Graphite electrodes makers in focus; Graphite India, HEG up 5%

HEG was locked in upper circuit at Rs 3,270, while Graphite India was trading 4.5% higher at Rs 817, after hitting an upper circuit of Rs 821 in intra-day trade.

Shares of graphite electrodes manufacturers were in focus with HEG and Graphite India rising 5% each in otherwise weak market on expectation of rise in demand from steel companies.

HEG was locked in the upper circuit at Rs 3,270 on the BSE with only buyers seen on the counter. A combined 171,538 equity shares changed hands and there were pending buy orders for around 1,000 shares at 10:20 am.

Graphite India was trading 4.5% higher at Rs 817, after hitting the upper circuit of Rs 821 in intra-day trade. The counter has seen huge trading volumes with a combined 710,397 shares changed hands on the BSE and NSE.

HEG believes that this current upsurge in the global graphite electrode demand which commenced in 2017 is expected to sustain its momentum over the foreseeable future as the demand-supply gap in the graphite electrode space is only expected to widen over the coming years.

This augurs well for the business division. Even as the team remains focused on strengthening its efficiency standards, the management is contemplating an increase in the operational capacity to capitalise on the structural changes in the industry space, HEG said in annual report.

Graphite electrodes are primarily used in Electric Arc Furnaces (EAF) and Ladle furnaces in steel making. So far electrode consumption accounted for only 2-3% of steel making cost.

China’s closure of inefficient induction furnaces and polluting blast furnaces is expected to be replaced by EAF’s. New policy measures announced in China, ensures zero growth in steel capacity by requiring steel capacity replacement to be kept in ratio – 1.25:1 or 1:1 (regional differentiation). In 2017, about 66 mmt /year of new EAF capacity was granted approval in China. Thus, the Chinese production through the EAF route is expected to rise, HEG said.

According to industry estimates, China’s EAF output in 2016 was around 52 mmt and is likely to increase by 110 mmt by 2020, which means an additional demand of 275,000 tons of graphite electrodes, it added.