Graphite Electrode : Graphite India/HEG

HEG does have a Graphite story brewing up and from my point of view it is very interesting.
Lets look at the anode part of an EV. We can see that the anode is 15% of the overall cost of the battery. The anode is made up of powder graphite with various binder in it. The particle size of the carbon needs to be small and the purity of the powder should be high.

HEG has a new subsidiary TACC which will produce the graphite for anode. They will invest 1000 cr in CAPEX. The yearly output of the plant will be 10000 tons. The plant will be in operational from Q2CY25. The revenue will be 1000 cr and the margins will be around 30% [Interview of Mr. Riju Jhunjhunwala]

Why is this important ?

India has a PLI scheme to set up a 50 GWh cell manufacturing plant. As per Mr. Riju, to produce 10 GWh of cell, the graphite required in the anode would be 10000 tons. By 2030, the total requirement will be 260 GWh. This in my opinion is huge opportunity and currently all the graphite is being imported.

The following players have been awarded by the PLI scheme to set up Lithium ion cell production.


Valuation ?

The market still views HEG as a deep cyclical company. In case the Anode story plays out the cyclicality will be reduced and the company can get re-rated to 4-6 times P/S.

Disc: Biased. Invested (0.5% PF) willing to scale up as numbers come.


The graphite electrode price is expected to remain subdued in current FY. Graftech increased capacity utilization and commissioning of HEG new capacity will further add on the supply side there by further impacting the realization… Anode story is 24 months ahead story…
Long term growth story seems intact but that will probably play after 12 to 18 months. As there are other good opportunities in the current market, one should carefully allocate capital as you may loose out growth opportunity on other stocks/sectors.

Disclosure : Not invested but tracking the industry for academic purpose…


My view is a good time ahead for Companies like this and the reason is

Domestic steel demand to grow 9-10% in FY24, says revised ICRA estimate (

Feel free to share your thoughts which company looks more attractive to you.


Does anyone has a view that what the export ban of graphite electrodes y china has in store for companies like these. I am assuming positive, but these companies are working at kind of peak or good margins in last couple of years so definitely not a cyclical low here.

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export ban is not on graphite electrodes (used in EAF) , but graphite anode which is used in Lithium Ion Batteries. Both are entirely different products, hence no impact on them.


Wrote a post on Graphite anode powder play


poor results from HEG

  1. drop in realization
  2. Margin compression
  3. Depreciation kicking in due to added capacity.
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HEG Q3 FY24 concall Highlights

No growth in steel production worldwide
a. US is flat
b. EU has degrown by 7%
c. CN has subdued demand + excess inventory has been exported
d. currently electric arc furnace - upcoming capacity of 90 million tons, by 2025 40 Million tons of additional capacity will come online. Rest post 2025. Decarbonization of steel is a one way process.
Though margin pressure is going on, HEG has operated at 85% capacity for last 9 months on the 80000 ton capacity plant
Margin looks bad due to delay in passing price drop in needle coke. Usually takes at least a quarter. However margin pressure will remain subdued for the next 3 quarters
There is no inventory overhang and it is at stable level. So risk of an inventory right off is relatively low as per management.
HEG has the highest utilization in the electrode space~ 85%
getting subsidy on electricity from MP at a discount of 50 paisa. They expect the power cost to remain at 5.5 rupees per unit but this can go down to 4 as they are also looking out to buy renewables.

TACC - Construction has started and will get operational by June / July 2023
the major step is the process of making anode powder where HEG has experience from past . They will use the old furnaces to graphitize.
the next of the steps to create anode powder is mostly done by machines

TACC has been procuring 10 ton per month and evaluation with customers . They can see 50-60 GWh capacity being materialized in India.
competition (himadri etc. ) has not announced any capex in anode powder space.

they have indicated that they have the necessary expertise to produce anode powder. ( Which seems legit from my point of view )

industry is going through a lot of pain HEG is holding up

  1. Graftec has shut down 25000 ton capacity and has been reporting losses -

  2. Graphite India numbers are very poor and have been writing off inventory


Very informative excerpt on Global Graphite Electrodes Market from Graftech Annual Report FY 2023:


Q4FY24 Concall Highlights

HEG is restructuring itself. It will separate the legacy business from the new age business. The concall is very detailed.


Industry Overview:

  • Global steel demand expected to rebound with a 1.7% increase in 2024.
  • India expected to have an 8% growth in steel demand driven by infrastructure investments.
  • Decarbonization process leading to increased demand for electric arc furnaces. German company SMS report
  • Positive outlook for the electrode market due to increasing demand for green technologies.
  • Ninety million tons of Greenfield capacities are announced. Currently nine million tons are already operational. 30 million tons are coming in next one year.
  • Graphite demand (ex China) is currently 500,000 to 550,000 tons It will increase to 700,000 to 750,000 tons by 2030

Graphite Electrode Business:

  • HEG has been gaining market share due to high capacity utilization. No req Requirement for inventory write-offs.
  • Needle coke prices have been aligned with electrode price drops, minimizing margin impact.
  • Optimistic about future demand growth for electrodes due to increasing electric arc furnace capacities globally.
  • Volumes have been around 69,200 to 69,500 during the last 3 fiscals.
  • The company plans to provide utilization or volume numbers in quarterly presentations.
  • Revenue split: Roughly 70-75% from ultra high-power graphite electrodes.
  • Margins have reduced due to a reduction in selling price caused by steel production degrowth.
  • No existing players have announced capacity . greenfield capacity takes four to five years and brownfield capacity picks two to three years.

RE plus is also into Battery pack manufacturing for battery energy storage and vehicles. This is good for TACC as part of the anode powder will be consumed by the cell supplier.

Disclaimer: Was invested , currently tracking for better price