Electric arc furnace steel producers in the US may still feel the wrath of Hurricane Harvey as some in the industry are bracing for a temporary shortage of needle coke, used to make graphite electrodes and produced largely by US Gulf Coast refineries that are shut or at reduced rates.
"It won't be an extended shortage of needle coke, but it is a key issue in the aftermath of Hurricane Harvey," Jeremy Jones, managing partner with US-based Continuous Improvement Experts, told S&P Global Platts Thursday.
Jones explained that even a temporary shortage of needle coke would come at a time of diminished graphite electrode manufacturing capability.
"Several manufacturers of electrodes have shut down in recent years, to the point where there are only a few suppliers left," Jones said.
Among those electrode suppliers most active in the US market now compared to a dozen or more only a few years ago are Showa Denko (SDK), Graftech, Sangraf and UKCG.
"There are a few other Chinese and Indian manufacturers, but they tend to specialize in smaller-diameter electrodes," Jones said.
China's Fangda is a big supplier.
500% JUMP IN ELECTRODE SPOT PRICES
Jones and other market sources noted that historically -- but not too long ago -- the spot price of carbon graphite electrodes ranged from $2.50/lb to $3.50/lb. Spot prices recently, however, have surged five- and six-fold to $16-$20/lb.
"A needle coke shortage could see even more of an upside," said another market source.
Big EAF steelmakers in the US, however, purchase electrodes on an annual contract basis, at prices typically negotiated every February, according to Jones. The spot price escalation has had more of an impact at smaller metals producers such as foundries and those who use ladle furnaces.
And even throughout the EAF steelmaking ranks, the extent of any impact will vary widely.
"The best operations consume 1.2-1.5 lb of electrodes for every ton of steel produced; the least efficient consume 4-6 lb for every ton," Jones said. He added, however, that scrap-to-finished steel conversion costs could increase $80-$100/st at some producers.
Electrode prices have risen globally because of a curtailment in Chinese electrode production, prompted by pollution control, supply-side reform and global tight raw material supply.
Some in the US market are wondering, nonetheless, if the Chinese electrode shortage is intentional. A number of US sources speculated China might be sending an early message about how it could retaliate on the trade front -- if the Trump Administration clamps down on steel imports, as it has pledged.
"We should see in a few months if this is really about Chinese trade retaliation," Jones said.
