【Graphite Electrode】Graphite electrode market struggles with unstable prices

The graphite electrode market has been experiencing poor performance and struggling to maintain stable prices as of mid-June 2023. The main reason is the impact of weak demand, with downstream electric arc furnace steel enterprises operating at low levels. State-owned steel mills are procuring graphite electrodes on a need basis, and the market for silicon and yellow phosphorus is also performing poorly, resulting in hindered shipments of graphite electrodes. Industry reports indicate that there are fewer new orders, and most transactions are based on fulfilling pre-existing contract orders.

1. Upstream raw material prices for graphite electrodes have shown a slight upward trend, but cost support remains limited.

The price of low sulfur petroleum coke, a key raw material for graphite electrodes, was raised by 100 CNY/ton in early June, reaching 4,250 CNY/ton, a 7.59% increase compared to the end of May. The average market price of modified coal tar pitch increased by 60.93% to approximately 4,904 CNY/ton, and the average market price of needle coke decreased by 7.65% to approximately 9,112 CNY/ton.

Taking into account the current prices of low sulfur petroleum coke, coal tar pitch, and needle coke, the theoretical production cost of graphite electrodes remains at 19,000 CNY/ton. However, due to sluggish market trading and most orders being priced below the cost, graphite electrode manufacturers are experiencing continued losses.

2. Intense competition within the graphite electrode market has led to low prices.

Major graphite electrode manufacturers hold a significant market share and have reasonable resilience. Some orders are being fulfilled at reasonable prices. To increase their market share, some small and medium-sized graphite electrode manufacturers are engaging in low-price transactions. Graphite electrode producers are cautious and unwilling to accumulate inventory risks. Some individual graphite electrode companies have suspended production, and the timing of resumption is uncertain. Overall, the insufficient number of orders within the graphite electrode market and intense competition among industry players have put pressure on prices. As of the end of April, the operating rate of graphite electrode production was approximately 44%.

3. Slow recovery of downstream demand impacting the graphite electrode market.

In terms of steel, with declining steel prices, electric arc furnace steel mills are running at a loss, leading to widespread production cuts. Currently, the operating rate has dropped below 30%. The weak demand has transmitted to the upstream graphite electrode market, with state-owned steel mills primarily making purchases on demand, and private steel mills mostly remaining idle. Some graphite electrode companies have reported a lack of orders, with downstream markets only making inquiries and fewer transactions, resulting in increased shipment pressure.

In terms of non steel, the yellow phosphorus and metallurgical silicon markets have low operating rates. As of June 8th, the operating rate in the yellow phosphorus industry was around 30.56%, with operating rates in Yunnan, Guizhou, and Sichuan provinces at 24.90%, 29.19%, and 40.98%, respectively. The price of metallurgical silicon is in a challenging stabilization phase. The current operating rate in the southwestern region is lower than in previous years. Although some silicon smelters in Sichuan have resumed production after adjusting electricity prices, most of them are not operating at full capacity. In Yunnan, the number of operating furnaces is currently low, and the subsequent further reduction in electricity prices may increase the number of operating furnaces. The upstream raw material prices are experiencing downward pressure, which has limited support for metallurgical silicon prices. Recently, there has been a slight recovery in the automotive industry, and some industry players have increased confidence in the future of the silicon industry. However, the positive sentiment has not yet translated to the metallurgical silicon market.

Market Outlook

The graphite electrode market is expected to remain stable. On the supply side, it is projected that the graphite electrode market will continue to operate at low levels in June. As some companies deplete their inventories, overall market supply is expected to contract slightly. On the demand side, an increase in steel prices may stimulate sentiment for electric arc furnace steel companies to resume production. Based on these factors, the graphite electrode market is expected to maintain stability, with prices ranging between 16,000 and 22,000 CNY/ton for uhp graphite electrodes. Focus on graphite electrode market trends, feel free to contact us at anytime.