Carbon and Graphite Products

SIC 3624

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing carbon, graphite, and metal-graphite brushes and brush stock; carbon or graphite electrodes for thermal and electrolytic uses; carbon and graphite fibers; and other carbon, graphite, and metal-graphite products.

Industry Snapshot

Carbon and graphite products manufacturing establishments were responsible for shipments worth approximately $1.82 billion in 2009, down from $2.79 billion in 2008. During the 1990s, the total value of shipments peaked at $2.34 billion in 1997. In the first years of the 2010s, the industry was attempting to recover from the recession of the late 2000s, which saw two of the main end markets, automotive and the iron and steel industries, suffer significant declines, thus sending the carbon and graphite demand plummeting.

The lackluster performance of the industry from the 1980s through the late 1990s was attributed to the effect of several economic forces that created product oversupply and excess industry capacity. One of the main causes cited for almost two decades of industry stagnation was the decline of the steel industry, a prime market for the industry's products. In addition, world demand for carbon and graphite electrodes plummeted, due to the development of more efficient electrode performance in steel production. This decline in demand, coupled with the strength of the dollar in the 1980s and early 1990s, allowed rival foreign producers to increase their profitability in the U.S. market, which adversely affected the industry's output and profitability.

Structural changes in the industry led to a rebound in the late 1990s, including growth in some export markets. Although the industry was a perennial net importer of carbon and graphite products, the volume of carbon and graphite exports continued to increase steadily throughout the late 1990s.

In the early and mid-years of the first decade of the 2000s, the carbon and graphite industry declined as the overall economy suffered from recessive conditions. Additionally, the steel industry in particular was hit hard, and as a result, the carbon and graphite industry also suffered. Although revenues had remained relatively stable during the late 1990s, with total shipment values consistently exceeding $2.0 billion annually, in 2001 total shipment values fell to $1.77 billion, falling again in 2002 to $1.72 billion. 2006 saw a rebound to $1.97 billion, however, despite the global economic recession, which began in 2008, and sales increased to $2.8 billion in 2008. However, the effects of the sharp decline in the auto industry and the iron and steel sector caught up to the industry in 2009, and sales plummeted.

Organization and Structure

In 2010 approximately 193 establishments were engaged in the production of carbon and graphite products. Of that total, 46 percent of the companies employed less than 10 workers. Larger companies with more than 100 employees comprised about 15 percent of firms but nearly all the revenues. The industry included carbon and molded graphite brush blocks; brushes and brush stock contacts; carbon specialties for electrical use; and carbon and graphite electrodes for thermal and electrolytic uses.

Geographically, the greatest number of establishments producing carbon and graphite products in the first decade of the 2000s were located in the steel production region of the Northeastern and Midwestern United States. Ranked by the total value of shipments per state, Ohio was first, followed by Pennsylvania and New York.

The bulk of the industry's revenue was garnered by a limited number of manufacturers. It was estimated that publicly held Graftech International Ltd. (previously known as UCAR International Inc.) of Parma, Ohio, led the industry with sales of just over $1 billion and 2,915 employees in 2010. The other dominant company in the carbon and graphite products industry was Keystone Consolidated Industries Inc. of Dallas, Texas, which emerged from Chapter 11 bankruptcy in 2005 and posted sales of nearly $563 million with 1,000 employees in 2010. Keystone operated within the holding company Contran, and Dallas billionaire Harold Simmons owned about two-thirds of its shares.

Background and Development

The products composing the carbon and graphite products industry are mostly of a very high carbon content and include both natural and synthetic graphites. Carbon is an essential nonmetallic chemical element. Carbon's hardest form is known as diamond, graphite is its softest form. Graphite appears naturally in three forms: amorphous, which is the last stage of the coalification process; crystalline flake, which is used in brake linings and pencils; and lump, used mostly in batteries and found primarily in Sri Lanka.

Synthetic graphite is manufactured by high-temperature treatment of carbon using calcined petroleum coke and coal tar pitch. Synthetic graphite comes in three basic product categories. Electrodes comprise the industry's largest product category. Making up more than half of the industry's products, electrodes are used in all types of electric furnaces. Graphite fibers are the second largest category of graphite products. Synthetic powder, made from scraps that are pulverized into a powder, make up the bulk of the third category of products.

Industrial uses of graphite and carbon began in the early 1800s. In 1800, Sir Humphry Davy (1778-1829) used carbon in the electric arc that came from an electrode made out of charcoal. By 1857, after seven years of experiments with new electrodes yielding a purer carbon, De Grasses B. Fowler patented the process of making carbon plates by mixing ground coke with tar and shaping the mixture under pressure in molds. Soon after, in 1877, Charles F. Brush and Washington H. Laurence of Cleveland began to experiment with carbon electrodes, and by 1878, Brush was manufacturing electrodes.

In 1896, E.G. Atcheson patented a process that transformed amorphous carbon into synthetic graphite by heat treatment, laying the foundation for the modern graphite industry. A succession of inventions followed in the electrothermal field, all of which required electrodes of carbon or graphite for their applications. For example, in 1896, H.Y. Castner patented a process that involved heating carbon electrodes with electricity so that a graphite-like form of carbon was produced. By 1899, the Atcheson Graphite Company was formed in Niagara Falls, New York, producing electrodes for Castner's electrochemical processes, with most of the production being exported to Europe, which then was the center of the industry.

In 1906 the first steel made with electric power was manufactured in the United States by the Holcomb Steel Company in Syracuse, New York, using German electrodes. As the industry progressed, larger and larger electrodes were needed. By 1914 there was a vast expansion in electric furnace capacity and in the electrochemical industry, leading to a rise in the demand for electrodes of all varieties. The 30-inch carbon electrode was produced in 1927 and the 40-inch carbon electrode followed a year later. Graphite electrodes progressed similarly, but at a slightly slower pace, with the 14-inch electrode introduced between 1914 and 1918. By 1937, the size of graphite electrodes reached 20 inches. At that time, Germany, England, France, Italy, and Sweden made graphite and amorphous electrodes. Carbon products were made in most countries, including Europe and Japan.

By 1959, many new products had followed. Filamentary carbon was made into graphite cloth and eventually carbon and graphite cloth, felt, yarn, tape, and fibers were to follow. These products had the desirable properties of not melting at high temperatures or under high pressures. Such applications for carbon and graphite increased exponentially, with many new firms capitalizing on the thermal stability, electrical conductivity, thermal conductivity, and corrosion resistance of carbon and graphite fibers.

By the early 1980s, world demand began to collapse because of the decline in consumption of graphite electrodes, particularly by the steel industry. This decline was attributed to improved electrode performance, as well as lower priced electrode imports. By 1985, leading producer Union Carbide suspended production at its Clarksville, Tennessee plant. A lower cost of production at the company's facilities in Yabucoa, Puerto Rico, and Columbia, Tennessee attributed to this closure. Union Carbide reopened the Clarksville facility in 1987.

At that time, costs were rising and carbon products firms were experiencing poor profitability. Union Carbide was not the only firm experiencing poor profitability and excess capacity. Fierce domestic and foreign competition was making it hard to meet rising costs in new carbon electrode plants. Declining demand led to overcapacity in electrodes, due mostly to low operating rates in steel mills. Coupled with this was the decline in the U.S. steel industry caused by heightened competition from foreign producers. Another key factor was the increased costs of fuels, such as natural gas used to carbonize coal to make carbon and graphite. Foreign competition was strengthened further by the strength of the U.S. dollar at the time, which increased prices of U.S. goods in proportion to foreign goods and enabled consumers to purchase lower priced products from rival producers, predominantly Italian and Japanese companies. Lastly, alternative products (titanium diboride electrodes were substituted for carbon or graphite) provided a 25 percent savings on electrical energy, which is a major expense in aluminum smelting. Accordingly, key aluminum producers, such as Kaiser Aluminum, Alcoa, and Alcan, began using titanium diboride instead of carbon or graphite.

After peaking at $2.34 billion in 1997, the value of industry shipments began to decline, falling to $2.30 billion, $2.09 billion, $2.06 billion, and $1.77 billion in 1998, 1999, 2000, and 2001, respectively. In 2002, shipment values again totaled $1.77 billion, representing a 25 percent decrease over a five-year period. Significant factors include high energy and raw material prices.

In the mid-years of the first decade of the 2000s, manufacturers continued to look for cost-effective ways to add graphite to automobile designs, and sales increased to $1.97 billion. By 2008, sales rose further to $2.8 billion. Carbon fiber reinforced plastic (CFP) provides the strength and durability of steel at a 50 percent reduction in weight. CFP is 30 percent lighter than aluminum. However, due to the complex production process, CFP has been too expensive to use widely. Raw materials for CFP cost approximately $15 per pound, compared to $2.75 per pound for aluminum. Nonetheless, because automakers are looking to decrease weight and increase performance, the industry will continue to work to solve price and production issues. In 2008 the U.S. held a modest trade surplus in this industry with exports of $1.2 billion and imports totaling $900 million.

Current Conditions

Although the U.S. carbon and graphite industry suffered during the recession of the late 2000s as the U.S. steel industry continued to decline, global demand began to return to the market in the early 2010s, with increased growth expected. In March of 2011, the SGL Group, one of the world�s leading manufacturers of carbon-based products, announced a price hike for graphite electrodes, stating in a press release, "Global demand for graphite electrodes continues to increase, in line with the growing demand for steel. Input costs remain at high levels or are increasing further."

The United States was the largest market for carbon and graphite worldwide. China was responsible for roughly 80 percent of graphite production in the early 2010s, keeping about 60 percent for its own consumption. During the later part of the first decade of the 2000s, China saw unsteady production totals. About 70 percent of China�s graphite is of lower value: small graphite flakes that are used for industrial applications. The other 30 percent is higher grade graphite that can be used for higher-end applications such as lithium batteries. Other graphite-producing countries, including the Czech Republic, Madagascar, Zimbabwe, Canada, and Mexico, all experienced a decline in production. The United States imported a significant portion of its graphite.

Global Industry Analysts reported in 2011, "Post recession, the carbon and graphite market is expected to register growth led by demand from a multitude of industrial sectors in advanced as well as developing economies." Graphite was expected to be consumed in large quantities in the United States to update and modernize the U.S. steel industry. Similarly, the carbon industry was expected to grow based on increased applications with prices remaining high due to supply uncertainty.

To meet their growth needs for advanced carbon parts, some auto manufacturers were striking deals with carbon fiber producers. In 2010, BMW and SGL Carbon entered a joint venture deal for SGL to supply the auto maker with carbon fiber-reinforced automotive parts. In 2011, German auto manufacturer Daimler AG and Toray Industries, the world's largest manufacturer of carbon fibers, located in Japan, entered a similar arrangement.

Workforce

From 1991 to 1997, total employment in carbon and graphite production rose from 8,400 people to about 10,900 employees before falling to 9,959 in 2000. Production worker employment fell from 7,400 in 1988 to 6,000 in 1991 and rose to more than 8,000 in 1997 before declining to 7,313 in 2000. Between 2000 and 2002, overall industry employment fell by 16 percent, to 8,369. During the same time period, the number of production workers also dropped 16 percent, to 6,167. Streamlining continued into the middle of the decade, and 2006 saw employment dip to a 7,584 total with 5,452 production workers. Growth in the industry, however, saw employment rebound to 8,666 employees who earned nearly $400 million in 2007, 5,442 of whom were production workers earning slightly less than $228 million. In 2009 the industry�s workforce had dropped to 7,790.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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