Shares of graphite electrode (GE) companies Graphite India and HEG rose as much as 10% on the BSE in intraday trade on Friday amid heavy volume in an otherwise subdued market.

Shares of Graphite India soared 10% to Rs 369.75 as the average trading volume on the BSE and NSE quadrupled. HEG also gained 10% to Rs 1,309 as volumes tripled. HEG is trading near its 52-week high of Rs 1,378 on August 19, 2022. In contrast, the S&P BSE Sensex rose 0.09% to 62,487 at 11:30 am.

Shares of Graphite India have soared 15% in the past three sessions after the company’s management said it remains confident that efforts to accelerate decarbonisation of the steel industry will lead to increased adoption of electric arc furnace (EAF) steel production. This, in turn, drives sustainable demand growth for graphite electrodes.

Moreover, the Indian steel industry is expected to continue its growth momentum on the back of government spending on infrastructure and exports, which are likely to impact electrode demand positively.

Meanwhile, the company’s consolidated capacity utilisation rate is 55% in FY22-23, compared to 81% in FY22. Lower volumes impacted results during the year as customers experienced higher energy costs and business uncertainty from the conflict in Russia and Ukraine.

The Indian government’s decision to remove basic duties on metal scrap in the 2023 Union Budget is expected to boost EAF output, Graphite India said. The allocation of Rs 10 lakh crore for capital expenditure in the Union Budget 2023 is expected to increase infrastructure development, thereby boosting steel demand.

Steelmakers are moving to the EAF process, expected to drive sustainable demand for graphite electrodes in the long run. Graphite India said in an investor presentation that the EAF process is considered more environmentally friendly than traditional methods of steel production, making it an attractive option for companies looking to reduce their carbon footprint.

Rising demand for infrastructure and consumer goods drove the growth in steel production. In addition, the trend of urbanisation has further boosted steel demand. However, the company said global economic volatility and trade tensions could affect steel demand.

Graphite India further said that China’s crude steel capacity would show moderate growth in 2023. Chinese steelmakers plan to commission up to 118 million tons/year of new crude steel capacity through the capacity exchange mechanism.