GrafTech International (NYSE:EAF) said its third-quarter results continued to reflect lower graphite electrode prices tied to customer commitments made before its recent pricing actions, while the company reported progress in securing higher-priced business for late 2026 and 2027.
Chief Executive Officer Tim Flanagan said customer commitments secured during the third quarter and early fourth quarter were at higher price levels than earlier agreements. The company expects those agreements to lift weighted average realized pricing by a mid-single-digit percentage in the fourth quarter, followed by a more significant increase in 2027.
GrafTech reported weighted average realized graphite electrode pricing of about $3,900 per metric ton in the third quarter, essentially unchanged from the second quarter and down about 7% from a year earlier. Flanagan said the company’s reported pricing has lagged market improvements because much of its 2026 volume had been contracted before its pricing actions.
Third-quarter financial results
Net sales totaled $140 million in the third quarter, down approximately 3% from the same quarter a year earlier, primarily because of lower realized graphite electrode prices. Sales volume was approximately 29,000 metric tons, essentially flat year over year, while year-to-date sales volume rose about 7% from the first nine months of 2025.
The company maintained its expectation for full-year sales volume growth of 5% to 10% in 2026. Production volume was approximately 27,000 metric tons, up 2% from a year earlier but down 19% sequentially due mainly to planned summer maintenance shutdowns at its European facilities. Capacity utilization was 64%, compared with 63% a year earlier and 74% in the second quarter.
GrafTech recorded a net loss of $47 million, or $1.76 per share, compared with a $28 million loss, or $1.10 per share, in the prior-year quarter. Results included approximately $14 million in restructuring and other exit charges related to the planned closure of its Monterrey, Mexico, manufacturing facility, most of which were non-cash.
Adjusted EBITDA was $9 million, compared with $13 million in the prior-year period. Chief Financial Officer Rory O’Donnell said the decline primarily reflected lower realized pricing, partly offset by lower cash cost of goods sold per metric ton.
Net cash used in operating activities was $8 million during the quarter, while adjusted free cash flow was negative $16 million. Both figures improved from the second quarter, when operating cash usage was $69 million and adjusted free cash flow was negative $75 million. The company expects working capital, including inventory, to decline in the fourth quarter, though it continues to anticipate a modest full-year increase in working capital and about $35 million in capital expenditures.
Higher pricing expected to outpace cost pressure
Flanagan said GrafTech announced an initial price increase late in the first quarter, followed by another 30% increase in early September. The company had previously indicated that customer commitments made after the first increase represented roughly a 15% uplift when applied across its sales mix, though about 80% of its volume had already been committed when that increase was announced.
In response to analyst questions, Flanagan said the company expects the pricing gains being negotiated for 2027 to be margin accretive and to more than offset anticipated cost inflation. O’Donnell said each $100-per-metric-ton increase in weighted average realized pricing would represent about $12 million of incremental annual cash flow.
Needle coke pricing has also risen during 2026, according to Flanagan. He said the market entered the year in an approximate range of $1,000 to $1,200 per ton depending on grade, and had risen to roughly $1,700 to $2,000 per ton. He cited higher oil-related input costs as well as supply-and-demand conditions, including reduced decant-oil availability as refineries produce more diesel.
O’Donnell said GrafTech’s blending capabilities, supplier diversification and sales of oil-related byproducts help manage decant-oil cost pressures. The company also has fixed-price energy contracts covering a significant portion of its 2026 European requirements, though it expects energy costs to rise as some contractual coverage resets in 2027.
GrafTech expects cash cost of goods sold per metric ton to decline by a low-single-digit percentage for full-year 2026 versus 2025.
Monterrey closure to reduce capacity and costs
GrafTech announced during the quarter that it plans to close its Monterrey graphite electrode manufacturing facility. The phased wind-down is expected to be completed early in the second quarter of 2027, after customer requirements are transferred to plants in Calais, France, and Pamplona, Spain. Connecting-pin production also is being moved to Pamplona.
After the transition, GrafTech expects annual graphite electrode production capacity of about 127,000 metric tons. Flanagan said Monterrey was the company’s highest-cost facility and its smallest set of assets, and the closure is intended to improve fixed-cost leverage while preserving product capabilities and customer service.
- Annual cash cost savings are expected to total approximately $20 million to $25 million, with the full benefit anticipated in 2028.
- Annual capital expenditure requirements are expected to decline by approximately $5 million beginning in 2027.
- The company expects to release approximately $20 million to $25 million of working capital, mostly in 2028.
- One-time cash costs associated with the closure are expected to total approximately $20 million to $25 million, with most incurred by the end of 2027.
Flanagan said the company intends to pursue a sale of the Monterrey property following the shutdown and permanent removal of production capabilities. Any proceeds could support liquidity and debt reduction, subject to the company’s loan documents.
Steel demand outlook and liquidity
Management said steel market conditions outside China are gradually improving. Global steel production excluding China increased about 2% year over year through the first two months of the third quarter, reaching approximately 142 million metric tons. U.S. steel capacity utilization reached 80% for the second consecutive quarter, according to the company.
GrafTech cited the World Steel Association’s forecast for finished steel demand outside China to grow approximately 1.5% in 2026 and 4% in 2027. The company continues to expect graphite electrode demand outside China to grow at an approximately 3% compound annual rate in coming years, supported by electric arc furnace steelmaking, infrastructure investment, defense spending, energy-transition projects and data-center development.
The company ended the quarter with approximately $242 million of total liquidity, including $134 million of cash and roughly $108 million available under its revolving credit facility. O’Donnell said GrafTech has substantially no debt maturities until December 2029.
GrafTech also said it continues to pursue synthetic graphite opportunities beyond steelmaking. In September, the company announced a collaboration with Antora Energy involving manufacturing capabilities at its St. Marys, Pennsylvania, facility for Antora’s thermal-battery technology. Management said the initiative remains in its early stages but could help utilize idled assets and support new revenue opportunities.
About GrafTech International (NYSE:EAF)
GrafTech International Ltd. (NYSE:EAF) manufactures graphite electrodes and related carbon-based products used primarily in electric arc furnace steelmaking. Its graphite electrodes conduct electricity at extremely high temperatures, enabling steel producers to melt scrap steel and other metallic inputs. The company also produces petroleum needle coke, a specialty carbon material used in the manufacture of graphite electrodes.
GrafTech serves steel producers and industrial customers worldwide, supplying products through manufacturing and distribution operations in North America, Europe and other international markets.
