Manufacturers of graphite electrodes in India are thriving after China’s pollution clampdown but the rising prices are becoming a hindrance in the companies’ relations with government and steelmakers.
Last year, China tightened the hold on its polluting industrial plants which resulted in around 30 percent of its graphite electrode production being closed down. This lead to a sharp increase in global prices and benefited other manufacturers around the globe. India’s export increased up to 71 percent over April-August in 2017.
The steel ministry is now urging the electrode makers to reduce prices for smaller steelmakers after a 500 percent surge in domestic prices and also plans to introduce an export tax to increase domestic supply.
Since India’s two manufacturers account for approximately one-fourth of the global production, the price cut and tax implementation could reduce margins and put even more pressure on prices for India’s international customers like ArcelorMittal and South Korea’s POSCO.
Electrode makers have been asked to draw up fixed-term contracts with steel companies to protect them under Prime Minster Narendra Modi’s “Make in India” plan. It also urged them to regulate pricing for smaller firms with those for big companies such as Jindal Steel and Power Ltd that have entered into long-term contracts. The government in its budget announced that it would allow imposing an export tariff rate as high as 20 percent on electrode makers.
Electrode makers have agreed to cut prices for local steel companies by as much as 20 percent for February and March but they plan to raise prices again by 20 percent during April-June.
The manufacturers argue they need to protect margins due to high prices for imported needle coke, which accounts for 61 percent of the cost of electrode production.