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Highlights

The tight supply of carbon graphite electrodes is having a considerable follow-on impact in the refractory market with prices of feedstocks to manufacture the furnace-lining bricks having more than doubled this year, according to refractory suppliers.

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"The price of fused magnesia from China is up nearly 175% from January 2017 and dead-burned magnesia is up about 150% depending on the grade," Jason Borgesi, senior director of global procurement for Pittsburgh-based HarbisonWalker International, told S&P Global Platts Tuesday.

Borgesi said about 60% of the world's natural magnesite reserves are in China and North Korea, and earlier this year China stopped issuing permits for explosives at magnesite mines due to environmental concerns. "Since then we're seeing less and less feed material. Suppliers just don't have much magnesite because it's not being mined," he noted.



Magnesite ore, when fused, is the primary feedstock for steel furnace refractory brick. "In fact, as a refractory manufacturer, we are also being affected by the electrode shortage because the suppliers of fused magnesia also use electrodes," Borgesi added.

The electrode shortage has been caused by reduced Chinese electrode and needle coke output amid Beijing's sharper environmental focus.

"It is our job to mitigate and manage risk so we can assure supply for our customers," Borgesi said, explaining the company's proactive approach in dealing with the current situation. "We have very good relationships with our suppliers both inside and outside of China, and have met with our Chinese suppliers face-to-face in China to discuss these issues."


HIGHER COSTS BEING PASSED ALONG


"This is an unusual period of raw material inflation in our industry," said James Skelly, senior director for North American sales at HWI.

"Customers have been understanding that we are relentless in securing supply for them, and have been open to supporting us to secure materials," he added.

Refractory suppliers and consumers in Europe have also told Platts prices have increased dramatically and suppliers are looking to renegotiate term contracts.

"The shortage and drastic price increase of graphite electrodes in steelworks is affecting us," said a spokesman with Vienna-based RHI in a statement to Platts, "in particular, of course, the electric arc furnace [steelmaking] route."

He acknowledged that if steel mills decide to reduce EAF-based production because of unavailable electrodes, "then this has an effect on the demand for the use of refractory material."

The RHI spokesman added: "The then expected higher capacity utilization of blast furnace production would, however, only partially compensate [for] the reduction of refractory material. We are monitoring the situation closely and are in active exchange with our customers."

Prices of fused magnesia in Europe are at their highest in a decade and prices of Chinese high-grade fused magnesia recently surpassed $1,100/mt, according to the UK-based publication, Industrial Minerals.

--Joe Innace, joseph.innace@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com