SteelMint Events

Category: Graphite Electrode & Needle Coke

  • Iran Subverting US Sanctions, Importing Chinese GE ?

    Iran Subverting US Sanctions, Importing Chinese GE ?

    The political friction between the US and Iran took a turn for the worse in the beginning of this month with the former imposing a new round of sanctions on Tehran, severely restricting the Islamic Republic’s trade with other countries.

    After pulling out of the 2015 nuclear deal with Tehran, the US had announced the first tranche of financial sanctions on Iran in August last year, targeting the purchase of Iranian currency thereby affecting key industries. The sanctions restricted Iran’s purchase of US dollars – the most preferred currency in global trade.

    Again in November 2018, the US slapped a second round of sanctions on Iran, this time targeting the country’s precious oil sector. Any country importing Iranian oil today naturally invites secondary sanctions upon itself. And, to top it all, in early May this year the Trump administration imposed the latest round of sanctions on Iran’s metal industry including the iron and steel industry, aimed at cutting off revenue to Iran. These sanctions are a warning to other nations that allowing Iranian steel and other metals into their ports will attract secondary sanctions.

    GE Imports Steady Despite Sanctions

    Amid these trade restrictions being imposed on Iran one of the key sectors that will take a major hit is steel. This is because about 85% of steel production in Iran takes place through the EAF route and the remaining via BFs. The key raw material required to produce steel in electric furnaces is Graphite Electrodes (GE) and Iran is totally dependent on imports to meet its GE requirements.

    Iran imported about 85% of its GE requirement from China and India last year. With the sanctions in place, it was anticipated that the country’s electrodes imports would suffer a setback and so would steel production. However, Iranian customs data show that GE inflow into that country has not only continued after the clampdown of sanctions but have actually registered a Y-o-Y rise.

    In 2018, Iran imported about 109,331 tonne of GE against 87,480 tonne in 2017 – a 25% rise on a Yo-Y basis. In fact, Iran’s GE imports post sanctions, i.e. from Aug to Dec’18, have surged by 24% against the corresponding period of the previous year.

    Country-wise GE import trends over the past few years show that the highest imports came from China followed by India. However, the scenario changed in 2018 as GE exports from India to Iran dropped to almost negligible levels after August. But China has remained the top GE exporter to Iran despite sanctions; in fact during Aug-Dec’18, China’s GE exports to Iran recorded a surge of 42% against the corresponding period of 2017.

    During Jan-Mar 2019 Iran imported about 47,377 tonne of GE against 29,166 tonne in the same period last year, thus registering an increase of 62%. Now, out of the total imports of 47,377 tonne in the first three months of the ongoing year, about 87% came from China followed by UAE (6%) and Germany (5%) whereas imports from India were quite insignificant.

    Subverting the Sanctions

    While analyzing import data one major question that arises is how Iran is able to import GE from China despite the sanctions in place. And the answer to this riddle lies in the fact that circumvention of the sanctions by the trade participants is being made possible through collusion with shipping agents in Oman and Turkey.

    As per market sources, Chinese exporters are directing their exports to Oman or Turkey in the Middle-East. After altering the bill received upon landing in which the origin of the shipment is changed at the port, the goods are channeled to Iran thus making evasion of the US sanctions possible. Although none of the industry participants from China will acknowledge that such a trade arrangement is in place, China’s GE export data is testimony to continuing – even increasing – exports to Iran. China’s customs data show that out of the 76,172 tonne of GE exported from China in 2019, about 13% were directed to Oman and Turkey during the first three months of the current year and the trend was almost similar after the sanctions were imposed last year.

    Thus, with its GE requirements properly met, Iran has been able to continue churning out steel. In fact the country’s crude steel production in 2018 registered an increase of 5% (Y-o-Y) at 21.3 MnT. During Jan-Mar 2019 production stood at 6.5 MnT, up 7% compared to the same period last year.
    Increasing production apart, tepid domestic demand is forcing Iran to export cheap steel to other Middle-East and Southeast Asian countries including India, hurting Indian manufacturers. As per trade sources, about 65,000 tonne of steel, mostly HRC, entered India after the import papers were altered in the UAE, thus subverting the US sanctions.

    Big Burning Question

    The Indian steel industry is demanding imposition of effective trade barriers on cheap steel imports from Iran. The big question is whether Iranian importers as well as exporters will continue trade by circumvention of the sanctions or will the US come up with stricter regulations for global trade with Iran in the near future.

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  • How US China Trade War Could Alter Global GE Market Scene

    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.

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  • China still not major competitor in UHP grade GE market: GrafTech

    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.

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  • Needle Coke Prices Won’t Fall in Next 2 Years: Chinese Needle Coke Manufacturer Tells SteelMint

    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.

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  • SteelMint’s China Roadshow: Precious Insights into Graphite Electrodes and Needle Coke

    SteelMint’s China Roadshow: Precious Insights into Graphite Electrodes and Needle Coke

    Graphite Electrodes is an indispensable part of steel making through the EAF route – and it’s evolving all the time in China. In tandem with Needle Coke quality improvements opening up previously unimaginable trade possibilities.

    SteelMint with delegates from world over hit the road in China to find out all this and more. We immersed ourselves in the production processes and the plant visits helped us clear long-standing doubts.
    China has emerged as the epicentre of the global Graphite Electrode (GE) market as it has the potential to shape global GE demand, prices and trade dynamics. In end-2017, the clampdown on 300,000 tonne of inefficient GE capacity in China triggered severe GE shortage across the globe, which further pushed prices upwards, even as steelmakers scrambled to secure supplies. However, the significance of recent announcements of capacity enhancement in China has been grossly downplayed by a section of the industry, with the prevailing opinion being that Chinese plants, inexperienced newcomers as they are, can’t manufacture UHP electrodes as they do not have the required high-specification needle coke.

    Some of the unanswered questions crowding the minds of industry insiders have been:

    • What is China’s GE and needle coke performance potential?
    • Does Chinese GE and needle coke quality match global standards?
    • Is the needle coke manufactured in China ideal for UHP grade production?
    • What is the current expansionary state of EAF steelmaking in China?

    Despite these pressing queries, the outside world still lacks a coherent understanding of the Chinese GE market. While traders and manufacturers around the world are eager to secure comprehensive, first-hand, ground-zero know how of the Chinese market, their channels of accessing such vital information were, unfortunately, clogged. This bleak scenario, however, used to prevail before SteelMint organised the novel and pleasantly offbeat International Graphite Electrode & Needle Coke Roadshow from 8-12 April, 2019 that included extensive tours of GE and needle coke plants in the country to assess the ground reality. The foremost objective of this tour-de-force of an event was to facilitate interaction between Chinese GE manufacturers and the outside world and to bridge the information gap pertaining to the Chinese GE industry.

    Albeit hectic, the event shone a light on the Chinese GE and Needle Coke market and offered a non-blinkered insight into what the future holds. Here are the key takeaways from the Roadshow:

    China’s GE Production Rising Fast
    Since 2018, the supply of electrodes from China has started to increase. Supply is expected to expand sharply due to new facility investments in 2019 and 2020. In 2018, about 700,000 tonne of GE was produced contributing to a rise of 19%. In 2017, production increased by 16% compared to the previous year. The largest new plant is Baofang Carbon Material Technology, a joint venture between Baosteel Group and Fangda Carbon. It is scheduled to start operations in Lanzhou in 2020 with a nameplate capacity of 100,000 MTPA UHP electrodes.

    Inner Mongolia Emerging as a GE Hub
    With favorable investment policies and low electricity prices, the Inner Mongolia region is emerging as China’s GE hub, with production slated to reach 300,000 tonne this year plus an additional 100,000 tonne in 2020. In 2018, there were about 220,000 tonne of production plans in areas outside Inner Mongolia, but was postponed to 2019. One of them, Baoshan Changdu (40,000 tonne) has started production in Yunnan Province from February.

    Chinese Producers Aggressively Improving GE Quality

    Chinese GE producers are making constant efforts to procure quality needle coke either via imports or through domestic procurement as well as securing technology for quality improvement. Chinese electrode manufacturers are also focusing on producing more of UHP grade GE and that too of sizes higher than 700mm.

    China Market Dominated by Small Diameter Electrodes
    China’s EAFs and refineries are mostly small, with capacities of 50 tonne, essentially dominated by HP and UHP grade manufacturers of sizes under 500mm. More than 200 companies produce electrodes. In particular, it is estimated that there are more than 160 companies in Handan Area, Hebei Province, that specialize in processing and trade. Most companies often produce and sell second-grade electrodes on a very small scale with fake brands, thereby stoking quality concerns.

    Global Non-UHP Grade GE Supply Might Rise
    Chinese GE manufacturers are aggressively increasing the production of HP/RP grade electrodes and amid limited domestic demand they are focusing on exports. With removal of anti-dumping duty on GE imports to India, it is slowly becoming one of the favourite GE export destinations.
     

    GE Prices in China Likely to Remain Stable

    In 2018, the utilization rate of Chinese electrode companies was less than 60%. The expansion of existing suppliers, emergence of new companies and winter production cuts brought down electrode prices in the latter half of the year, subsequently affecting companies’ profit margins. In fact, in Feb 2019, the electrode prices in China fell by 17-20% due mainly to extremely sluggish demand during the New Year holidays. The EAF utilization rate was less than 5% and electrode stocks rose by 27% in preparation for delivery. However, given the fact that domestic as well as imported needle coke prices are surging, electrodes prices are unlikely to fall further in the coming months.

    China’s Needle Coke Demand-Supply Imbalance

    Needle coke imports and domestic production make up for 870,000 tonne in China whereas demand is 940,000 tonne, resulting in demand-supply imbalance. This apart, a majority of needle coke plants in China are pitch coke-based and high-quality coal tar pitch-based needle coke as well as petroleum-based needle coke still need to be imported.

    Needle Coke Demand from Lithium-ion Battery Segment Growing

    The demand for lithium-ion batteries in China is expected to grow at a rapid pace due to increased demand for new energy vehicles, as well as accelerating demand for energy storage batteries for on-grid and off-grid applications. The country’s needle coke demand from the ion-battery segment is surging. It is anticipated that China will have about 1 MnT of total needle coke capacity by 2020 out of which a substantial portion will be dedicated to the lithium-ion battery segment.

    20% Rise in China’s EAF Capacity

    As per market sources, China, which has increased its EAF steelmaking capacity from 6% of total annual production in 2016 to 12% in 2018, is likely to increase EAF steelmaking to 20% of overall crude production by 2025. Regardless of the forecast, virtually all EAFs in China are meant for production of special and stainless steel, while carbon steel accounts for only 60-70% at the moment. Also, low price competitiveness compared to BFs might stall EAF capacity enhancement. GE demand, therefore, will likely soar in the near- and mid-term.

    The International Graphite Electrode & Needle Coke Roadshow organized by SteelMint offered a rare and holistic insight into the Chinese GE industry that market watchers from across the world are tracking attentively. However, market participants who were eager for a direct interaction with Chinese GE and needle coke bigwigs but have unfortunately missed the bus this time around need not lose heart. Not all good things in life come just once. A golden opportunity that slips between the fingers elicits regret but there is always a second chance to look forward to in intense anticipation. Take heart.

    Industry insiders who could not join the SteelMint Roadshow but are anxious to catch up on precious bits of latest information on the Chinese GE market ought forthwith book their seats at the 2nd Global Graphite Electrodes Conference to be held in Bangkok, Thailand’s Hotel Avani Riverside from August 27-29.

     

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