The turning point of the graphite electrode industry has emerged, and profits are expected to recover. Deep analysis of the industry chain

The profitability of the graphite electrode industry is improving. So this article focuses on graphite electrodes.

2、 Understanding graphite electrodes

Graphite electrode is a high-temperature resistant graphite conductive material that can conduct current and generate electricity, mainly used in steel production.

The upstream raw materials in the graphite electrode industry chain are mainly petroleum coke and needle coke, which account for a large proportion of the production cost of graphite electrodes, accounting for over 65%. Due to the difficulty in ensuring the quality of domestically produced needle coke, China’s dependence on imported high-quality needle coke is still high.

3、 Current supply and demand situation

1. Supply situation

In recent years, the support and guidance from domestic policies towards replacing converter steelmaking with arc furnace short process steelmaking have driven an increase in demand for graphite electrodes in the Chinese steel industry.

According to the concept of “carbon neutrality”, the transformation of traditional high-energy consuming industries is in two directions: one is the original energy electrification, and the other is the process upgrade. The steel industry is a typical “coal to electricity”, which means that arc furnace steelmaking requires scrap steel and graphite electrodes.

High quality and ultra high power graphite electrodes are mainly used in the production of stainless steel and special steel. Due to the demolition of low capacity factories, long-term environmental rectification and renovation, the production capacity and output outside China continue to decrease, and this part of the production capacity accounts for more than 90% of the global market. Therefore, the gap between production and consumption is filled by the export of graphite electrodes from China.

Since 2017, China’s production has rebounded and reached 800000 tons in 2019. Compared to the global graphite electrode market, domestic manufacturers have relatively lower levels of ultra-high power graphite electrode manufacturing capabilities. However, for high-quality ultra-high power graphite, domestic manufacturing capabilities are very limited. In 2019, China’s production of high-quality ultra-high power graphite electrodes was only 86000 tons, accounting for about 10% of the total production, and there is a significant gap in the structure of foreign graphite electrode products.

2. Current demand situation

In recent years, global crude steel production has maintained steady growth. The application of steel in the automotive, construction, packaging, and railway industries is becoming increasingly widespread, and global steel consumption is also steadily increasing. At the same time, the quality of steel products has improved, and environmental regulations are increasing. Some steel manufacturers are turning to electric arc furnace steel manufacturing, and graphite electrodes are crucial to electric arc furnaces, thus increasing the requirements for the quality of graphite electrodes. From a downstream perspective, about 70% of China’s special steel and 100% of high alloy steel are produced by electric arc furnaces. The future development of high-end special steel in China will drive the development of electric furnace steel and graphite electrodes for electric furnaces.

The proportion of electric furnace steelmaking in China is still lower than the global average, but the gap is gradually narrowing. The management has stipulated that by 2025, the proportion of steel scrap in Chinese steel enterprises will not be less than 30%. It is expected that the export volume of graphite electrodes from China will increase to 398000 tons by 2023, with a compound annual growth rate of 5.5%.