Graphite electrode crisis

I would like to discuss the still very relevant topic of the electrode shortages and thereby caused price chaos beginning in spring 2017. Many steel mills were hit hard and the consequences are still perceptible now.

Recently, I came across an interesting article on a popular question-and-anwer site, Quora Digest as well as on LinkedIN. The question about whom we can attribute the copyright to doesn’t matter for our purposes. Its name was “What is the reason and trend of graphite electrode price increase?” – I was really excited and its title grabbed my attention within a nanosecond. 

You must know that during my visits and discussions with purchasing managers of steel plants, the hottest discussions always centered around prices for graphite electrodes.

Before I present my point of view (which is essentially the position of GES Group’s), I would like to relate to above article. I am not giving the post in full; instead I am summarizing my thoughts on it.

My position to aforementioned article “What is the reason and trend of graphite electrode price increase?”

The author identifies three reasons for the shortage/price tumult at the beginning of 2017; all of which originated in China.

• production cycles of electrodes prolonged because of imposed heating season
• increased inland demand for graphite electrodes due to a shift in production technology towards electric furnaces
• refilling stocks to fulfill market demand of after spring 2017

Although the writer does a good job describing the influences of altered demand for graphite electrodes and governmental actions, I'd like to add the following points as critical reasons for the electrodes crisis

• graphite is supplied through a multitude of sales channels (directly and indirectly through third or even fourth party dealers)
• availability of raw materials before and after price increases
• were all contractual parties treated fairly? This point is overseen easily as we always implicitly presume that companies stand to contracts. 

What really confuses about the article on Quora Digest is that the author constantly mentions HP electrodes (which essentially is a hyperlink to her company’s pages). >>HP<< is short for >>High power/purity<< and denotes a specific quality of electrodes. However, I want to point out that graphite electrode prices increase happened worldwide and for every and each electrode size and quality.

A new attempt to explain the electrode crisis

Reading through the article, you may wonder, whether the shortage was a totally random event? My answer is >yes, but<.

Indeed, it was not possible to predict external factors such as government behavior in the short run. BUT there were alarming signs such as the empty stocks; something, that remained un-communicated in most cases between Chinese manufacturers and overseas endusers.

This means: for a graphite electrode enduser without an own agent based in China the electrode crisis was not foreseeable. On the other hand, having an agent would meant having a huge information advantage.

Do you know that with the right partner you would have been alarmed at least 5 months before the crisis began? How do I come up with this number? Well, this was the time span from Oct/Nov 16 to Feb/Mar 17 when warehouses had to be refilled.

In my next blog article, I am going to post an article that will be published in a popular steel magazine in the August 18 edition. For all non-German speakers among the readers of this blog: I am also going to post the English translation. PLEASE SHARE!

This article was originally published on the first blog for graphite products.