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Good day, ladies and gentlemen, welcome to the HEG Limited Q4 and FY '22 Earnings Conference Call organized by SKP Securities Limited. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal Head, Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. It's my pleasure 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; along with his colleagues, Mr. Manish Gulati, Executive Director; and Mr. Gulshan Kumar Sakhuja, CFO. We will have the opening remarks from Mr. Jhunjhunwala, followed by a Q&A session. Thank you, and over to you, Mr. Jhunjhunwala.
Thank you, Navin, and good afternoon, friends, and welcome to our quarter 4 and full year '21, '22 conference. This quarter's performance was in line with the previous 3 quarters, showing a consistent improvement, 2021, '22 results are significantly better than the previous year, driven by strong sales volumes and electrode prices.
In terms of volumes, this year has seen a record production as well as sales. A rapid increase in industrial activities all over the world contributed to higher-than-expected demand for steel and steel products all over the world. And consequently, demand for our products also increased.
In calendar year 2021, excluding China, the top 10 steel producing countries increased their steel production by a whopping 13% over previous year 2020. Large steel producing countries like U.S., Japan, Germany, increased their steel production by as high as 18.3%, 14.9% and 12.3%. These kinds of increase, we have not seen in a long time.
In order to control carbon emissions, you would remember, China had gone on a streak of closing down around 125 million to 150 million tons of its highly polluting blast furnace-based steel capacity between 2015 and 2017, which led to their steel exports declining in levels of about 115 million tons per annum in 2016 and '17 to about 55 million tons in 2020. It's close to half of what they used to export in a year.
This reduced trend of steel exports out of China continues in 2021 and also in the first 4 months of 2022. As you know, any reduction in export of steel from China enables all other countries of the world to produce more steel, where about 47% to 50% of steel is produced through the electric blast furnaces, which is where our products find its use.
However, global steel output has recently started to moderate a bit due to the escalation of the Russia-Ukraine crisis, coupled with supply chain introductions and inflated input costs, impacting their margins despite near record level of steel prices. The margins of steel industry still continue to be healthy, although a bit lower than in the past few quarters.
Friends, as we shared with you in our last con call, after a very, very long time, we have seen a flurry of announcements by some of the large steel companies of the world, especially in the U.S. and Western Europe for establishing new electric arc furnace-based steel capacities.
These new greenfield announcements total up to between 30 million to 35 million tons of additional capacities. About 15 million to 20 million tons of deals are likely to be on the ground between today and 2025 while balance would also be on the ground between 2025 and 2030.
This is in line with world's desire to control carbon emissions seriously and take effective steps in that direction. It's not out of place here to mention that every ton of steel produced by blast furnaces and it's about 4x more carbon in the atmosphere as compared to the same ton of steel produced to the electric arc furnace. And hence, the focus -- and hence this sudden focus on electric arc furnaces.
Therefore, as the world keeps adding more and more electric arc furnaces in the immediate and foreseeable future, the demand for electrodes is likely to keep increasing. Most of these would be large sized furnaces using what we call ultrahigh-power electrodes, which we are fully equipped to cater to.
As you are aware, after a very long time, we have been maintaining a level of about 2/3 of our production going for exports to more than 40-plus countries of the world, including U.S., Europe, Asia, Middle East, et cetera.
In this backdrop, our expansion of 20,000 tons, which is likely to be ready by the end of this year, has been very timely, and we are confident of being able to find markets for this additional production as soon as we go into stream.
Indian crude steel production has been increasing continuously in the past few quarters. Calendar year 2021 versus calendar year 2020, increase was a whopping close to 18%.
In January, March 2022, it further grew by about 4.6% compared to the preceding quarter of October-December '21.
The steel industry in India has been in good shape, supported by strong demand from domestic consumption and also exports to various countries. The demand and consequently, the price of electrodes improved quarter-on-quarter since the beginning of 2021, and we expect prices to remain strong during the rest of 2022 as well. We continue to work at about 90% capacity utilization since the past 3, 4 quarters, and we expect to remain at these levels in the future.
Needle coke prices also kept rising since the start of 2021, in line with electrode prices. The price of needle coke, taxes of other raw materials and imports also kept increasing. But our electrode prices have kept pace with this trend, we have been able to maintain our margins.
We are upbeat by our expansion [indiscernible] stream by the end of this year at a time when more and more new electric arc furnace capacities are being installed.
As no new capacities have been announced by any other graphite company in the Western world, we don't foresee any problems in finding our markets -- in finding markets for our additional 20,000 tonnes.
Our plant in Madhya Pradesh with a capacity of about 80,000 tons as with the single largest plant in the world under 1 roof and are after expansion to 100,000 tonnes. This gap between us and other plants will increase further, thereby increasing our competitiveness due to economies of scale.
In the current financial year, we expect our sales to be higher versus the previous financial year. Part of this increase would come by some technological innovations achieved by our technical team in existing facilities and the other part from the newly expanded facility, which should start production from early 2023.
As you all know, the electrode process is a fairly long run, involving between 2.5 to 5 to 6 months. So even if we start our expanded capacities, let's say, by the end of this year, it will take another 2 to 3 months, 2 to 4 months to see the products out in the market.
In the passing, I'm happy to share that 2022 is company's 50th year since the incorporation. And in all these years, we have grown every few years from a level of 10,000 tons going up to 100,000 tonnes. We have also gathered a lot of experience in learning as a company and have been through various kinds of business environments only to emerge stronger.
I'm very proud of our entire team at HEG, whether general management, technical, marketing or finance, who have left no stone unturned to bring HEG to where it is currently standing. They have all worked tirelessly over all these years and especially the last 2 COVID years to make sure that we still attain our targeted commissioning of the expanded capacity more or less in time -- more or less in the time period that we had originally announced.
With our 5 decades of experience in the international business, we expect to be a supplier of choice to all our global and Indian customers.
Business friends, I would like to pass to Gulshan Sakhuja, who will walk us through the financial numbers. And then between me our executive director Manish and CFO, Gulshan, we will be very happy to answer all your queries. Thank you. Over to you, Gulshan.
Yes. Thank you, sir. Good afternoon, friends. I will now briefly take you through the company's operating and financial performance for the year ended 31st March 2022.
For the year ended March 2022, HEG's recorded revenue from operations of INR 2,201 crores as against INR 1,256 crores in the previous year. The revenue for the fourth quarter of FY 2022 was INR 673 crores as against INR 380 crores in the corresponding quarter of the previous FY. Revenue for the year saw an increase of 75% on an annual basis while it witnessed an increase of 77% on a Q-on-Q basis.
Since turnover is a factor of both volumes and prices, we are happy to inform you that the company has been able to achieve healthy growth in both aspects.
During the year ended 31st March 2022, the company has delivered EBITDA including other income of INR 607 crores as against INR 54 crores in the previous year. The EBITDA for the year ended 31 March 2022 has increased manyfold vis-a-vis last year due to an increase in both the sales quantity and price realization of graphite electrodes. The increase in annual employee benefit expenses over the financial year 2021 is on account of annual increment in salaries and incentive to employees and provisioning for the profit-related commission payable to CMD and ED of the company under contractual terms of their appointment. The increase in expenses pertaining to power and fuel is on account of higher production during FY '21, '22 and the increase in the price of LNG, furnace oil, et cetera. The increase in other expenses is due to higher logistic cost, which is because of the increase in the sales quantity in the current FY ad campaign compared to the previous FY along with the increase in the price of freight and forwarding and increasing consumption of stores and space on account of higher production.
In accordance with the prevision laid down in Section 135 of the Companies Act, the company has incurred expenditure on account of Corporate Social Responsibility amounting to INR 19.12 crores during the quarter ended 31st March 2022. INR 5.3 crores during the quarter ended 31st December 2021, and to this INR 30.65 crores during the financial year ended 31st March 2022, which has been included under the head, Other Expenses. Please refer Note #8 of our published results.
RBI has also extended the interest equalization scheme on 3 and 4 shipment. Export credit during the quarter 4 of FY 2022. The extension takes effect from 1st of October 2021 and the interest equalization rate have been revised from 3% to 2% with effect from 1st October 2021. The impact of the same related to the period 1st October 2021 to 31st December 2021, amounting to INR 1.6 crores has been considered in the quarter ended 31st March 2022. Please refer point #9. The company recorded a net profit after tax of INR 391 crores in FY 2022 as against a loss of INR 25 crores in the previous FY.
The company's a long-term debt free and had a trading size of approximately INR 1,400 crores as on 31st March 2022, yielding an average return of approximately 6% per annum. The Board of Directors has recommended a 400% of final dividend, that is INR 40 per share, which is subject to the shareholders' approval at then AGM.
We would now like to address any questions or queries you have in your mind. Thank you. Over to Navin.
[Operator Instructions]
Our first question is from the line of Sonali Salgaonkar from Jefferies India.
My first question is regarding the price hikes. Could you help us with the broader quantum of price hikes between Q3 and Q4 that's sequential as well as any further price hikes from 1st of April until now.
Can I answer that? So between -- Sonali, between Q3 and Q4, it is of the order of 12%. And your question about what we foresee in the future we are expecting to add at least 4% to 5% quarter-on-quarter.
And this would be throughout FY '23. Sir, for the next 3, 4 quarters at least?
I hope for that. because 2 quarters are visible to us, the April to June and July to September, that is for sure. And beyond that, as we are booking quarter-by-quarter, which you know about. So I cannot really say that what will happen in the balance too. But demand continues to be there. So I think it will go on.
Right. So just continuing on that, your initial comments did mention that the global steel output has moderated post the Russia, Ukraine crisis as well as supply chain issues. So could you dwell a little more deeper into this because all throughout last year, we saw very good demand, which was supporting our 90% less capacity utilizations. So once, and as the demand is moderating, do you foresee the capacity utilizations to stay at elevated levels?
See the issues which are rising out of this Russia-Ukraine thing are the steep hike in energy and electricity prices in Europe. So as electric arc furnaces need a lot of electricity, so we have seen the electricity prices go up by 3x, which is kind of cause -- is a dampener for the European electric arc furnaces. So that is one issue. So the supply chain, which you know very well, the rate freight costs are going up. It is hindering global trade, whether it is of steel or other commodities. And the way iron ore prices are also shooting up. So all put together, we are posing some challenges for steel industry.
Got it, got it. And sir, what are the current inventory levels? I mean, in the light of Russia, Ukraine war, are we still looking at optimal or newer normal inventory levels in the channel? Or do you think that they are now more at an elevated level?
Are you talking about steel, inventories of steel companies or electrodes?
Electrodes, sir.
We have -- we are working at very low inventory levels still, normal would be, let's say, a month, and we are working less than that. So there are no excess inventories either with customers or with electrode suppliers.
Understand, sir. And also one more thing about the China supply trends. The entire downturn about 2, 3 years back, majority of that was because of excess Chinese exports. So how are we foreseeing the situation right now? I mean, has the supplier really moderated, especially of the electrode export, not about steel. Or do we still foresee some price disruption going forward because of any possibility of China coming back to export more?
No, I should clarify here, I'm sure you've heard this so many times from us. There is no dearth of capacity of electrode making in China. But what type of electrodes they're making and exporting to rest of the world is mostly the high power variety, the lower-grade electrodes, which are mostly used in needle furnaces. We are yet to see the big customers actually qualifying them for UHP grade and giving them, let's say, a 20%, 30% business. So that is where -- I mean we don't compete globally also. India also we don't compete with them on the UHP part. And our production is mostly the UHP and not non-UHP. We do make or 25% or some 30% of non-UHP grade electrodes, but that is to service our customers who bought electrode as a package. They want us to be supplying the UHP also and the HP also.
And one point I can add to this is that recently, Europe has put a stiff anti-dumping duty on Chinese electrodes of the order of 25% to 27%. And U.S. has also imposed a duty. That duty was imposed about maybe almost 4 years back, 5 years back and it still continues. So there are steep duties against their electrodes. Chinese electrodes.
But Sonali, notwithstanding the duties and everything that Manish explained, let me again explain clearly that -- more than 2/3 of our production is what we call ultra high power. China doesn't have the technology to produce the ultra high power. So what we are competing with China is for the lower 25%, 30% category, which is a non-UHP. And as most of the steel companies who need ultra-high power. They also need 1/4 of that quantity about that -- in that region because they also have a small, little furnace.
So we reduced that 1/4 of our ore production in non-Ultra High Power because all these companies don't want to go to too many suppliers to find electrodes.
So generally, everybody will be buying in that ratio of 20-80 so 25-75 ratio of UHP and non-UHP.
Right. Sir, what percentage of our overall exports is Europe -- is towards Europe? I'm asking because you did mention that the electricity cost in Europe have spiked, which is leading to some disruption in the demand from EAF. So what exactly is the percentage of our exports to Europe?
It is without going into the specific numbers, it's very low. It's not a very significant number.
Okay. Sir, which are our key export geographies?
See, Americas is one; followed by Middle East; followed by Southeast Asia and we rather follow -- and then followed by Europe and a little bit 2 African countries. So we're pretty much in all the continents and all the major steel producing countries of the world, about 40 countries, I would say.
Got it. And this 30 million to 35 million new EAF steel production, which you talked about in your opening remarks, where is it exactly coming?
About 15% to 20% in Americas and the rest is in Europe.
This is a new trend. I mean, I have been in this business for the last 40, 45 years. And except addition of a couple of million tons every 2, 3, 5 years. We haven't seen -- I haven't ever seen these kinds of numbers. And these kinds of numbers are all serious numbers. And 20 million -- 15million, 20 million tons each in America and 15 million, 20 million in Europe. These are significant numbers in terms of steelmaking.
And as I explained, the major reason is that the focus that the world has now seen in the last 5, 7 years on the environment and carbon emissions and green energy and everything, that has led to this kind of a shift. So I'm not sure how many million tons of blast furnaces are getting closed to replace this by electric arc furnace, but a fairly large chunk of this is replacement. They are being replaced by electric arc furnaces because, as I said, you produce the same ton of steel through the 2 processes and the carbon emission is about 4x higher in blast furnaces.
Right. So you are saying that majority of this 30 million, 35 million is via replacement by EAF versus the earlier blast furnace due to decarbonization. Is that correct?
Not exactly. I would not say all of it. But yes, a part of that is replacement, a part of that is addition.
Sonali, the ones that are coming in America are the new electric arc furnaces, while Europe is the more trend towards decarbonization. See, America was predominantly electric arc furnaces. So these are the new furnaces, which are coming up in U.S. of 15 million, 20 million metric tons. They are like -- and in Europe, they want to actually close down the blast furnaces. In Europe, it's still 47%, 48% of electric arc furnace. So the existing key companies, what they are doing is the phase -- they're going to phase out the blast furnaces and put the new electric arc furnaces there.
And just to put a figure, America produces 70% of its steel through electric arc furnace. So obviously, there is a bigger focus on electric arc furnace in America to start with.
And Europe is about 50%. Is that correct?
Europe is in that region of 45%, 50%. I mean there's no published data. I mean, we are just giving you this number based on experience.
Sure. Sir, just last question from my side. You did mention that the CapEx will likely commission towards the end of this year. So, what proportion of our outlays already spent out of this INR 12 billion? And how much are we left to invest this year?
See, INR 800 crores has already been spent till date and INR 400 remains to be spent until December.
[Operator Instructions]
Our next question is from line of Rajesh Agarwal from Moneyore.
[Operator Instructions]
The next question is from the line of Abhijeet [ Bay ] from Equentis Wealth Advisors.
Just 1 question. In terms of needle coke, of course, last year, we saw prices rising. But going forward, let's say, over the next 2 quarters, what is the kind of price increases you expect in needle coke?
Just like electrode, which is practically they're 5, 6 companies in the world. It's more or less the same story in needle coke, they're only 2, 3 of them. And this kind of a needle coke that we use in graphite business. This is typically only for graphite. So obviously, if there is a higher demand for graphite electrodes. Automatically, there is a higher demand for needle coke.
So both of these go hand-in-hand. So it cannot happen. There could be a lag of 1 quarter here and there. But normally, we tag each other as wheels. So whatever happens to graphite business, the needle coke follows.
But you don't see something like what you have seen 3 or 4 years back that graphite -- the movement in graphite electrode prices basically lead needle coke prices, I mean the spreads improve. That scenario do you expect to see this year or next?
No, I didn't get your question. What scenario? As I said, this needle coke, if graphite prices will go up, needle coke prices will certainly follow. It's a matter of 1 or 2 quarter lag.
Okay. Now I was seeing the spreads, I mean the price of graphite electro minus the price of needle coke, you don't see that going up materially?
No, I'm not saying that. I mean, obviously, there is a correlation between the 2, but it was never an exact correlation. So a couple of quarters here and there, it will catch up.
But obviously, I mean, what we are basically saying is that demand for electrode is very strong. And as we have been saying that for a very, very long time. We have been somehow concentrating on our exports.
Every year, our export is about between 65% to 70% of our production. So although we don't see too many new electric arc furnaces being established in India. But we already spoke about this number of 30 million, 35 million tons, which is on the annual in the whole world. And we have been there for the last 30, 40 years in all these 30, 40 countries. And most of these -- most of these new investments are coming at least -- at our customers who are already buying from us. So it's just a matter of adding a little bit of market share with the existing customers.
And on the Russia-Ukraine conflict, is there any disruption as far as Russia is concerned on the supply of electrodes? I mean, Russia is an exporter of electrodes. I understand to both Europe as well as the U.S. may not be the largest, but they have some market share. So have you seen any kind of disruption over the last 2 or 3 months in terms of supply from Russia?
Sure, Russia is a very small producer of electrode. And Russia is a fairly large steel producer. So a majority -- a very large majority of their electrodes are self-consumed within the country. So to the extent that they must be exporting a little bit to Europe, but it's not worth -- I mean it's not a quantity, which can be disruptive to anything. It's a very small quantity. It has always been a very small quantity. And again, in the low category, the non-UHP.
Okay. Yes, if I could add to what Chairman said. See, Russia -- this Russian supplier of electrodes was exporting some quantity and at the same time, Russia was importing some.
With this, both have stopped. So they were like exporting some low-quality electrodes and importing -- the steel companies are importing some high-quality electrodes. So net-net, now they have to make do, they can neither export, nor import. So they have to make do with whatever is available locally. And whatever quality they can get, they have to manage that.
Our next question is from the line of [indiscernible] Jain from HDFC Securities.
Sir, can you help me with the production and sales volume for Q4 FY '22 and for the whole financial year '22?
We have a 90% capacity utilization. That's the figure you can take.
Okay. So you won't provide the numbers in terms of production and sales?
No, not at all. I mean this is completely out of order in fact against the guidelines also when we are there it means the exact sales figures are not supposed to be given out.
No, I'd just like to clarify here that if you have been tracking graphite business for a long time, as I said, it's a very long-drawn process. I mean the easier ones take about 2 months to produce and the most difficult one takes between 5 to 6 months to produce.
So in our kind of industry, which is -- which takes so long to convert the needle coke into electrodes and then go out in the market, there are 4, 5 very, very distinctly different processes in this period of 2 to 5, 6 months that I'm talking about. And practically, we've never seen anybody consistently being able to achieve capacity utilization of, let's say, more than 90%, 92%. So I'm very generally saying that in our kind of an industry, which is process 1 to 5 are very, very distinctly different and very, very long, even if there is a very small breakdown in any of these 5 processors, the wholly suffers -- the whole supply chain suffers.
So going beyond 90%, 92%, we haven't seen any company consistently going beyond 90% to 93%.
Our next question is from the line of Rajesh Agarwal from Moneyore.
Sir, my question is, did we have a volume growth in Q4? And when will like capacity come online? And when can we see volume growth?
The volume growth of Q4 was -- I mean, it's the same as Q3 because the last 3 quarters have been quite hot in demand. And for the new capacity to -- new volumes to come in we would have to say, first quarter of calendar year then to March '23. That's when we should start seeing the volumes.
How much volume growth can happen at that time?
From this year to next, considering the electrode demand, we should be doing 7%, 8% more than what we have done last year, '21, '22. 7% to 8% more than that.
And sir, the price hike, which we will be taking a quarter-to-quarter of 4% to 5%. Will there be a commissioned increase in expenses also, or no?
See, the meaningful price also is quarterly. So that is also increasing quarter-by-quarter. But the good part is that electrode prices are able to absorb that increase and some other inputs -- key inputs also.
Net to net benefit will be much more than the price hike?
At least similar margins would be there. That's what we can safely say.
And is there a possibility of a spread increasing?
Depends on the market actually.
Depends on the -- okay. If the demand scenario is very robust because 30 million, 35 million, it will get added in the U.S., then there are a lot of local steel players who wants to increase the capacity by EAF technology. So is there a possibility of spread increasing, that is the question.
What was your last question? the possibility of what?
Spread increasing he says.
Meaning more than the needle coke our selling price increases.
Very difficult to answer this question. Actually, considering the global environment today, suppose this has not happened. We would have been -- said this with more confidence. But even if we are able to say we have healthy margins and even if we are able to say today that we are in a position to maintain that despite all kinds of problems, I think that is good. Is it not?
No, it's good. But just -- the aim is in commodity company, it has to come from both the spread and volume growth also, volume growth will be 10%, to 20%. It's okay with this margin also. That is what I'm trying to understand.
And we're going to get additional volumes.
Additional volumes, right. So there's no -- I don't think that there's any demand destruction in the year of graphite -- it will not happen?
No, we don't see that. And the vast part you see, I mean, you have been tracking the logistics disruptions and all. In some cases, hence since we are exporting more than 2/3 of our products.
In some countries, the freight has gone up by as high as 5x.
Double is very, very normal. 2x to 3x is very normal, but in some case it has gone...
So were you taking the freight hit, sir, or the customer is taking that?
We deliver CNF.
The flying CNF or to deliver -- so all the cost increase...
Increase of 3x increase...
Understood.
We have been able to pass on all the increases basically.
Sir, you feel there can be any disruption in the capacity being added through EAF technology, no?
No. No, there is -- in fact, on the contrary, the clamor towards EAF is only increasing by the day.
Okay. And how is the worldwide graphite demand and supply, it is a shortage or it is?
Right now, all the global companies, all the Western companies are running to this order of 90%. Any little demand increase will help in further hardening of prices.
[Operator Instructions]
Our next question is from the line of Dewang Sanghavi from ICICI Securities.
My question is regarding the European market. The European market is currently 45% to 50% EAF-based, and we expect another 15 million to 20 million of EAF capacity coming online. So this 45%, 50% share can go to 60% plus in the next, say, 3, 4 years?
Yes. Obviously, when this gets added, it will increase the share of EAFs.
Dewang ji, if you look at the total production of steel, it's like somewhere in the region of 900 million to, let's say, 950 million, something like that.
So if you calculate mathematically between 45% to 50%, in the electric arc furnace, and then you add another 30 million tons. So it's a substantial change, a substantial number. And basically, the other way to look at it is with 30 million tons whenever it gets added, obviously, it will happen over the next 2, 3, 4 years. Some of this is going to happen within this year. I mean, I can't -- I don't want to publicly give the numbers on the table. Out of this 30 million tons, some of it is coming within this year, within the next 9 months. Some of it is coming in 2023. And then in the next 5 to 6 years, all that is going to be on the table.
So the demand increase for electrode could be anywhere in the region of between 40,000 to 50,000 tons. If you take 1.5, 1.6, 1.7 kilos per tons of steel on 30 million tons, 35 million tons, the demand increases will be going to be in that region of 40,000, 45,000, 50,000 tons.
And no new capacities have been announced at least up till today. So the only increase which is happening in the graphite industry in the world is the 20,000 tons that we are adding by the end of this year.
And again, to remind you, we had taken this decision to -- and it's a brownfield expansion. It's not even a greenfield and we had announced our intent to increase exactly in October of 2019.
So our company which has gone through 6, 7, 8 expansions in its lifetime, we have taken about 3, 3.5 years, 3.25 years, just to add 20,000 tons.
So what I'm trying to impress is that even if somebody was to announce an expansion today, it's a matter of anywhere between 3 to 4 years.
Basically, what I'm trying to impress is new capacities even in a brownfield case is a very long-drawn process.
Right. So demand, supply guidance will be strongly in favor of demand for next 3, 4 years because demand is there and there's no specific new capacity coming on stream after all?
I mean I can only put the figures, I mean, I'm hoping what you're saying is right.
Secondly, this market, it was seeing some challenging times because of electricity cost that you have highlighted in your opening remarks. Have you seen improvement in next last 15, 20 days? Or it is the same thing?
Last 15, 20 days, I mean, I don't think anything has changed in 15, 20 days. No.
Close to a month, I was just highlighting. If we pay a utilization improvement happening in Europe after not a good April and March because of energy cost or maybe first few months because of the energy cost and some improvement happening in the next, let's say, last month or so. Still the challenging time continues. I just want to take your view on this. Can we see improvement in Europe happening in next 3, 4 months? or is it still difficult to call? .
Manish, would you want to...
Yes, sir. Dewang, this electricity as the prices for them are still at a very high level. Of course, they are not sustainable. And of course, they will come down with time. But right now, they continue to face that challenge.
So we have seen the customers who had placed orders on a request for a pushback. Anybody who needed electrode in June now wants it in July, the July guy wants it in August. So it's a pushback of orders because they're not operating electric arc furnace to the full extent they can. They operated off-peak hours and peak hours the electricity prices are way too high for them.
But all this is going to be temporary. I mean nobody is going to pay those kind of electricity prices, industry or domestic. They're completely unsustainable. So they will probably cool off in the next 2, 3 months and a long-term trend of electric arc furnace will always be there because they are very cautious about it, and I think the best efforts are being put in Europe to decarbonize.
I always say credit costs are very high and probably will not sustain and maybe demand can come back.
It's a carbon cost has gone up from $28, $30 to almost $90 today. So who is going to pay that carbon cost? It's completely waste.-- so eventually, it will be restored. It's only temporary that electricity prices are so high that they are kind of operating electric arc furnaces at less than capacity.
All right. And my last question is on the recent duty on steel exports. What is your take on the payment? Is there any demand impact on...
In India, Dewang, despite producing 120 million tons of steel, no more than 30% is produced from the electric arc furnace route. So yes, it is a dampen up of our steel customers, but government is trying to do whatever it can to control inflation.
So I believe this is also a temporary. Nobody puts export duty like this. I mean they will also be taken out once the domestic market cools down on prices. And we are anyway, as Chairman said, 2/3 is we export to 40 countries. So we won't see as much impact.
[Operator Instructions]
Thank you very much. That was the last question in the queue. As there are no further questions, I would now like to hand the conference over to Mr. Jhunjhunwala for closing remarks.
Thank you, friends, for joining us today and asking some very pertinent questions. We are -- I'm very happy to be living in this environment. which looks very good, very optimistic to us, and I look forward to talking to you once again in 3 months' time. Thank you.
Thank you very much. On behalf of SKP Securities Limited, that concludes the conference. Thank you joining us. You may now disconnect your lines.