SteelMint Events

Author: SteelMintEvents

How US China Trade War Could Alter Global GE Market Scene

There is a distinct possibility of low-grade Chinese GE flooding the Indian market with the duty hike imposed by the US on Chinese imports.

Adding a new chapter in the ongoing trade war between two major global economies, the US and China, the former created a stir last week by announcing a hike in tariffs on certain goods from the existing 10% to 25%. The laundry list of products with increased duties includes Graphite Electrodes (GE). It would be interesting to analyze whether this additional levy might impact China’s GE exports to the US.

The dominant steelmaking route in the US is EAF. In 2018 the country’s electric furnace capacity stood at 76 MnT, which means the country’s GE requirement is quite high. The US is home to the GE behemoth GrafTech International with a total installed capacity of 230,000 tonne from four plants located in the US, Mexico and Europe.

US reliant on GE imports

Nevertheless, the US is still dependent on GE imports to meet it requirements because GrafTech’s US plant, with a capacity of 28,000 tonne, is lying idle (with effect from the second quarter of 2016) as a part of the overall capacity reduction in the industry that began in early 2014.

As per US customs data, in 2018 the economic superpower imported about 127,586 tonne of GE with highest imports coming from India (32%) followed by Mexico (22%) and Russia (14%). The percentage share of China in total US GE imports stood at 13%. Thus, although not a major exporter to the US, China has a share in that country’s electrodes imports, and now with the tariff surge that share is likely to decline.

Opportunity for other GE exporters

This situation could well throw open opportunities for other GE exporting countries such as India, Russia and Japan to cater to US demand that was hitherto supplied by Chinese exporters. In fact, India’s share in US GE imports has already registered a significant uptick on a Y-o-Y basis from 10% in 2017 to 32% in 2018. India’s exports to the US must also have increased as supplies to a key importer, Iran, stopped after the imposition of sanctions on the Islamic Republic by the US in August last year.

Chinese GE exports to India to Spike Further

According to market sources, China mainly exports HP grade electrodes to the US. The US’ share in China’s total GE exports in 2018 stood at 7% and with the new tariff system in place China will divert its GEs to other countries like India. India has become a key destination for lower grade (HP/RP) electrodes exports for China after the anti-dumping duty on GE imports into India was removed in August last year. China’s share in India’s total electrode imports increased from 14% in 2017 to 56% in 2018.

China’s GE market scenario

Chinese GE prices that were falling incessantly for almost six months have now turned stable. Current prices in China of UHP grade GE of size 450mm are heard to be in the range of RMB 26,000 – 28,000/MT (USD 3,800 – 4,100/MT) whereas 600mm GEs are in the range of RMB 48,000 – 53,000/MT (USD 7,000 – 7,700/MT). The price of HP grade electrodes 400mm in size are in the range of RMB 22,000 – 24,000/MT (USD 3,200 – 3,520/MT).

After the end of the winter heating season in March, Chinese steel mills scale up production. Therefore, during this period GE prices in that country surge too. But this year, domestic steel demand in China has turned tepid amid slow growth in the automobile and infrastructure sectors. Thus, at present steel mills in China have adopted a wait and watch policy resulting in GE prices turning stable.

On the raw materials front, domestic needle coke prices too remained stable this week. Domestic needle coke price is heard to be in the range of RMB 20,000-25,000 per tonne (USD 2,950 – 3,660/MT) whereas the imported offers are heard to be in the range of USD 4,000-4,600/MT.

Fluctuating GE price dynamics

As China already has excess GE supplies, amid the surge in taxes, China’s electrodes exporters will have two options: either to lower their GE offers further and continue exporting to the US or interrupt the price dynamics of lower grade GEs of other countries, especially India, with their increased supplies. How will Chinese GE exports affect global price dynamics this year? To know more register for the 2nd Global Graphite Electrode Conference to be organized by SteelMint Events from 27-29 August, 2019 in Thailand.

Know More

May 23, 2019
China to Achieve Expected Goal of 20% Scrap Ratio Ahead of Schedule – Li Shubin

Li Shubin, Executive Vice President and Secretary General of China Waste Steel Application Association pointed out that China’s waste steel resources utilization level has achieved new breakthroughs, and the development of the “13th Five-Year Plan” of the scrap steel industry is expected to be completed two years and three months ahead of schedule. The plan proposes a scrap target ratio of 20%. Not only that, the total consumption of scrap steel, the combined consumption of scrap steel and the proportion of scrap steel application have reached the best level in China’s steel industry after the removal of large flat furnace smelting process, and it also marks the development of China’s scrap steel industry.

China’s scrap resources and consumption continue to increase steadily –

In 2018, China’s total consumption of scrap steel in the whole year was 188 MnT, an increase of 39.68 MnT, an increase of 26.9%. The scrap consumption was 202.3 kg/ton, an increase of 24.5 kg/ton, an increase of 13.8%. Among them, converter scrap consumption was 152 kg/ton, an increase of 23.8 kg/ton, an increase of 18.6%; electric furnace scrap consumption of 662.8 kg/ton, an increase of 2.2 kg/ton, an increase of 0.3%. The scrap ratio was 20.2%, an increase of 2.45% points Y-o-Y; the electric furnace steel ratio was 9.8%, an increase of 0.5% points Y-o-Y.
In the first two months of this year, the total consumption of scrap steel in the country was 29.33 MnT, an increase of 3.97 MnT, an increase of 15.6%.
According to the statistics of the Scrap Association, the total amount of scrap steel resources generated in the country in 2018 was 220 MnT, an increase of more than 20 MnT, an increase of 10%. Iron and steel enterprises produce 50 MnT of scrap steel, accounting for 23% of total resources; social procurement of scrap steel is 170 MnT, accounting for 77% of total resources. Among them, the total consumption of scrap steel in iron and steel enterprises was 188 MnT, accounting for 85.5% of the total resources.

Problems being faced by Chinese steel scrap industry?

1. China’s waste steel recycling is still relatively low compared with the global average. There is a gap between China’s scrap ratio and the global average. It is necessary to speed up the increase of scrap ratio and increase the ratio of electric furnaces to accelerate the development of China’s scrap steel application industry.
2. The current national policy measures to use green resources for scrap steel and short-process steelmaking. It needs to be further strengthened.
3. The fiscal and taxation [2015] No. 78 document does not fully honor the preferential policies for the scrap steel enterprises. The focus should be on full use of existing capital channels such as green manufacturing, guide and encourage social capital to increase support for scrap steel application, and strengthen departments with finance and taxation. Communicate and coordinate to promote the implementation of the VAT refund and refund policy, and ensure that eligible enterprises are eligible for tax incentives.

Steel scrap prices to see no major fluctuation!

The China Iron and Steel Association predicts that steel prices will remain range bound in 2019 and there will be no major decline in scrap steel prices. The recent analysis believes that the price level of the scrap market in 2019 should fluctuate around 2,500 yuan/ton (including tax price), there will be no major decline and there will be no 2015-style decline.
Li Shubin believes that scrap prices and steel prices are linked and related to the cost of hot metal. As long as steel prices are firm, steel companies have substantial profits, scrap demand will not be greatly reduced, scrap prices will not fall sharply, but there will be no big climbs. It is reasonable for heavy scrap to float at around 2,500 yuan/ton.

What are major opportunities available for scrap processing and distribution companies?

1. 7th batch of scrap access of the Ministry of Industry and Information Technology is about to begin
2. China’s new regulations on the dismantling of scrapped cars, which will help achieve the integrated development of the scrap industry.

“Encourage scrap processing enterprises to expand and group development through mergers and acquisitions, support steel companies to lead the establishment of large-scale scrap processing and distribution enterprises, drive the green development of upstream and downstream industrial chains, and guide the rational flow of scrap steel resources.” Li shared.
To know more on Rising Importance of Steel Scrap in China, book your seat at SteelMint’s 4th Steel Scrap, Billet & DRI Summit and get a chance to hear views of Li Shubin. The conference is being organized during 27-29’th Aug’19 in Bangkok, Thailand.

Know More

May 17, 2019
China still not major competitor in UHP grade GE market: GrafTech
In its Q1 2019 earnings call held recently, US-based Graphite Electrode (GE) major GrafTech highlighted the company’s sales and financial performance, market prospects in the short term and the likely risk emerging from the upcoming Chinese GE additions. Listed below are the key points revealed by GrafTech’s top management:

A majority of Chinese manufacturers are still new in the UHP GE business:

Asked about the potential risk from the rising GE capacities in China, GrafTech’s top management highlighted that China is adding to its GE capacity massively because with 10% EAF capacity in that country almost 100 MnT of crude steel is being produced by the EAF route. The nation is planning to expand EAF capacity to 20% by 2021, which signifies the addition of another 75 to 100 MnT (equal to the entire US arc furnace industry) of crude steel to existing capacity. In order to service such a huge magnitude of EAF capacity, the country would obviously require GE capacity additions.
As regards UHP grade GEs, GrafTech’s top management said a couple of Chinese producers are working for years to produce UHP electrodes and during the shortage last year, customers selectively bought Chinese UHP grade GE on a trial basis. However, it has taken years for a couple of well-established Chinese producers to reach a point from where they can produce UHP grade GEs with a consumption and breakage rate that steel producers would prefer to try. UHP electrodes are used in high-intensity applications and high-production melt shops.
Thus, barring a few, a majority of new GE capacity additions that are claiming to be UHP grade don’t have the experience of producing high-grade GEs. It is unclear how much new capacity is being added to bolster UHP grade production and how long it will take to build and run UHP grade GE plants.

Availability of good quality needle coke still a big hurdle:

Asked about the availability of petroleum-based needle coke required to produce high-grade GEs, GrafTech highlighted that producing high-grade petroleum-based needle coke is not easy and it takes years to develop the process and secure specific decant oil supplies. Decant oil, used to produce needle coke, is a secondary product, basically a leftover at the bottom of the barrel during the oil refining process. As refineries have different operations, the quality of decant oil varies widely from refinery to refinery. So it is difficult to secure decant oil with those properties that are required for petroleum needle coke, which, in turn, is required to manufacture high-grade electrodes used in high-intensity melt shops.

Demand for needle coke from China’s EV segment:

Top GrafTech executives pointed out that China has a burgeoning requirement of needle coke from the expanding electric vehicles segment. In order to manufacture efficient battery with long life, premium quality petroleum-based needle coke is required. The Chinese still mix different products, including petroleum needle coke and pitch needle coke as well as natural graphite. This is because it’s all about the ability for the product to transfer a charge in the most effective and efficient way. Thus, the Chinese GE industry will face competition from the domestic battery industry which could well prove to be a deterrent to high-grade electrodes production in the future.

BOX

Snapshots of GrafTech’s Q1 CY19 Performance
- Net sales rise by 5% Y-o-Y from USD 452 million in Q1 2018 to USD 475 million in Q1 2019
- Company registers an increase in sales from 42,000 tonne in Q1 18 to 45,000 tonne in Q1 CY19
- Average realised price from sale in Q1 CY19 recorded at USD 9,954/MT against USD 9,989/MT in Q1 2018
- GE major plans to sell majority of volumes on long term (3-5 years), take-or-pay, fixed price or volume contracts
- Company has entered into long-term agreements with more than 100 customers for 675,000 tonne at an average contract price of USD 9,800/MT for 2018-2023.
- GraftTech’s ‘Take-or-Pay’ agreements are estimated to reduce from 148,000 tonne (as of 31 Mar’19) to 120,000 tonne in 2022 with average price to plunge from USD 9,800 in 2019 to USD 9,700/MT in 2022.
- Company plans to focus on operational improvements with capital expenditure of USD 60-70 million in 2019.
Know More
May 17, 2019
South Korea: Ferrous Scrap Imports from US Rise Sharply in Q1 2019

South Korea – world’s 2^nd largest ferrous scrap importer after Turkey has witnessed sharp rise in ferrous scrap imports from US in Q1’2019. South Korean ferrous scrap imports hit a record volume of more than 4 years high in the first quarter of 2019, the customs data maintained with SteelMint showed.

South Korean ferrous scrap imports stood at 1.85 MnT ferrous scrap in Q1’2019, up 24% Q-o-Q against 1.49 MnT in Q4’2018 while jumped 22% against 1.52 MnT ferrous scrap in Q1’2018 on yearly premises. Scrap imports recorded in Feb’19 hit 53-month high against earlier highest was at 671,974 MT in Sept’14.

Notably, US has supplied 0.41 MnT ferrous scrap to South Korea in Q1-2019, up 46% Q-o-Q against Q4’2018 while exports multiplied almost three folds against just 0.14 MnT recorded in the same quarter last year.

Why was a shift in preference towards US scrap?

Japanese domestic scrap prices remained on higher side in March ahead beginning of Golden Week holidays. Amid expectation of hike in prices, South Korean steel mills had booked bulk cargoes in previous months from US and Russia.

Hyundai’s bidding for Japanese scrap is considered to be the benchmark for East Asian scrap market. The steelmaker has resumed open bidding in Mar’19 after a gap of two months. It had discontinued bidding amid high inventories and comparatively higher Japanese prices during Jan-Feb’19.

Also Hyundai Steel had planned maintenance activities at its factories including Incheon steel mill during 3rd-19th February. Company officials had plans to reduce local scrap prices ahead of facility repair.

Japan continues to remain the largest scrap supplier in Q1 2019

Despite observing marginal fall in total scrap exports in Q1 2019, Japan exported 1.16 MnT ferrous scrap to South Korea, observing a rise of 36% Q-o-Q against 0.85 MnT ferrous scrap in Q4’2018 and a rise of 7% Y-o-Y against 1.08 MnT in Q1’2018. Japan occupied the highest 63% share in total scrap imports in Q1’2019 followed by US and Russia occupying 22% and 9% share.

US stepped up as second largest supplier position surpassing Russia amid less clarity on scrap export ban from the Russian government. Russia supplied 0.17 MnT ferrous scrap to South Korea down 32% Q-o-Q against 0.25 MnT in Q4’2018. Russian scrap yards continued attracting higher prices domestically resulting in remaining on the higher side in Q1’2019 in comparison with Japan & US.

Hyundai Steel aims at 3.5 MnT ferrous scrap imports in CY19

The largest ferrous scrap consumer in South Korea- Hyundai Steel aims to bolster its ferrous scrap consumption to around 10 MnT in CY19. Out of total around 3.5 MnT scrap is anticipated to be imported in 2019. The company is likely to bolster its overseas ferrous scrap procurement lineup by strengthening the long term relationship with supplying scrap yards globally in 2019.

According to World Steel Association, the country’s crude steel output stood at 18.10 MnT during Q1’2019 marginally up 2% against 17.81 MnT produced during same quarter last year. South Korean finish steel prices are driven by imported scrap prices. Country’s finish long exports remained stable at around 0.6 MnT in Q1’2019 while finish flat exports jumped 12% Q-o-Q to 6.14 MnT in Q1’2019 against that of Q4’2018.

To know more on Japanese scrap supply-demand, book your seat at SteelMint’s 4^th Steel Scrap, Billet & DRI Summit and get a chance to hear views of Mr Arshdeep Singh, Director Vital Solutions. The conference is being organized during 27-29’th Aug’19 in Bangkok, Thailand.

Know More

May 10, 2019
Needle Coke Prices Won’t Fall in Next 2 Years: Chinese Needle Coke Manufacturer Tells SteelMint

EAF steelmaking in China has witnessed considerable capacity enhancements of late mainly due to the surging environmental concerns and the burgeoning demand for higher grades and specifications. From the current 12%, crude steel produced through the EAF route is expected to contribute to around 20% of overall crude steel production in China by 2020. However, UHP grade Graphite Electrodes (GE) of sizes <600mm are still hard to come by owing to the relative scarcity of high-specification needle coke. There is still a prevailing opinion that China lags behind the US, Japan and India when it comes to manufacturing premium quality GEs to run global standard EAF units.

Amid such doubts in the minds of prospective investors and buyers about the real market scenario in China and also with a view to the fact that China is slowly emerging as a nerve centre of global GE demand and trade, SteelMint came up with a unique idea of organizing the International Graphite Electrode & Needle Coke Roadshow from April 8 to 12, 2019 that included visits to GE and Needle Coke plants to assess the ground reality in China.

As part of this roadshow, SteelMint visited Jingyang Technology, a needle coke plant located in the Shandong province. The company has a nameplate capacity of 60,000 MTPA of needle coke and is striving to double its output in the next three years. Below are excerpts from an interview with Shen Jianfeng, Deputy General Manager, Marketing and Sales, Jingyang Technology:

Can you please elaborate on Jingyang Technology’s business and market share in China?

SJ: Jingyang Technology started its journey in October 2014 and is mainly focused on manufacturing petroleum-based needle coke. We have a market share of 25% in China. At present our plant’s production is about 65,000 tonne for calcined needle coke, 20,000 tonnes for green coke which means about 85,000 tonnes in total. We expect to increase our capacity to 150,000 tonne by October 2019 after much-awaited expansion plans are implemented. With this expansion the needle coke manufactured is suitable for the production of GEs ranging 600mm and above in size.

Currently the sulphur content of the needle coke we produce is 0.45%. We use hydrogen to remove the sulphur. After expansion, the sulphur content in our GE can reach below 0.4% (roughly 0.35%) which is equal to the level that the US and Japanese needle coke manufacturers maintain.

Who are your customers in China? Do you also export to India?

SJ: Currently our major clients in China are Fangda Carbon, Nantong Yangzi Carbon, Jilin Carbon and Xinxing Carbon to name a few. With regard to the anode material segment, our clients include Shan Shan Tech and Zhongke Electric. And there is one renowned GE manufacturer which is located in Sichuan province and is using our product to manufacture 700mm GE.

Jingyang Tech has been exporting since 2017 and we have regular orders of 2,000 tonne per month from Russia. Last month we exported 500 tonne to Italy. A few months back we signed a supply contract for 300 tonne per month with a Japanese GE producer. Last year we exported 200 tonne to India and plan to ramp up exports to India.

What is the current needle coke market situation in China? There is talk of large needle coke capacities coming up in China. How much capacity will be added in the next two years?

SJ: The current needle coke capacity in China is around 280,000 tonne with coal tar pitch-based needle coke and petroleum-based coke having a percentage share of 71% and 29% respectively in the market. The additional capacities (both coal tar pitch-based and petroleum-based) that are expected to be added is around 720,000 tonne by 2020, thus taking the country’s total needle coke capacity to around 960,000 tonnes.

Will this capacity addition ease the demand-supply imbalance and lower prices in China?

SJ: The needle coke manufactured in China is used by two sectors: GE and anode materials. The demand for needle coke from both the segments will likely be around 1 MnT by 2020. However, supplies in the next two years will be around 960,000 tonne, which means that the demand-supply imbalance will continue and prices may not fluctuate much in the next two years.

Is the quality of petroleum coke-based GE different from that manufactured using coal tar pitch-based needle coke? Are these suitable for making UHP electrodes required in big EAF plants?

SJ: There is no major difference between GE manufactured using petroleum or coal tar but there is always scope for improvement. However, like Japan, China can also make good quality coal tar pitch-based needle coke that can be used to manufacture electrodes of bigger sizes and specifications. For example, a Chinese needle coke manufacturers have made a breakthrough in production of high quality coal tar pitch-based needle coke used to manufacture 700mm UHP GE. At present, petroleum-based coke is expensive than coal tar pitch based, roughly by RMB 2,000-3,000 per tonne.

What is the current needle coke price scenario in China?

SJ: Currently the price in China is around RMB 20,000-25,000 per tonne but it is difficult to make any predictions. Judging by the willingness of customers it seems prices have bottomed out since early April and it is likely that the market will be better in the future.

How does Jingyang Technology maintain its needle coke quality?

SJ: We regard quality as supreme and have put in place a whole set of measures to strictly control quality with regard to raw material selection, production control, online monitoring, checking prior to dispatch, customer follow-up, third party inspection and appraisal, etc.

We have a professional team with rich experience in this industry and it accepts only quality raw materials after sample testing. They comprehensively process the raw materials from difference resources to make the finished product. In the warehouse, we maintain around 40,000 to 50,000 tonne of raw material to stay away from market fluctuations. As regards the final product, 20% is earmarked for anode material and the rest is used in GE production.

What is the ground level progress of EAF in china? How much capacity can come online in the next two-three years?

SJ: In my opinion to some extent, the development of needle coke banks on the increase in EAF capacity but the EAF output of steel in China is unlikely to exceed 20% in next 2-3 years. At present current EAF route capacity is less than 12% in total.

What is the lead time of setting up a needle coke plant in China?

SJ: It takes about 2 years to set up a needle coke plant for others normally but for us only 10 months are sufficient to set up a new needle coke plant given the knowledge and resources we have.

Do you have any further plans after the capacity expansion?

SJ: We plan to start manufacturing of nipples used for electrodes of size 600mm to 650mm.

How the winter production was cut in 2018 and is likely to be in 2019?

SJ: Last year the production cuts policy not too strict as policy no longer took the approach of ‘One size fits all’. We had production cuts of 30% in winters of 2018 and will make up for the lost capacity most likely during summers. Besides, this our production majorly complies with the environmental protection requirement with water treating systems in place and thus for 2019 winters, production cuts would not have major impact on us.

Know More

April 24, 2019