Two Emerging Areas of Interest: Needle Coke & South Asia

Bangkok(ScrapMonster) - Day 3 of SteelMint Events’ 4^th Steel Scrap, Billet & DRI Trade Summit – Emerging Markets and the 2^nd Global Graphite Electrode Conference turned the scanner on two emerging areas of importance. One is needle coke and the other is the growing play of South Asian markets in terms of generating scrap demand.  

Let us look at needle coke first. Three eminent speakers dwelt at length on the demand and supply side dynamics of needle coke. The fates of two other industries are intertwined with that of needle coke – lithium ion batteries (LIB) and graphite electrodes (GE). However, the proportion (and quality) of usage of needle coke is reducing in China. Supply shortages and rapid price rises have changed priorities for GE producers, as per Harry Fisher, Senior Consultant, CRU Group, Australia. For instance, 60-95% of needle coke goes into making UHP electrodes against more than 95% for the rest of the world (ROW). Around nil to 30% of needle coke goes into HP electrodes in China against 20-30% for ROW while for RP, the proportion is balanced at 0-10% for both China and ROW. He also said the LIB market will outpace graphite electrodes – its total demand will rise 8-fold in the coming decade (by 2028). But despite the continued growth, growing competition, high costs and limited availability will encourage interest in alternative anode materials and experimentation with lower quality cokes.

As per Shen Jianfeng, Deputy GM, Marketing & Sales, Jingyang Technology, China, the supply of needle coke in the Chinese market in 2019 is about 728,000 tonnes. China's GE production is expected to reach 1.346 million tonnes in 2019, and the new output is mainly for UHP550 plus. The demand for needle coke in the GE market is expected to be 587,000 tonnes in 2019. The output of anode materials is expected to reach 300,000 tonnes in 2019, indicating a demand for needle coke of about 230,000 tonnes. The demand for needle coke in the China market will be about 817,000 tonnes in 2019.

In terms of supply-side issues, Jianfeng said, the strong demand in the market urges China's needle coke enterprises to improve their output and quality. Although there are many Chinese needle coke enterprises with newly-invested capacity, the year 2018, however, saw little newly released capacity, keeping it at around 2017 levels of 540,000 tonne. In 2019, China's needle coke production is expected to reach 618,000 tonnes in 2019 from 295,000 tonnes in 2018, of which 60,000 tonnes are estimated to go for exports and 558,000 tonnes for the domestic market.

Lian Ping, General Manager, ICCSINO China, who spoke on Chinese needle coke capacity increase and effects on global markets, said needle coke has seen rapid growth in supply. By 2019, it is estimated that needle coke consumption will rise to 71 KT against a drastic fall to 12 KT in 2015 whereas in 2019 supply will be at 76 KT against the 71 KT demand.

In summary, the supply gap of needle coke in the China market is 89,000 tonnes in 2019, but since the new demand for needle coke in 2019 is mainly from GE specifications of UHP550, higher quality needle coke is required. The short supply will be greater than current estimates.

The demand for needle coke in the anode material is gradually increasing, but is subject to cost constraints. As per Lian Ping, the demand for anode materials is likely to rise from a low of 0.3 KT in 2013 to 33 KT in 2019. China’s anode material production may rise from 31% in 2018 to 35% in 2019 but is way below 66-69% seen in 2015-16.

South Asia: Next Big Scrap Demand Generators?

India, Bangladesh and Pakistan are likely to be the scrap sales destinations because the demand generating fundamentals are strong with accelerated infrastructure development under way and the present per capita steel consumption levels being low.

Where Pakistan is concerned, steel here is made through the EAF and IF routes and local scrap sourcing is limited, with the country 80% dependent on imports. As per Fahad Javaid, Director, Mughal Iron & Steel Industries Limited of Pakistan, steel mills’ capacity expansions are under way which will further boost scrap demand. Although Javaid could not be present at the conference, a video recording of his speech was a bonus for the audience.

Bangladesh’s economy continues to grow at an impressive rate. Its GDP growth rate is currently 8% and a lot of infrastructural work along with big government projects are under way and the steel required is being sourced domestically, Sanjoy Ghosh, Head of Supply Chain at BSRM, informed. Steel mills here too, as a result, are enhancing capacity. While a nascent vessel scrapping industry exists, with around 3 MnT of scrap being produced internally, these are directed at the small players. The large mills all depend on imported scrap.

India’s domestic steel scrap is expected to touch 48-52 MnT by 2030, to be sourced mainly from end-of-life vehicles, ships and construction. As per Vijay Arora, VP, Strategy, Operations and Business Development, Mahindra Accelo, India aims to become self sufficient in steel scrap generation. But, he added that high quality scrap steel imports will continue to rise.

Conference call

Overall, from demand-supply dynamics to energy-efficient and green technologies to the China factor and pricing scenarios, all issues were discussed threadbare. There was a focus on individual countries like Turkey, Russia and Japan. There were productive buyer-seller meets and engaging networking sessions.