Synthetic graphite is a man-made substance manufactured through the high-temperature processing of amorphous carbon materials. The types of amorphous carbon used as precursors to graphite are many and can be derived from petroleum, coal, or natural and synthetic organic materials. The main application of high-purity synthetic graphite is as a carbon raiser additive in iron and steel. This application consumes a significant portion of synthetic graphite.
Increase in Demand for Graphite Electrodes to Drive Synthetic Graphite Market
Synthetic graphite is extensively used for manufacturing graphite electrodes, which are used in electric arc furnaces for smelting metals such as steel and in the metallurgy industry. China is a major producer and consumer of steel at the global level despite a fall in demand for the metal in the country as compared to 2015. Furthermore, increase in demand for synthetic graphite, and, in turn, steel, from India and other countries in Asia, North America, and the European Union (EU) is expected to compensate for the decline in demand for steel in China. Moreover, steel manufacturers prefer the electric arc furnace (EAF) method for the production of steel over the blast furnace-blast oxygen furnace (BOF) processes, owing to stricter environmental regulations.
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About 0.2 to 0.3 kilograms of graphite electrodes are required to produce one ton of steel utilizing the BOF process. Whereas, 0.7 to 0.8 kilograms of graphite electrodes are required to produce the same amount of steel by employing the EAF process. This leads to a sudden increase in demand for synthetic graphite.
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Additionally, environmental regulations in China are becoming increasingly stringent. This suggests that deploying the blast furnace-blast oxygen furnace (BOF) process using iron ore is likely to incur increasingly higher environmental taxes compared to using the electric arc furnace (EAF) process. Currently, steel scrap is in short supply in China, due to the closure of a large number of induction furnaces. However, in the long-term, the supply of domestic steel scrap is set to increase rapidly along with electricity supply. These factors are fueling the usage of the EAF method for the production of steel, thus driving the synthetic graphite market during the forecast period.
Synthetic graphite is a manufactured product made through the high-temperature treatment of amorphous carbon materials. The overall production cost of synthetic graphite is very high. For instance, in the U.S., the primary feedstock used for making synthetic graphite are calcined petroleum coke and coal tar pitch. This makes it up to 10 times more expensive to produce than conventional graphite, and as a result, hampers the market growth.
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Key players profiled in the synthetic graphite market include GrafTech International, Showa Denko K.K., SGL Group, Graphite India Limited, HEG Limited, Tokai Carbon Co., Ltd., Nippon Carbon Co., Ltd., SEC Carbon, Ltd., Kaifeng Carbon Co., Ltd., and Nantong Yangzi Carbon Co., Ltd.. Production capacity expansions, geographical expansion, and acquisitions are strategies implemented by major players. For instance, in October 2016, Showa Denko K.K. acquired SGL GE Holding GmbH, which engages in the graphite electrode business and was a part of the SGL Carbon group based in Germany, for an enterprise value of EUR 350 Mn. The company’s decision to acquire SGL is in line with its medium term growth plan, ‘Project 2024,’ for increasing competitiveness of its graphite electrode business by enhancing cost competitiveness, reducing fixed costs, improving efficiency in logistics, reinforcing brand equity, and increasing purchasing power in raw material procurement. Additionally, in August 2017, Brookfield Asset Management Inc. completed the acquisition of GrafTech International Ltd. at a cost of US$ 5.05 per share, or a total value of US$ 706.5 Mn. GrafTech International Ltd. became a fully owned subsidiary of Brookfield Asset Management Inc. after the acquisition.
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