SteelMint has heard from its market sources that China is likely to add about 80,000 MT of Graphite electrode (GE) capacity in 2018 in Neimenggu, Shandong, and Shanxi provinces.
Out of the total capacity to be added about 60% will be the addition in HP (high power) grade and remaining 40% will be in UHP (ultra-high power) grade.
China’s existing idle capacity of 150,000 MT is also likely to resume their operations in 2018. This means that the country is likely to have additional graphite electrode capacity of 230,000 MT.
According to China’s official data, the country currently has operational graphite electrode capacity of 1.2 MnT and in 2017 its actual output during the year was 551,000 MT.
Now out of the total graphite electrode production in 2017, about 123,981 MT (23%) was of RP (regular power) grade, 179,100 MT (33%) was HP (high power) grade and 248,000 MT (44%) was UHP (ultra-high power) grade.
China exported about 39% of its total GE output to foreign countries while remaining 61% was used for domestic consumption. However, this ratio of domestic consumption versus exports will be a thing of the past as the quantum of export volume will shrink substantially in 2018 due the increasing Graphite Electrode domestic consumption in China, which is expected to reach a mammoth level of around 532,000 MT this year.
Why is China adding its Graphite Electrode capacity?
Graphite Electrode purchase by Chinese steelmakers is expected to gain steam in 2018 on account of rising usage of EAF (electric arc furnace) in the country going ahead. Subsequently, GE prices in the global market are also anticipated to stay at elevated levels driven by changes to demand for Graphite Electrode from the Chinese Steel Industry.
According to China’s industry numbers, the country has ideal EAF capacity of 120 MnT and the operational capacity of 86 MnT. About 15 MnT is likely to be added in 2018 and the country’s EAF capacity is likely to reach about 137 MnT. China’s EAF Output in 2017 was around 52 MnT, Which is likely to increase to 82 MnT in 2018 and 120 MnT by 2020.
For Steel-making via the EAF route, there is no substitute for Graphite Electrodes. Global manufacturers who have a high dependence on Electrode imports from China, need to prepare themselves for further supply tightness of Graphite Electrodes as China is expected to rapidly increase its EAF capacity and implement reforms aimed at culling polluting capacities.