Closures of synthetic graphite electrode (SGE) plants have resulted in lower production in Q1 2020, with Chinese production reported to be down by 20% in February before seeing some recovery in March and April. Major Indian producers HEG and Graphite India, along with producers in Europe, have also been forced to close temporarily to prevent the spread of the COVID-19 virus.
In addition to supply closures, low demand from the steel industry is expected to continue to hamper SGE output levels, with major electric arc furnace (EAF) producers in China remaining shut.
SGEs are the largest end use market for graphite, accounting for an estimated 30% of global graphite consumption in 2019 following a period of significant growth. They are the exclusive electrode product used in crude steel production via EAF, as well as being used in ferroalloy manufacturing.
China is the largest SGE producer and consumer and its increasing demand has shaped the industry in recent years. The increasing availability of steel scrap has allowed greater production of steel by EAF across Asia; however, China’s shift to EAF was given a boost by major changes in the country’s steel industry that effectively halted all steel production by induction furnace from January 2017. Since then, the proportion of steel produced by EAF in China has shot up, increasing from just 6% in 2015/16 to 13% by 2019, and with the potential to rise to 20% by the second half of this decade.
Roskill’s latest steel forecasts (which take into account the initial effects of COVID-19 on global demand), however, expect overall crude steel production to decline slightly this year, with growth in China pretty much flat, before seeing recovery in the coming years. Global crude steel growth to 2030 is expected to remain at less than 1%py. Despite lower overall levels in steel growth, the long-term forecast for SGEs remains positive as a result of the continued shift to EAF steel in China.
In the short-term, one major issue for SGE capacity looking to reopen to serve recovery, is the long lag times for SGE manufacture of around six months, so it will be some time before any closed plants can fully return to the market. Also, not all staff may be available, initially, for plants to return to full production, even if restrictions are relaxed.
Roskill’s NEW Natural & Synthetic Graphite: Outlook to 2030, 13th Edition report will be published in July 2020; Click here to download the brochure and sample pages for the report, or to access further information.