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China’s graphite electrode price hits 28-month low

China’s graphite electrode market has remained weak over the past month, with Mysteel’s benchmark price for 600mm ultra-high-power (UHP) grade electrodes in East China’s Jiangsu province sliding by a further Yuan 2,000/tonne ($282/t) or 4.3% on month to hit a 28-month low of Yuan 45,000/t including the 13% VAT as of October 15.

“Actually, spot market offer prices for 450mm UHP electrodes in other areas have even fallen below the Yuan 14,000/t threshold,” an electrode trader complained. “It seems the steady pace of the decline will continue, so long as market demand stays sluggish,” he added. For example, in Liaoning province on October 15, the spot price of 450mm UHP electrodes was Yuan 13,000/t, less than half what the price was just six months earlier, according to Mysteel’s data.

As of October 12, the capacity utilization rate among the 53 independent electric arc-furnace (EAF) producers nationwide which Mysteel monitors regularly reached 57%, higher by nearly 8 percentage points on month. Market watchers explained the jump on mini-mills cranking up production from early September when their profit margins were better than currently.

However, the rise in ferrous scrap prices thanks to the tightness of supply, plus the recent weakening of the finished steel market, has seen the EAF mills’ production costs rise and their margins narrow. As a result, the arc furnace makers are struggling to cut costs, and cutting their bid prices for electrodes is one option, Mysteel notes.

As of October 15, the spot transaction price of 6-8mm common grade scrap in Zhangjiagang city, China’s core scrap consumption base, had increased by Yuan 30/t on month to Yuan 2,450/t excluding the 13% VAT. On the same day, Mysteel’s national average price for HRB400 20mm dia rebar price was at Yuan 3,846/t including the 13% VAT, which marked a decline of Yuan 83/t from October 8.

Accordingly, as of October 12, the cost of EAF-produced rebar had increased by Yuan 15/t from September 30, the last working day before the National Day holiday, to reach Yuan 3,733/t including the 13% VAT, according to the data disclosed by  Iccsino, a leading platform for online information and trade relating to China’s graphite carbon industry.

“The rise in scrap prices – and the impact this is having on steel production costs – may force more EAF mills to conduct production suspensions for overhauls,” a Shanghai-based analyst said. As a result, should market demand worsen further the domestic graphite electrode market will probably keep sliding.

Written by Lindsey Liu, liulingxian@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com