【Graphite Electrodes】Market and Prices

Market Situation

As of mid-June 2023, the graphite electrode market has been performing poorly, struggling to maintain stable prices. The main reason is the weak demand, as downstream electric furnace steel enterprises are operating at low levels, and state-owned steel mills are purchasing on-demand only. Additionally, the silicon and yellow phosphorus markets have shown poor performance, causing disruptions in graphite electrode shipments. Representatives from graphite electrode enterprises have reported few new orders, with most of the transactions being executed based on pre-existing contracts. 

I. Limited Cost Support Despite Slight Price Increase in Upstream Raw Materials for Graphite Electrodes

The price of low-sulfur petroleum coke #1 from a certain refinery in the Northeast region was raised by 100 yuan/ton in early June, reaching 4,250 yuan/ton, an increase of 7.59% compared to the end of May. The average market price of modified coal tar pitch is approximately 4,904 yuan/ton, a month-on-month increase of 60.93%. The average market price of needle coke is approximately 9,112 yuan/ton, a decrease of 7.65% compared to the previous month.

Overall, the prices of raw materials for graphite electrodes have experienced a slight increase. Based on the current prices of low-sulfur petroleum coke, coal tar pitch, and needle coke in the graphite electrode market, the theoretical production cost of graphite electrodes remains around 19,000 yuan/ton. However, due to the sluggish trading and most orders being priced below the cost, graphite electrode enterprises are facing continued losses.

II. Internal Competition and Low Prices in the Graphite Electrode Market

Major graphite electrode enterprises have a high market share and relatively strong resistance, resulting in some orders being shipped at reasonable prices. To increase their market share, some small and medium-sized graphite electrode enterprises have been engaging in low-priced transactions. Graphite electrode producers are cautious and reluctant to accumulate inventory risks. Some graphite electrode enterprises have suspended production, and the timing of resumption is yet to be determined. Overall, there is a shortage of orders in the graphite electrode market, leading to intense internal competition and price stability pressure. As of the end of April, the operating rate of graphite electrodes was around 44%.

III. Slow Recovery of Downstream Demand Transmitted to Graphite Electrodes

In the steel sector, due to continuously weakening steel prices, electric furnace steel mills have been operating at a loss, leading to widespread production cuts. Currently, the operating rate has dropped to below 30%, and the weak end-user demand has also affected the upstream graphite electrode market. State-owned steel mills are mainly purchasing on-demand, while private steel mills have mostly shut down. Some graphite electrode enterprises have reported a lack of orders, with minimal inquiries and transactions, increasing the pressure to deliver goods. In the non-steel sector, the operating rates of yellow phosphorus and metallurgical-grade silicon have been low. As of June 8th, the operating rate in the yellow phosphorus industry was approximately 30.56%, with rates of 24.90%, 29.19%, and 40.98% in the Yunnan, Guizhou, and Sichuan regions, respectively. The current price of metallurgical-grade silicon is in a difficult stabilizing state. The start-up in the southwestern region is lower than the same period in previous years. After the adjustment of electricity prices in multiple locations in Sichuan, silicon producers have gradually resumed production, but most of them have not reached full capacity. In Yunnan, the current number of operating furnaces is relatively low. With further reduction in electricity prices, the number of operating furnaces is expected to increase. The upstream raw material prices are declining, providing little support to the price of metallurgical-grade silicon. Recently, there has been a trend of recovery in the terminal automotive industry, which has slightly boosted confidence in the future of the silicon industry. However, the positive sentiment has not yet translated to metallurgical-grade silicon.

Future Forecast

The graphite electrode market is expected to stabilize in the near term. In terms of supply, it is anticipated that the graphite electrode market will continue to operate at low levels in June, with a slight contraction in overall supply as some enterprises deplete their inventories. In terms of demand, if steel prices rise and stimulate the sentiment for electric furnace steel producers to resume production, the graphite electrode market is expected to remain stable. The price range for ultra-high power graphite electrodes is projected to be between 16,000 and 22,000 yuan/ton. Please follow us for the latest updates on graphite electrodes.