HEG to double output by 2010

Graphite electrode manufacturers, HEG Ltd, part of the $500 million LNJ Bhilwara Group, is planning to double its output of graphite electrodes from 33,300 tonnes in 2005-06 to 100,000 tonnes by 2010. For this, it will also setup a greenfield unit abroad.

HEG Ltd, one of the two manufacturers of graphite electrodes in the country apart from Grahhite India, will invest Rs 160 crore in the brownfield expansion at its Mandideep plant near Bhopal.

There are very few graphite electrode makers in the world producing 800,000 tonnes,

The company is also considering options in central Asia and eastern Europe, where the cost of power and gas is low, to setup its greenfield venture with an initial capacity of 30,000 tonnes.

"In the greenfield plant, we are basically looking for backward integration to conduct some of the more power intensive processes like graphitisation and machining after which the semi-finished electrodes will be brought to our Mandideep plant. The greenfield plant will also have a built up capacity of 30,000 tonnes of the finished product," said Ramesh Surana, CEO and executive director, HEG Ltd.

The brownfield capacity expansion will take place in two stages. In the initial phase, the capacity will increase production from 52,000 tonnes in 2006-07 to 64,000 tonnes at a cost outlay of Rs 120 crore. In the second phase, the company will invest Rs 40 crore to push up capacity to 70,000 tonnes.

The company, which saw a 82 per cent jump in its topline in the first quarter of the current financial year at Rs 187.46 crore, is targetting a turnover of Rs 810 crore this year. It achieved a net turnover Rs 525.27 crore in 2005-06.

Of its total production of 33,300 tonnes of graphite electrodes in 2005-06, 80 per cent was exported to over 25 countries and the client list includes Mittal Steel, Arcelor, Posco, Nucor Steel and Thyssen Krupp.

"Exports will continue to drive our growth and we expect a doubling of exports in the current year. There are several new clients being targeted with an enhanced product mix but north America and the West Asia will be our biggest markets," Surana said.

While sounding bullish on the outlook of market on the back of rising costs that can be passed on to the end user while maintaining operating margins, Surana said the sole concern was the availability of raw materials - needle coke in this case - as the supply side also had an oligopolistic market with no new capacity expansions expected.