# Graphite and Steel Electric arc furnaces melt scrap with synthetic graphite electrodes that burn away at about 1.7 kg per tonne of steel, so electrode demand tracks EAF output rather than steel prices; India's HEG is among the world's largest electrode makers and Graphite India is another major producer. Source page: https://www.materialinsights.org/links/graphite-and-steel/ [Graphite](https://www.materialinsights.org/commodities/graphite/) (commodity) and [Steel](https://www.materialinsights.org/commodities/steel/) (commodity): 4 relationships. ## How they are linked ### 1. Electrodes for arc furnaces *Physical flow · Strong · Graphite to steel (EAF route)* An electric arc furnace passes current through graphite electrodes to melt scrap; the electrodes oxidise and wear down with use and have no commercial substitute with the needed conductivity and heat resistance. - **about 1.7 kg** UHP electrode use per tonne of EAF steel - **under 5%** electrode share of total EAF steel production cost Because electrodes are a small share of cost but cannot be done without, mills pay what is asked in shortages, which is why electrode prices can swing far more than steel prices. The tie is specific to the EAF route. Sources: [GrafTech International (SEC filing)](https://www.sec.gov/Archives/edgar/data/931148/000093114823000035/gti-20221231.htm) ### 2. Price link: electrode use *Cost and price · Weak · Both ways* Electrode demand follows EAF output, but the site's graphite series is a proxy index and electrode prices follow their own supply cycle, so price moves barely line up with US steel prices. - **0.00** monthly change correlation - **-0.15** 12-month change correlation - **0.41** fitted elasticity Treat this as a physical tie, not a price hedge. Electrode prices are driven by needle coke supply and Chinese capacity: Value Research reported in 2024 that surplus Chinese electrodes, left over when China's shift to arc furnaces stalled after the pandemic, had cut prices from $3,000 to $4,000 a tonne to about $2,000. Sources: [Material Insights (World Bank, FRED, IMF data)](https://www.materialinsights.org/commodities/graphite/correlation/); [Value Research](https://www.valueresearchonline.com/stories/223782/heg-expansion-shrinking-graphite-electrode-market/) ### 3. Needle coke bottleneck *Shared risk · Medium · Needle coke supply limits electrodes and so EAF steel* Electrodes are made from petroleum needle coke, a speciality carbon from few plants, and the same high-purity coke route also feeds synthetic graphite for battery anodes. - **up to 10 times** battery graphite use by 2027 versus 2018, a 2018 forecast reported by Steel Market Update GrafTech calls needle coke the key raw material for electrodes and makes most of what it needs at its own Seadrift plant. Analysts warned in 2018 that battery demand competing for graphite could raise electrode costs for steel mills; that risk returns whenever needle coke capacity is tight. Sources: [GrafTech International (SEC filing)](https://www.sec.gov/Archives/edgar/data/931148/000093114823000035/gti-20221231.htm); [Steel Market Update](https://steelmarketupdate.com/2018/05/24/study-growing-demand-for-graphite-to-boost-cost-of-eaf-electrodes) ### 4. Shift to arc furnaces *Transition · Rising · More EAF steel lifts electrode demand* Steelmakers cut emissions by moving from coal-based blast furnaces to scrap or DRI fed arc furnaces, and every extra tonne of EAF steel consumes electrodes. - **49%** EAF share of world steel output excluding China, 2021 - **28 to 30%** EAF share of global steel output, about 2024 The gap between the two shares shows how much of the upside depends on China, where blast furnaces dominate. Electrode capacity outside China shrank from about 900,000 to 700,000 tonnes between 2014 and 2024, so a strong EAF build-out could tighten supply again. Sources: [GrafTech International (SEC filing)](https://www.sec.gov/Archives/edgar/data/931148/000093114823000035/gti-20221231.htm); [Value Research](https://www.valueresearchonline.com/stories/223782/heg-expansion-shrinking-graphite-electrode-market/) ## For investors ### Key learnings 1. Electrode demand is set by EAF tonnage, not by steel prices, so EAF capacity additions are the leading indicator for electrode makers. 2. Electrodes are under 5% of EAF cost but irreplaceable, so prices spike in shortages and collapse in gluts, as the Chinese surplus showed by 2024. 3. Needle coke is the choke point shared by electrodes and battery anode graphite; tight coke supply hits both. ### What to track - **EAF share of steel output by region**: Rising share means more electrode demand per tonne of steel (Yearly · worldsteel, World Steel in Figures) - **Graphite electrode export prices**: Margin cycle for HEG, Graphite India and GrafTech (Quarterly · company results) - **Needle coke prices and capacity**: Cost pressure and supply risk for electrodes (Quarterly · company filings and trade press) ## For policymakers ### Key learnings 1. A low-carbon steel strategy built on arc furnaces raises demand for electrodes and needle coke, so these belong in industrial supply planning. 2. India hosts HEG, one of the world's largest electrode makers, and Graphite India, an export strength that depends on access to needle coke. 3. Chinese overcapacity has pushed electrode prices down sharply, so trade remedies and capacity data matter for domestic producers. ### What to track - **India EAF steel output**: Domestic electrode demand growth (induction furnaces use no graphite electrodes) (Monthly · Joint Plant Committee) - **Electrode and needle coke trade flows**: Import reliance on coke and export competitiveness (Monthly · Ministry of Commerce) ## India India's HEG (about 100,000 tonnes a year of capacity) and Graphite India (about 80,000 tonnes) were major electrode makers in 2024; Value Research describes HEG as among the largest in the world. ## Sources 1. [Price correlation, Material Insights](https://www.materialinsights.org/commodities/graphite/correlation/), Material Insights (World Bank, FRED, IMF data) 2. [GrafTech International Form 10-K, fiscal year 2022](https://www.sec.gov/Archives/edgar/data/931148/000093114823000035/gti-20221231.htm), GrafTech International (SEC filing) (2023) 3. [HEG: expansion in a shrinking graphite electrode market](https://www.valueresearchonline.com/stories/223782/heg-expansion-shrinking-graphite-electrode-market/), Value Research (2024) 4. [Study: growing demand for graphite to boost cost of EAF electrodes](https://steelmarketupdate.com/2018/05/24/study-growing-demand-for-graphite-to-boost-cost-of-eaf-electrodes), Steel Market Update (2018)