Ann Joo has locked in its electrode requirement for 2018 at below market prices.

I believe investors have to be careful and understand well graphite electrode shortage matter. Although the cost of graphite electrode is just merely 2~3% of the total production cost, it might affect the productivity of EAF steel millers as it is the key component in EAF steel production.

phx.corporate-ir.net/External.File?item…t=1

As this article points out, rather than halting production, some mills may work weekends or night shifts, when electricity is cheap and costs lower, as they cannot operate for 24 hours, electrode producer sources said. When a steel miller couldn’t operate 24 hours, this will affect its production volume as well as its production cost.

https://www.platts.com/latest-news/metals/london/graphite-electrode-shortage-could-impact-steelmaking-21582232

http://www.aist.org/news/steel-news/2017/august/21-25-august-2017/mills-grapple-with-graphite-electrode-shortage

Alternative Solution

Due to this matter, a lot of steel millers are opting for alternative method in producing rebar. Instead of manufacturing rebar from scrap metal, they are purchasing billet from BF steel millers as rebar can also be manufactured by rolling billet. Hence, this explains the increase in billet selling prices.

https://www.metalbulletin.com/Article/3739730/Southeast-Asia-import-billet-prices-rising-amid-reduced-supply.html

According to UOBKayHian, Ann Joo has locked in its electrode requirement for 2018 at below market prices. As Ann Joo recovers early and has very healthy cash flow compared to other steel millers, Ann Joo has the edge over other competitors.