The Strategist

Fight for clean air hits the market of steel in China

09/22/2017 - 11:32

The fight for clean atmosphere could hit the steel industry in China, according to Reuters.

Alfred T. Palmer
Alfred T. Palmer
In an attempt to clean the air near large cities, the Chinese authorities began to actively shut down thousands of enterprises producing low-quality steel and coal. This aggressive environmental war struck hardest on the producers of graphitized electrodes, which are used in electric arc furnaces when smelting steel from scrap.

As a result, large steel producers faced a shortage of consumables in the market.

The environmental campaign in China resulted in closure of about 30 percent of the country's capacity to produce these products, and some provinces limited its production. Now, there were only large manufacturers in the market. Taking advantage of their position, they overestimate the prices of their products.

For example, shares of China's largest manufacturer of graphitized electrodes Fangda Carbon New Material have grown by 263% since the year started, and the company's net profit rose to $ 63 million compared to $ 2.3 million for the same period last year. The fact is that since the beginning of the year, prices for graphite electrodes in China have grown nine times $ 16.3 per ton. Moreover, the deficit in the Chinese market was reflected in the world markets. The prices for electrodes, due to the lack of supplies from the Middle Kingdom, were 12-15 times higher - up to $ 35 per ton.

According to an expert of CRU company, mass closure of companies producing graphitized electrodes resulted in the fact that the supply in the market was reduced by 300 thousand tons.