The graphite fix: Inside China’s newest commodity addiction – by Manolo Serapio Jr and Tom Daly (Reuters U.S. – September 21, 2017)

MANILA/BEIJING (Reuters) – China’s aggressive environmental protection campaign has tightened supplies of graphite electrodes used in steelmaking, boosting the fortunes of big producers like Fangda Carbon as mills search far and wide for a material now in short supply.

Beijing’s campaign for clearer skies has closed thousands of mills and mines producing low-quality steel and coal, and makers of electrodes, particularly those near big cities, have not been spared.

Graphite electrodes are used to melt scrap in electric arc furnaces to produce new steel. Their main ingredient is high-value needle coke – named because of its shape – which is made from either petroleum or coal tar. As China tightened the screws on polluting industrial plants, about 30 percent of its graphite electrode production capacity has been shut and some provinces have restricted output, said Dawn Brooks, a consultant at CRU.

“It’s just a fairly polluting industry, so factories near large urban areas were the ones to get hit by the environmental restrictions,” Brooks told Reuters. But it’s boom time for major players who have survived, including Fangda Carbon New Material, China’s biggest producer of graphite electrodes.

The company is the best performing stock on the Shanghai Stock Exchange with a 263 percent year-to-date gain, while its first-half net profit surged to 412 million yuan ($63 million) from just 15 million yuan a year ago. Analysts expect its July earnings alone to trump that figure as graphite electrode prices explode.

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