Expansion of electric furnace investment in the blast furnace industry → Japanese stock selection with a view to increasing demand for graphite electrodes

The Japanese stock market on September 5 was a mix of buying and selling. In a situation where TOPIX updates daily high prices, it would be a natural move for profit taking sales to increase.

JFEHD (5411) is drastically cheaper. The equity finance plan was announced at 11:50 today. The dilution of rights due to the increase in the number of issued shares was disgusted and declined. Associated sales have also been made by Nippon Steel.

The need for blast furnace manufacturers to “invest in decarbonization and invest in replacement of environmental protection equipment” has not started now. Both Nippon Steel and JFEHD set year-to-date highs on the 4th. The implementation of JFEHD's financing was probably an opportunity to launch profit-taking sales on steel stocks.

Regarding large-scale corporate investments, I place importance on “what the funds will be used for.” This is important as to what the funds raised by JFE will be used for. There is a possibility that the profits of companies that obtain funds that obtain funds will increase depending on what kind of companies the funds invested by JFE will be paid to through business. We value that kind of thinking when investing in stocks.

The sentences in today's JFE presentation materials are quoted below.
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“As a specific investment plan for 2030, there are investments to achieve energy savings and high efficiency, such as building a new high-efficiency, large electric furnace in the Kurashiki district of the West Japan Steel Works, increasing the capacity of existing electric furnaces at the Sendai Plant, and introducing a new stainless steel electric furnace in the East Japan Steel Works Chiba area, investment to secure direct reduced iron used as a raw material for electric furnaces, and upgrades to high-efficiency coke ovens, etc., and for 2030, CN on a scale of 1 trillion yen ( We anticipate that “carbon neutrality” related investments will be necessary.”
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The word electric furnace comes up over and over again, doesn't it? If production facilities for electric furnaces that suppress the generation of oxygen dioxide are expanded, what kind of businesses will increase their business? “When steel manufacturers proceed with the introduction of new electric furnace equipment, which companies will benefit?” -- This kind of thinking is important.

For example, electric furnace production requires a component called a graphite electrode. Graphite electrodes are a necessary component for melting scrap when melting scrap in an electric furnace to make iron. It seems that it will melt the scrap at a high temperature of about 1600 degrees. Tokai Carbon (5301), Nippon Carbon (5302), SEC Carbon (5304), Resonac HD (4004), etc. are manufacturers of graphite electrodes.

In February this year, Tokai Carbon announced a medium-term management plan with the fiscal year ending December 25 as the final year. We are planning operating income of 69 billion yen for the fiscal year ending December 25 (40.6 billion yen for the fiscal year ending December 22). The plan is to increase operating profit by approximately 70% over 3 years.

The operating profit of Tokai Carbon's “graphite electrode business” is planned to be 19 billion yen for the fiscal year ending December 25. Profit for the current fiscal year ending December 23 will decrease by 6 billion yen compared to actual results for the fiscal year ending December 22 (8 billion yen). However, the plan is to increase it by more than 3 times at once in the 2 years from the fiscal year ending 23/12 to the fiscal year ending 25/12.

According to Tokai Carbon's published materials, the long-term outlook for the graphite electrode business
◎ Increased ratio of electric furnace steel due to carbon dioxide reduction (5% annual growth)
◎ Projects to build new electric furnaces, mainly in the US, are progressing steadily, and the outlook for the expansion of the high quality market in the medium term has not changed
There are descriptions such as.

If blast furnace manufacturers such as JFEHD proceed with investment in electric furnaces, it will be a positive factor for the graphite electrode market.

(Radio NIKKEI commentator Kamata Shinichi)