Japan’s Showa Denko Bullish of Steady Graphite Electrodes Demand in the Months Ahead

Amid the negative sentiments that have engulfed China’s graphite electrodes market over last six months due to change in market dynamics, the GE market ex-China also got affected with the global manufacturers lowering their revenue forecasts for the second half of 2019.

While it is being understood that the GE party which continued for almost two years is over, an exception has been expressed by Japan’s key GE producer, Showa Denko. The company’s top management has recently expressed its opinion that the bullish conditions will continue in the electrodes market for the coming quarters of 2019.

Demand for large-diameter GE will increase

As a matter of fact, the graphite electrodes can be majorly divided into two. These are large-diameter graphite electrodes, which are used for melting scrap steel to create electric furnace steel, and small-diameter graphite electrodes, which are used to maintain the molten state of iron that has been melted in a blast furnace or electric furnace. The production of large diameter GE requires both technological expertise and high-quality raw materials (needle coke) and Showa Denko is amongst the few three companies globally that manufacture good quality large-diameter GE.

Now, as per the company’s top management, with the growing EAF facility around the world especially in North America and East Asia amid environmental concerns to reduce pollution, the demand for large-diameter electrodes will continue to rise whereas their supply will remain tight which is set to support the GE prices.

Showa Denko has kept its earnings forecast unaltered

In its own earnings forecast for calendar 2019, Showa Denko has projected that its inorganics segment �" which includes graphite electrodes �" will generate 148 billion yen in operating profit (USD 1.36 billion), up by 11.8% year-on-year. Figures from the first quarter show that the company’s graphite electrode sales stayed at largely the same level as that seen last year.

While another Japanese GE major, Tokai Carbon has made a downward revision in its earnings forecast for the second half of 2019 based on the current market situation, Showa Denko didn’t change its existing prediction of continued high sale prices for graphite electrodes, expecting the average price here for 2019 to be around five times that seen in 2017. The company’s GE price contracts with Japanese and other East-Asian customers for Apr-Jun quarter have been finalised at prices 5-10% more against the corresponding quarter of last year.

Apart from this, the capacity additions in China’s GE sector are majorly going to be focused on small diameter GEs resulting which no major impact on the demand-supply balance of large-diameter is expected. The strong growth prospects of North American steel sector the general expectation is that demand for graphite electrodes will be steady in the medium term.