It seems that the slowdown in steel demand and plunge in graphite electrode (GE) prices over the past few months are hitting Indian electrodes manufacturers as, according to some market sources, there is news that Graphite India is contemplating production cuts.
GE prices in India have been falling since the beginning of 2019, recording a plunge of 35-50%. Graphite India is amongst the largest GE manufacturers in India. With an eye on the weak global GE market scenario, especially in South-east Asia and Europe, and sanctions on Iran by the US, which has resulted in zero exports from India to the Islamic Republic, Graphite India, according to sources, is considering a cut in production unless demand picks up towards the end of this year, which is very unlikely.
Although the company has not disclosed the quantity of production cuts that may happen, its management might well believe that there is no point in piling up inventory and blocking working capital.
Graphite India’s annual production is to the tune of 80,000 tonne, and this is primarily from its existing facilities in Durgapur and Nashik. Additionally, it produces another 18,000 tonne at its facility in Germany. The company’s Bangalore unit has suspended operations following environmental concerns. However, the company’s production capacity remains unaffected as it has ramped up production in Durgapur.
GEs used in electric arc furnaces (EAFs) to manufacture steel witnessed a significant surge in demand in the latter half of 2017 amid supply-side structural changes in China. The country closed all polluting GE units and, at the same time, announced targets to increase the percentage of EAFs in total crude production. This led to a sudden increase in GE demand and shortage in supplies ultimately leading to dramatic rise in prices. With this, the GE prices ex-China also surged, benefiting Indian manufacturers.
Now, when Chinese GE prices started falling in Nov’18, market participants thought it was a short-term price correction. However, since then the downtrend in electrodes prices has continued and it’s been almost nine months with absolutely no uptick in Chinese GE prices. The key reasons behind this are GE oversupply and tepid domestic steel demand in China. Given the poor in-house market situation, Chinese GE manufacturers have started exporting to the global market, giving tough price competition to Indian manufacturers.
Will the global GE market witness a lessening of production levels and prices start rising by the end of 2019? Make sure you keep abreast of all upcoming trends by attending the 2nd Global Graphite Electrode Conference to be organized by SteelMint Events from 27-29 August, 2019 in Thailand.