The graphite electrode market is approaching a crunch point
after months of heavy falls, according to producer and graphite
Graphite electrodes are used in both electric-arc furnaces
(EAFs) and ladle furnaces for the production of steel,
ferroalloys and cast iron (see below).
"We are in a delicate situation on the supply side of the
market. Inspired by high electrode prices in 2017 until the
middle or end of 2018, producers increased their capacities and
new entrants came into the market in China and in the West,"
Benjamin Sarkoezy, an analyst with the European company, said
in a recent interview with Fastmarkets.
To fund their developments, many producers amassed debt or
took on private investors. Meanwhile, electrode production
capacity and stocks increased and the market softened
significantly in response to the ramping-up of output.
"There has been a 60% fall in the price of electrodes since
winter [2018-19] and 20% in the past two months," Sarkoezy
said, "and the price of petroleum coke [pet coke] has risen to
the point that some electrodes producers are now struggling to
cover their costs for raw materials."
Pet coke is a key raw material in graphite electrode
manufacture and represents one of the main costs in
"In the short term, all the producers are still selling, but
we are convinced that the next step is for some to cut down and
then stop their output," Sarkoezy said.
This would echo the situation in 2016 when tighter Chinese
environmental inspections led some producers to cut back their
production. This tightening of supply sparked a crisis when
prices spiked. (See pricing section below.)
"This time, the market could be moved by either the
introduction of new environmental policies in China or by the
trade war between China and the United States," Sarkoezy said.
"We are looking to see what will be the external force that
triggers prices to rise again."
Competition for materials, tepid demand
Producers of graphite electrodes must compete to secure
supplies of pet coke, which helps to define the costs for
electrodes producers, along with electricity.
"Future technologies, such as anode and solar panel
producers, consume much of the [same] raw material [as is]
required for graphite electrodes, such as petroleum coke,"
Sarkoezy said. "There is great rivalry for material between
them and electrodes producers. As a result, we expect the price
of pet coke to remain high or even to increase."
At the same time, GES expects only a modest increase in
Demand for electrodes is expected to increase in China and
India in the near future, but to fall in Western economies.
"Overall, we expect a slight net increase in the near future
for graphite electrodes," Sarkoezy said.
In the short term, therefore, pressure will remain on
producers to be profitable with the current low electrode
prices. But despite the low prices, it is unlikely that
consumers will build inventories and spark a meaningful
increase in demand.
"The current situation is a good time for spot buyers of
electrodes, but most buyers have enough stock [to meet their
needs] until next year so cannot make use of the situation,"
Current electrode prices
GES believes that prices have bottomed out and will be
stable before they start to rise again in 2020.
At their peak in 2016, graphite electrode prices for
different grades of materials peaked at $20,000 per tonne.
Current prices are shown below:
- Electrode size: Small diameter, less than 400mm
- Electrode price: $2,000-2,300 per tonne fob China
- Electrode size: Large diameter, more than 400mm
- Electrode price: $2,500-3,000 per tonne
- Ultra High Power (UHP) electrodes
- Electrode size: Around 450mm
- Electrode price: $3,100-3,500 per tonne
- Electrode size: Around 600mm
- Electrode price: $8,000 per tonne
- High Power (HP) Grade and Super High Power (SHP) (GES
- Electrode size: diameter 400mm max
- Electrode price: $2,500-3,000 per tonne
(Prices correct on September 13, 2019, and were produced by
GES using data from manufacturers and from tenders.)
Graphite electrodes in production.
The largest producers fall into two groups, either inside or
outside China, Sarkoezy said.
There are 35-40 official graphite electrode producers in
China, and at least 30 more new entrants to the market in the
past two years which make other refractory products as well as
The two biggest producers in China, Fangda Group and
Sinosteel Jilin Carbon, were also the first when they began
production in the mid 1990s.
About 70% of Chinese production is consumed domestically and
30% is exported.
The major producers outside China include GrafTech in the
US. GrafTech is the only graphite electrode producer in the
world that has its own petroleum coke production, so does not
need to compete for raw material pet coke against battery and
HEG (capacity of 80,000 tonnes of UHP per year) and Graphite
India (98,000 tonnes per year capacity of electrodes) are the
biggest producers in India.
Tokai Carbon (38,000 tpy capacity in Japan, 96,000 tpy
globally) and SEC Carbon make graphite electrodes in
And since SGL Group sold its graphite electrode business to
Japan’s Showa Denko in 2017, production in Germany
has moved to Russia, where electricity costs are lower. It is
highly energy-intensive to convert carbon into graphite in the
production of electrodes so lower prices can drive the location
China is by far the lowest cost producer, followed by
The biggest consumers of graphite electrodes are
electric-arc furnaces (EAFs), followed by ladle furnaces,
EAFs smelt steel scrap while ladle furnaces are used to
raise the carbon content of steel.
Graphite electrodes are indispensable in EAF steelmaking,
which is often a more efficient and cheaper alternative to
blast-furnace steelmaking, but this is dependent on energy
EAF steelmaking involves using recycled steel scrap and
emits much less CO2 than a blast furnace, making it the more
environmentally favorable choice for producing steel.
EAFs need electrodes of large diameter and high quality,
otherwise they break when conducting electric current.
In contrast, ladle furnaces usually operate with an
electrode diameter of less than 300mm.
By country, the biggest consumer by far is China, with at
least 60% of the market.
Chinese consumers only use imported material when they need
electrodes bigger than 800mm in diameter, and often source from
About 80% of Indian production is consumed domestically.
Changes in the graphite electrodes market can be roughly
linked to movements in the crude steel market.
While the size of the markets in China and India have
significantly increased in volume year-on-year so far
in 2019, they have shrunk slightly in the US and Europe.