Some thoughts and analysis:
@aammiitt2, The information that you have posted is not relevant to Graphite Electrode (GE) manufacturing companies.
The term “Graphite” could mean different forms/variations of graphite, and they all have different properties resulting in varied applications.
Broadly speaking, graphite can be divided into two kinds: Natural and Synthetic. Syrah Resources produces natural graphite. Graphite flakes also belong to this group. GE is a form of synthetic graphite, which is much more expensive, as it is purer (less sulphur for instance) and has a low coefficient of thermal expansion (can withstand high temperatures without deforming making it ideal for electric arc furnaces). For these reasons, synthetic graphite is also preferred for making anode materials that go into EV batteries.
In the slide displayed above, Syrah Resources is saying: “They expect flat graphite demand from the Chinese steel sector”. This is in fact good news for GE companies. Natural graphite is also used in the steelmaking process. It is used to build refractory linings in blast/EA furnaces and is added to steel to increase the carbon content and thereby its strength. Since China has been reducing its steel manufacturing from CY 15- CY 18 and closing factories with blast furnaces to keep pollution in check, the need for natural graphite has correspondingly reduced. That is what Syrah is saying. The rest of the world excluding China has been producing more steel to compensate (GI and HEG export electrodes to the rest of the world) and given that roughly half of this production comes through the EAF route, the requirement for UHP grade GE should continue to exist. Further, protectionist measures against Chinese steel exports could result in more steel production from the rest of the world benefiting the GE companies.
GE is produced from two different kinds of needle coke: Petroleum based (as a part of the oil refining process) and coal tar based. GE requires high quality needle coke and the one derived as a part of oil-refining is produced only by a few refineries in the world (either based in US like Phillips-66 or Seadrift/Graftech or in Japan). This variety of needle coke is also used to produce synthetic graphite that goes into lithium ion batteries. Synthetic graphite is preferred to natural graphite in batteries though a mix is used (Syrah is saying that natural graphite production/demand will be driven by EV batteries). Given the tight supply situation of needle coke due to competing priorities (GE, batteries), margins for GE companies might shrink because of increased costs. China has needle coke manufacturing setups but they are primarily coal tar based. Refineries are trying to manufacture petroleum needle coke but this is easier said than done. It will take a sizable investment, time, technological expertise and environment related regulatory clearances for new needle coke plants, particularly the coal tar-based ones. Further, China has the world’s largest number of Battery/Plug-in Hybrid (BEV, PHEV) based electric cars and buses and this is expected to increase, which will further fuel demand for needle coke. New GE capacity in China is meaningless unless good quality needle coke is available at a reasonable price, which is what the GI presentation was saying. Further the capacity is HP grade. In the HEG conf. call, the management has mentioned that the needle coke contracts are in place till June. The process to manufacture GE takes six months. The current contracts should cover GE manufacturing till the end of the year.
Putting all of this together, I think that a relatively high ASP for UHP GE can be maintained as long as the steel cycle (particularly for the rest-of-the-world excluding China) remains in an uptrend. HEG mgmt. also said that steel companies stocked up on UHP GE given the shortage witnessed in the second half of last year, and the inventory will be used up in around 3 months. Needle coke availability at a reasonable price could most probably be an issue, and this will keep the capacity utilization of existing GE players in check, but as long as increased costs can be reflected in ASP, margins should not deteriorate drastically.