Graphite Electrode : Graphite India/HEG - Not-so-Hidden Gems

Hi

I would recommend going through the beginning of this thread and you will be able to understand the reason for the rise. It was a once in a lifetime kind of opportunity and was primarily sourced from the Raw Material Shortage and Graphite Closure of capacity over the years.

There are six or seven companies in the world Outside China that produces GE but the overall demand supply is not in favor currently.

Also I am not sure whether the current COVID Scenario is going to drive Steel Demand , if any the effect will be negative

To put it simply, we need the following

1. High Steel Demand to drive GE demand as GE is the RM for Steel
2. Shift towards EAF (of producing Steel) as unless there is a big shift , we wont see
   much of GE demand
3. Shortage of RM i.e. Needle Coke which is a RM for production of GE - This is a key as everybody else will start adding new GE capacity

All the three happened a couple of year back that led to the surge but I am seeing anything similar.

Bottomline: The Company may look cheap in terms of Cashflow / Assets etc but there is no tailwind pushing the business growth . If I have to chose between Valuations or Tailwinds , would always recommend the tailwind

The last thing here is we didnt saw a great Cashflow allocation when there is a windfall for the company in and . A critical aspect of a great company is Capital Allocation and I havent seen any trend here or yet to spot one

Disclaimer: Pls use your judgement and do not take above as a buy or sell recommendation. I am not currently invested in this stock and my views may be biased

PFB the notes from the conference, I had taken:

Global Graphite Electrode Conference being organized by SteelMint is presently underway in Mumbai where industry experts from across the globe have gathered to express the views and opinion on the volatile GE industry. Live coverage of Question and answer session of the Conference below.
How will the industry be impacted with China continuously adding EAF capacity?
In China presently 57 EAF plants are coming up with each having about 1 to 1.25 mnt capacity per plant. That accounts for about 60 to 70 mnt of fresh capacity. There are around 35 plants already existing. China is substituting closed capacity with EAF. Demand is visibly high there. There will certainly be an impact on demand side but we cannot assume that supply of Graphite Electrode would be restricted. There is a demand supply mismatch which would last for between 2 to 3 years. There are two drivers behind EAF development in china, first is to avoid environmental issue in future. And the other is to compensate for closed capacity. Chinese can hinder the GE export from China to protect the steel industry. It remains an important raw material.
What is the contribution of Chinese GE suppliers?
It is difficult to track the Chinese market right now. The precise amount of GE being produced is not available with us right now. We need to understand that quality of Chinese product is different. Ultra high power GE is being produced by India, Japan etc. but the production of this is limited in China. EAF producers in China itself avoid using entirely Chinese made electrode. China could play a role but Graphite capacity in China has also been closed. It is a possibility that more capacity can be closed.
What is synthetic graphite how can it disruptive? Are there new capacity?
Natural graphite has a different structure. The molecular structure is such that it can withstand a lot of heat. It is not very likely a substitution can happen any time soon.
India commands 25% global market share? What if the Indian Government imposes 20% export duty on GE to protect its domestic steel industry?
Graphite India and HEG, the two India suppliers were selling their product at differential prices to large producers and to those procuring a limited quantity. It is due to this differential pricing the smaller steel producers approached the Indian government and suggested that an export duty be imposed as protective measure.
The Govt. did consider the suggestion. However now of late pricing has been equalized for all Indian producers. Now this issues of imposing export duty is not be looked at very serious of late.
What are chemical components which can reduce cost for EAF?
You need energy to make steel. You can take either for Chemical energy through exothermic reactions. Or electric energy which needs GE. Technically if it is viable they can use high speed injection for carbon. That way more energy is coming from chemical reaction. However it is not an easy task. If a study is done you can arrive at a formula to balance both. However in the past GE was not a cost factor so no research has been done in this. But at this point in time there can be a lot of attention drawn towards these estimates and cost analysis.
Are there any alternatives being seen in place of EAF production to mitigate rising cost of GE?
Not right now. BOF and LF combination can be considered. But still these industries are polluting. This can be helpful in the short term.
Is any new GE entrant expected as the industry is in strong upcycle?
&#;Technology restriction, it was shared by US and German companies in INDIA, the possibility of the exchange happening is limited. No capacity has been seen in china also. Not likely. Graphetization needs a 20 feet bunker and other furnaces. This setup cant be done by everyone.
&#;Equipment not available. It needs customized requirement. Last equipment was supplied almost 40 years back when the last GE plant was set up in India.

Export Duty Not Good For Indian Buyers
Graphite India and HEG account for close to 25% of the world production, and if the situation arises of Graphite Electrode prices rising by 20% &#; it will be easily absorbed by the global market.
Hence, we believe Indian buyers will end up paying more, in line with international prices if any duty is ever imposed.
NEEDLE COKE

In a recent article published by IC Carbon, CCIA( China Carbon Industry Association) reported that Baosteel Chemical Co. is expected to have stable production in January, with needle coke production estimated at - MT and corresponding price of RMB 22,000/MT. It is estimated that the output of needle coke will increase by 20% in .
The user will be mainly anode material manufacturer and graphite electrode manufacturergraphite electrode manufacturer. In addition, the company will conduct a 25-day overhaul in April.
A longstanding limiting factor to the increase of graphite electrode production is the supply of needle coke, which is limited to a few refineries around the world with only one independent needle coke production facility in the world.
Shortage of needle coke, a form of calcined petroleum coke (CPC), is exacerbating the ability of graphite electrode producers currently operating, to increase production rates to meet demand. Needle coke represents approximately 70% of the input cost of graphite electrode production.
According to China Carbon Industry Association (CCIA), needle coke price sky-rocketed by over 726 percent in while imported needle coke price lagged behind in rise given its longer order time.
CCIA data shows the total production of China&#;s needle coke is 143,000 MT in and needle coke imports were recorded at 170,000 MT. In view of uplifting performance, there has been an expansion boom in China&#;s needle coke market.
According to CCIA, eight needle coke enterprises, including Jinzhou Chemical, Jingyang Chemical, Baitailong, Hongte Chemical, Baosteel Chemical, Yida New Materials, Fangda C-Chem, etc. have released production resumption, expansion and new production plans. China&#;s needle coke demand is expected to reach 600,000 MT by

As part of the Q&A round for the second session of Global Graphite Electrode Conference being conducted by SteelMint Events, Joey Xiao, Vice General Manager Sinbro International China and Liang Wang, Manager International Sales IC Carbon, China responded to questions from the delegates and present China&#;s perspective on the present situation in the industry.
Are Chinese Pollution norms acting as a catalyst for upturn in GE sector?
The environment pollution in china was quite high two to three years back. Focus has shifted from GDP to health in China. Earlier it was not so. When I drove at 6 am, visibility was not more than 5 metres. The pollution was very serious. But now it is already getting better. EAF is more environment friendly. In the long run pollution would play a big role in government decision making. BF capacity would go down. But it will take time.
The Chinese government acted on smaller mill, which do not have recycling facilities etc. or proper technology. The government forced them to shut shop.
Is there any difference in UHP and HP grade of GE in China as against the rest of the world?
So it depends on the effectiveness and the usage. Where you are using the electrode matters in determining output. The effectiveness of the plant plays a role. In china we also have a standard for what type of GE we use in what sector. Another factor is where the GE is being procured from. The kind plant that is producing the product in China.
Why is UHP in China equal to HP in India do they follow different standards?
We have already supplied to quite a few Asian countries but there have been no such reports. All of them buy UHP. I don&#;t think there is a difference in quality. There are a few mills which are not that good. But as long as it is being bought from right mills there is no problem.
Is the China Govt concerned with rising cost of GE? Can China turn importer?
Chinese GE prices increased a lot. Even the stock market was concerned and even in India it was the same. The Chinese govt is concerned. Because steel industry is a main industry in China. So it also influnces the steel sector at large. We are also concerned because we will not be able to buy raw material. Speaking interms of China. This is a serious concern for the govt. But this is just one industry. China considers a lot of other trade industry. So the policy is determined by many factors. We are also focusing on healthy society. So if we will increase production or go for import is not sure. But right now imports wont be a lot.
Are Chinese companies cutting production because of excessive capacity and Anti dumping?
Other countries in the world are rising at a great pace but China it is quite slow. China in the long run they are controlling capacity. The govt is trying to speak to other countries to shift their capacity to other countries. So that they can encourage employment for other countries and to facilitate Chinese migration to other countries. This can be one way to control capacity. This is mostly discussion among people. Statistics show that rate of growth has declined significantly.
Reports suggest more than 300,000 capacity has been closed in china is it true ?
So far as we know it is true. Most of the mills are losing a lot of money. Many mills have not been announced bankrupt but they are already there. Because the govnt check is very stringent and regular. Because the real term figure is this. There are several other places where the use this. So for example in china. There are several entreprises which have closed down.
Due to recent clamp down is EAF capacity is expected to grow?
Capacity is expected to grow to 137 MnT in compared to 120 MnT in
What is the production ?
According to our statistics, from onwards the ratio was 6 % in it came up to 7.5 % it would go to 10% in in it would go to 13%. Gradually we are incrasing every year. Because of the importance given to environments but the EAF production is also increasing gradually.
Does China have the capability or technology to produce UHP grade of GE which can actually be sold overseas and complete with other producers?
At present China is already manufacturing different kind of products. There does not seem to be problems in production. Primarly because Chinese graphite electricity utility of China has no problem with technology or raw materials.
Scrap generation is very high in China &#; 340 mnt scrap is expected by ? Export duty is 40% for scrap? Where is China going to get EAF to consume this scrap?
We do talk about production of scrap but it is a little difficult to say. There is over supply and that&#;s why we are trying to include other countries. The OBOR is also part of this policy.
Can China be net importer of GE?
It is a bit difficult to import. Because price from other countries has to be low enough to cover duties etc. Atleast for next 1 to 3 years we don&#;t see it happening.
What is needle coke demand from China for Lithium Ion?
It is about 60% earlier but it has reduced to 40% now.

I would recommend going through the beginning of this thread and you will be able to understand the reason for the rise. It was a once in a lifetime kind of opportunity and was primarily sourced from the Raw Material Shortage and Graphite Closure of capacity over the years.

There are six or seven companies in the world Outside China that produces GE but the overall demand supply is not in favor currently.

Also I am not sure whether the current COVID Scenario is going to drive Steel Demand , if any the effect will be negative

To put it simply, we need the following

1. High Steel Demand to drive GE demand as GE is the RM for Steel
2. Shift towards EAF (of producing Steel) as unless there is a big shift , we wont see
   much of GE demand
3. Shortage of RM i.e. Needle Coke which is a RM for production of GE - This is a key as everybody else will start adding new GE capacity

All the three happened a couple of year back that led to the surge but I am seeing anything similar.

Bottomline: The Company may look cheap in terms of Cashflow / Assets etc but there is no tailwind pushing the business growth . If I have to chose between Valuations or Tailwinds , would always recommend the tailwind

Contact us to discuss your requirements of Super High Power Graphite Electrode. Our experienced sales team can help you identify the options that best suit your needs.

The last thing here is we didnt saw a great Cashflow allocation when there is a windfall for the company in and . A critical aspect of a great company is Capital Allocation and I havent seen any trend here or yet to spot one

Disclaimer: Pls use your judgement and do not take above as a buy or sell recommendation. I am not currently invested in this stock and my views may be biased

PFB the notes from the conference, I had taken:

Global Graphite Electrode Conference being organized by SteelMint is presently underway in Mumbai where industry experts from across the globe have gathered to express the views and opinion on the volatile GE industry. Live coverage of Question and answer session of the Conference below.
How will the industry be impacted with China continuously adding EAF capacity?
In China presently 57 EAF plants are coming up with each having about 1 to 1.25 mnt capacity per plant. That accounts for about 60 to 70 mnt of fresh capacity. There are around 35 plants already existing. China is substituting closed capacity with EAF. Demand is visibly high there. There will certainly be an impact on demand side but we cannot assume that supply of Graphite Electrode would be restricted. There is a demand supply mismatch which would last for between 2 to 3 years. There are two drivers behind EAF development in china, first is to avoid environmental issue in future. And the other is to compensate for closed capacity. Chinese can hinder the GE export from China to protect the steel industry. It remains an important raw material.
What is the contribution of Chinese GE suppliers?
It is difficult to track the Chinese market right now. The precise amount of GE being produced is not available with us right now. We need to understand that quality of Chinese product is different. Ultra high power GE is being produced by India, Japan etc. but the production of this is limited in China. EAF producers in China itself avoid using entirely Chinese made electrode. China could play a role but Graphite capacity in China has also been closed. It is a possibility that more capacity can be closed.
What is synthetic graphite how can it disruptive? Are there new capacity?
Natural graphite has a different structure. The molecular structure is such that it can withstand a lot of heat. It is not very likely a substitution can happen any time soon.
India commands 25% global market share? What if the Indian Government imposes 20% export duty on GE to protect its domestic steel industry?
Graphite India and HEG, the two India suppliers were selling their product at differential prices to large producers and to those procuring a limited quantity. It is due to this differential pricing the smaller steel producers approached the Indian government and suggested that an export duty be imposed as protective measure.
The Govt. did consider the suggestion. However now of late pricing has been equalized for all Indian producers. Now this issues of imposing export duty is not be looked at very serious of late.
What are chemical components which can reduce cost for EAF?
You need energy to make steel. You can take either for Chemical energy through exothermic reactions. Or electric energy which needs GE. Technically if it is viable they can use high speed injection for carbon. That way more energy is coming from chemical reaction. However it is not an easy task. If a study is done you can arrive at a formula to balance both. However in the past GE was not a cost factor so no research has been done in this. But at this point in time there can be a lot of attention drawn towards these estimates and cost analysis.
Are there any alternatives being seen in place of EAF production to mitigate rising cost of GE?
Not right now. BOF and LF combination can be considered. But still these industries are polluting. This can be helpful in the short term.
Is any new GE entrant expected as the industry is in strong upcycle?
&#;Technology restriction, it was shared by US and German companies in INDIA, the possibility of the exchange happening is limited. No capacity has been seen in china also. Not likely. Graphetization needs a 20 feet bunker and other furnaces. This setup cant be done by everyone.
&#;Equipment not available. It needs customized requirement. Last equipment was supplied almost 40 years back when the last GE plant was set up in India.

Export Duty Not Good For Indian Buyers
Graphite India and HEG account for close to 25% of the world production, and if the situation arises of Graphite Electrode prices rising by 20% &#; it will be easily absorbed by the global market.
Hence, we believe Indian buyers will end up paying more, in line with international prices if any duty is ever imposed.
NEEDLE COKE

In a recent article published by IC Carbon, CCIA( China Carbon Industry Association) reported that Baosteel Chemical Co. is expected to have stable production in January, with needle coke production estimated at - MT and corresponding price of RMB 22,000/MT. It is estimated that the output of needle coke will increase by 20% in .
The user will be mainly anode material manufacturer and graphite electrode manufacturer. In addition, the company will conduct a 25-day overhaul in April.
A longstanding limiting factor to the increase of graphite electrode production is the supply of needle coke, which is limited to a few refineries around the world with only one independent needle coke production facility in the world.
Shortage of needle coke, a form of calcined petroleum coke (CPC), is exacerbating the ability of graphite electrode producers currently operating, to increase production rates to meet demand. Needle coke represents approximately 70% of the input cost of graphite electrode production.
According to China Carbon Industry Association (CCIA), needle coke price sky-rocketed by over 726 percent in while imported needle coke price lagged behind in rise given its longer order time.
CCIA data shows the total production of China&#;s needle coke is 143,000 MT in and needle coke imports were recorded at 170,000 MT. In view of uplifting performance, there has been an expansion boom in China&#;s needle coke market.
According to CCIA, eight needle coke enterprises, including Jinzhou Chemical, Jingyang Chemical, Baitailong, Hongte Chemical, Baosteel Chemical, Yida New Materials, Fangda C-Chem, etc. have released production resumption, expansion and new production plans. China&#;s needle coke demand is expected to reach 600,000 MT by

As part of the Q&A round for the second session of Global Graphite Electrode Conference being conducted by SteelMint Events, Joey Xiao, Vice General Manager Sinbro International China and Liang Wang, Manager International Sales IC Carbon, China responded to questions from the delegates and present China&#;s perspective on the present situation in the industry.
Are Chinese Pollution norms acting as a catalyst for upturn in GE sector?
The environment pollution in china was quite high two to three years back. Focus has shifted from GDP to health in China. Earlier it was not so. When I drove at 6 am, visibility was not more than 5 metres. The pollution was very serious. But now it is already getting better. EAF is more environment friendly. In the long run pollution would play a big role in government decision making. BF capacity would go down. But it will take time.
The Chinese government acted on smaller mill, which do not have recycling facilities etc. or proper technology. The government forced them to shut shop.
Is there any difference in UHP and HP grade of GE in China as against the rest of the world?
So it depends on the effectiveness and the usage. Where you are using the electrode matters in determining output. The effectiveness of the plant plays a role. In china we also have a standard for what type of GE we use in what sector. Another factor is where the GE is being procured from. The kind plant that is producing the product in China.
Why is UHP in China equal to HP in India do they follow different standards?
We have already supplied to quite a few Asian countries but there have been no such reports. All of them buy UHP. I don&#;t think there is a difference in quality. There are a few mills which are not that good. But as long as it is being bought from right mills there is no problem.
Is the China Govt concerned with rising cost of GE? Can China turn importer?
Chinese GE prices increased a lot. Even the stock market was concerned and even in India it was the same. The Chinese govt is concerned. Because steel industry is a main industry in China. So it also influnces the steel sector at large. We are also concerned because we will not be able to buy raw material. Speaking interms of China. This is a serious concern for the govt. But this is just one industry. China considers a lot of other trade industry. So the policy is determined by many factors. We are also focusing on healthy society. So if we will increase production or go for import is not sure. But right now imports wont be a lot.
Are Chinese companies cutting production because of excessive capacity and Anti dumping?
Other countries in the world are rising at a great pace but China it is quite slow. China in the long run they are controlling capacity. The govt is trying to speak to other countries to shift their capacity to other countries. So that they can encourage employment for other countries and to facilitate Chinese migration to other countries. This can be one way to control capacity. This is mostly discussion among people. Statistics show that rate of growth has declined significantly.
Reports suggest more than 300,000 capacity has been closed in china is it true ?
So far as we know it is true. Most of the mills are losing a lot of money. Many mills have not been announced bankrupt but they are already there. Because the govnt check is very stringent and regular. Because the real term figure is this. There are several other places where the use this. So for example in china. There are several entreprises which have closed down.
Due to recent clamp down is EAF capacity is expected to grow?
Capacity is expected to grow to 137 MnT in compared to 120 MnT in
What is the production ?
According to our statistics, from onwards the ratio was 6 % in it came up to 7.5 % it would go to 10% in in it would go to 13%. Gradually we are incrasing every year. Because of the importance given to environments but the EAF production is also increasing gradually.
Does China have the capability or technology to produce UHP grade of GE which can actually be sold overseas and complete with other producers?
At present China is already manufacturing different kind of products. There does not seem to be problems in production. Primarly because Chinese graphite electricity utility of China has no problem with technology or raw materials.
Scrap generation is very high in China &#; 340 mnt scrap is expected by ? Export duty is 40% for scrap? Where is China going to get EAF to consume this scrap?
We do talk about production of scrap but it is a little difficult to say. There is over supply and that&#;s why we are trying to include other countries. The OBOR is also part of this policy.
Can China be net importer of GE?
It is a bit difficult to import. Because price from other countries has to be low enough to cover duties etc. Atleast for next 1 to 3 years we don&#;t see it happening.
What is needle coke demand from China for Lithium Ion?
It is about 60% earlier but it has reduced to 40% now.

If you are looking for more details, kindly visit graphite electrodes.