The black grit that beat Bitcoin's rally and didn't slump

MUMBAI –  China’s push for blue skies has caused an obscure steelmaking ingredient to fuel gains of as much as 2 600% since the start of 2017 for the few companies that supply it, minting at least one new billionaire.

The material is graphite, a form of carbon that has seen demand soar because of its use in electric-vehicle batteries and the lower-pollution steel mills that China is favoring to clean up its air. That double-whammy pushed shares of Graphite India up more than 1 200% since January 2017, boosting the wealth of founder K.K. Bangur to about $1.75-billion, according to Bloomberg calculations. HEG fared even better, rising more than 26-fold to add $1.4-billion of value for its owners including chairman Ravi Jhunjhunwala.

China unveiled a three-year “blue-sky protection plan” in July, widening anti-pollution controls that are shuttering plants that make the graphite electrodes and traditional blast-furnace steel mills. Companies that recycle China’s increasing mountains of scrap metal are being forced to switch to electric-arc furnaces that burn through about 2.5 kg of graphite electrodes for each ton of steel produced.

China’s pollution curbs could double the share of electric arc mills to 20% of total production by 2020, from less than 10% now, pushing global demand for electrodes up 60 percent, according to Mitsubishi UFJ Morgan Stanley Securities Co.

“This uplift should be viewed as structural and not just an up cycle,” said Bangur, 58, who hails from a Kolkata-based industrial family that split its businesses spanning cement to jute mills to textiles in the 1990s. “The outlook looks promising.”

The graphite crunch has had repercussions around the world. In Japan, industry leader Showa Denko KK’s value has tripled to $6.7-billion, giving it ammunition to consider buying assets in Europe. Rival Tokai Carbon Co., which has seen its market value jump to $3.8-billion, from $691-million two years ago, forecasts that the market won’t peak for at least another four to five years. US-based producer GrafTech International Ltd. has risen 15% since an initial public offering in April.

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