Graphite electrode makers in focus; Graphite India, HEG rally up to 10%

In the past one month, the stocks of HEG (up 34 per cent) and Graphite India (up 16 per cent) have outperformed the Sensex, which gained a marginal 0.02 per cent during the period

Shares of graphite electrode (GE) manufacturers, Graphite India and HEG, were in focus, surging by up to 10 per cent, on the BSE on Wednesday on expectation of the pick-up in steel production globally is expected to drive demand for GEs.

Shares of Graphite India hit a 52-week high of Rs 517.40, rallying 10 per cent on the BSE in intra-day trade on the back of heavy volumes. HEG's stock soared 9 per cent to Rs 1,635, trading close to its 52-week high of Rs 1,645.80, touched on March 3. In comparison, the S&P BSE Sensex was up 0.54 per cent at 51,301 points, at 02:28 pm.

In the past one month, HEG's stock (up 34 per cent) and Graphite India (up 16 per cent) have outperformed the Sensex, which gained a marginal 0.02 per cent during the period.

During the October-December quarter (Q3FY21), the overall recovery in steel production led to a small-pickup in graphite electrodes demand. Going forward, steel industry production growth trend is likely to continue with a healthy recovery in major steel consuming industries like construction and automobiles.

The excess inventories of GE have been liquidated and now steel companies are working at normal inventory levels. The increase in steel production and normalisation of electrode inventory levels have resulted in increase of electrodes demand thus increasing our capacity utilisation levels. HEG expect electrode prices to start firming up from next quarter, HEG said in Q3FY21 investor presentation.

The World Steel Association forecasts steel demand to increase 4.1 per cent year on year (YoY) to 1,795 m tonnes in 2021. With around 28 per cent of global steel produced in electric-arc furnaces, analysts at Anand Rathi Share and Stock Brokers expect the fortunes of GE manufacturers to turn around.

“The domestic steel industry is also poised to grow with the recent announcement of increased government spending on infrastructure. The combination of these factors may drive demand for steel and graphite electrodes in the near term. Graphite electrode prices have started to stabilise and a positive recovery is likely in coming quarters. Needle coke prices have also stabilised and may increase in line with electrode pricing in coming quarters”, ICICI Securities said in Graphite India's results update.