Looks like, Graphite electrode makers will have an advantage due to USA China trade war as Indian makers could replace Chinese exports.
Disclaimer: Not invested
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A slide from Graftech presentation yesterday. They sold more & at higher prices than q12019. Margins are a little down due to higher needle coke prices.
Result:
Net Sales of Rs. 967 Crores, a decline of 51% y-o-y
EBITDA of Rs. 352 Crores; Margin of 36%
Net Profit of Rs. 220 Crores
Earning Presentation:
Hi All,
whats the reason graphite india stock is trading at so low yet ?
Pls go through the thread and you will be able to get a very good reason for the fall
Will China’s Graphite Electrodes Flood World Markets By 2020?
Posted on February 18, 2019 0
All eyes are on the fast-changing dynamics of the Graphite Electrode market in China, not least because of its global implications in shaping prices and demand.The phenomenal rise in China’s Graphite Electrode prices over the past one year was largely attributable to the shutting down of Chinese Graphite Electrode plants resulting in global shortage of the commodity.
China is making rigorous efforts to replace polluting induction and blast furnaces with electric furnaces. New policy measures announced in early 2018 ensure zero growth in steel capacity by requiring steel capacity replacement to be kept in a ratio of 1.25:1 or 1:1 (regional differentiation).
The percentage of EAFs in the country’s total steel production has increased from 6% in 2016 to 9% in 2017 and again to 12% in 2018. The objective is to achieve a target of 20% by 2020.
This perceptible policy thrust in promoting EAFs coupled with rising Graphite Electrode prices have motivated Chinese Graphite Electrode manufacturers to increase their production and rev up capacities.
Will China Be Saddled With Graphite Electrode Overcapacity?
In 2017, China had an effective Graphite Electrode capacity of 900,000 tonne and a production capacity of 630,000 tonne (including exports and non-member enterprises). Last year, it produced almost 700,000 tonne of Graphite Electrode (including exports and non-member enterprises).
Statistics maintained by the China Carbon Industry Association (CCIA) reveal that by December 2018, the newly-added Graphite Electrode capacity in China was 600,000 tonne (including new processes which are already under construction or are being designed to start construction soon). From Jan to Aug’18, Graphite Electrode output in China was 416,392 tonne, up 14.18% on a Y-o-Y basis.
According to a top CCIA official, China’s carbon industry, which includes various products such as Graphite Electrodes, is set to be bogged down by severe overcapacity from the second-half of 2020, after producers scramble to expand their capacities amid spiralling demand and high profit margins.
At an industry conference held recently, CCIA’s General Secretary Sun Qing said: “Extravagant profits over the last one and a half years have lured companies that were shut down in bleak years to resume operations and even expand capacity whereas some of those companies that didn’t have carbon capacity are planning to launch new production lines.”
Qing added that China is expected to have Graphite Electrode capacity totalling 1.5 MnT by 2020, up 67% against 2017. With the increase in electric furnace steel, the demand for Graphite Electrodes will simultaneously rise, but the current utilization rate of Graphite Electrodes is only 53.33%.
By 2020, production and sales of Graphite Electrodes in the country will not exceed 800,000 tonne (including exports and non-member enterprises) which will be less than the total capacity of 1.5 MnT, thus resulting in overcapacity.
Could Graphite Electrode Capacity Addition Be Stemmed?
Unlike China’s steel and coal industries whose capacity is strictly controlled by the central government, carbon producers do not need to acquire approvals from authorities to add new capacity as long as they are able to meet environmental standards.
Since the latter half of 2017, China’s aggressive environmental protection measures have tightened supplies of low-quality carbon products and have led to the promotion of EAFs in steel production that emit less toxic air compared to blast or induction furnaces.
In order to rein in overcapacity, Qing mentioned that the country would accord importance to emission levels as part of environmental protection measures. In addition, it would be vigilant about addition of low-quality redundant capacities, focus on producing high quality products, lay emphasis on co-ordination between demand-supply and take measures to avoid aggressive competition by following self-discipline.
Cog in the Wheel: Good Quality Needle Coke in Short Supply
The only area of concern for China’s Graphite Electrode producers will be the tight supply of high quality key raw material, Needle Coke that is required to produce ultra-high power (UHP) Graphite Electrodes.
In an interview, Qing has highlighted that as China depends upon imports of good quality Needle Coke for the production of UHP grade Graphite Electrodes, the country’s carbon industry should prioritize research activities, scientific and technological innovation and co-operation of upstream and downstream units to improve the quality of supply chain.
Join SteelMint for ‘International Graphite Electrodes & Needle Coke Roadshow’ in China
Given the production and capacity estimates of Graphite Electrodes in China and export restrictions to Iran due to US sanctions, it is likely that China may flood the global market with its Graphite Electrodes in the coming couple of years. To find out the ground reality, hit the road with SteelMint to gather a more holistic view of the Graphite Electrode and Needle Coke plants in China at the ‘ International Graphite Electrodes & Needle Coke Roadshow – China ’, to be held from 8 to 12 April, 2019.
RECENT POSTS
- SteelMint’s China Roadshow: Precious Insights into Graphite Electrodes and Needle Coke
- Indian Graphite Electrodes Contracts Likely to Plunge
- How will Iran Source Graphite Electrodes Amid Sanctions?
- Will Graphite Electrode Prices Bounce Back in 2019?
- Will China’s Needle Coke Shortage Derail Their Graphite Electrodes Production Plans?
RECENT COMMENTS
- Ellrousty on Will Graphite Electrodes Prices Continue to Rise in China?
- Keldumn on Will Graphite Electrodes Prices Continue to Rise in China?
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From the above article it is apparent that China is developing huge capacities and any how such high margins are not sustainable for large period of time.
Presently it seems every player is keeping his cards close to his Chest. From the concall of HEG, the management was not ready to divulge the prices and every body wants to en cash the present shortage.
Any Idea why needle coke cannot be prepared in India when such huge demand is apparent in future.
This is precisely how a commodity cycle behaves, and the Market was able to predict the downturn much in advance. The collective wisdom of the Market and the Efficient Market Hypothesis in full display here.
Learnt a lot as the GE story unfolded, if one understand why one is buying then selling also becomes simple as the basic assumptions start turning negative
In the beginning, there were enough opportunities to enter if one understood the rationale od Demand & Supply and also the Closures in China . And Honestly there were enough indications about the eminent fall as well in GE stocks : the Nomura Report , the fall in Graftech and other GE stocks world wide and the Buyback in HEG etc etc.
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Reason for sudden rise of Graphite stocks? is China issue resolved or this rise is temporary & wont sustain?
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What about the perfect market predicting removal of anti-dumping duties on Chinese GE?
http://content.icicidirect.com/mailimages/IDirect_HEG_Q1FY20.pdf
" Against the backdrop of removal of
antidumping duties on Chinese electrodes in India, this trend has intensified,
forcing domestic companies to reduce prices to maintain market share.
Furthermore, the muted trend in steel prices witnessed domestically and
globally does not augur well for the graphite electrode market. Cumulatively,
all above factors have put downward pressure on graphite electrode prices. "
This Trumps all else. 
Indian sarkar had threatened GE producers before to reduce prices. EAF Steel has prio over GE. And now environment is the new sexy thing in town.
Maybe we will see some people jumping off bridges? 
" The industry also wants the government to remove the country-specific high anti-dumping duty of $238 -900 a tonne levied on graphite imports. "
" Ravi Jhunjhunwala, Chairman and Managing Director, HEG, one of the largest graphite manufacturer, said the graphite prices are going up due to strong demand and not due to short-supply. He said the rise in graphite price has pushed up steel making cost by 6 per cent from 2 per cent and is surprising that steel companies are not targeting the rise in cost of other raw materials. "
So sarkar was worried about a 4% rise in steel cost/prices, so it chose Chinese dumping. Wah sarkar, wah! phir ek baar!
About the chinese article, it is communist propaganda. I have no decent words to say about the chinese.
The ADD (anti dumping duty) was imposed in February 2015. So, HEG guy looks correct.
Good study here:
Chinese is just 1000/ton more expensive than Indian GE.
This Forum totally missed this FACT and curious people asking questions about the decline were asked to “study the thread please” 
The decline EXACTLY started with the mid-September removal of the ADD, in this “perfect market case-study”. 
Even the ICICI report mentioned here, buries the FACT in the 8th line of a 13 line paragraph explaining the “softening trend”.
Bad Result:
OPM now 16% last quarter was 30%. Gone back to same early 2017 level.
PBT down 50% from last quarter.
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PAT@ 6 cr vs 866 cr YOY, vs 179 cr QOQ
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Horrible Q3-20 from GI. A superb example on how a cyclical/commodity company will behave?
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=2b7127d1-a487-431e-9524-6484a962379a
Tata Reality and Singapore’s CapitaLand have emerged as the main bidders for 25 acres land of graphite India in Bangalore. Deal is likely to be valued around Rs. 800 crores. Today’s Times of India
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When is the quarterly result off HEG expected?
Disc: Studying business, planning to take a small entry position
Cheers,
Personal View, retail inv knowledge. Disc: invested in Graphite India. Not a recommendation.
GI and HEG will be re-looked as normal manufacturing companies now as the previous returns are based on retulatory intervention in China and limited supply capacities.
Graphite Electrode returns will stablize slowly (2-3 Qtrs) due to following reasons:
- De-Stocking of Steel Companies at Higher Prices will come down.
- Supply side is constrained due to COVID, even from China.
- Global steel sector may see recovery in coming years.
- Pet Coke and Crude prices will stablize
- Focus on EAF Capacities by global companies due to decrease the pollution…
Risk:
All the above can be wrong and stock may correct down further…
Hi Arjun,
What about the possible headwinds that could arise due to Graphite being used in EV batteries and export goodness that could come as a result.
Did you come across this during your analysis?