GrafTech International (NYSE:EAF) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/833501560
Summary
GrafTech International reported a net loss of $43 million for Q1 2026, with adjusted EBITDA at negative $14 million, primarily due to a decline in average pricing.
The company announced a price increase for graphite electrodes by $600 to $1,200 per metric ton, aiming to restore pricing levels and safeguard supply continuity.
Despite geopolitical uncertainties, the company maintains strong liquidity of $329 million and expects modest year-over-year improvement in cash costs.
GrafTech is actively engaged in supporting trade cases in the U.S. related to unfairly priced imports, with potential rulings expected by mid-2026.
The company is positioning itself for long-term growth, capitalizing on trends like decarbonization and the shift to electric arc furnace steelmaking.
Full Transcript
JL (Operator)
Thank you for standing by. My name is JL and I will be your conference operator today. At this time I would like to welcome everyone to the GrafTech International’s first quarter 2026 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press Star one again. I would now like to turn the conference over to Mike Dillon, Vice President of Investor Relations and Treasurer. You may begin.
Mike Dillon (Vice President, Investor Relations and Treasurer)
Good morning and welcome to GrafTech International’s first quarter 2026 earnings call. Thank you for joining us. Joining me on the call are Tim Flanagan, Chief Executive Officer and Rory O’Donnell, Chief Financial Officer. Tim will begin with opening comments on our first quarter performance and key strategic initiatives. Rory will then provide more details on our quarterly results and other financial matters. After brief closing comments by Tim, we will then open the call to questions turning to our next slide. As a reminder, our comments today may include forward looking statements regarding, among other things, performance trends and strategies. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by forward looking statements are shown here. We will also discuss certain non GAAP financial measures and these slides include the relevant non GAAP reconciliations. You can find these slides in the Investor Relations section of our website at www.GrafTechh.com. a replay of the call will also be available on our website. I’ll now turn the call over to Tim. Good morning and thank you for
Tim Flanagan (Chief Executive Officer)
joining Graftech’s first quarter earnings call. While the graphite electrode industry continues to navigate a period of transition, we are starting to see signs of improvement and GrafTech is well positioned to capitalize on the recovery ahead. At the same time, geopolitical conflicts are generating macro uncertainty and energy market volatility. Against this backdrop, our priorities remain clear, drive disciplined commercial execution, continue improving our cost structure, maintain strong liquidity, operate safely, and position GrafTech for long term value creation. In all of these areas, we’ll continue to take decisive actions to support the long term viability of our business. To that end, let me provide an update on several of our key strategic initiatives that leverage the commercial, operational and financial progress that we’ve made over the past couple of years. Starting on the commercial front, for some time we’ve been clear that pricing levels have not reflected the indispensable nature of a graphite electrode nor the level of investment required to maintain a stable, reliable supply for the steel industry. That’s happened even as steel makers in the US And Europe have announced cumulative price increases over the past five quarters for finished steel products of approximately 50 and 25% respectively, reinforcing the disconnect between value creation in the steel industry and the pricing environment for graphite electrodes. A Mission critical consumable in response, we are actively pursuing both market based and policy driven solutions as part of our disciplined approach to addressing this condition. On March 26, we announced that we’re increasing our graphite electrode prices by by a minimum of 600 to $1,200 per metric ton, depending on the region. From a customer’s perspective, this represents a 1 to $2 increase, or less than 1/2 of 1% of the cost to produce a ton of steel. This increase will only apply to volume that was not yet committed as of that date. This price increase represents only a first step to restoring pricing to levels that safeguard regional graphite electrode production and continuity of supply for our customers. And as we remain focused on value over volume, we’ll continue to walk away from volume opportunities that do not meet our margin requirements. So still early on, we’ve been encouraged by our customers reaction to the price announcement and the reflection of the price increase in recent tenders. As of Today, more than 85% of our anticipated volume is committed in our order book, mostly at price points that reflect market pricing at the end of the fourth quarter of 2025. However, we’re pleased to see the positive pricing momentum which will lay a critical foundation as we begin the 2027 price negotiations later this year. To further support these efforts, we are actively engaged in advocating for GrafTech in our key commercial jurisdictions as part of our commitment to fair trade and market stability in the U.S. this includes our support of trade cases filed earlier this year related to the imports of large diameter graphite electrodes at unfair prices. In April, the International Trade Commission announced the preliminary determination that there is a reasonable indication that the domestic industry is being materially injured by imports from China and India that are being sold in the US at far less than fair value and subsidized by those governments respectively. As a result of this determination, the U.S. department of Commerce will continue its investigation. We’re very encouraged by these developments and remain confident that the Commerce and that the ITC will complete a thorough investigation and take the necessary actions to address these unfair trade practices. As we assess progress towards constructive pricing and supportive trade actions, we continue to evaluate the level of production capacity we need to maintain and the level of volume we will deliver to the market, reflecting our commitment to take decisive actions and support the long term viability of our business. We also continue to assess the industry wide impact of recent geopolitical developments, particularly the effect on key graphite electrode inputs including oil based raw materials, energy and logistics. Disruptions in the production and transportation of oil out of the Middle east are having a significant impact on the global oil market. This in turn has translated into higher decan oil prices, the key raw material for petroleum, needle coke. While the needle coke market has been relatively flat for the past two years, we anticipate that higher input costs and potential disruptions in decan oil availability for certain needle coke producers will provide a catalyst for needle coat pricing. In addition, shipping disruption and rising geopolitical risk continue to reinforce the need for supply chain security. We are beginning to see a shift in sourcing behavior for certain steel producers with an increased focus on regional production and surety of supply to safeguard continuity of their operations. In this regard, we’re well positioned to meet the needs of our customers. Our strategically positioned global manufacturing footprint provides a competitive advantage given its proximity to large EAF steelmaking regions. Further, we have surety of needle coke supply through our vertical integration with Seadrift which sources all of its decan oil needs from domestic producers. Lastly, regarding the impact of the conflict on Graftex cost structure, our efforts over the past several years have created a more agile, more efficient manufacturing footprint that positions us well to control production costs while navigating a dynamic macro environment. We expect incremental improvement through operational efficiencies and disciplined production management. As a result, our current expectation is that we’ll achieve a modest year over year reduction in cash cogs consistent with our guidance at the beginning of the year. However, the extent and duration of the conflict in the Middle east and the resulting longer term impact on the oil and energy markets remains uncertain. Ultimately, sustained increases in our key input costs will require us to take further action on electrode pricing. Stepping back as it relates to the graphite electrode and needle coke industries, we are seeing an inflection point take shape. The near term pricing environment is improving and the long term fundamentals remain firmly intact. Electric arc furnace steelmaking continues to gain share globally driven by decarbonization trends and structural shifts in steel production. This transition supports long term demand for graphite electrodes and and in turn petroleum needle coke. We expect further synthetic graphite and petroleum needle coke demand to result from the building of Western supply chains for battery needs, whether for electric vehicles or energy storage applications. We applaud the efforts of policymakers both in the US and the EU as begin to develop a joint Critical Minerals Action Plan. This action plan establishes a framework for the two trading partners to coordinate policies to ensure supply chain resiliency for critical minerals such as synthetic graphite as they explore potential trade mechanisms including order adjusted price floors. Furthermore, there’s overwhelming evidence in trade cases across multiple jurisdictions that whether it’s to support the establishment of a supply chain that doesn’t exist outside of China today, or to protect those industries that do, pricing sport for materials that are critical for national and economic security are an absolute must. Against this backdrop, graphtec continues to take proactive measures that seek to capitalize on these emerging opportunities. These include ongoing engagement with the US Administration at various levels to help inform and shape critical mineral policies as it relates to graphite electrodes as well as battery materials within the eu, supporting the ongoing efforts of the European Carbon and Graphite association as they advocate for stronger European steel and graphite electrode industries and demonstrating our technical capabilities through partnership and engagement with various agencies, research institutions and companies. Let me pivot to our current thoughts on the steel industry trends as context for the rest of our discussion. Our Performance and Outlook Global steel production outside of China was 212 million tons in the first quarter, up approximately 1% compared to the prior year, with a global utilization rate of approximately 67% for the quarter. Looking at some of our key commercial regions, using data recently published in the World Steel association for North America, steel production was up 2% in the first quarter compared to the prior year, driven by 6% year over year growth in the United States and we’re seeing this Trend continue into Q2 with the AISI reporting that weekly US capacity utilization rate hit 80% for just the second time in the past two years. This is a clear signal that EAF steelmaking activity and therefore demand for our electrodes is gaining momentum in an important commercial region. Conversely, in the EU, steel output for the first quarter remained depressed, declining 3% compared to the prior year. However, as we’ve noted previously, indicators of a rebound in the steel market have started to appear both in the EU and globally. Turning to the next slide and extent expanding on this point, in April, World Steel published their latest short range outlook for steel demand globally. Outside of China, World Steel is projecting 2026 steel demand to grow 1.9% year over year for the US World Steel is projecting 1.7% steel demand growth in 2026. Along with this demand growth, favorable trade policies are expected to further support U.S. steel production. For Europe, World Steel is projecting a return of steel demand growth in the near term, forecasting demand growth of 1.3% for 2026. This reflects some of the demand drivers we’ve discussed in the past earnings calls, including initiatives to increase infrastructure investment defense spending representing key steel incentive industries. In addition, key policy initiatives in the EU are expected to support higher levels of steel production in this important commercial region for Graftec. Specifically, provisions within the Carbon Border adjustment mechanism, or CBAM, implemented in early 2026 will make certain steel imports into the EU less competitive. Further, in April, the EU approved the proposal initially made by the European Commission in 2025 to to significantly increase trade protections on steel. These new measures, which will be effective at the beginning of July, will cut tariff free steel import quotas nearly in half, double the above quota duties to 50%, and introduce melt and pour disclosure rules to prevent circumvention. All this is expected to boost domestic steel production, with some analysts projecting capacity utilization rates in the EU could increase from current levels around 60% to potentially 80% over time. Overall, we continue to project that globally outside of China, demand for graphite electrodes will increase in 2026, with all major regions expected to contribute. Graphtex is uniquely positioned to capture a disproportionate share of that growth. Before I hand the call over to Rory, I want to circle back on one of the key priorities I mentioned in my opening comments, operating safely. Our team continues to do just that and I want to thank them for their efforts. For the first quarter, our total recordable insert rate was 0.35, a further improvement over the full year rate for 2025. Sustaining this momentum will remain a critical focus as we work relentlessly towards our goal of zero injuries. But with that, I’m going to turn it over to Rory, who will provide more color …
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