HEG Limited (NSE: HEG) Q4 2025 Earnings Call dated May. 26, 2025
Corporate Participants:
Unidentified Speaker
Ravi Jhunjhunwala — Chairman, Managing Director and Chief Executive Officer
Ravi Kant Tripathi — Chief Financial Officer
Manish Gulati — Executive Director
Analysts:
Unidentified Participant
Navin Agrawal — Analyst
Suraj Khaitan — Analyst
Shlok Bhartiya — Analyst
Kaushal Patel — Analyst
Aryan Sharma — Analyst
Amol Rao — Analyst
Presentation:
operator
Sam.
operator
Ladies and gentlemen, please stay connected. The conference call will begin in next few minutes. Thank you. Good day. Ladies and gentlemen, welcome to the HEG Limited Q4, FY25 and full year FY25 result conference call organized by SKP Securities Limited. As a reminder, all participant lines will be in the listen only mode and you will be able to ask questions after the management’s opening remarks. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Naveen Agrawal, head institutional equities at SKP Securities Limited. Thank you. And over to you, sir.
Navin Agrawal — Analyst
Good afternoon, ladies and gentlemen. I am pleased to welcome you on.
Navin Agrawal — Analyst
Behalf of HEG Limited and SKP securities.
Navin Agrawal — Analyst
To this financial results conference call with.
Navin Agrawal — Analyst
The leadership team at HEG Limited. We have with us Mr. Ravi Junjunwala.
Navin Agrawal — Analyst
Chairman, Managing Director and CEO and Mr.
Navin Agrawal — Analyst
Raju Junjunwala, Vice Chairman along with their.
Navin Agrawal — Analyst
Colleagues Mr. Manish Gulati, Executive Director, Mr.
Navin Agrawal — Analyst
Om Prakash Ajmera Group CFO, Mr. Ravi Tripathi, CFO and Mr. Ankur Khetan, MD and CEO of TACC Limited, a subsidiary of HEG Limited.
Navin Agrawal — Analyst
We will have the opening remarks from Mr. Junjunwala followed by a Q and A session.
Navin Agrawal — Analyst
Thank you and over to you, Raviji.
Ravi Jhunjhunwala — Chairman, Managing Director and Chief Executive Officer
Thanks friend. Good afternoon and welcome to our financial results conference call for the fourth quarter and full year 2425. As per the World Steel association, global crude steel production in Q1 2025 declined slightly by 0.3% to 468 million tons compared to 470 million tonnes in Q1 of 2024. Similarly, steel production excluding China also came down by 1.5% to 209 million tonnes in Q1, indicating continued weakness across major steel producing regions due to weak demand and pricing challenges. Chinese production however, rose by 0.8% to 259 million tons, enabling stronger export volumes and impacting global pricing. India was one of the exceptions and continued its upward momentum with a 6.8% year on year increase in steel output to 40 million tonnes in Q1, driven by infrastructure investments and other demand.
In contrast, large steel producing countries like us, Germany, Japan, South Korea, Turkey all witnessed notable declines ranging between 0.6% in US to as high as 12.6% in Germany, reflecting regional economic slowdowns leading to weaker demand. Chinese steel exports once again surged, intensifying global competition and further pressurizing the international prices. Consequently, it also impacted demand of our products, keeping prices under Pressure. The recent imposition of 10% import duties in the U.S. if not withdrawn, will have some impact on our business. However, given HEG’s very well diversified sales sales footprint across all major global markets, the overall impact is expected to be limited.
Our EBITDA quarter on quarter has been going up. It was 16% in Q1 which went up to 21% in Q3 and in last quarter Q4 it was as high as 27% with a full year average being 21% excluding mark to market loss on investments in the shares of Graftec International. Operationally, last quarter was our best quarter. HEG continues to be amongst the lowest cost producer of electrodes in the world, more so with our last expansion which brought our capacity to 100,000 tons. This should be seen against the backdrop where we have recently seen most of our Western competitors not only completely shutting down some of their plants, but also downsizing some of their plants in Malaysia, China, us, Spain, France, Mexico and Japan.
If you look at these closures and reduction of capacities which have all been announced in the last 12 months or so over the past we have seen four plant closures, four full plant closures, an additional downsizing of four other plants leading to a combined capacity reduction of 120,000 tonnes which is equivalent to about 16% of global total capacity excluding China and Russia. These are very significant and meaningful reductions in recent years in our business which points to tightening of supply and possible implications on future pricing dynamics. This should help industry to regain some pricing power in the medium term.
All these reductions have happened at a time when we at HEG have increased our capacity from 80,000 tons to 100,000 tons last year. Even after our expansion, HEG continues to operate at the highest capacity utilization in our industry at between 80 and 85% as compared to an average of 50 to 60% of our international Western peers. Moreover, world’s largest graphite electrode company, Resonac of Japan, with a total capacity of approximately 210,000 tons spread across six plants worldwide, US, Spain, Austria, Japan, Malaysia and China, representing about 30% of the world’s graphite electrode capacities, excluding China and Russia, is considering sale of its graphite electrode business by end of this year.
It has also recently announced closure of two of their plants in Malaysia and China, resulting in a total reduction of 44,500 tonnes, which is which constitutes a 21% cut in their total capacity. Similarly, in July 2024, Tokai Carbon of Japan had announced a capacity downsizing their German plant from 30,000 tons to 20,000 tons and the closure of a plant in Japan which was about 14,000 tons, resulting in a total capacity reduction of 24,000 tons which is equivalent to about 25% of their overall capacity. All these are in addition to Graftec International having closed their US plant early this year with a capacity of 24,000 tons.
In US all these closures add up to about 120,000 tons and with these the total graphite electrode industry today stands at a total of about 633,000 tonnes as against about 752,000 tonnes about two years ago, a reduction of 18%. You are aware that given their high cost structure and incurring significant losses, most of our international peers had announced their intent to increase electrode prices by about 15 to 20% in last two quarters. While we are while we do see some price increases being absorbed in the market, we hope in the coming quarters the impact of and the impact of significant closures of above capacities would help the industry to get back in a healthy state.
Now let me take you through our investment in equity of GrafTech International US a significant player in the electrode industry. Graftec is the second largest graphite company in the world with a capacity of about 178,000 tons with three plants in Mexico, Spain and France. In addition, they also have a backward integrated needle Coke plant, our key raw material located in Texas US with a capacity of about 140,000 tons which meets a significant part of the needle coke requirement. As part of our treasury operation we have invested a total of Rupees 282crores to buy 2.57 crore shares of Graftec which is 9.98% of their equity at an average price of $1.32 per share.
As you are aware, as per accounting standards, we have to record our investment at fair value as per the quarter closing price of the share. As such as on 31st March 2025 the share was trading at $0.07 per share because of which we had to fair value them at a closing price and take the hit of MTM mark to market of rupees 160 crores for the quarter 4 of FY25 and rupees 80 crores for the full year of 2425 purely on account of this investment. This is evident when you look at our other expenses which looks abnormally higher in the quarter as compared to the last quarter.
Excluding this MTM loss on Graphtec investment shares, our PBT would have been rupees 88 crores for Q4 and rupees 228 crores for the full year 202425 which makes Q4 as the best performing quarter. In the previous year our capacity utilization for the year 2425 was close to 80% based on our expanded capacity of 100,000 tonnes and we hope to maintain this in the current year too if not increase this a little bit. We do remain the most cost competitive graphite electrodes company in the Western world supported by low fixed costs and a large capacity of 100,000 tons at single location.
While the total graphite industry’s average plant size stands at about 40,000 tonnes today. Despite near term challenges, we remain optimistic about the mid to long term outlook. The global shift towards decarbonization is now irreversible and we continue to closely monitor new greenfield electric arc furnace projects which are expected to drive future demand of graphite electrodes. We believe over the last 18 months or so approximately 11 million tonnes of new greenfield electric arc furnace capacities have already been commissioned and in the next 18 months this figure is likely to be in the region of another 25 to 30 million tons.
So which will make it close to 3540 million tons in the next 18 months. 35 to 40 million tons of new electric arc furnace capacities above capacity reductions across the graphite electrode industry coupled with higher electrode demand are likely to help stabilize the demand supply dynamics easing margin pressures and paving the way for a more balanced market environment in the coming years. We hope these reductions in electrode capacities will help in selling prices firming up soon as the current prices are unsustainable for the industry which is reflecting in most of the western world’s actions in the recent past as described above.
Now a word about demerger of heg. Our scheme has been filed with stock exchanges and all other relevant authorities after which it will go to nclt. We expect to get all the required approvals by end of calendar year 2025. With this friends, I would now request our CFO Ravi Tripathi to to take you through the financials of the company for the last quarter as well as full year 2425 and then we’ll be very happy to address all your questions and queries. Thank you.
Ravi Kant Tripathi — Chief Financial Officer
Thank you sir. Good afternoon friends. I will now briefly take you through the company’s operating and financial performance for the year ended 31st March 2025. For the year ended 31st March 2025, HCG recorded revenue from operation of rupees 2,153 crores as against rupees 2,395 crores in the previous financial year. The revenue for the quarter of FY2025 was rupees 537 crores edge against rupees 547 crores in the corresponding quarter of the previous year. During the year ended 31st March 2025 the company delivered EBITDA of rupees 388 crores as against rupees 526 crores in the previous financial year.
The company on a standalone basis recorded a net profit after tax of rupees 101 crores in FY25 as against rupees 232 crores in the previous financial year. And on a consolidated basis the net profit after tax is rupees 115 crores in FY25 as against rupees 312 crores in FY24. The company is long term debt free and had a treasury size of approximately rupees 875 crores as on 31st March 2025. The Board of Directors have recommended a 90% of final dividend that is through rupees 1.80 per equity share of the face value of rupees 2 each for the financial year 2025 subject to the approval of the shareholders at the ensuing agm.
To take up more questions from the participants, the detailed presentation has been uploaded on the company’s website and on the stock exchange. We would now like to address any questions or queries you have in your mind. Thank you. Over to Naveenji.
Navin Agrawal — Analyst
Thank you very much.
Questions and Answers:
operator
We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question and limit themselves to two questions. You may join the queue again and time permitting we will take your follow up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Suraj Khaytan from SKP securities limited.
Please go ahead.
Suraj Khaitan
Hello. Am I audible?
operator
Yes. Please go ahead.
Suraj Khaitan
My first question is regarding the graphite anode plant. When is the. What is the update on the commissioning timeline of the graphite and plant?
Ravi Jhunjhunwala
Would you like to take that measure, sir? That will be. That will be in April 2027.
Suraj Khaitan
Okay. And so what is the capex that we have incurred so far? And what is the Expected remaining spent.
Ravi Jhunjhunwala
Sorry, can you repeat the question again?
Suraj Khaitan
So what is the capex that we have incurred so far and what is the expected remaining spend?
Ravi Kant Tripathi
So we have, right now we have all the land and the permissions related to the site. We have started our groundwork and we have also finalized our machinery. So in next one quarter we’ll be finalizing all the, we’ll be placing all the orders of the main machinery and our, our site work is already started.
Suraj Khaitan
Can you please quantify the capex that we have incurred so far till now.
Ravi Kant Tripathi
In terms of implementation? A little bit more than 100 crores we have already spent and we have, we have started committing against the main machinery.
Suraj Khaitan
And what is the expected capex that we can incur on this plant? In this FY26.
Ravi Kant Tripathi
The total capex is around 1850 crore and we would be spending a large amount of that. We would be committing almost 100% within this, within this financial year.
Suraj Khaitan
How do we plan to structure the capital for this project? Like it will be all through internal accruals or debt.
Ravi Kant Tripathi
It will be a mix of debt and equity.
Suraj Khaitan
And any recent development around the US tariffs that is going on that.
Ravi Kant Tripathi
Yes, definitely.
Ravi Jhunjhunwala
You’re talking of U.S. tariff or something else.
Suraj Khaitan
Yes, a U.S. tariffs.
Ravi Kant Tripathi
So right now in case of anode, the biggest change which has happened is that almost all the customers outside China has started opting for US for China +1 +1 because of the uncertainty in US and various other geographies. So that is giving us a very clear advantage of the project being manufactured in India.
Suraj Khaitan
Around the graphite electrode that on the forex side. What is the current heading policy that we are opting right now and how are we managing currency volatility especially given our export exposure?
Ravi Jhunjhunwala
You see our exports are much larger than our imports. I mean our main raw material needle coke is also imported. So on an overall basis our export proceeds are larger than what our dollar spends are. So we do take a view from time to time and either we book a little bit in advance or we just leave it open based on, based on the market. Market speculation if you want to call it. And so this is what it is. It’s partly covered, partly not covered.
Suraj Khaitan
Okay sir, thank you. Thank you for the opportunity.
operator
Thank you. Ladies and gentlemen, to ask a question please press star and one on your phone. Now we’ll take our next question from the line of Shlok Bhartia from Swan Investments. Please go ahead.
Shlok Bhartiya
Good afternoon sir.
operator
Shlok, can you use your handset mode please? Your audio is not clear.
Shlok Bhartiya
Is it audible now?
operator
Better, please go ahead.
Shlok Bhartiya
So in your initial remark you indicated that near about 120,000 tons of the supply out of the market. So right now the current capacity is around 630,000 tonnes. So just wanted to understand in terms of the demand perspective, what was the total demand in financial year 25 and with the new 11 years, that commission in 18 months and another 25 million ton likely to come in 18 months, what could be the incremental demand on electrode do we see in next 18 to 24 months?
Ravi Jhunjhunwala
You see on an average, any electric carpenter steel producer uses about 1 1/2 to 2 kilos of electrode per ton of steel. So if we are talking about 25, 30 million tons of new capacities, partly which have already been commissioned and the other part which is likely to be commissioned in the next six to eight months, you more or less multiply that by 1.5 to 2 kilos and that is the additional demand for electrode that gets created. But to answer your second part of the question as we spoke, in addition to whatever has been commissioned in the last 12 months and whatever is likely to be commissioned in the next 12 months, we believe that in addition to that there is about 50 million tons more, which is at different stages of commissioning.
I mean at some places the equipments have been ordered, at some places the construction has started. So from off all various data that we collect from different sources, the total new electric arc furnace capacities, including the last 12 months actual commissions of about 1012 million tons, it’s more than 100 million tons.
Shlok Bhartiya
In FY25. What was the actual demand of lead towards globally?
Ravi Jhunjhunwala
I mean it’s very difficult to answer that very specific question. All I can tell you is that as I said, you look at the electric awkwardness production of steel and you more or less multiplied by 1.5 to 2 kilos. And electric arc furnace steel capacity, I mean production, I mean it changes from month to month. So without China, Manish, what would you say what is the general production has been last year or let’s say this year, minus China?
Ravi Kant Tripathi
Yes, sir. Sir, I would like to put this in, in a way that if we look at the capacity utilizations of all the producers, Western producers, heg, graphite, India. So if, if let’s say Grabtech was working at 58 or something. I don’t remember the figure accurately. So that was the figure. And we, let’s say take 65% for Japanese this and others put together, industry put together. If we put a figure of, let’s say around 65% multiplied by six, six and a half, 650,000 ton of capacity. So this is where we are. So these are. It depends on the utilization of the electrical finance industry which we can say for the.
For the markets which they cater to. If the electric arc furnace steel is running at an average capacity utilization of let’s say 75% we can look at the individual companies Graphtech resonance, our Stockholm graphite India’s capacity utilization. So we’ll. I think we will come in demand of around between 450 to 500,000 tons for these. For these six companies combined.
Shlok Bhartiya
Thanks for that answer. Just wanted to understand definitely now globally the role of China plus getting China plus one is I mean again coming back in the. But in terms of the electrodes, can you help us in understanding the supports all these capacity 120,000 tons is going of the system. What role does China plays in terms of the overall experience of electrodes and in terms of the impact on the overall pricing? Because in first quarter also we have seen some increase in the pricing now after this closure of Japan resembling there was some increase but the benefit of the same is yet to get reflected on the.
On our numbers.
Ravi Jhunjhunwala
I’m sorry, on number on the question that you just asked. But just to tell you generally China still does not have the technology and we do compete with China but in a very small segment in the market, which is the lower part of the segment of the let’s say 500,000 tons of electrode demand or whatever Manish just spoke about. So the impact on people like us or graphite India or the Japanese or Americans is minimal because of Chinese production of electrode and exports. But again, I’m very clearly saying that China produces very large amount of electrodes but they are not yet there in the real, in the real sense what you call the high grade electrodes or the ultra high power electrodes where we are only competing with the two Japanese companies and Graphtec in America.
Shlok Bhartiya
So overall it seems that because of this closure and no competition from China there could be addition enough of the price appreciation for the graphite electrodes for the forthcoming year. And that’s an August well for US Graft and the other manufacturers. We’ll try to assume that.
Ravi Jhunjhunwala
Can you repeat the question? Your voice is not very clear.
Shlok Bhartiya
Now since you said that a Chinese is not a big player because of the technology. So the closure of the current unit and the price hike that has happened in the June to March quarter, try to assume that coming quarters of FY26 we should have a Decent price increase for the graphite electrodes and that should be sustainable for the full year.
Ravi Jhunjhunwala
I hope so. I mean these closures have just been announced. I mean it takes some time to even close the plant. But there have been very significant announcements in the last two, three quarters, as I just explained, who has announced what kind of capacity reductions. So it’s a very sizable number. And as I said, we continue to operate. We were, let’s say operating at about 75, 80% about two years ago when we had a capacity of 80,000 tons and we are still operating at 80% with a new capacity of 100,000 tonnes. So obviously our production has gone up and we have taken some somebody’s market share.
And as I said, we are probably the lowest cost producer in the world. And again, to repeat what we have been saying for a very long time, Exports constitutes about 2/3 of our exports, 2/3 of our sales. So we are fairly well entrenched in the export market and we are exporting to more than 25, 30 countries, from smallest ones to the biggest ones.
Shlok Bhartiya
Last question from my side, I mean the last four quarters, definitely we have seen a sequential improvement in operating leverage and which has driven the overall margin for us. So is it fair to assume the last quarter margin of 21%, is there sustainable numbers to work with or probably there could be, I mean some pressure on that.
Ravi Jhunjhunwala
You see, it will all depend on the pricing. I mean, what can I tell you? I mean, I can’t pinpoint the number of 20%, 22%. We’ll keep on reporting to you whatever happened in the last quarter. But from all indications and from all the happenings in this industry for the last 2, 3/4 where substantial closures have been announced, and these, obviously these will take a couple of quarters, at least one or two more quarters to be closed down. So while the capacities of electrodes are getting closed in, high cost economies of the world and the new electric car furnaces coming up in the world, which will need more in more electrodes.
So directionally what you are saying is absolutely right. I mean it’s a matter of time that we’ll see, we’ll start seeing some impact on the pricing.
Shlok Bhartiya
Sure, sir, that’s all from my side. Thank you and all the best.
Ravi Jhunjhunwala
Thank you.
operator
Thank you. Take our next question from the line of Kaushal Patel, an individual investor. Please go ahead.
Kaushal Patel
Hi, can you hear me? Yes, can you hear me?
Ravi Jhunjhunwala
Yeah, we can, we can.
Kaushal Patel
Hi, thanks. Thanks for taking. Just to piggyback on the last question, that’s a an additional 100 to 120,000 of new graphite electrode capacity. Sorry EF Steel Products and capacity coming online. Do you expect the China electrode would be a major competitor in that new capacity or is it all like large mills and requires ultra high power and it should not be a major part of competition from China?
Ravi Jhunjhunwala
No. Most of these new capacities of electric arc furnaces which are coming up, these are these hundred million tonnes that we are talking about, these are all on in the western economies. So obviously they’re putting up large furnaces which will require big size electrodes which we call ultra high power. And that’s where the competition from China is minimal. These are all large furnaces which are now coming up. I mean nobody is going to put 100,000 or 200,000 tons in electric car furnace in today’s world.
Kaushal Patel
Also there was a report last December coming out of South Korea saying Posco, the major steel producer there is trying to phase out their graphite electrode imports which South Korea doesn’t produces currently and say the sister company is trying to produce their graphite electrode themselves. Do you have any thoughts on that? Or like do you see any other player coming out in South Korea that produces graphite electrode?
Ravi Jhunjhunwala
Manish, Manish, would you take this question?
Manish Gulati
Yes sir. Cbn, what you’re mentioning this Korea thing. Bosco, we have also heard this but nothing beyond that, I mean nothing concrete we have come across. We did hear that they will, they are considering putting up a plan somewhere here there. So beyond that then nothing came over. This news is I think about three to four months old. So maybe we’ll, we’ll check up. But so far there’s nothing concrete on that but we did hear it.
Kaushal Patel
Okay, thank you. Also to come to your new anode production facility, can you explain us like with new policy like China plus one where US might be looking to import their material from like other countries than the China. What is the current situation? What are the other major countries that is providing to this anode material for the EV batteries And where do you see yourself? Because it seems like because of the China competition other countries are also struggling right now where they sell their material below their cost. So where do you see this going? Like if this China anti China policy from us and where do you see India playing role in that?
Unidentified Speaker
Hi Ankur. This side. So yes right now the major part of the anode is happening in China. China is in fact supplying more than 90% of the synthetic anodes. And there’s a very big difference between production in the western countries versus India, as we speak about the electrode business, the same is applicable about the anode as well. Because while manufacturing in India, we have a very significant advantage to have control over our fixed cost, which is one of the most important factors for the long run. Second part is that when with expertise of HEG over last 50 years, our team plus our technological aspects are very well settled in terms of the finalization of the product, the making, the graphitization and several other processes.
That is why for a newcomer, especially in the Western world, there is a lot of work which has to be done in terms of research and development, which HEG has already been doing over the last many years. So we definitely enjoy at least a very big advantage of the R and D as well as of our expertise over the years. And while we are coming up with our commercial plan today, the fact of the matter is that we have been working on the project in terms of the research, in terms of the demo plant since a much longer time.
So when we discussed Today with the OEMs across Europe and US, there is a clear distinctive advantage to have a facility in India and supplying to the Western world versus compared with actually having facility in the Western world or in fact competing with China.
Ravi Kant Tripathi
And also, if I can, also, if I can just tell you quickly about the domestic market, I think by the year 2030 you will see a demand of between 100,000 tons to 140,000 tonnes based on the batteries cell that will be produced in India. So we are looking at not only the global market, but actually the India market itself would be mature enough to consume 120,000 tons of graphite anode powder. So our first stage, of course we are starting with 20,000, but we hope that in the same location we’ll be able to at least double that capacity in the next four to five years.
Kaushal Patel
And what is the current supply dynamics in India?
Ravi Kant Tripathi
Currently they are importing from China, although there is hardly any cell manufacturing in India. But couple of companies who have started cell manufacturing, like Ola Xide and all, they are sourcing their anode from China, which is not a problem right now, because obviously, but one day the Indian companies start producing the same anode powder, then they would rather buy here for localization, you know, promotion. And they will be getting more and more benefits if they buy out of the Indian factory rather than import from China.
Kaushal Patel
And what is the main raw material that is used in this? Like plants like to produce the EV battery anode factories like is it same as the graphite electrode like the petroleum needle coke or like is it something else?
Ravi Kant Tripathi
Ankur?
Unidentified Speaker
So it’s very similar to the petroleum Navy coke but the only major difference is that we don’t use calcined materials. So it is normally green needle coke and the two major raw materials are the needle coke as well as power. So again like electrode anode is also very highly power intensive manufacturing process.
Kaushal Patel
And who are the major supplier for those currently?
Ravi Kant Tripathi
So we have very good tie ups with the western players including P66 and we have again with the relationship with HCG have. So we have good material which they are also providing. And then you have, then we do have material in Japan as well available. So these are some of the sources because again even in the raw material there is a difference of the customers for non Chinese raw material. And for our kind of capacity we don’t see a challenge of this quantity from the western and the Japanese producers.
Kaushal Patel
Okay, and my last question to Ravi sir, you have said this many times in the past conference calls saying the current prices are unsustainable. And we have seen that over the years like closing down substantial capacity of about like 18%, 16% of the ex China graphite production. If this continues for a little while, where do you see HEG and Indian players being the low cost players. I would assume that you are very well protected from this. But where do you see major cut downs coming from? Like if you have to, if you have to take a good care like whether China, USA and yeah, where do you see that? And the reason I’m asking is because you’re putting a substantial amount of confidence in buying 10%, about 10% of Graphtec and just trying to understand like if you see, if you see if this continues for a little while, do you see that any major, any major write down that company can incur.
Ravi Jhunjhunwala
You see obviously we increased our capacity about four or five years ago from 60,000 to 80,000 tons which more or less happened during the COVID years. And as I mentioned in my talk we were operating at about 80% after expansion from 60,000 to 80,000 tons two years ago. And currently we are still operating at 80% when we are at 100,000 tons. So our capacity utilization has more or less been in that region of 75, 80, 85% at 60,000 tons, 80,000 tonnes and now 100,000 tonnes. And this indirectly also tells you that we are probably the best cost producer, the lowest cost producer and we have twin advantages.
One is the size after all these new closures that we just saw in the last three, four months from The Japanese and Americans. The average size of all other plants is like 40, 45, 50,000 tons at the most. So if you’re comparing a capacity of 40 to 50,000 tons in Japan, Germany, France, Spain, US versus a hundred thousand ton plant in India, I mean you. You have the answer. And as I said, and as I said, we have been exporting about 2/3 not for the last 5, 7 years but for the last 25, 30 years.
So we are fairly well established in most of the geographies of the world. And obviously unless our quality was as good as anybody else provides we would not be exporting 65, 70% for 30 years. And we are pinning a lot of hope with this new new electric arc furnaces which are. Your call has been put on hold.
Ravi Jhunjhunwala
By the other party.
operator
Yeah, please go ahead, sir.
Ravi Jhunjhunwala
No, I probably finished my answer. There was some interruption in between.
operator
Kaushal, I believe your questions have been answered. Yeah. Thank you.
Kaushal Patel
Yeah.
operator
We’ll take our next question from the line of Suraj Khetan from SKP Securities. Please go ahead.
Suraj Khaitan
Thank you for your follow up question. My question is regarding the US impact on the graphite electrode. What? The tariff that they are imposing. What will be the impact that we can see in graphite elections?
Ravi Jhunjhunwala
No, it is 10% for the time being. It is 10% not only from India but from all over the world. So we will have to see, wait and see. I mean the real date is the 9th of July when this 10% until when it is 10%. I mean you never know whether it will come back, come back to zero or it will remain at 10% or. I mean it’s just speculation today.
Suraj Khaitan
Thank you.
operator
Thank you. We’ll take our next question from the line of Aryan Sharma from BNK Securities. Please go ahead.
Aryan Sharma
Yeah. Hi. So from what I get there are multiple capacity closures you just told us. Plus we have already seen some price increases in seb. I think. So could you quantify like what we could expect in price realizations in IT and electrodes going forward? Like are there any price increases which we have asked for or expected near term as steel prices are also better comparatively.
Ravi Jhunjhunwala
Manish, would you take that?
Manish Gulati
Yeah. Yes, sir. You see, Arian, the price increases which they have announced you would have noted that they have said for future business booked. So any company if, like if we talk about ourselves. So we are of course booked for the next two months, three months. So these things take some time to take effect. And of course these capacity reductions are helpful in a way. And if you look at the financials of the peer group, everybody is eager, they’re dying to increase prices because only then everyone, the industry can sustain itself. Some are in better shape, some are not so better shape.
But price, everybody needs prices to rise. It may take a while, it, it may take a quarter for you to actually see it happening on the ground. But what the sense we are getting is, is that yes, some price increase may be on the way, but we have to wait for a while because the orders which we have on hand, of course they have to be executed. So towards, let’s say the second half, I think, and we hope that prices should increase, extent will be known how much steel production is still down. As chairman said in his speech, the rest of the world we cater to it is still down.
So once the seed production starts to improve, I’m sure there would be price increase. But please wait for, give us a quarter or two to provide clear direction.
Ravi Jhunjhunwala
And in addition to what Manish just explained, I mean the impact of these very recent closures, I mean these recent closures that we just spoke about, especially the Malaysian plant and German plant and this and that, it takes some time to. It’s not like electric arc furnace operation that you switch it off in one day and from tomorrow morning you don’t have any capacity. It’s a very long drawn process even to shut it down. So the shutting down process of all these plants that we just spoke about in the Western world, world takes a little bit of time before the whole thing is shut down.
Until then, obviously they would have electrodes at different stages. So they will have to finish and produce those electrodes before they completely shut down. But as Manish said, it’s a matter of maybe a quarter or two before this total capacity of I think something in the region of 100, 120,000 tons that we spoke about, which, which disappears from the horizon.
Aryan Sharma
Thank you for the elaborate answer.
operator
Handset mode please. The audio is not very clear.
Aryan Sharma
Is it better now?
operator
Not really. Are you on your handset? Mod? Hello, Arya.
Aryan Sharma
Hello.
operator
Yes, please go ahead.
Aryan Sharma
Yeah. Is it better now?
Ravi Jhunjhunwala
Yeah, yeah, yeah, yeah, I’m okay. I’m hearing.
Aryan Sharma
Yeah. So could you just tell us about what we think about the spread going forward? Like what are the needles of price trends that we’re seeing right now? Sir.
Ravi Kant Tripathi
Prices have been stable in the last three quarters and now they are also, of course needle prices are tied to the electrode prices. So let’s say in the next one or two quarters we think they should be in the same range because electrode prices are Also going to be in the same range. But once liquid prices start to increase, then we’ll figure out what, what needle cook people have to say. But so far they have been stable in the last three quarters and the same continues for the April to June quarter. And I hope they will keep the same for July to September quarter because whatever price increase happens will actually happen beyond that, even if people start booking orders now at increased prices.
But they’ll take effect later.
Aryan Sharma
Sure. Previously you mentioned that it takes a lot of time to shut down the plants. Obviously it takes some time, but my question is regard to whether how much time it will take to restart production from these plants. So like what we see going forward is a lot of EF capacities are coming up, plus they’re not the electrode capacities are going down. But there could be a significant supply and demand gap. So like how much time will it take to correct that gap if it happens?
Ravi Kant Tripathi
If the electrode production has to go up, the moment it goes up, the electrical furnace is very quick to respond to market changes because it’s a, it’s a stop and shut operation the moment demand grows up. The electric furnace industry is the first to capitalize on that because they increase their heat melted per day. And since graphite electrode is a derived demand and every ton of steel consumed, it takes 1.5 to 2 kg of graphite electrodes. So the demand comes, starts to come rather quickly. So how much time is going to take? We just have to watch the steel production in the major steel producing countries of the world making it through the electric arc furnace route, which means Americas, which means Europe, which means Middle East.
So these are the countries where the moment steel production starts to go up, the electrode demand will, will come very soon because it’s derived from every ton of steel made sure everybody can hazard, I guess.
Aryan Sharma
Sure, sir. Thank you for the elaborate answer. One, One final question is with regards to power consumption. So what is the power consumption in units per ton of graphite production and what is our average cost per unit? Also, could you just quantify what percentage of captive we do for a power requirement?
Ravi Jhunjhunwala
No, let’s not, let’s not get into how many kilowatt hours and the pricing. I mean, we don’t want to talk about it publicly for obvious reasons, but as far as your answer to your second question, more captive, we have a 15 megawatt hydro power plant just about two hours away from where we produce electrodes. So that’s a very insignificant consumption of power that we do on our own majority. A big large chunk is purchased from the electricity board.
Aryan Sharma
Sure. So that’s it from my side. Thank you for answering my questions.
operator
Thank you. We’ll take our next question from the line of Amol Rao from one of financial consultants. Please go ahead.
Amol Rao
So just a clarification Mr. Nwala. So we are still holding on to those six month contracts for needle coke and our finished product pricing, right? We price our product.
Ravi Jhunjhunwala
No, I don’t think we ever said that. I mean there’s no fixed formula that we hold six months, that we order needle coke six months in advance or produce electrodes six months in advance. I mean there’s no, there’s no basis for that. I mean we produce six, seven, eight different sizes of electrodes, two, three different kinds of electrodes, uhp, non UHP and all that. So there’s no fixed formula. I mean but because of, because of our experience we know in which category on which size and which quality of electrodes we normally sell. It takes a very long time to produce electrode.
So we have to make some estimates based on our past experience and that’s how the production cycle goes.
Amol Rao
Got it sir. Secondly sir, just to get into the small part of our utilization. So you mean, did you mention that we operated at 80% of our expanded total capacity of 1 lakh tons for last year, right?
Ravi Jhunjhunwala
Correct. Correct.
Amol Rao
Yes sir. And so we expect it to be around the same level this year. So probably next year is an inflection.
Ravi Jhunjhunwala
Point once all a little, little, little higher, little higher.
Amol Rao
All right. And sir, just to get into take back on the last participants question, so there’s this whole thing about you know, sourcing from the renewable sources and all that stuff at concessional rates. So any, any, any moves by our company on that to reduce the power cost probably in the future. Sourcing from renewable sources?
Ravi Kant Tripathi
Yeah, we are working on that. You see, since there are two things which we have, our power consumption is very high considering that we’re making 80,000 tons of electrodes. So one is that hydro plant, the power of which is sold to the exchange. Then we have some three megawatt solar plant inside. Another three is being put up and there is option available from the madibilities the storm that they are ready to sell us renewable energy but that it costs higher, almost more than 50 paisa higher. So we have to, in times to come we’ll take a call of that.
But we remain totally conscious of this fact that going forward we would start to use more and more renewable. And as you can see the solar power prices are coming down day by day. So let’s see, once they. Once the MP discom becomes a little more reasonable and provides us renewable power at a bit more competitive rate, certainly we look at that.
Amol Rao
Okay, so it’s a tactical call based on the prices basically. So whenever it’s in our favor.
Ravi Kant Tripathi
Yeah, yeah, yeah, yeah. Absolutely.
Amol Rao
All right, sir. Thank you so much, sir. Thank you.
Ravi Kant Tripathi
Wish you all the best.
Amol Rao
Thank you.
Ravi Kant Tripathi
Thank you.
operator
Thank you. Ladies and gentlemen, to ask a question, please press N1 on your phone. As there are no further questions, I now hand over the conference to the management team. Mr. Junjunwala, for closing comments. Over to you, sir.
Ravi Jhunjhunwala
There’s nothing much to talk more than what we already spoke. So based on all these description that we gave that 120,000 tons capacities have been shut down very recently and more and more new electric arc furnaces are coming up which is a fact of life. I mean we are not speculating there. So the demand for electrodes will keep going up. And since we are the only ones who have added more and more capacity capacities and we claim to be the lowest cost producer, so we are just waiting for better days to come. It may be a couple of quarters away, it may be four quarters away.
Nobody can predict that. But we are pretty, pretty bullish about this industry in the long term. Thanks.
operator
Thank you on behalf of SKP securities limited that concludes the conference. Thank you for joining us ladies and gentlemen. You may now disconnect your lines.