Carbon and graphite product manufacturing company HEG Ltd's operating margin contracted in the fourth quarter due to higher prices of needle coke, a key raw material, says its chief marketing offricer and chief operating officer Manish Gulati in an interview with Swati Khandelwal. Gulati also added that prices of electrodes have remained almost the same when compared to the same quarter of last year.
The results are weak on both yearly basis and quarterly basis and a lot of pressure has been felt on margin and profit. How were electrode prices in this period?
If you compare the fourth quarter of fiscal 2019 with the same quarter of fiscal 2018, then our prices were almost the same. When it comes to pressure, then you are comparing the results of this quarter with the results of the previous quarter when we reaped the benefits of spot prices for two continuous quarters. But now we are operating in a stable environment. So when you are comparing Q4 of 2018-19 with Q4 of 2017-18 year on year, then the pricing was almost the same but higher prices of needle coke, which is a prime raw material for HEG, led to a contraction in the fourth quarter.
There is a need to understand the prices of needle coke as they are putting huge pressure on the margins.
In 2017-18 and 2018-19, the needle coke suppliers have increased their prices every six months. However, the price negotiations for July to December 2019 period will be completed in June and then we will know that the prices are going up or remaining stable at existing levels or will go down.
Destocking by steel companies has gone down and steel production and demand is on a rise. Do you think that the problems associated with the graphite electrode sector will come to an end soon?
Our steel customers were in anxiety last year as it seemed that there was a shortage of electrode. So almost every company bought little more than what they needed at the time. For instance, companies who had two months' stock in reserve started stocking for the next four to five months and they also committed a lot because of the anxiety. I think that the situation will correct in the next two-three months, and then, the demand will be equal to supply.
What is your outlook for fiscal 2019-20?
I would like to say that it will be very stable.
