Shares of graphite electrode makers HEG and Graphite India are higher by 10% and 8% respectively on anticipation of a ruboff after major global player Resonac Graphite recent hiked prices by 20%.
Formerly known as Showa Denko, Resonac Graphite is a leading player in the business of graphite electrodes, and its price hike of over 20% applies to all orders from September 9.
In a recent note, B&K Securities said it sees 50% upside in shares of Graphite India, re-iterating its Buy recommendation. B&K said the growth outlook for Graphite India remains strong owing to the decarbonization push in steel manufacturing, as well as capacity addition in Electric Arc Furnaces.
HEG recently said that the demand for graphite anodes are 'absolutely one way, which is upwards', and the prices at which Chinese companies are selling is below cost because of large overcapacity they have created.
HEG has one of the largest integrated Graphite Electrode plants in the world, and exports over 70% of its production to more than 30 countries of the world.
Graphite anodes are between 10-14% of a battery price, and even with battery prices going down, HEG said the business is viable with excellent IRRs and sticky demand.
The Indian government too has been in discussions with the government of Sri Lanka on acquiring graphite mines there, it has been reported.
HEG has already announced plans for over 100 million tonnes of Greenfield capacities, which will be operational by 2030. Out of this, about 64 million tonne is likely to be in operation by as early as 2027.
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