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Kolkata-based graphite electrodes maker Graphite India expects a better demand for its graphite electrodes on the back of a steady rise in the production of ferro alloy steel globally.
The closure of steel capacities in China leading to the decline in exports of both steel and graphite electrodes from the region will further strengthen the demand.
Graphite electrodes are primarily used in the manufacturing of ferro alloy steel through the Electric Arc Furnace (EAF) route.
According to KK Bangur, Chairman, the recent decline in exports from China has led to a rise in steel production through the EAF route globally.
Firm pricesIn India, the growth in the steel industry is supported by the government’s initiatives such as anti-dumping duties on major steel products and increased expenditure on affordable housing, roads and infrastructure, he pointed out.
The steady demand will help keep the prices firm. “Prices have doubled in the last one year and we expect it to stay firm this year,” Bangur told BusinessLine on the sidelines of the company’s annual general meeting here recently.
An Edeweiss report on Graphite India suggests that the demand for graphite electrodes was on a downswing between 2006 and 2015 on account of excess steel capacity created by China through the blast furnace route. This in turn exerted pressure on prices. “Dumping of steel products by China across the world resulted in lot of smaller capacities in the developed countries facing closures during the period,” the report said.
Any further consolidation will help achieve better price realisations, Bangur said.
Financial performanceRiding on the back of higher sales and better capacity utilisation, Graphite India posted 164 per cent rise in net profit to ₹29 crore for the quarter ended June 30, 2017.
EBITDA margins improved to 16.1 per cent during the first quarter of FY-18 compared with 10.3 per cent in the same period last year. The company had a capacity utilisation of 95 per cent in the first quarter of FY-18 against 68 per cent in the same period last year.
The improvement in margins was primarily on account of achieving better economies of scale due to higher capacity utilisation, Bangur pointed out.
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