The charming trap

HEG, Graphite India HEG and Graphite India manufacture graphite electrode, which is used in steel-making. They hit the jackpot when China introduced stringent pollution-control norms and as a result, the production of electrodes decreased. Electrode prices went all the way from $3,000 to $15,000/metric tonne. This caused many steel companies to over-stock electrodes. Hence, the demand and the price of electrodes went down, causing the stock prices of these two companies to crash up to 81 per cent after having gone up 10 times in the last couple of years. While the managements of these companies are still optimistic about their future prospects, investors should be cautious. Don't go just by the cheap valuations of these stocks. Tata Steel With a consolidated installed steel capacity of 34 million tonnes (MT), Tata Steel is one of the largest steel manufacturers globally. Of the 34 million tonnes, 19.6 million tonnes is domestic production and this is