Good day, ladies and gentlemen. Welcome to the HEG Limited Q2 FY25 Results Conference Call, organized by SKP Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. You will be able to ask questions after the management is opening the mics. Should you need assistance during the conference call, please signal an operator by pressing STAR, then zero, on your touch-tone phone. Please note that this conference call is being recorded. I now hand the conference over to Mr. Navin Agarwal, Head, Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. I'm pleased to welcome you on behalf of HEG Limited and SKP Securities to this Financial Results Conference Call with the leadership team at HEG Limited. We have with us Mr. Ravi Jhunjhunwala, Chairman, Managing Director, and CEO, and Mr. Riju Jhunjhunwala, Vice Chairman, along with their colleagues, Mr. Manish Gulati, Executive Director, Mr. Om Prakash Ajmera, Group CFO, Mr. Ravi Tripathi, CFO, and Mr. Puneet Anand, CSO. We'll have the opening remarks from Mr. Jhunjhunwala followed by a Q&A session. Thank you, and over to you, Ravi.
Thank you, Siddhan. Friends, good afternoon, and welcome to our Financial Results Conference Call for the second quarter of fiscal year 24-25. As per the recent data published by the World Steel Association, global crude steel production for the first nine months of 2024 declined by about 2% to 1,394 million tons, while production for the previous quarter, July-September, saw a larger drop of 5.5% compared to the same period last year.
This declining trend shows notable differences across major steel-producing regions. While the U.S. saw a decline of 1.6%, Japan decreased by 3.3%, South Korea by about 5%, and Russia by about 6%. In contrast, India's steel production went up by 5.5%, reaching 110 million tons, supported by government's push on infrastructure projects. Germany and Turkey also experienced some small increases of 3.8% and a large one in Turkey, 12.1%, respectively.
Meanwhile, China, by far the largest steel producer of the world, declined by about 4.8%. It is important to highlight here that China produces a little over 55% of the total world steel in the first half of the current year. Chinese steel exports have surged to around 81 million tons since September, which is on track to reach close to 100 million tons by the end of the year. This impacts the demand of graphite electrodes worldwide, which brings pressure on sales prices and the production, obviously.
Operationally, our performance was more or less similar to past two quarters. Now, coming to the outlook, as you are aware, our expansion from 80,000 tons to 100,000 tons is now fully operational and stabilized, and this makes us, by far, the single largest plant in the entire Western world, leading to certain cost advantages over all the other large producers.
For Q2 2024-2025, our capacity utilization for the quarter was about 80%, the highest among all the other producers around the world. We expect this to continue for the rest of the year. The electrode pricing continues to remain under pressure due to reduced demand.
Ladies and gentlemen, the line for the management seems to have disconnected. Please hold while we reconnect. Ladies and gentlemen, thank you for patiently holding. The management is back on line with us. Sir, I'd like you to resume your presentation.
I'm sorry, we had some technical glitch on our side. So now, coming to the outlook, as you are aware, our expansion from 80,000 to 100,000 is fully operational, and this makes our plant by far the single largest plant at any location in the entire Western world, leading to certain cost advantages over all other producers.
For Q2 2025, our capacity utilization for the quarter was 80%, which is the highest among all other producers around the world, and we do expect this to continue for the rest of the year. Electrode pricing continues to remain under pressure due to reduced demand. The needle coke prices kept correcting through the past year due to difficult market conditions, but the spread between electrode prices and needle coke prices narrowed down, bringing pressure on margins.
While we are currently facing some near-term margin pressures, we are positive about our industry in the mid to long term. Decarbonization has now become an irreversible process. We are consistently tracking more and more announcements as they happen for new greenfield electric arc furnaces from different parts of the world.
Already, more than 100 million tons of new capacities have been announced, which would be in operation between now and 2030. As we have been exporting about two-thirds of our production to more than 25-30 countries for a very long time, we are in a good position to meet this increasing demand all over the world. We remain one of the most competitive plants due to our large capacity at a single location.
The next few quarters may see margins remaining under pressure, but we are hoping that the demand would come back sometime from the second half of 2025, and we are fully equipped to take advantage of that. We have all the technological capabilities, operational efficiencies, and market reach to take our company forward, to succeed and thrive in all emerging situations, to create long-term value for our shareholders. Now, friends, coming to our quarterly performance, as you have seen from our results, our profit before tax has been much higher in this quarter as compared to the previous one.
I would like to mention the impact of one of our treasury-related investments in the equity shares, where we have taken a mark-to-market gain due to the increase in stock price of that company and booked it under the head of other income, while in the previous quarter, we had a mark-to-market loss due to fall in its stock price. With this, I'll now pass on the floor to our CFO, Ravi Tripathi, who will take us through the financial figures. Following that, our Vice Chairman, Riju, Executive Director, Manish, Chief Strategy Officer, Puneet, and I will be delighted to address any queries that you may have. Over to Ravi.
Thank you, sir. Good afternoon, friends. I will now briefly take you through the company's operating and financial performance for the quarter-ended 30th September 2024. For the quarter-ended 30th September 2024, HEG recorded revenue from operations of INR 568 crores as against INR 614 crores in the corresponding quarter of the previous financial year. During the quarter-ended 30th September 2024, the company delivered EBITDA of INR 140 crores as against INR 130 crores in the.
Ladies and gentlemen, the line for the management seems to have disconnected. Please hold while we reconnect. Ladies and gentlemen, thank you for patiently holding. The line for the management is reconnected. Sir, please go ahead.
Yeah. I'm continuing my speech. For the quarter-ended 30th September 2024, HEG recorded revenue from operation of INR 568 crores as against INR 614 crores in the corresponding quarter of the previous financial year. During the quarter-ended 30th September 2024, the company delivered EBITDA of INR 140 crores as against INR 130 crores in the corresponding quarter of the previous year.
The company, on a standalone basis, recorded a net profit after tax of INR 62 crores in Q2 FY25 as against Rs. Similar amount of INR 60 crores in the corresponding quarter of the previous year. And on a consolidated basis, the net profit after tax is INR 82 crores in Q2 FY25 as against INR 96 crores in the corresponding quarter of the previous financial year. The company is a long-term debt-free and had a treasury size of nearly about 923 crores as of 30th September 2024.
Now, to take more questions from the participants, a detailed presentation has been uploaded on the company's website and on the stock exchange. Now, we would like to address any questions or queries you have in your mind. Thank you. Over to Navin.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 up your follow-up questions. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question is from the line of Saumil, sir, from Paras Investments. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, on a consolidated basis, our EBITDA margin is in the range of 17% for this quarter. So where do we see this range settling for the remaining half of this year?
Yes, we are expecting the similar range in the coming quarters too, sir.
And, sir, I mean, considering the current demand scenario, any guidance you would like to give for FY26?
As I said in my opening remarks, we don't see much of a difference in the next couple of quarters. But as I said, something like 20-25 million tons of new capacities, which we talked about out of 100 million tons. We expect about 20-25 of them to be operational, let's say, sometime in the second half of next year. So that will obviously increase the demand.
Okay. Okay. And sir, my final question, sir, any update on this demerger of HEG GreenTech?
I'll ask Puneet, our Chief Strategy Officer, who is pursuing that.
Hi, good afternoon. Our scheme of arrangement is today with the stock exchange. I think in a couple of weeks, it will go to SEBI for the approval. Once SEBI approves it, then it will go to NCLT. We feel that by October or September 2025, the entire process will be completed, and the company will be listed, the HEG.
This is what we had originally said. I mean, we are more or less on track.
So there was a bit of a delay of one month due to the split which we have done in between, but everything is back on track.
Okay. And sir, in one of the interviews, we had mentioned that we are looking at an EBITDA of 1,000 crores in the next two, three years for HEG GreenTech.
Yeah.
I mean, anything you would like to say about that?
So, Abhi, it is too early to say because the annual project which we are envisaging and we are pursuing, it has some lag for a quarter or two. So we expect that by next conference call, we'll give you the better timeline on the EBITDA for the coming years for the new company. But the business is on track.
Okay. So as of now, is there any, I mean, sales from this company, HEG GreenTech? I'm sorry, I'm not tracking this.
So if you ask me about HEG GreenTech, today, it holds the hydro assets, which has the business, and they are generating the revenue and the EBITDA, which has been shown in the HEG books also. Apart from this, our battery storage company is also doing very well, and we have won a couple of contracts here. So we are expecting to have a good turnaround in that company. Apart from this, we have some wind assets which are generating the EBITDA. The future revenue and EBITDA will be coming from the anode part, which is the major asset we have here.
Okay, so as of now, GreenTech EBITDA would be how much?
As of now, GreenTech EBITDA will be in a range of at a consolidated basis, you're asking?
Yes, yes. Consolidated.
It will be around INR 125 crores. That is the dividend that we received from the hydro assets today.
And consolidated.
I mean, on a consolidated basis, the EBITDA is between 275-300 crores. That is, once the scheme is approved, and 100% of Dilwara Energy shares belong to this thing, the GreenTech.
Correct. Correct. So again, post the consolidation of the entire hydro asset under HEG GreenTech, the EBITDA is between INR 275-300 crores, seeing the numbers today.
Okay. Okay. That's it from my side. Thank you and all the best.
Thank you.
Thank you. Participants who wish to ask a question may press star and one at this time. Our next question is from the line of Aryan Sharma from BNK Securities. Please go ahead.
Yeah. Hi, actually, I had a question about the pricing scenario. So since we saw one of the major global players retroactive increase prices by around 20% in September, so we are still seeing that margins will remain subdued. So what would be your outlook on spreads for the rest of the year? And what do you think about this price hike which the global players came out with?
Sir, we have seen that announcement that you're talking about, but we haven't seen that on the ground. The obvious question is, is the demand? There's a pressure on demand. There is extra capacity worldwide. So we are basically not seeing any impact of that 20% increase. Everybody is attempting to do that, but it is not going through.
Okay, sir. Sir, final question. You mentioned that we have the highest capacity utilization globally currently. Could you mention what is the average global capacity utilization in GE right now?
We are at about 80%, and some of these major foreign players are more or less at about 50%-55%, and probably the other Indian companies at about 60%-65%.
Okay, sir. That's it.
These are all public data. This is all available. They're all listed names.
Okay, sir. Thank you, sir. Thank you so much. That's it from me, sir.
Thank you. Participants who wish to ask a question may press star and one at this time. Our next question is from the line of Pradeep Rawat from Last Flu. Please go ahead.
Yeah. Good afternoon. So, sir, can you name some of the major global players in graphite electrode business?
Basically, there are only four, five of us. Apart from us and Graphite India in our country, there are two large competitors of ours who have more or less 1.8-2 times of our capacity, but they have several plants. I mean, one company is called GrafTech International, which used to be Union Carbide about 20 years ago.
And until recently, it was part of Brookfield, and now it's a professionally run independent company. They have about 180,000 tons. And then there is a Japanese company called Showa Denko. It's a very large conglomerate where graphite businesses are a very minuscule kind of percentage. They have about 200,000-210,000 tons, but again, at four different locations. And all these locations are in Europe, America, and Japan. So obviously, all these locations, we have certain advantages of cost.
Okay, sir. And what is the status for our graphite anode plant?
I think so, sir. I'll reduce the second. The status of our anode plant is as follows, and I'll be as candid as I can be. So the global battery prices, the cell prices for which we will supply this product have sharply come down, as you may know, from around $0.85-$1.00 per kWh. And now they've come down to around the level of $0.55-$0.60 per kWh. Now, this obviously depends on different applications like energy storage or EV cars. So for the sake of prudence, we are taking our top line, which we were expecting two years back, let's say at 9-10 thousand. We are doing all the project planning at 6,000.
So we are going back to the state government trying to get some more subsidy on power because power will be the major component in this. Around 15,000 units of power per kWh of production in this particular product. So while we have the land in place, we've leveled the land. We are ready to place the machinery orders, but we are still fighting with different state governments for giving us slightly more subsidy to make the project commercially viable from day one. So that is the status right now. We are ready to break ground tomorrow. I mean, after this call, technically, we can break ground, but we are purposely holding back.
I think by the end of December, middle of January, we'll have two very good letters from two different state governments giving us different power rates, beneficial power rates, and capital subsidy that will help us make this project even more successful at $6,000 per ton also. After being all this sensitivity of $70,000, $8,000, $8,000, or $5,000 for BESS, $6,000 is a very conservative number that we've taken. We are going to start construction of this plant as soon as we get the extended benefit from the state government in hand.
Yeah. Understood. That's all from my side. Thank you, and wish you all the best.
Thank you. Our next question is from the line of Dhaval Doshi from Diamond Asia. Please go ahead.
Yes. Hi. Thank you. Thanks for taking my question. Just continuing on the previous question, if we can just elaborate a bit more in terms of the kind of return expectations that we have, assuming status quo, which is no incremental subsidies that the government, any of the state governments, are offering, how would that be? And what would change with the state subsidies coming in? And secondly.
I'll tell you in terms of very simple words, if we get no subsidy from the state government, then also our project payback on paper becomes 9-10 years, but if we get those subsidies from the state government, the project payback goes back to around 6 years, which is basically a higher rate of return. At 6 years, we are looking at more than 20% return on equity, which is mostly desired at this point in time. Having said that, all the cell companies also which were putting up their cell capacities in India, they've all kind of seen the decline in prices. They also are doing the same kind of work that we are doing.
With our pilot plants, we are already working with those companies and seeing a lot of success as to how much we'll be able to sell the product at and the quality.
So in terms of the product approvals, at what stage are we?
So in terms of product approval, fortunately, our pilot plant is fully up and running since the last one year. And we are working on at least 28 different permutations and combinations of raw material that we need. And we are working very closely with all the cell companies,
whether they are in India or abroad. And on the technical front, I can assure you that on almost all parameters, we are not only achieving the global standards, but we are also meeting them. So this plant is definitely coming, whether three months here, three months there, I cannot say. And whether we sell in the domestic market or export market.
Once again, from the point of view of the question that you asked, I mean, we are assuming 45% capacity utilization in year one, going up to 60%, then going up to 75%, and going up to 90% because this is not a commodity product. Like you rightly said, we have to work very closely with the cell makers so that there is complete standardization of that product. But the pilot plant is greatly helping us to kind of resolve that problem. So once the plant is up and running, we want to run it at least at 45% utilization from day one.
So, our assumption in terms of the payback is assuming what kind of utilization is 45, 60, 70, and 90, 40, 45, 60, 75, and 90, and that's all included in the payback calculation and taking $6,000 as the most pessimistic price for the cost of selling of the product. And how long do you think so will the construction take once we break ground?
So let's say if we start tomorrow, this will take around 18 months. The longest lead time in this is the 220 kVA line, but we can start production even before that because you won't be operating at 100% capacity utilization. In short, I mean, right now, we've taken INR 6 as the power cost, but we are trying hard to negotiate with the governments to get us power at INR 4.5 per unit. Once that happens, there is absolutely zero problem in this project.
So given we have an existing plant, can't we use them in terms of restructuring PPAs or because Dilwara Energy plants will be a part of the demerger company, right? Where in.
No, no, no. But you know that company, the Dilwara Energy, we have a very it's a run-of-the-river plant, and it has its own reservoir, which basically produces 60% of its energy at peak power. So we are able to sell that power at INR 8, INR 9 to the state government. And the average cost of selling that power becomes around INR 6.
So I mean, keeping this at arm's length, why should we take that power, which we are able to sell tomorrow to the state government at INR 6, and make more money there? We'd rather negotiate with the state governments to give us cheaper power over here. Or also, at the same time, looking at solar PPAs, captive power, etc., etc., as all the options.
So when I speak to you, I mean, before the last phone call and this call, a lot of work has actually happened on the ground in terms of trying to work with the different companies. But yes, the captive power plant that you're talking about for Dilwara Energy, which will be part of this company, we don't want to mix the two things up because there we are already getting an advantage of selling the power at an average of easily more than INR 6 per unit. So it will be foolish for us to use that power for this particular project.
If we can.
And moreover, sending this power from Himachal to, let's say, Madhya Pradesh is more or less impossible. It's too expensive.
What we hope isn't because green power, the government has exempted. You can put a power in Karnataka, power plant in Karnataka, and sell the power to your this thing. But that is only limited to solar power. So as the chairman just mentioned, that getting this power from Himachal Pradesh to Madhya Pradesh or Odisha, wherever we set up this plant, there will be so many government charges, etc., etc., that INR 1, INR 1.5 will actually go into that.
So instead of selling the power straight at INR 6 and getting that advantage to Dilwara Energy, we are not even looking at that option of kind of selling that power to this particular plant. But we are very confident. I mean, Odisha as a state, let's say, already has a policy of INR 4.5 power.
But again, that would mean going and buying new land, going and doing an entire new setup, environmental approval. So as I talked to you today, we are in the position tomorrow to open LCs for all the machines, give out all the civil costs. But we are just holding back on that for three more months so that we can get cheaper rates from the government. And having said that, all the cell capacities also that were coming up in India, they are coming, but they are also well delayed by a year or two. So we don't see a problem in kind of a three- to six-month delay on this project. What is the cost exactly?
No money has been spent except for buying the land, in any case. You don't have stuck money which is going into kind of making the project not viable.
What is the project cost that we're looking at total?
We are looking at INR 1,750, which is including a INR 100 unnecessary cost of a 220 HEVA line that we have to build over 52 km. So that is the long lead item, actually. But the total project size for the 20,000 tons is around INR 1,750.
Okay. Thanks. Thanks a lot for these details. Just one more question with regards to the electrode pricing. So the chairman did mention that the prices aren't getting absorbed on the ground despite the announcement by RESNAC for a 20% hike. Is it to do with the Chinese electrodes still coming into the market and coming at much lower pricing, or it is to do with the overall weak demand environment as well? Let me take this question.
It's a combination of both, so Chinese electrodes are coming, and they're coming quite a lot in India, especially, but as we have always maintained that we also produce about 25%-30% of our products, which are what we call non-ultra-high power, so in that segment, we compete with China, and to that extent, I mean, Chinese prices are crazily low, so you don't even want to compete with that.
Okay.
Sorry, I'm reading the slide, and sorry if I'm just commenting in between. Iran is completely kind of blocked from our market right now because of all the sanctions. So all the Chinese products are getting dumped in Iran. Now, with all the geopolitical changes happening, etc., etc., we don't know what's going to happen tomorrow. If that market reopens for us, then obviously it takes a lot of pressure off our heads in terms of volume. Closer to four years back, Iran used to be a major market for us.
Yeah, that's correct. But it's been a while back.
So right now, I think when the chairman is talking about 80% capacity utilization, etc., it is all without Iran. Tomorrow, if Iran actually comes on the global map, by any chance, we don't know what's going to happen three months, four months down the line, then definitely our supplies will increase to that region also because we were always very strong over there. And Iran is a large market. I mean, they consume about 40,000-45,000 tons every year. They used to buy practically everything from India 7-8 years ago until the sanctions were put on them.
Okay. So right now, if you were to touch a bit more on the realization part, the current realizations, and do we see any bit of an improvement or practically no more improvement?
I think this is very difficult to put a number. I mean, basically, if I were to guide it, I would say more or less similar numbers.
Okay. So the global plants operating at below cash cost, we'll need to see how long do they take to blink. Is that the correct understanding?
Yeah. I mean, and that is exactly what I said when I said we have the single largest plant, and that plant happens to be in India versus most of the major plants in Japan, Europe, and U.S. So we do have that advantage, and that is why you see the difference between our capacity utilization versus others.
Thanks. Thanks a lot, sir.
Thank you. A reminder to the participants that you may press star and one to ask a question. Next is a follow-up question from the line of Dhaval Doshi from Diamond Asia. Please go ahead.
Hey, thanks. So if you can just elaborate, how do you see the CBAM mechanism changing the industry dynamics going into CY 2025 and 2026?
No. We are very bullish. I mean, as I said, about 100 million tons of new electric arc furnace capacities have already been announced. And when I'm saying 100 million, I mean, 100 million tons has been announced. Out of that 100 million tons, we believe that somewhere in the region of 70 million tons are such where the grounds have been broken, the orders have been placed for all the equipment.
Because as you know, electric arc furnaces of large capacities of 1 million, 1.5 million, 2 million tons, they take about two and a half to three years to build. And these are all greenfield plants. So our confidence is coming from the fact that out of that 100 million tons which have been announced till now, about 65-70 million tons are due to start operations between 2025, 2026, and let's say first half of 2027.
So our confidence is coming from that number that 65-70 million tons are definitely coming. I mean, the grounds have been broken. Obviously, the construction has started. The equipment has been ordered. And I don't want to publicly give the number, the breakup of that 65 million tons, but we do have certain numbers for 2025, 2026, and 2027 separately.
So we are pretty confident there. And we have an advantage that we have been in exports for more than 30-35 years. And for 30-35 years, our exports have been more or less in the region of two-thirds and one-thirds. So one-third Indian market, two-thirds exports. So we have relationships. We have been selling to all these customers for the last 30-35 years. We've been exporting two-thirds. So it's only a matter of time.
I mean, and obviously, these existing customers are the ones who are adding all these 100 million ton capacities. There are not too many total newcomers, so to say. So it's only a question of building these new capacities of electric arc furnaces, needing more electrodes. So even if we continue to sell the same market share that we today have with them, running at 80%-85% is not a problem.
So, my question was more to do with how China is likely to react and also to do with the pricing. I completely understand in terms of the overall volume game that you're trying to say, but that was a similar story probably a few years back as well before China actually started ramping up their electrode production into the global market. So.
No, just to remind you, I mean, say any steel producer, electric arc steel producer who buys electrodes, he buys more or less three-fourths of his electrodes, which is called Ultra-High Power.
Yeah, I agree.
And 25%-30% is the small ladle furnace, as they call. So while we do compete with China, but our competition is limited to that 25%-30% of non-electrode producers. Most of these new furnaces which are coming up in the Western world, they are all going to be a million tons, million and a half tons, two million tons kind of furnaces, which will require 65%, 70%, 75% ultra-high power. So we don't compete with China in that segment. And it is not just us, but all the other four, five international graphite players. So we don't.
Correct me if I'm wrong, sir, but China is gaining acceptance even in the UHP segment?
I mean, it's a very loose term. I mean, it's not easy to explain on a call, but we can have a one-to-one call, and I can explain to you in detail. It's a very, very loose term. What is UHP? What is non-UHP? But yes, I mean, if you go literally, then China can produce something which is on the very low end of UHP. But beyond that, China cannot. And one thing, again, I'll remind you, the cost of electrode for a steel company is less than 1.5%-2%. So they don't want to take any chance on a product where it costs them only 1.5%-2%. They want to be very sure about the quality.
They don't want to take that chance that to save that 1.5%-2%, if they buy an inferior product, then what they lose is much, much more than that 1.5% profit they save.
Okay. So secondly, with regards to China once again, when I said CBAM mechanism and its impact on China, this time I'm referring more to the mode of steel production. Do you see China shifting more towards its electric arc furnace production despite of a higher cost, probably running into the second half of next calendar year?
I'll tell you, you see, until about four, five years ago, if you remember the electrode boom which came in 2019, China was at that time also producing more than 50% of the world's steel.
Correct.
While the rest of the world was producing 40% of their total steel through electric arc furnaces, China, which was the other half, China was only producing 5%. So the difference between China and the rest of the world, in which I'm literally taking each country outside America and everybody, so that part of the world was producing 40% through electric arc furnaces, and China was producing 5%.
Today, when that boom happened, it basically happened because China announced on a particular day, five years, six years ago, that they want to close 140-150 million tons of blast furnaces simply to control their pollution and replace this by 150 million tons of electric arc furnaces, again, to control the environment and the pollution and all those things.
While they had announced their intention to go from 5% to 20% in the next five, six years, they have reached about 13%-14% by now. China has more than doubled their share of electric arc furnaces, but it still is very small at 13%-14% compared to the rest of the world, which was already at 40%.
Now, to complete the story, the rest of the world, which was 40% about five, six years ago, has already gone up to 50%. In the world context, where the growth is hardly 1%, 2%, 2.5% every year, a growth from 40% to 50% is like 25%. Electric arc furnaces in the last five, seven years, minus China, have gone up by 25%, 40% to 50%.
In the near future, it is likely to go to 60-65%, as and when we are talking about that 75-100 million tons of new capacities coming in. So the rest of the world will go up to 65-70%. That is where we are hoping that the electrode demand should rise by anywhere in the region of 150,000-200,000 tons, which is exactly what our other two major international competitors from the U.S. and Japan have been talking about. I mean, these are all public information.
It's all on their website. Our numbers and their numbers are more or less matching. Everybody is saying that the 40 has become 50. 50 is going to become 60. So 40-60 in the world context is a huge number. You're talking about more than 50%.
So, correct me if I'm wrong, but this 40 to 50.
40 to 50 has already happened.
No, no. What I'm trying to understand is this 40-50 and 50-60 is a function of the share of the absolute production on the blast furnace side coming down, right?
Exactly.
It's not to do with the absolute production of electric arc furnaces going up, so while this percentage share does look good, what I am trying to understand is, will this mechanism actually lead to an increase in production from the electric arc furnaces? Because still, the absolute production starts going up.
No, you see, I understand what you're saying. But if you see the steel production number minus China, it has declined by maybe one, 1.5%, two%, 2.5% in the last two, three years. It's a very abnormal situation. I mean, we just got out of the COVID in 2022, 2021, 2022. So that was a different reason.
And then all the geopolitical scenario that we have seen in the last two, three years, it's not going to be permanent like that. So coming from COVID and the last two years because of the Ukraine, Russia, and Israel, and Gaza, and things like that, so it has to stabilize one day. I mean, it's been four, five years now. So obviously, it's not related to electrode, but everything is impacted by the world situation.
But the only good part in our business is that 40 has become 50, and 50 is likely to go to 60. And in that context, as we are always speaking about that our expansion came from 80, 200 at the same location, at 80,000 tons, already we were having certain advantages of cost in India. So that cost has further been impacted positively for us in the last nine months or so since we have gone to 100,000 tons. So until last year, while we were speaking that our capacity utilization was 70%, 75%, 80%, that was based on a capacity of 80,000 tons. So in the last nine months and today, now we are talking of 80% on 100,000 tons.
So if you look at the total tonnage, 80% of 80,000 versus 80% of 100,000, so we are able to produce more additional 10, 11, 12,000 tons and find a market for that in a situation in the world where the total electrode demand has gone down, total consumption has come down for the reason that we just spoke about. So we have been able to increase our market share, basically. I'm not talking of India. I'm talking of India plus the rest of the world.
Okay. So with regards to GraphTech and our investment in it.
Mr. Ramasagavan, we request you to get in touch with the SKP Securities team to arrange an option call.
Sure. Thank you.
Thank you. Our next question is a follow-up from the line of Pradeep Rawat from Last House. Please go ahead.
Yeah, thank you for the follow-up. I have only one question. So for one MTPA EAF plant, how much graphite electrode would be required?
See, depending upon the kind of furnace they are putting up, depending on the size of the transformer that they use, it's about 1.5-2 kilos per ton of steel. So let's say a million tons will mean 1,500-2,000 tons per annum. So you convert that 100 million tons, I mean, we are talking about 100 million tons. If that 100 million additional capacity is built, then you're talking of an additional demand of anywhere between 150-200,000 tons.
Yeah, that's annually, correct?
Annually, which is not small. I mean, currently, as we speak, the world demand minus China is about 500,000 tons, 500,000 tons. So you're talking of 150-200. So that's a big number.
Okay, understood. Thank you. That's all from my side.
Thank you. That was the last question in the queue. As I know for the questions, I would now like to hand the conference over to Mr. Jhunjhunwala for closing comments.
So thank you, friends. I mean, we had some very good discussion, very pointed questions, and we tried to be as much as frank and as detailed in our explanation. I hope that helps. Thank you, and I look forward to talking to you again.
Thank you very much, sir. On behalf of SKP Securities Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines. Thank you.