GrafTech International Q1 Earnings Call Highlights

Key Points

• GrafTech announced a $600–$1,200 per metric ton price increase (region-dependent), is pushing a "value over volume" strategy, and expects roughly 90% of the pricing benefit to materialize in the second half of 2026.
• The company supports U.S. trade cases after the USITC’s preliminary finding of injury from Chinese and Indian imports, with potential countervailing duties by end of July and an anti‑dumping decision by mid‑September, while EU carbon and trade measures are also expected to bolster pricing.
• Operationally, sales volume rose 14% YoY to 28,000 mt (production 29,000 mt) and full‑year volume growth is guided to 5%–10%, but Q1 showed a $43 million net loss and adjusted EBITDA of negative $14 million, with $329 million of total liquidity and about $12 million of incremental EBITDA per $100/mt ASP improvement.

GrafTech International NYSE: EAF executives said the graphite electrode market is showing early signs of improvement after a prolonged downturn, as the company pushes through price increases, pursues trade enforcement efforts, and manages input-cost volatility tied to geopolitical disruptions.

On the company’s first-quarter 2026 earnings call, CEO Timothy Flanagan said the industry remains in a “period of transition,” but added that GrafTech is “starting to see signs of improvement” and believes it is positioned to benefit from a recovery. CFO Rory O’Donnell outlined first-quarter operating and financial results, including higher sales volumes, lower sequential costs, and continued pressure from pricing.

Pricing actions and “value over volume” approach

Flanagan reiterated management’s view that graphite electrode pricing has not reflected the importance of electrodes to electric arc furnace (EAF) steelmaking or the investment required to maintain reliable supply. He highlighted that steelmakers in the U.S. and Europe have announced cumulative finished steel price increases over the past five quarters of about 50% and 25%, respectively, which he said “reinforc[es] the disconnect” between steel pricing and graphite electrode pricing.

GrafTech announced on March 26 that it is increasing graphite electrode prices by a minimum of $600 to $1,200 per metric ton, depending on region. Flanagan characterized the change as roughly a $1 to $2 per ton-of-steel impact, or “less than one half of 1% of the cost to produce a ton of steel,” applying only to volume not yet committed at the time of the announcement.

O’Donnell said the company’s average selling price in the first quarter was about $3,900 per metric ton, down 5% year-over-year and down 2% sequentially. While near-term reported results have not yet reflected the new pricing, Flanagan told analysts that most of the benefit will land later in the year. “Probably 90% of the volume that will be impacted by the price increase will happen in the second half of the year,” he said, adding that GrafTech would not expect “a big change in ASP in the second quarter,” with increases materializing in the third and fourth quarters.

Management also emphasized that the price move was an initial step. Flanagan said the company remains focused on “value over volume” and will continue to walk away from business that does not meet margin requirements. As of the call, GrafTech had more than 85% of anticipated 2026 volume committed in its order book, mostly at pricing reflecting market levels at the end of the fourth quarter of 2025, according to Flanagan. O’Donnell said this commitment level was tracking ahead of the same point last year.

Trade actions and policy developments

GrafTech also discussed policy and trade initiatives it says could support pricing and market stability. Flanagan said the company supports U.S. trade cases filed earlier this year concerning imports of large-diameter graphite electrodes sold at unfair prices. In April, the U.S. International Trade Commission issued a preliminary determination finding a reasonable indication that the domestic industry is being materially injured by imports from China and India alleged to be sold “at far less than fair value” and subsidized, respectively. The determination allows the U.S. Department of Commerce investigation to continue.

On timing, Flanagan said the countervailing duties ruling “could be applied no later than the end of July,” while the anti-dumping decision “would come in mid-September.” He said both would occur ahead of the bulk of 2027 negotiations, which are expected in the back half of 2026.

Flanagan also referenced European policy developments he expects to support higher steel production. He cited the EU’s Carbon Border Adjustment Mechanism implemented in early 2026, and noted the EU approved additional steel trade protections in April that are expected to take effect at the beginning of July, including reduced tariff-free quotas, higher above-quota duties, and new disclosure rules to prevent circumvention.

Steel market trends and demand outlook

Flanagan said global steel production outside China totaled 212 million tons in the first quarter, up about 1% year-over-year, with utilization around 67%. He highlighted stronger trends in North America, where production rose 2% year-over-year, driven by 6% growth in the U.S. He pointed to American Iron and Steel Institute data showing weekly U.S. capacity utilization reached 80% during the second quarter for only the second time in two years, calling it a signal that EAF activity and electrode demand are gaining momentum.

In Europe, Flanagan said first-quarter steel output fell 3% year-over-year, though he added that indicators of a rebound are emerging. He cited World Steel Association projections that steel demand outside China will grow 1.9% in 2026, with 1.7% growth expected in the U.S. and 1.3% in Europe.

Based on these trends, Flanagan said GrafTech continues to project that graphite electrode demand outside China will increase in 2026, with all major regions contributing, and said the company is positioned to capture market share growth.

Cost structure, input-cost exposure, and Seadrift integration

Executives spent significant time discussing geopolitical impacts on oil-based raw materials, energy, and logistics. Flanagan said disruptions in the production and transportation of oil from the Middle East have raised decant oil prices, a key raw material for petroleum needle coke, and management expects higher input costs and potential availability disruptions to act as a catalyst for needle coke pricing.

On the Q&A, O’Donnell said decant oil represents about 25% of GrafTech’s total production cost and cautioned against directly correlating the company’s decant oil costs to Brent crude because GrafTech’s pricing is tied to other indices and includes quality-related adjustments. He said the company had incorporated futures-market and analyst-consensus assumptions into its cost outlook and maintained its guidance for a low single-digit cost improvement versus 2025.

Flanagan added that while GrafTech has not yet seen major moves broadly, the company has seen a roughly $175 to $200 increase in needle coke prices in China and said he would expect “a marked increase in needle coke prices on the merchant side” in the second half of the year.

O’Donnell also told analysts that fixed-price energy contracts cover European electricity costs through year-end and that electricity and natural gas together represent about 10% to 15% of total costs. Beyond decant oil and energy, he said GrafTech uses operational strategies and production scheduling to manage consumption and costs.

GrafTech’s vertical integration with its Seadrift needle coke operation was a recurring theme. Flanagan said Seadrift sources decant oil from domestic producers and provides “surety of supply.” O’Donnell noted that the company is in the middle of planned major maintenance at Seadrift and brought forward oil purchases in the first quarter to support operations through the turnaround.

Quarterly results, liquidity, and cash flow

Operationally, O’Donnell said first-quarter production volume was 29,000 metric tons, implying 65% capacity utilization, while sales volume was 28,000 metric tons, up 14% year-over-year. He said U.S. sales volume rose 37% year-over-year as the company expanded in higher-value regions. GrafTech reiterated full-year guidance for total sales volume growth of 5% to 10% year-over-year.

First-quarter cash costs were $3,848 per metric ton, which O’Donnell said was higher than the prior year but down 4% sequentially. Management said it remains focused on reaching a longer-term cash cost target of about $3,600 to $3,700 per metric ton.

Financially, GrafTech reported a first-quarter net loss of $43 million, or $1.66 per share. Adjusted EBITDA was negative $14 million, compared with negative $4 million in the prior-year quarter, which O’Donnell attributed primarily to lower average pricing.

Cash used in operating activities was $15 million. Adjusted free cash flow was negative $27 million, an improvement from negative $40 million a year earlier, which O’Donnell said reflected a planned inventory build in the prior-year quarter compared with a more neutral working capital impact in the current quarter. Capital expenditures are expected to total about $35 million for the full year, according to O’Donnell.

GrafTech ended the quarter with total liquidity of $329 million, consisting of $120 million in cash, $108 million of revolver availability, and $100 million of availability under a delayed draw term loan. O’Donnell said the company still expects to draw the remaining delayed draw term loan amount, “most likely by the end of the second quarter,” and noted there were no revolver borrowings at quarter-end. He also said revolver availability is limited by a springing covenant to about $115 million, less letters of credit of about $7 million at quarter-end.

As a pricing sensitivity, O’Donnell said that, at current utilization levels, each $100 per metric ton improvement in average selling price equates to about $12 million of incremental EBITDA and liquidity, based on expected volume levels.

Flanagan closed by saying improving demand, the company’s pricing actions, and trade and policy developments are “reinforcing the pricing recovery thesis,” while longer-term drivers such as decarbonization and the shift toward EAF steelmaking remain intact.

About GrafTech International NYSE: EAF

GrafTech International NYSE: EAF is a leading global manufacturer of graphite electrodes and other specialty graphite products used primarily in electric arc furnaces (EAFs) for steel production. The company's core offerings include ultrahigh-power, high-power and regular power electrodes, along with related accessories such as graphite shapes and heterogeneous carbon materials. These products play a critical role in steelmaking by conducting the high electrical currents required to melt scrap steel efficiently and with reduced environmental impact compared to traditional blast furnace methods.

With a manufacturing footprint spanning North America, Europe and Asia, GrafTech serves steel producers and foundries worldwide.

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