Graphite Price and Shortage Update
Over the last couple of years, reliably priced graphite materials have been harder to come by on the world market. As we detailed in an article about the US-China trade war last year, synthetic graphite manufacturing largely depends on coke and pitch produced in China. The ongoing trade war has further troubled the market that was already experiencing stressors from idle production facilities and green initiatives by the Chinese government that slowed the production of coke and pitch. Although we are now seeing some pricing and availability relief on the raw material front, the market for graphite material is still tight. Semco expects that we will see another year at least of this tight market before graphite availability and price stability return to levels the market last saw in 2016. Semco is continually tracking these market developments to help our clients better assess their long-term needs and allocate resources intelligently in the current volatile market. Here, we’ll examine some recent reporting on the causes of the volatile market and its effects on the production of graphite electrodes and needle coke, and the industries that depend on them.
One big cause of the tightening graphite materials market is China’s push to fight pollution by limiting certain industries, especially those near big cities. As Reuters reported in an article from September 21, “Beijing’s campaign for clearer skies has closed thousands of mills and mines producing low-quality steel and coal.” “Makers of [graphite] electrodes,” the article points out, “have not been spared.” According to the article, “Graphite electrodes are used to melt scrap in electric arc furnaces to produce new steel. Their main ingredient is high-value needle coke - named because of its shape - which is made from either petroleum or coal tar.” Manufacturing facilities near cities were hit the hardest by these restrictions as China attempts to fight pollution near large population centers. While these closings hurt some firms, “it’s boom time for major players who have survived.”
Even though some graphite production firms not hit hard by environmental regulations are thriving in this market, industries further down the supply chain that depend on needle coke are suffering. “Apart from graphite electrodes,” the article explains, “needle coke is used to make lithium-ion batteries, [and is] used in phones and electric cars, further tightening availability for the steel sector. Petroleum coke, of which needle coke is a variety, is also widely used in the aluminum industry to manufacture the cathodes that are key to the smelting process.” The situation is dire in some industries, with “steel mills around the world concerned that they will run out of replacement electrodes by the end of the year.”
At Semco, we are part of the supply chain that begins where firms produce the raw materials used in the manufacture of graphite material. To mitigate some of the worst of the price fallout from events beyond our control (such as Chinese environmental regulations and President Trump’s trade policies with regard to China), Semco looks ahead at the market and stocks up on graphite material when prices are more favorable. There is a limit to how much graphite we can stockpile, however. Like other graphite manufacturing firms, we are looking forward to more favorable conditions on the international graphite market in the coming years.
You can read the entire article from Reuters here