UHP Graphite Electrode

Ultra-high-power (UHP) electrodes are often found inside of electric arc furnaces, or EAFs, which are used in most metal shops. Capable of reaching extremely high temperatures to melt even some of the hardest metals, ultra-high-power (UHP) electrodes play a vital role in melt-shop operations, yet they have never received that much attention when it comes to relevant markets, at least not until 2018.

UHP electrodes are made using many different materials, including petroleum coke, needle coke, and coal pitch. There are many steps to the production process.

Following calcination, the UHP must be kneaded, pressed, roasted, graphitized, machined, and finally released into an electric arc furnace (EAF) for the steelmaking process to begin. Graphite electrode quality is indicated by the name, ranging from ordinary power graphite electrode (lowest quality) to HP graphite electrode (mid-quality) to UHP graphite electrode (highest quality).

A few years back, the steel industry noted a shorted of UHP graphite electrodes and, as expected, the lack of supply in the face of imminent demand drove the prices up to critical highs. Meanwhile, steelmakers tried to secure a steady source of UHP to avoid production holdups. Of course, not every steel producer was able to do so, and many some steel production was slowed or halted until producers could secure more UHP.

Reportedly, the panic led to UHP electrode prices peaking at up to $30,000 per tonne. However, prices have since fallen, although they remain high when compared to the historical cost of UHP. Meanwhile, the global demand for UHP is estimated at around 785,000 tonnes per year. This has kept steel producers on their toes, since the global demand is very near to the annual global production capacity of 800,000 tonnes.

While China is capable of producing approximately 50,000 tonnes on top of the above estimate (and perhaps even more if they lower the quality), the current state of UHP electrodes is still on the edge. Today, the supply and demand equation for UHP remains in a careful balance, which is a far cry from the state of the market some years ago.

Back when the world steel markets were performing exceedingly poorly, UHP was in very low demand, and about 20% of UHP production stopped as a result of that. This is what experts say led to the unexpected shortage the markets witnessed just a few years back. However, although demand has picked up, UHP production remains bridled in light of materials shortages.

Needle coke is one such critical ingredient in the production of UHP that UHP producers are struggling to find. Experts estimated a global production of no more than 900,000 tonnes per year for this ingredient, and producing 1 tonne of UHP consumes about 1 tonne of needle coke.

With the most recent estimated need for UHP sitting at 820,000 tonnes per year (implying a 5% annual increase in demand), producing needle coke at full capacity is a critical element in avoiding another shortage. As we enter 2020, it awaits to be seen just how the market turns out for UHP production and its components.