Graftech International (EAF) Q3 2026 earnings call transcript

Good morning and welcome to GraphTech International's third-quarter 2026 earnings call. Thank you for joining us. Joining me on the call are Tim Flanagan, Chief Executive Officer and Roy O'Donnell, Chief Financial Officer. Tim will begin with opening comments on our key strategic initiatives. Roy will then provide color on our quarterly results, how work and other financial matters. After closing comments by Tim, you will then open up 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 that are subject to risks and uncertainties. Factors that could cause actual results different materially from those indicated by forward-looking statements are shown here. We will also discuss certain non-GAP financial measures and these slides include the relevant non-GAP reconciliation. You can find these slides in the Investor Relations section of our website at www. graphtech. com. A replay of the call will also be available on our website. I'm now turning the call over to Tim.

Morning everyone and thank you for joining us today. The third quarter marked another important period for GraphTech as we continue to advance the commercial, operational and strategic initiatives designed to improve our long-term profitability and strengthen our competitive position. We are particularly encouraged by the progress we are making on the pricing front. As higher-priced customer commitments reinforce our confidence that we've reached an inflection point in our realized pricing. During the quarter, we also announced significant step in our strategy to improve the efficiency and competitiveness of our manufacturing footprint to the planned closure of our monitoring Mexico facility. These actions together with our ongoing efforts to improve our cost structure, advocate for fair trade and capitalize on emerging market opportunities reflect our commitment to taking decisive steps to strengthen GraphTech's financial performance.

We also remain confident in the longer-term fundamentals of our end markets. Supported by improving steel industry conditions across many of our key regions that continue transition towards electric arc furnace steelmaking and the growing strategic importance of synthetic graphite. This morning I'd like to begin with an update on our strategic priorities followed by our perspectives on the steel market and broader industry environment. I'll then discuss safety before turning the call of a brewery for review of our financial results. On the commercial front, our disciplined commercial approach is beginning to produce tangible results. During the third quarter and early in the fourth quarter, we continue to secure customer commitments at higher price levels than those secured in earlier periods this year, reinforcing our expectation for meaningful improvement and realized pricing in the 27th.

Restoring graphite electric pricing to more sustainable levels remains essential to supporting continued investment in high quality manufacturing capacity and ensuring reliable supply for our customers. As we've seen in prior industry cycles, changes in the balance between supply and demand can result in relatively rapid and significant movements in graphite electric pricing. While the timing and magnitude of any recovery will depend on market conditions, we believe the combination of improving commercial momentum and actions to better address industry over capacity create the potential for meaningful price recovery. To put our recent pricing progress in perspective, market pricing continued to decline early in 2026 before beginning to recover during the second quarter. On the heels of the inner price increase, we announced in March.

Since then, we have seen sustained improvement in prices reflected in new customer commitments. However, because of our realized pricing reported to date in 2026, reflects commitments that were primarily entered into and prior periods, those improvements have not yet translated into our quarterly results. Our weighted average realized pricing was approximately $3,900 per metric ton in the third quarter, essentially flat with the second quarter.

However, based on our current order book and the timing of shipments against these higher priced commitments, we expect the mid single digit percentage increase in realized pricing in the fourth quarter.

Looking ahead to 2027, we are seeing positive results and securing customer commitments at significantly higher prices than those reflected in our 2026 business. While a substantial portion of our anticipated 2027 volume remains to be committed, as is typical for this point in the year, these initial results reinforce our confidence in the pricing momentum we are building. Importantly, our objective is not simply to achieve near term improvement in pricing, but to establish a more sustainable pricing environment. We believe our efforts to better align production capacity with underlying demand together with the value customers place on reliable high quality supply, provide important support for that objective. We remain focused on securing commitments that appropriately reflect the value of our differentiated products, technical capabilities and reliable supply, while maintaining discipline and how we allocate our available production capacity.

We look forward to providing a more comprehensive update on our 2027 commercial position when we report our fourth quarter results early next year.

Beyond our own commercial progress, we are also seeing positive industry developments. In China, graphite electric prices have increased throughout the year, supported in part by higher raw material costs. At the same time, Chinese graphite electric exports have declined approximately 10% year over year. Taking together, we view these developments as further indications that the prolonged period of low industry pricing is beginning to change. We are also seeing strengthening conditions in the petroleum needlecoat market.

Needlecoat prices have steadily increased throughout the year, reflecting a combination of high raw material costs and evolving supply and demand conditions. At the same time, interest in our own needlecoat production capabilities is growing amongst potential customers serving various end markets. Historically, needlecoat and graphite electric pricing have been closely correlated with an average spread between the two of approximately $4,000 per metric ton over the past 20 years on an inflation adjusted basis.

Therefore, we believe the strengthening needlecoat market provides another catalyst for higher electric pricing, while vertical integration positions graphite favorably as these market dynamics evolve. Second, with respect to our manufacturing footprint, in the third quarter, we announced the plan closure of our graphite electrode manufacturing facility in Monterey, Mexico. This represents an important step in our efforts to optimize our manufacturing network, improve operational efficiency, and better align production capacity with market demand. Over the past several years, the graphite electrode industry is based persistent structural over capacity, reflecting significant capacity additions in certain markets that have outpaced underlying demand growth. These conditions have contributed to a prolonged period of dispress surprising and admittedly increasingly difficult to justify maintaining excess manufacturing capacity.

We have taken meaningful actions over the past several years to improve our cost structure and operational efficiency, or given the continued imbalance, supply and demand, we determined that further action was necessary.

Following the phase line down of Monterey, customer requirements currently served by that facility will transition to our manufacturing operations in Calais, France, and Pamplona, Spain. The transition of connecting pin production capacity to Pamplona is also in process and on track.

Upon the completion of this transition, early in the second quarter of 2027, our annual graphite electrode production is expected to be approximately 127,000 metrics. Importantly, we are confident this consolidation will enable us to serve our customers more efficiently through a more competitive manufacturing footprint. While preserving the differentiated product capabilities and technical expertise that are central to the graphite's value proposition, we expect the initiative to strengthen our cost structure, improve operating efficiency, or reduce future capital requirements. We are managing the transition carefully with a focus on safety, paying supply continuity, and meeting our customer commitments.

Plus one or eight or eight of our support for the employees impacted by this. The Monterey team has made important contributions to graphite over many years, and we're committed to treating our colleagues with respect, supporting them throughout the transition, taking together with our ongoing manufacturing productivity and cost reduction initiatives. This action represents another meaningful step towards establishing a more sustainable foundation for profitability. Following the wind down of operations, impermanent removal of graphite electrode production capabilities at Monterey, we intend to pursue the sale of the property and have already begun preliminary activities in preparation for potential transaction. Any proceeds from a future sale would provide additional opportunity to support our liquidity position and reduce our outstanding debt, consistent with requirements or loan done.

We continue to advocate for fair trade and more balanced competitive conditions across the graphite electrode industry, including through our support and trade proceeding in key commercial jurisdictions.

Discuss last quarter of the Department of Commerce has been investigating the imports of large diameter graphite electrodes from China and India. Since our last call, commerce has issued as preliminary anti-dumping determinations. While we were disappointed with the preliminary outcome, it's important to emphasize that the investigation is not yet complete. The information submitted by the Indian respondents remain subject to clarification by commerce and the final determination during the first quarter of the remainder of this process, efforts to address unfair trade practices that undermine the competitiveness of the graphite electrode manufacturing. More broadly, we believe appropriate trade enforcement is an important component of establishing a healthier and more sustainable competitive environment, particularly as governments increasingly recognize the strategic importance of maintaining domestic and regional industrial capabilities.

Finally, with respect to emerging opportunity, we continue to believe that the growing strategic importance of synthetic graphite presents attractive longer term opportunities for graphite. As we've discussed previously, graphite electrodes are essential to electric arc furnace steelmaking, which we expect to benefit from the continued transition towards more sustainable methods of steel at the same time, demand for high quality synthetic graphite petroleum needle coke is expanding into applications beyond traditional steelmaking, including battery materials, energy storage, and certain defense and industrial application. These trends are reinforcing the importance of reliable high quality supply chains, particularly in North America and Europe, graph text vertical integration and petroleum needle coke, extensive manufacturing capabilities, and expertise in graphite and carbon science.

A differentiated foundation with an example of our progress in this area, which we're quite excited about, is a collaboration with Antora Energy that we announced in September, and toward develops thermal batteries designed to provide reliable energy supply for industrial applications, such as AI data centers. And our collaboration is focused on leveraging our manufacturing capabilities that are St. Mary's Pennsylvania facility to support this technology. Although still in its early stages, this represents tangible progress in our efforts to leverage existing assets and technical capabilities to develop new revenue opportunities. We continue to engage with prospective customers and strategic partners and policymakers to evaluate opportunities that leverage our existing capabilities and infrastructure. While these opportunities remain at various stages of development, we believe they offer a attractive potential to diversify our business over time and create additional value from our asset.

In summary, we are making progress on several important fronts. Pricing decisive steps to improve our manufacturing footprint and cost structure and we continue to position graph tech to benefit from longer term growth opportunities. These actions will strengthen our competitive position and enhance our ability to generate improved earnings and cash flow as industry conditions recover.

With that, let me turn to the broader steel market player. Turning to slide five, let me spend a few minutes discussing the broader steel market as steel industry fundamentals remain the primary driver of long-term graphite electric demand. Overall, we continue to see improving trends across several lucky regions, supporting our expectation for modest growth and graphite electric demand during 2026. To the first two months of the third quarter, global steel production, excluding China, total of approximately 142 million metric tons, an increase of approximately 2% compared to the corresponding period last year. In the United States, steel production continues to benefit from favorable trade policies and resilient domestic demand. With steel capacity utilization reaching 80% for the second, while the pace of improvement varies by region, we're also encouraged by recent policy developments in Europe that we believe will support a more favorable environment for regional steel producers over time.

Taking together, these trends reinforce our view that the steel industry fundamentals outside of China are gradually improving, productive foundation for graphite electric demand. Turning to slide six, beyond the improving conditions we're seeing today, several potential catalysts could support additional growth and steel demand over the coming years. These include infrastructure investment, higher defense spending, investments associated with the energy transition, and growing demand related to artificial intelligence and data center infrastructure. We also see opportunities for additional demand growth as construction activity recovers, investment in steel intensive manufacturing increases, and geopolitical tensions keep. While the timing and magnitude of these individual catalysts will vary, we believe their combined impact provides a favorable backdrop for steel demand growth over the medium term.

Importantly, this perspective is supported by the World Steel Association's latest short-range outlook publisher this month. The World Steel Association is projecting finished steel demand growth outside of China of approximately 1.5% in 2026, accelerating to 4% in 2027. We view this anticipated acceleration as an with positive implications for graphite electrode demand.

Specifically in Europe, which remains one of our most important commercial regions, we see important developments aimed at strengthening the competitiveness of regional steel production. As we discussed last quarter, the implementation of the European Union's carbon border adjustment mechanism, together with increased trade protections for steel, has the potential to improve the competitive position of European steel makers. More broadly, we believe these catalysts will drive increased regional steel production over time, and support a view that graphite electrode demand outside of China will increase at a compound annual growth rate of approximately 3% in the coming years.

While the pace of improvement will depend on broader economic and market conditions, we believe that these demand drivers combined with other strategic actions, we are taking to improve our commercial performance and cost structure, position graphs to benefit, and like to briefly discuss an area that will always remain our highest priority, which always believe that no business objective is ever more important than ensuring our people return home safely at the end of every shift.

And I am proud of the continued focus our employees have demonstrated across their global operations. Through the first nine months of 2026, our total recordable incentive rate was . 47. While this is above our full year 2025 performance, it remains substantially below the levels we experienced several years ago, reflecting the meaningful progress we have made in strengthening our safety culture. We recognize that maintaining a strong safety performance requires constant attention and a commitment to continuous improvement. Safety must remain embedded in every aspect of how we operate, rather simply than a metric being reported each quarter.

On behalf of our leadership team, I'd like to thank all of our employees for their dedication to operating safely while delivering for our customers.

Their commitment is the foundation of everything we accomplish as a team. With that, I'll turn it over to Rory to review our third quarter results and our outlook in greater detail.

Thank you Tim. And good morning everyone. I'll begin with our third quarter operating and financial performance before discussing our liquidity position and financial outlook while it's reflected continued execution against our operating priorities, including discipline production management and ongoing cost improvement. While financial performance continued to reflect lower realized graphite electrode pricing associated with customer commitments established before starting with our operations. Production volume was approximately 27,000 metric tons during the quarter, an increase of 2% compared to the prior year quarter, but a sequential decline of 19% from the second quarter of 2026. The sequential decline in production primarily reflected planned summer maintenance shutdowns at our European manufacturing facility. Our capacity utilization rate for the quarter was 64% compared to 63% in the third quarter of last year and 74% in the second quarter of 2026.

Through the first nine months of 2026, production volume exceeded sales volume by approximately 2,000 metric tons. We continued our respect production and sales volumes to be balanced on a full-year basis, consistent with our previous outlook.

Turning to sales, we delivered approximately 29,000 metric tons during the quarter, essentially flat compared to the prior year period and in line with our expectations.

Importantly, year-to-date sales volume increased approximately 7% compared to the first nine months of 2025, keeping us on track to achieve our full-year expectation for sales volume growth between 5 and 10%.

Net sales for the quarter were $140 million, a decline of approximately 3% compared to the third quarter of last year, primarily reflecting lower weighted average realized graphite electrode pricing. Our weighted average realized price was approximately $3,900 per metric ton, down approximately 7% compared to the prior year quarter, and has been essentially flat through the first 3 quarters of 2026.

As Tim discussed, our reported pricing continues to reflect customer commitments established before the more recent improvements in market price. We respect the benefit of these higher price commitments to begin flowing through our reported results in the fourth quarter, with a significant increase in realized pricing anticipated in 2027 compared to 2026.

But the financial opportunity in the perspective, each $100 in premium and our weighted average realized price would equate to approximately $12 million of incremental annual cash flow, thereby further supporting our liquidity position.

Combined with these actions, we are taking to optimize our manufacturing footprint and improve our cost structure. We believe this pricing momentum positions us to deliver stronger financial performance going forward.

Turning to slide 9, we continue to make progress on our cost and premium shifts while managing the impact of ongoing inflationary pressures across several key input categories. During the third quarter, cash costs a good sold per metric ton declined approximately 4% compared to the prior year quarter. While this metric can fluctuate from quarter to quarter due to production schedules, inventory timing, and the recognition of manufacturing costs, our underlying cost structure remains materially improved from the levels we experienced several years ago. Our teams remain focused on identifying and executing opportunities to improve manufacturing productivity, enhance operating discipline, optimize procurement effectiveness, and improve energy efficiency. Like two key areas of focus, expected decamp oil, a key raw material in our needle cook operations, we continue to manage cost pressures through supplier diversification and enhancements in our blending capabilities.

In addition, sales of oil related byproducts from our needle cook manufacturing process provide a natural hedge that partially offsets increases in decamp oil costs. Further, our domestic feedstock sourcing and established supplier relationship provide an advantage in managing raw material availability, particularly given the ongoing supply chain disruptions and uncertainty affecting producers in Asia.

Second, in Europe, six price energy contracts covering a significant portion of our 2026 requirements have helped insulate us from recent market volatility. As we look to 2027, we anticipate higher energy costs as portions of that contractual coverage reset, and we're incorporating those expectations into our operating plans while continuing to pursue energy efficiency improvement. Despite these external headlands, we continue to expect a low single digit percentage decline in cash cost of goods sold per metric ton for the full year of 2026 compared to 2025. Looking beyond 2026, the planned consolidation of our manufacturing footprint through the closure of our highest cost facility, Monterey, is expected to provide meaningful financial benefits. As previously announced, we anticipate annual cash cost savings of approximately 20 to $25 million, with the full benefit expected in 2028, as well as a reduction in annual capital expenditure requirements of approximately $5 million beginning in 2027.

We also expect the one-time release of approximately 20 to 25 million of working capital, with the majority anticipated to occur in 2028. These benefits will be partially offset by approximately 20 to 25 million of one-time cash costs associated with the closure, the majority of which is expected to be incurred by the end of 2027. As we have emphasized previously, our objective is not simply to reduce costs in the near-term, but to establish a more efficient and competitive manufacturing network that can deliver greater operating leverage as market conditions improve. Importantly, we remain committed to achieving these improvements while maintaining the product quality, reliability, and safety standards that our customers and employees expect.

With that, let me turn to our third quarter earnings and cash flow performance. Turning to slide 10, we reported a net loss of $47 million, $1.76 per share, compared to a net loss of $28 million, $1.10 per share in the prior year quarter.

Included in our third quarter results were approximately $14 million of restructuring and other exit charges associated with the planned closure of our monitoring manufacturing facility, the majority of which were non-cash. Adjusted, even though it was $9 million during the quarter, compared to $13 million in the prior year period, with the decline primarily reflecting lower weighted average realized graphite electrode pricing, partially offset by lower cash costs of good sold per metric ton.

Turning to cash flow, net cash used in operating activities was $8 million during the third quarter while adjusted free cash flow was negative $16 million.

This represented a significant improvement from the second quarter. When net cash used in operating activities was $69 million and adjusted free cash flow was negative $75 million. Our third quarter cash flow reflected an increase in inventory levels that was consistent with our expectations.

We continue to anticipate the reduction in working capital, including inventory, during the fourth quarter. As we've discussed previously, our cash requirements are influenced by the seasonal nature of our working capital needs, as well as the timing of our semi-annual interest payments on our second lean notes, which occurs in the second and fourth quarters.

We continue to expect the second quarter to represent our highest quarterly cash requirement for 2026. With cash usage during the second half of the year, significantly lower than during the first half. For the full year, we continue to expect the modest increase in working capital, and we are maintaining our expectation for approximately $35 million of capital expenditures.

During the next slide, let me review our liquidity position and debt maturity profile. We remain focused on preserving liquidity and managing our balance sheet prudently as we execute on our strategic initiatives. We ended the third quarter with approximately $242 million of total liquidity, consisting of $134 million of cash and approximately $108 million of available note debt securities until December of 2029, providing us with the time to execute our operational and commercial initiatives and benefit from improving market conditions. Taken together, our liquidity position and debt maturity profile provide financial flexibility as we manage through the current industry environment and implement the actions necessary to strengthen our long-term profitability. As we look ahead, we remain focused on preserving liquidity, managing capital expenditures and working capital carefully, and pursuing opportunities to strengthen our balance sheet over time.

In my closing remarks, I would like to thank our employees around the world for their continued dedication and hard work. Their commitment is essential as we execute our strategic priorities and position graph tech for improved financial performance.

With that, I'll turn the call back to Tim for his closing remarks.

Thank you, Rory. Before we open up all for questions, I'd like to close with a few thoughts on why we remain confident in graph tech's future. First, we are making meaningful progress on the priorities within our control. Our commercial initiatives are gaining traction. We are securing customer commitments at significantly higher prices, and we are taking decisive actions to improve our manufacturing footprint and cost structure.

While we recognize that our financial performance is not yet reflected the full benefit of these actions, we believe the progress we are making today is establishing a stronger foundation for improved profitability and cash flow.

Second, we remain encouraged by the longer-term fundamentals of our industry. The continued transition toward electric arc furnace steelmaking, together with improving steel industry conditions outside of China, supports our expectation for growth and graphite electric demand over time. The graph tech possesses a set of differentiated capabilities that we believe will be increasingly valuable as market conditions evolve. These include our global manufacturing network, substantial vertical integration into petroleum needle coke, advanced manufacturing technology, and our ability to provide high-quality products and technical solutions to our customers around the world. We are also leveraging these capabilities to pursue opportunities in the adjacent markets, providing additional avenues for long-term growth.

Finally, we recognize the importance of strengthening our financial position. We remain committed to disciplined capital allocation, preserving liquidity, and ultimately reducing leverage as our operating performance improves. We recognize that there is more work ahead, but believe the combination of the pricing improvements we are securing, a more efficient cost structure, and our differentiated competitive position creates a compelling opportunity for graph tech. Our focus remains on executing our strategy and delivering sustainable value for our shareholders.

With that, we'd be happy to take your questions.

Yeah, we can hear you now. Okay. Sorry about that.

Yeah, absolutely. Thanks for the question. So maybe let's talk a little bit about kind of the evolution over the course of this year from a pricing perspective.

You know, as we entered 26, we saw declining spot prices that were contracting in the first quarter, which led to the initial price increase that we announced at the end of the first quarter. And we gave some guidance or at least some directional indications in the second quarter, call that if you extrapolated what we're seeing in the marketplace as a result of that over the full volume, you know, it'd be roughly a 15% uplift. And that's what's starting to take hold and we'll drive the mid-single-digit increase that we mentioned heading into the fourth quarter.

And then early September announced another price increase of 30%. And that really is where the negotiations start with every customer. And each customer is a bespoke or unique negotiation, but that's the starting point. And, you know, I think at this point right now, we're really pleased with the progress we're making in those discussions. You know, we still have quite a bit of volume yet to book, but, you know, I think we're right on track where we've been in prior years at this point in time, you know, now, you know, four to six weeks into the heart of the negotiation season. You know, I'd expect as we worked through the end of the year, you know, we would end the year and get into the first quarter, we call in February from the fourth quarter with roughly 60 to 65% of our order book confirmed.

So making good progress, you know, I think if I add some color to the customer conversations, I think they understand and appreciate that electrode pricing has been on a downward slope for quite some time and that, you know, necessarily isn't sustainable in the long run. I think there's absolutely a recognition of the importance of the electrode industry to the health of the steel industry. And I think when you start to talk about utilization rates at 80% plus in the United States, there certainly is a need to have a stable supply base. So I think a lot of the conversation is oriented around that. But I think there's also a recognition to that, to your question, to your second part of your question that there are rising costs and there are some headwinds, you know, globally and on the needlecoat front, in particular, the raw material input that we use decan oil, as well as energy pricing.

I'm confident in saying at this point in time that the price increase in the momentum we building and where we land in next year will be margin and creative, will more than offset any sort of price increases or sorry, cost increases that will experience. As I think, you know, we've done a pretty good job over the last couple of years in reducing our costs. And I think we can do quite a bit to combat the inflationary pressures we're seeing.

Yeah, that's a good question. So I think, you know, if you take a step back, you know, our first and foremost, and I think we'd alluded to this in a number of calls previously, you know, the oversupplied market conditions, you know, we felt that, you know, we needed to evaluate what our portfolio looked like. You know, I think everyone on the call can appreciate that running industrial assets at 60% utilization is not a recipe for long-term success. So really, our first objective was to bring that supply and demand oversupplied back into balance to the extent that we could. We looked at all of our facilities and really went through an evaluation process of saying, how do we continue to serve our customers?

By serving our customers, maintaining the product mix that we have today, our capabilities around supersized electrodes, the standard sizes, as well as some of the more unique products that we offer to the market that differentiate us, ALX, extra on-links, the low-oxidation items like that.

Secondarily, we wanted, obviously, to improve our cost profile, which we very spoke to in terms of bringing down our fixed costs. We were able to reduce the overall cost profile on a variable cost basis for a number of reasons. Monterey is the highest cost facility that we had in our portfolio, partially driven by the fact it's also the smallest set of assets in our portfolio.

And then lastly, it's how we manage the risk of transition, right, and how we can ensure that we can do this seamlessly and not disrupt ultimately our customer's business. And I think one thing that's important, you raised the point of the proximity to the U. S. market and that we only serve the U. S. market partially out of Monterey. We've historically brought in quite a bit of material from our European facilities. So from our perspective, this isn't really a change in the way we've otherwise had to operate. St. Mary's gives us a inventory to allow us to manage deliveries and shipments to customers. And so it's been a pretty efficient supply chain for us over time.

So at the end of the day, we view it as it's the same needlecoat going through the same production process, under the same quality standards, with the same expectations of product performance. So it doesn't really affect how we think we'll deliver to our customers at the end of the day. Hey Bennett, just one more couple more things to add on the cost front. Don't overlook the efforts that we've made in the past few years around investment and equipment and process innovation around our needlecoat production facility. I think we've got a proven track record that we're able to battle changes in underlying crude indices and other commodity costs with our capabilities around blending. I mentioned it in my prepare remarks.

With those investments we've been making, it's possible for us to continue to improve our premium needlecoat quality with a diversified set of oils. We've got many refineries that supply us. They're not all the same quality, but we've got the science behind the blending and the ability to push in some of the blow of market. So please keep that in mind. On the energy front, remember we have a pretty robust hedging strategy in Europe. Some hedging contracts are up to two years, so we're going to enjoy some protection against some of the volatility going into 2027 in some of operations in Europe. But it's kudos to the team, the management team, around identifying these risks and properly mitigating them, whether it's through process innovation, supplier relations, equipment investment, or contractual commitments.

So just want to add that to Tim's cost comments.

Of course, that's one of the benefits that we see. We're not going to guide to individual asset costs or any of the terms of the agreement. We're still working through it with our partner, but we're pleased where it's going. And that, of course, is what Tim was mentioning around prudent use of our idle assets. That's exactly one of the objectives. So I think I'll leave it at that, but I'm going to sum it up.

All right.

Yeah, everyone, thanks. I'm the pricing front again. I think good progress is being made by the team across the board. I think we'll start to see the realization of the initial price increase that we announced back in March in Q4, and that I have a higher ASP reported out in the fourth quarter. And then you'll see a step change that will be meaningfully higher as we head into 2027 as we continue to work through the negotiations, but very pleased with thus far with the team's effort and all the work that's been done throughout the year to get us here. So yeah, I don't know if there's much more I can say at this point on the price front.

With respect to needle coke, I think needle coke has been similar to electrode prices, pretty stagnant for a number of years. And we've probably entered the year somewhere in the $1,000 to $1,200 range, depending on grade. And we've seen that steadily increase over the course of the year. And really, that's a factor of two things. One, obviously higher oil prices are going to drive the byproducts for oil and that. So that's certainly driving up the price of needle coke to some extent, but also supply and demand. I think we're seeing greater demand in the market across a couple end markets and users, which certainly helps drive up the price needle coke. So if I had to say where I think the market is today, we're probably in that $1,700 to $2,000 a ton range, again, which I think provides support for higher electrode prices going into 2027.

And I probably would expect that number to continue to creep up as we head into Q1 and Q2 of next year. And again, it's been a little while since we've had this conversation. But again, when you start to see needle croke prices in that range, seizure really becomes a cost benefit to us in a strategic asset beyond the benefits we get from having security of supply and the ability to control the quality of the product we put into our electrodes. But so we're really pleased with how that markets evolving as well.

Thanks, Arun, and try to capture both of those. So just to clarify, on a year-to-day basis, we're at about 68% utilization, so a little better than the 60 that I threw out there before, but just as an example, I think if you look across the industry right now, if I had to take an estimate of where I think it's act collectively, we're probably sitting at about 65% globally outside of China. If you take the 51,000 tons of capacity reduction, that would put you probably closer to 70 or just over 70%. So certainly a meaningful move in terms of balancing out supply and demand, but I think there's still opportunity for that to tighten up, and some of it will happen organically as electrode demand continues to grow at, you know, call 3% a year over the next five years or so, or as we project out.

But also, I think there's still opportunity for some supply reduction in the market, you know, which plants and which competitors in that, you know, I think we've done our part, I won't speculate as to what it is, but I mean, I think at the end of the day, this is a cost game and fixed cost leverage game in many respects, so I think the bigger the plant, the more cost competitive they tend to be.

With respect to seed drift and how we view seed drift as an asset, certainly by reducing our electrode capacity that gives us a little bit more capacity, our excess capacity out of seed drift and certainly allows us to, you know, continue to explore how we partner in and supply needle coke into, I'll say broadly, other synthetic graphite applications, whether that's for EVs, energy storage, industrial defense applications, whatever. So, you know, we continue to work in the background, as we have been saying for the last couple of years, and Torah is the first, the example of kind of all of this work by our development technical teams to come to market and allow us to use some stranded assets.

We have a number of other initiatives and activities going on that'll allow us to use the needle coke at seed drift and pretty excited about where that'll land longer term.

That is a cash cost, 25 million. So, I guess I would split it predominantly as cost of goods sold, the primary categories of that cost are general closure costs is about half and people cost of the other half. So, you could probably think about that mostly as Cogs. We'll be isolating that to report it separately for you to go forward.

I misspoke over here. That cost savings will be primarily costing the soul. We're lowering our overall. And there's no long-term liability cleanup costs that are kind of associated with closing the Monterey. That's a clear account. Yeah, there's a lot of 20 to 25 millions pulled around. So, that first 20 to 25 million was the cash cost expected from the closure, which would incorporate all of the site closure costs and other decision-based costs.

And the 2025 million of cost savings going forward would be Cogs savings.

So, I'll go back to kind of the analysis or the indicators that we shared previously. Because the first price increase we announced was a range of $600 to $1,200. So, it wasn't ratable across each region. And again, negotiated on a customer-by-customer basis. But if you take what we achieved in those on a regional basis and apply our existing mix, it was about 15%. For the new contracts that we had, again, just to remind you, or the new commitments that we made during 2026 after the price increase announcement. But just to, again, to remind you that when we made the price increase announcement, about 80% of our volume was already committed. So, it's a relatively small subset of customer commitments that were at that higher price point.

Yeah. So, if you think about the way, you know, so Q1 would have been all negotiated in 25. Q2 would have been almost entirely negotiated in 25, maybe some small volumes in 26, but probably before the price increase. Q3 and Q4, that percentage of when it was contracted pre- or post-price increase tends to go up, the fourth quarter is going to have the biggest portion. And that's why we're seeing the price increase now trickle through our results.

And then, given your recent price increase, I think of 30% in September timeframe, that's going to then flow through one queue combined with the commitments you typically get from the North American markets. That will all essentially kind of flow through to the better higher price increases and starting in 2027.

Yeah. So, that'll be a step changes we get into 27. So, all of the 27 volume is being negotiated, post this new price increase announcement. So, you'll see a step changes we get into Q1 deliveries. And, again, typically, it's more of that 60 to 65% that we have committed in the start of the new year is going to be heavier weighted towards North American or US customers, just the way those markets tend to contract versus the rest, but there is a lot of European and other region commitment in there as well.

So, a little disappointed in the outcome. But, again, I don't think the previously communicated numbers were our expectations. That's what the filed cases were in the preliminary assessment coming out of the ITC. But, again, I think as we made in our prepared remarks, the investigation is not complete. That information will be subject to verification, as it always is as commerce works through its process. And I think we're confident that the commerce will complete through investigation before they announce their final ruling in Q1 of next year. In terms of market, I think certainly we saw the Indian competitors have called it 10% to 15% of the US market a few years ago. And with all of the turmoil and trade talk over the last year or year and a half, I think that maybe has pulled back some.

But how that plays out going forward, prices are still going up absent the announced increase or tariff levels as high as what the preliminary rulings would have otherwise suggested. So, I think we like our position, both in the US and Europe globally in our market position. Again, I think it all comes down to value proposition for those customers that value something other than just the absolute lowest price.

Yeah. So, I mean, I think there's a few things, right? Obviously, needle-coaked demand, I think all of the disruption in the oil markets to date in terms of oil coming out of the Middle East and getting to needle-coaked producers globally, certainly will have an impact as well as, I think, as you start to think about the demand and the impact that the diesel markets are having. As the refineries produce more diesel, they're producing less decan oil, less decan oil means less needle-coaked in the market. So, all of those things can weigh on kind of the supply and demand balance from a price pushing up, but also graphite electrode demand pulling needle-coaked prices up as well.

So, it's kind of a push and pull on that front.

Thanks, good.

Thank you, Kenneth. I'd like to thank everyone on this call for joining us this morning. We look forward to speaking with you again in the next quarter. Have a great day. This concludes today's call. Thank you for attending. You may now disconnect.