Industry Press Releases

Steel Scrap Prices Will Come Under Pressure From Electrodes Shortage

Tuesday, Oct 10, 2017
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Graphite electrodes are used in a range of industries, and the steel industry is exposed via electric arc steel production and secondary steelmaking.

Electrode prices have skyrocketed due to a shortage of needle coke, which is driving increases in electric arc furnace (EAF) conversion costs. Likewise, the cost of secondary steelmaking is rising, though to a lesser degree. While falling steel prices are expected to drive scrap prices lower, higher conversation costs will compound these falls as steelmakers look to contain variable costs.

Higher electrode costs will drive scrap prices lower

A global shortage of graphite electrodes has stemmed from the environmental closures of manufacturing capacity in China, which has in turn acted to tightened the needle coke market. This, combined with capacity rationalisation by major electrode producers outside China and higher demand for lithium-ion batteries production, has meant production could not be lifted elsewhere to cover the shortfall. The shortage has increased electrode prices to staggering levels, and is lifting steelmaking conversion costs. Higher conversion costs will place increasing pressure on scrap prices, as mills look to contain variable costs in anticipation of falls in steel prices in the near future. Worse yet for scrap prices, an acute shortage of electrodes would drop demand for scrap sharply as EAF-based output collapsed. This Insight will outline the problem the industry faces and show why higher electrode costs will apply greater downward pressure to ferrous scrap prices.

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Source:prnewswire.com

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