Mills to Pass Along the High Cost of Electrodes

“Graphite electrodes for the mills tend to be purchased on a contract basis. The rapid increase in graphite electrode prices started in August 2017. Therefore, even yearly contract prices should expire at summer’s end and thus these cost components should be reflected in every mill’s prices by fourth-quarter 2018.

“The recent graphite electrode surcharges are just the beginning of the impact on steel. The other impact involves the scrap mix. In order to prolong the useful life of these electrodes, mills want to melt higher grade, denser and cleaner steel scrap. That’s the reason the higher grades will be more in demand, while mills will tend to limit the HMS grades from their melts. Certain grades that are lower in quality and chemistry than HMS will also be limited. Gerdau Monroe is one example of an EAF mill that’s limiting HMS grades.

“Price differences between high grades and HMS and lower grades are widening. Recent bids by Hyundai steel in Korea show this widening gap. For Japan H2 grades, the recent price bids were 1,000 yen lower, while higher grades were 1,000 yen higher.

“In any case, finished steel prices in Asia have not fully adjusted for the graphite electrode costs yet, partially due to staggered contract prices on the electrodes. Moving forward, mills are working on lowering scrap prices and raising finished steel prices concurrently to reflect these costs. These adjustments globally will take some time, but should be fully reflected by Q4 2018.”