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Chinese electrode shortage rocks the steel industry. According to Gansu Province-based FangDa Carbon New Material Co., Ltd, a leading company in China’s graphite electrode sector, as of the end of July this year average graphite electrode prices in China indicated a year-on-year rise of 695 percent due to tight supply.

As for 2017, FangDa Carbon New Material Co. estimates that China’s electrode output will amount to 500,000 mt, while demand in China will reach as high as 600,000 mt, resulting in a shortfall of 100,000 mt. At present, China has an actual annual output capacity of 1.1 million mt of electrodes, but many producers in the provinces of Shandong, Hebei and Henan have had their outputs limited due to strict environmental inspections this year.

In addition to rising electrode prices in China, the share prices of Chinese electrode producers have increased significantly.

Besides reduced supply, the sharp rise in electrode prices this year has also been due to the elimination of low-grade construction steel production and intermediate frequently induction furnaces as of the end of last year and the resulting increased utilization of electric arc furnaces (EAFs) in steel production in China. Graphite electrodes are essential components in EAF-based steelmaking.

In 2015, crude steel output by electric arc furnaces in China amounted to 44.80 million mt, down by 17.52 million mt compared to 2010, accounting for 6.1 percent of China’s total crude steel output in 2015, down 4.5 percentage points compared to the percentage in 2010 and far lower than the global average of 25.2 percent in 2015. Increased scrap availability in China also favors the shift to steel production using EAFs.

On July 28, Liu Zhenjiang, secretary general of the China Iron and Steel Association (CISA) stated that Chinese steelmakers should focus on developing their EAF-based steelmaking capabilities.

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