Battery Metals

Graphite Investing

China’s actions to reduce pollution have curbed production of needle coke, a key feedstock material used for manufacturing graphite electrodes.

Chinese spot graphite electrode prices have reached $30,000 per MT, a 300-percent increase since January. 
Graphite electrodes are made from amorphous graphite, and are used within the electric arc furnaces of steel mills because they can withstand the high temperatures used to melt down and recycle scrap steel.
There are two factors behind this year’s price increase. The first is China’s actions to reduce pollution — the country’s clean-up efforts have curbed the production of needle coke, a key feedstock material used for manufacturing graphite electrodes.

The second is refinery shutdowns along the Texas Gulf Coast caused by Hurricane Harvey. Needle coke production has also been affected by those closures; in fact, an unnamed steelmaking executive reportedly told Platts that the world’s largest graphite electrode maker, GrafTech International (NYSE:GTI), declared force majeure in response to the needle coke supply issues caused by the storm.
On the back of disruptions to US needle coke production, the share prices of graphite electrode suppliers in India have been rising. Graphite India’s (BOM:509488,NSE:GRAPHITE) share price is up over 40 percent in the past month, while HEG’s (BOM:509631) is up over 100 percent.
Graphite electrode supply concerns have prompted Axel Eggert, director general of the European Steel Association, to say that primary and secondary steel production could be “seriously affected.” European steelmaking consumes 226,000 MT of graphite electrodes annually, with 60 percent of smaller ladle furnace melting sticks being sourced from China. 
“The global carbon graphite electrode market is serviced by relatively few companies in a limited number of regions,” he said. “Many producers are to be found in China, with others located in India, United States, Japan and Europe. All are heavily dependent on the availability of needle coke. With Chinese supplies of needle coke and graphite out of the market, there is a clear shortage of both materials.”
Across the ocean in the US, the president of the the Washington-based Steel Manufacturers Association said that despite the needle coke shortage, there is “no evidence of reduced output” at US electric arc furnace steelmakers. He did note that the organization is closely monitoring the “current volatility in the electrode market.”
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.


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