An employee wears protective clothing as he removes slag from molten spheroidal graphite (SG) iron. (Photographer: Paul Thomas/Bloomberg)

Graphite Electrode Maker HEG Plans To Raise Capacity To 1 Lakh Metric Tonnes

Graphite electrode maker HEG Ltd. plans to enhance its capacity to 1,00,000 metric tonnes per annum.

“We are presently have an annual capacity of 80,000 metric tonnes, which we want to enhance to 100,000 metric tonnes per annum,” said Raju Rustogi, chief financial officer of HEG Ltd. “We’ll go in for implementation after approval in the forthcoming board meeting.”

Traditional steel-making blast furnaces were seen as a cause of pollution and were shutdown in China. That increased the production and capacity utilisation of electric-arc furnaces—in which graphite electrodes are a key raw material. Thus began the dream run for electrode makers like HEG Ltd. and Graphite India. Electric-arc furnaces require about 2.5 kilograms of graphite electrodes for each tonne of steel produced.

China’s pollution curbs could double the share of electric arc mills to 20 percent of total production by 2020, from less than 10 percent now, pushing global demand for electrodes up 60 percent, reported Bloomberg citing Mitsubishi UFJ Morgan Stanley Securities Co.

Bank of America Merrill Lynch initiated coverage on HEG Ltd. with a ‘Buy’ rating. The price target of Rs 6,700, implying a potential upside of 108 percent from the last regular trade. BofAML also expects 30-40 percent dividend payout ratio implying 8.5 percent dividend yield, it said in the research report.

Shares of HEG Ltd. were locked in the upper circuit of 20 percent on Wednesday, trading at Rs 3,885.75 apiece.

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