Shares of HEG Ltd. have gained over 17% this week, due to Japan's newly imposed anti dumping duty on Chinese graphite electrodes.
This duty on China would increase the landed cost of imports of graphite electrodes in Japan; opening an opportunity for Indian players like HEG.
Anti Dumping Duty On China
On Monday, Japan imposed a 95.2% anti dumping duty on Chinese graphite electrode imports for a period of four months. This decision came after a government probe last month revealed that China was playing unfair and selling their graphite electrodes at prices that Japanese firms could not match.
Who Is HEG?
HEG is a Noida based company and is the third largest global producer of graphite electrodes — rods made of a special kind of carbon, which are used in electric arc furnaces that make steel.
The company runs the world's largest single site plant in Madhya Pradesh, with a capacity to make 1 lakh tonnes of rods per year. The company also exports 65% to 70% of its production to more than 30 countries.
Japan's Graphite Electrode Market
The size of Japan's graphite electrode market is around 60,000 tonnes per year. China supplies for 25% or 15,000 tonnes of this market.
With the new duty, China's landed import prices are about to get expensive around $10,000 to $14,000 per tonne. Earlier, the prices that the electrodes were being dumped at were around $5,000-7,000 per tonne, as per analysts.
This increase in prices could make Japanese steel makers not want to buy Chinese graphite electrodes — posing an opportunity for Indian players like HEG.
Does HEG Have Capacity?
As of 2024 end, HEG's annual capacity stood at 1 lakh tonnes per annum. The company had 20,000 tonnes of sparce capacity in the third quarter, according to Motilal Oswal Financial Services Ltd. This is more than the highest possible supply gap that Japan could face for its demand from China.
HEG Presence In Japan
Furthermore, as of HEG's FY24 annual report, the company has historically had exposure to Japan. The company earned a minor amount of Rs 6 crore from Japan in FY24. This share could increase if Japanese steelmakers shift who they buy their graphite electrodes from.
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