Where did the third quarter improve, and where does pressure remain?

  • GrafTech’s third-quarter revenue was 140.2 million dollars, up 10.1% quarter on quarter and down 2.7% year on year. Adjusted EBITDA rose from 1.9 million dollars in the second quarter to 8.6 million dollars, but remained below the 13 million dollars recorded a year earlier.
  • Prices continued to weigh on year-on-year performance: graphite electrode sales volume was 28.8 thousand tonnes, unchanged from a year earlier; the weighted-average realized selling price was approximately 3900 dollars per tonne, flat quarter on quarter and down 7% year on year.

Why are selling prices expected to rise?

  • The company said it secured customer commitments in the third quarter and early in the fourth quarter to purchase at higher prices, and that realized selling prices had reached a turning point. It expects the fourth-quarter weighted-average realized selling price to rise by a mid-single-digit percentage from the third quarter and to increase significantly in 2027.
  • The company reiterated its expectation that graphite electrode sales volume will rise 5%–10% year on year in 2026, based on market share gains. It also expects modest growth in global steel demand outside China and an improvement in the European market supported by trade protection measures.

Can cost reductions offset cost pressures?

  • Petroleum-based raw materials, energy and logistics continue to create cost pressures. The company expects cost-reduction and operational-efficiency measures to offset these pressures, with cash cost of sales per tonne declining by a low-single-digit percentage in 2026 from 2025.
  • The company plans to close its Monterrey, Mexico plant, with expected annual cash cost savings of 20 million to 25 million dollars, although the full annual benefit will not be realized until 2028.

Why is the credit rating still neutral?

  • Third-quarter adjusted free cash flow was negative 16 million dollars, an improvement from negative 75 million dollars in the second quarter but weaker than positive 18 million dollars a year earlier. Operating cash flow was affected by an increase in inventory, which the company expects to decline in the fourth quarter.
  • At quarter-end, the company held 134.3 million dollars in cash and had total debt of 1.225 billion dollars. Total liquidity was 242 million dollars, including 108 million dollars available under its revolving credit facility.
  • JPMorgan believes that, despite positive pricing momentum, the balance sheet will still need to be adjusted in the future to reflect the global graphite electrode market environment and expectations for earnings through the cycle. The bank maintains its neutral rating and believes the current bond discount appropriately reflects uncertainty in the macroeconomic and competitive environment.
  • Sell-side consensus expects approximately 50 million dollars in EBITDA for 2027; JPMorgan expects earnings to recover further before the bonds mature. Both bonds listed in the report mature in December 2029.