Graphite electrode makers up for challenging time

With slowing demand, high cost inventory add to Covid woes

- Sumit Maitra

Makers of graphite electrodes, used in steel making through electric arc furnace route, is up for some more pain with risk of further slippages in electrode prices given the evolving situation on the impact of Covid-19 on steel makers and maker of inputs for graphite electrodes.

While graphite electrode prices have corrected in the past few quarters, manufacturers in India continue to consume high priced coke putting them in more challenging position.

Manufactured by domestic players like Graphite India and HEG, graphite electrode is used as a consumable in steel production through the electric arc furnace route, the primary raw materials used in GE production are crude oil derivatives. Therefore, GIL, along with other GE manufacturers, is exposed to the cyclicality of the steel and crude prices.

Pricey inputs

Primary raw material, calcined needle coke is mostly imported from Europe, US and Japan.

At any particular time, manufacturers have large inventory of needle coke in stock on seaborne transit, and work in process given by above stated production cycle and in the form of finished electrodes.

Graphite electrodes have a long production cycle anywhere between six to eight weeks to 20 to 24 weeks for different category of electrodes and nipples that players like HEG produce.

“While the electrode prices have corrected in the past few quarters, we still keep consuming high priced coke,” said an HEG officials during the third quarter analysts call.

In fact, large inventory of costly needle coke led to high cost of production for Graphite India resulting in the company reporting a large loss in the third quarter.