Graphite India, HEG surge 10% on heavy volumes in subdued market

The steel industry's accelerating efforts to decarbonize will lead to an increased adoption of Electric Arc Furnace steel production, in turn driving sustainable demand growth for graphite electrodes.

Shares of graphite electrode (GE) companies Graphite India and HEG rallied up to 10 per cent on the BSE in Friday’s intra-day trade amid heavy volumes in an otherwise subdued market.

Shares of Graphite India surged 10 per cent to Rs 369.75, on back of four-fold jump in average trading volumes on the BSE and NSE.  HEG too rallied 10 per cent to Rs 1,309 on three-fold jump in trading volumes. HEG was trading close to its 52-week high of Rs 1,378, touched on August 19, 2022. In comparison, the S&P BSE Sensex was up 0.09 per cent at 62,487 at 11:30 AM.

In past three trading days, the stock price of Graphite India has soared 15 per cent after the company’s management said it remains confident that the steel industry's accelerating efforts to decarbonize will lead to an increased adoption of Electric Arc Furnace (EAF) steel production, in turn driving sustainable demand growth for graphite electrodes.

In addition, the Indian steel industry is expected to continue its growth momentum backed by Government spending on infrastructure and exports, both of which may positively impact electrode demand.

Meanwhile, during the financial year 2022-23, the company’s consolidated capacity utilization was 55 per cent as compared to 81 per cent in FY22. Performance during the year was impacted due to decline in volumes as customers experienced higher energy costs and business uncertainties arising from the Russia and Ukraine conflict.

Graphite India said the Indian government's decision to remove basic customs duty on metal scrap in the Union Budget 2023 is expected to boost the production of EAF. The allocation of Rs 10 trillion towards capital expenditures in the Union Budget 2023 is expected to boost infrastructure development, leading to an increase in demand for steel.

Steel manufacturers are shifting towards the EAF process, which is expected to drive sustainable demand for graphite electrodes in the long term. The EAF process is considered to be more environmentally friendly than traditional steel production methods, making it an attractive option for companies looking to reduce their carbon footprint, Graphite India said in investor presentation.

The growing demand for infrastructure and consumer goods has driven the growth of steel production. Additionally, the trend towards urbanization has further boosted the steel demand. However, fluctuations in the global economy and trade tensions can impact the steel demand, the company said.

Graphite India further said China’s crude steel capacity has shown modest growth for 2023 as Chinese steelmakers plan to bring up to 118 million MT/year of new crude steel capacity on stream through a capacity swap mechanism.