Soaring demand for Graphite Electrodes worldwide helped Fangda Carbon to achieve astronomical rise in profit in 2017, which is more than 50 times the 2016 bottom-line, as reported by IC Carbon of China. Vigorous optimism on the basis of the robust electrode demand is not specific to the company. Fangda Special Steel, a subsidiary of Liaoning Fangda Group Industrial Co Ltd, and also known as the Fangda Group, had earlier forecasted that its net profit in 2017 will grow by 265-300%, mainly due to the robust electrode demand. On specific terms, Fangda Carbon expects its 2017 net profit to go up to around CNY 3.59 billion (up by CNY 3.557 billion) from CNY 67.45 million in 2016.
In parallel to the robust demand, the tightening supply for the electrodes also has been contributing towards the massive profitability of the Graphite Electrode companies. Stringent environmental norms had led to the closure of many electrode plants in China, thus the electrodes prices have jumped manifolds, driven by the prevailing demand from steel mills across the world.
Profitability of the companies will escalate further in the coming years as supply tightness will persist and demand will strengthen further as new Electric Arc based steel facilities are coming up. Also, even if a few electrode plants resume production after the spring season, it will take 34 months for those supplies to hit the market as the production cycles are that long—and that means, the companies will continue reaping profits during the intervening period.
Chinese Steel Makers to Intensify Graphite Electrode Purchases in Feb’18 to Replenish Inventories
Graphite Electrode purchases by Chinese steelmakers in Feb’18 are expected to gain steam as buying was subdued in Jan’18, and there is a bit of uncertainty in the electrode price movements in Feb’18 due to the Spring Festival; as such, the steel mills are expected to purchase heavily to maintain high inventories. As in the normal practice, steelmakers there maintain electrode inventories for two months. The current Chinese spot prices of UHP grade graphite electrode of 650 mm is in the range of USD 20,000-25,000/MT.
In Jan’18, the overall electrode purchases in China were stable as prices of scrap and steel had shrunk, reducing profits of steel mills to Yuan 400-500/MT from the peak profits of last year at Yuan 1,200/MT.
Shandong Steel Mill has 2 x 100-tonne electric arc furnace. Normally, the company purchases every month 200 MT of UHP 600 mm and 100 MT of UHP 450 mm graphite electrode. The steelmaker is expected to bid for higher quantity for Feb’18 as compared with that for Jan’18 as the price outlook is unclear with coinciding of the Spring Festival in Feb’18.
Jiangsu Steel has 5 x 100 tonne of electric arc furnace. The steelmaker has however increased usage of hot metal, lowering electrode usage, to tackle the pressure of high electrode prices. In view of this, the steelmaker is likely to bid at normal levels in Feb’18.