graphite electrodes with diameters of 300-600mm in China are as follows: Regular Power - 18,000-19,500 RMB/ton, High Power - 18,000-20,500 RMB/ton, Ultra-High Power - 18,500-22,500 RMB/ton, and Ultra-High Power 700mm - 25,500-26,500 RMB/ton. 

By mid-May 2023, the trading activity in the graphite electrode market remains weak due to insufficient demand. Downstream electric arc furnace steel enterprises continue to undergo maintenance and production cuts, while silicon plants also exhibit poor performance. Despite the relatively normal production pace of graphite electrode manufacturers, the market is affected by oversupply conditions, resulting in a weak downward trend. Feedback from graphite electrode companies indicates a lack of sufficient orders, with a scarcity of new contracts, especially for ultra-high large-sized graphite electrodes.

1. Declining raw material prices for graphite electrodes have insufficient cost support:

The prices of certain raw materials for graphite electrodes in Northeast China have increased by 200 RMB/ton since early May, with low sulfur petroleum coke 1# priced at 3,900 RMB/ton, a 6.94% increase compared to the end of April. The average market prices for modified coal tar pitch and needle coke have decreased by 44.42% and 7.40% respectively.

Overall, the prices of graphite electrode raw materials have declined. Considering the prices of low sulfur petroleum coke, coal tar pitch, and needle coke, the theoretical production cost for graphite electrodes remains around 19,000 RMB/ton. However, due to weak trading conditions and most orders being priced below the cost, graphite electrode manufacturers continue to face losses.

2. Intense competition and supply-demand imbalance in the graphite electrode market:

The presence of low-priced orders in the market has affected the production sentiment of some graphite electrode companies. Several companies have indicated limited profitability and demand, and they plan to control production to alleviate shipment pressure and inventory risks. According to investigation, large graphite electrode manufacturers are operating relatively normally, with most companies fully operational in each production process. Only a few graphite electrode companies have temporarily suspended certain molding processes while consuming semi-finished products. The overall operating rate of graphite electrodes by the end of April is around 41%, a decrease of 0.34% compared to the previous month.

3. Weak demand situation with limited improvement, dragging down graphite electrode prices:

In the steel sector, steel demand is not optimistic. Due to losses, most short-process electric arc furnace steel mills have chosen to halt production for maintenance, resulting in weak purchasing power for graphite electrodes. As of May 12, the average operating rate of independent electric arc furnace steel mills is 66.67%, a decrease of 1.76% compared to the previous period and a decrease of 4.36% year-on-year. 

In the non-steel sector, the performance of the silicon metal and yellow phosphorus markets is also poor, leading to a slowdown in the purchase of graphite electrodes for regular power. Particularly in regions such as Southwest, Northwest, East China, and North China, silicon plants are facing cost pressures and have chosen to shut down or reduce production, resulting in weak demand for graphite electrodes. May is the traditional off-season for real estate consumption, and despite policy support, it will take time for the boost in terminal demand to be transmitted to the silicon metal market, further dragging down the prices of silicon metal. Currently, the silicon industry chain is mainly experiencing a sluggish trend.

Future Market Forecast

As we enter May, the weak trading conditions in the graphite electrode market have yet to improve. With weak downstream demand and the inability of declining costs to support graphite electrode prices, bearish factors dominate the market. Some graphite electrode companies are beginning to adjust their product structures. Overall, the market sentiment is pessimistic, and the weak demand remains the main restraining factor for the graphite electrode market. In the short term, graphite electrode prices are expected to stabilize, with low-priced resources for ultra-high power 450mm graphite electrodes trading at 17,500-18,000 RMB/ton. Contact us for more news and information on graphite-based products.