GrafTech International Ltd. Aktie

Hello, everyone. Thank you for joining us, and welcome to GrafTech's Third Quarter 2026 Earnings Conference Call and Webcast.

[Operator Instructions]

I will now hand the conference over to Mike Dillon, Vice President of Investor Relations and Treasurer. Please go ahead.

Good morning, and welcome to GrafTech International's Third 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 key strategic initiatives. Rory will then provide color on our quarterly results, outlook and other financial matters. After closing comments by Tim, we 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 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.graftech.com.

A replay of the call will also be available on our website. I'll now turn the call over to Tim.

Good morning, everyone, and thank you for joining us today. The third quarter marked another important period for GrafTech 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 a significant step in our strategy to improve the efficiency and competitiveness of our manufacturing footprint through the planned closure of our Monterrey, 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 GrafTech'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, the continued 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 over to Rory for a 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 continued to secure customer commitments at higher price levels than those secured in earlier periods this year, reinforcing our expectation for meaningful improvement in realized pricing in 2027.

Restoring graphite electrode 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 electrode 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 overcapacity 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 tariff 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 in 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 a mid-single-digit percentage increase in realized pricing in the fourth quarter. Looking ahead to 2027, we are seeing positive results in 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 in 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 electrode prices have increased throughout the year, supported in part by higher raw material costs. At the same time, Chinese graphite electrode exports have declined approximately 10% year-over-year. Taken 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 needle coke market. Needle coke prices have steadily increased throughout the year, reflecting a combination of higher raw material costs and evolving supply and demand conditions. At the same time, interest in our own needle coke production capabilities is growing amongst potential customers serving various end markets.

Historically, needle coke and graphite electrode pricing have been closely correlated with an average spread between the 2 of approximately $4,000 per metric ton over the past 20 years on an inflation-adjusted basis. Therefore, we believe the strengthening needle coke market provides another catalyst for higher electrode pricing, while our vertical integration positions GrafTech favorably as these market dynamics evolve.

Second, with respect to our manufacturing footprint. In the third quarter, we announced the planned closure of our graphite electrode manufacturing facility in Monterrey, 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 has faced persistent structural overcapacity, reflecting significant capacity additions in certain markets that have outpaced underlying demand growth. These conditions have contributed to a prolonged period of depressed pricing and have made it 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. However, given the continued imbalance between industry supply and demand, we determined that further action was necessary. Following the phased wind down of Monterrey, 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 capacity is expected to be approximately 127,000 metric tons.

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 GrafTech's value proposition. We expect the initiative to strengthen our cost structure, improve operating efficiency and reduce future capital requirements. We are managing the transition carefully with a focus on safety, maintaining supply continuity and meeting our customer commitments.

I also want to reiterate our support for the employees impacted by this decision. The Monterrey team has made important contributions to GrafTech over many years, and we're committed to treating our colleagues with respect and supporting them throughout the transition. Taken together with our ongoing manufacturing productivity and cost reduction initiatives, this action represents another meaningful step towards establishing a more sustainable foundation for long-term profitability.

Following the wind down of operations and permanent removal of graphite electrode production capabilities at Monterrey, we intend to pursue the sale of the property and have already begun preliminary activities in preparation for a potential transaction. Any proceeds from a future sale would provide additional opportunity to support our liquidity position and reduce our outstanding debt, consistent with the requirements of our loan.

Third, with respect to trade policy. We continue to advocate for fair trade and more balanced competitive conditions across the graphite electrode industry, including through our support of trade proceedings in key commercial jurisdictions. As we discussed last quarter, the U.S. Department of Commerce has been investigating imports of large diameter graphite electrodes from China and India. Since our last call, Commerce has issued its preliminary antidumping determinations.

While we are disappointed with the preliminary outcome as related to India, it's important to emphasize that the investigation is not yet complete. The information submitted by the Indian respondents remains subject to verification by Commerce, and the final determination is expected during the first quarter of 2027. We will remain actively engaged throughout the remainder of this process and continue to support efforts to address unfair trade practices that undermine the competitiveness of domestic 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 opportunities. We continue to believe that the growing strategic importance of synthetic graphite presents attractive longer-term opportunities for GrafTech. 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 production. 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 applications. These trends are reinforcing the importance of reliable, high-quality supply chains, particularly in North America and Europe.

GrafTech's vertical integration into petroleum needle coke, extensive manufacturing capabilities and expertise in graphite and carbon science providing a differentiated foundation from which to pursue these opportunities. An example of our progress in this area, which we're quite excited about is the collaboration with Antora Energy that we announced in September. Antora 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 at our St. Marys, 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 an attractive potential to diversify our business over time and create additional value from our assets.

In summary, we are making progress on several important fronts. Pricing momentum is building, and we are taking decisive steps to improve our manufacturing footprint and cost structure, and we continue to position GrafTech to benefit from longer-term growth opportunities. We believe 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 environment.

Turning to Slide 5. Let me spend a few minutes discussing the broader steel market as steel industry fundamentals remain the primary driver of long-term graphite electrode demand. Overall, we continue to see improving trends across several of our key regions, supporting our expectation for modest growth in graphite electrode demand during 2026. Through the first 2 months of the third quarter, global steel production, excluding China, totaled 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 consecutive quarter. 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. Taken together, these trends reinforce our view that the steel industry fundamentals outside of China are gradually improving, providing constructive foundation for graphite electrode demand.

Turning to Slide 6. Beyond the improving conditions we're seeing today, several potential catalysts could support additional growth in 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 ease.

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 published earlier 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 encouraging indicator of improving industry fundamentals 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 steelmakers. More broadly, we believe these catalysts will drive increased regional steel production over time and support our 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 GrafTech to benefit as the industry conditions strengthen.

Before turning the call over to Rory, I'd like to briefly discuss an area that will always remain our highest priority, which is safety. I've always believed 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 9 months of 2026, our total recordable incident rate was 0.47. 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 every day. Their commitment is the foundation of everything we accomplish as a team.

With that, I'll turn the call 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. Our third quarter results reflected continued execution against our operating priorities, including disciplined production management and ongoing cost improvements, while financial performance continued to reflect lower realized graphite electrode pricing associated with customer commitments established before our recent pricing actions.

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 facilities.

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 9 months of 2026, production volume exceeded sales volume by approximately 2,000 metric tons. We continue to expect 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 9 months of 2025, keeping us on track to achieve our full year expectation for sales volume growth of 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 pricing. We expect 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.

To put the financial opportunity into perspective, each $100 improvement in 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 improvement initiatives while managing the impact of ongoing inflationary pressures across several key input categories. During the third quarter, cash cost of goods 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.

To highlight 2 key areas of focus. First, with respect to decant oil, a key raw material in our needle coke 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 coke manufacturing process provide a natural hedge that partially offset increases in decant oil costs. Further, our domestic feedstock sourcing and established supplier relationships provide an advantage in managing raw material availability, particularly given the ongoing supply chain disruptions and uncertainty affecting producers in Asia.

Second, in Europe, fixed 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 are incorporating those expectations into our operating plans while continuing to pursue energy efficiency improvements. Despite these external headwinds, 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, Monterrey, is expected to provide meaningful financial benefits. As previously announced, we anticipate annual cash cost savings of approximately $20 million 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 a one-time release of approximately $20 million to $25 million of working capital with the majority anticipated to occur in 2028. These benefits will be partially offset by approximately $20 million 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 or $1.76 per share compared to a net loss of $28 million or $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 Monterrey manufacturing facility, the majority of which were noncash.

Adjusted EBITDA 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 cost of goods 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 a reduction in working capital, including inventory, during the fourth quarter.

As we have discussed previously, our cash requirements are influenced by the seasonal nature of our working capital needs as well as the timing of our semiannual interest payments on our second-lien 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 a modest increase in working capital, and we are maintaining our expectation for approximately $35 million of capital expenditures. Turning to 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 borrowing capacity under our revolving credit facility. Importantly, we have substantially no debt maturities 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 GrafTech for improved financial performance.

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

Thank you, Rory. Before we open the call for questions, I'd like to close with a few thoughts on why we remain confident in GrafTech'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 has 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 towards electric arc furnace steelmaking, together with improving steel industry conditions outside of China, supports our expectation for growth in graphite electrode demand over time.

Third, GrafTech 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 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's more work ahead, but believe the combination of the pricing improvements we're securing, a more efficient cost structure and our differentiated competitive position creates a compelling opportunity for GrafTech. Our focus remains on executing our strategy and delivering sustainable value for our shareholders.

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

[Operator Instructions] Your first question comes from the line of Bennett Moore with JPMorgan.

Can you guys hear me?

Yes, we can hear you now.

Okay. Sorry about that. I guess it's -- first, it's really encouraging to hear the strong price momentum headed into 2027. So first, could you just talk about how the dialogue has been with customers on that front?

And then second, is it your expectation that these increases will be margin accretive given the cost inflation, I guess, on the EU energy side and maybe lagged decant oil costs?

Yes, 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. 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 extrapolate what we're seeing in the marketplace as a result of that over the full volume, it would be roughly a 15% uplift. And that's what's starting to take hold and will 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 I think at this point right now, we're really pleased with the progress we're making in those discussions. We still have quite a bit of volume yet to book, but I think we're right on track where we've been in prior years at this point in time, now 4 to 6 weeks into the heart of the negotiation season. I'd expect as we work through the end of the year, we would end the year and get into the first quarter. We call in February for the fourth quarter with roughly 60% to 65% of our order book confirmed. So making good progress.

And 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 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 -- your second part of your question that there are rising costs, and there are some headwinds globally on the needle coke front, in particular, the raw material input that we use decant oil as well as energy pricing. I'm confident in saying at this point in time that the price increase and the momentum we're building and where we land in next year will be margin accretive, will more than offset any sort of price increases -- or sorry, cost increases that we'll experience as I think 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.

That's great color. I appreciate it. My second question, I want to ask about the rationale behind why Monterrey was specifically chosen. And I think the location makes it appear as if it's counterintuitive, but presumably, there were some aspects related to efficiencies and prior investments at other facilities. So maybe if you could just help unpack that.

Yes. No, it's a good question. So I think if you take a step back, our -- first and foremost, and I think we had alluded to this in a number of calls previously, with the market -- oversupplied market conditions, we felt that we needed to evaluate what our portfolio looked like. 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 oversupply 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-long lengths, the low oxidation items like that.

Secondarily, we wanted obviously to improve our cost profile, which Rory 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. Monterrey is the highest cost facility that we have 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 customers' 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 Monterrey. 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. Marys gives us a lot of flexibility to stockpile inventory, allows 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 needle coke 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.

Bennett, just one more -- a 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 in equipment and process innovation around our needle coke 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 prepared remarks. With those investments we've been making, it's possible for us to continue to improve our premium needle coke 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 cushion some of the below from the volatile markets.

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 2 years. So we're going to enjoy some protection against some of the volatility going into 2027 in some of our operations in Europe. But we are -- 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 I just want to add that to Tim's cost comments.

That's great color and much appreciated. And maybe just sticking with that thread, if I can squeeze in one last one is with the Antora deal, I mean, is there any opportunity here to help absorb stranded fixed costs at St. Marys?

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 idled assets. That's exactly one of the objectives. So I think I'll leave it at that.

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Yes, I think you mentioned kind of turning the corner on some pricing initiatives. So maybe you can just elaborate on what you're seeing there. And maybe if you could link that to your outlook on needle coke as well. It sounds like you've done some work there. But yes, is there more of an outlook on what you see there, especially given the recent oil price inflation?

Yes, Arun, thanks. On 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 will 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 yes, 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 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 2 things. One, obviously, higher oil prices are going to drive the byproducts for oil in 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 of end markets and end users, which certainly helps drive up the price of 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 coke prices in that range, Seadrift really becomes a cost benefit to us and a strategic asset beyond the benefits we get from having surety 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 market is evolving as well.

And I guess I wanted to get your thoughts on supply-demand for electrodes globally. Congrats on your own decisive actions here to close Monterrey. But would you -- you noted the 60% utilization. I imagine the industry is also not running full, maybe above that 60%. But where do you think industry utilization rates are? And where do you think -- and do you expect other actions? I know yourself may not be able to take anything else. But I guess maybe just get your thoughts on that.

And then as a related question, now that you've exited some extra -- or you will be exiting some electrode finishing capacity, conversion capacity, would you still be able to potentially use some of your needle coke and divert it to the EV side, the battery materials market? Or is that unlikely? Maybe you can offer your thoughts on both industry supply/demand and then potential forays into the EV industry.

Thanks, Arun, and try to capture both of those. So just to clarify, on a year-to-date 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 at 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, call it, 3% a year over the next 5 years or so as we project out. But also, I think there's still opportunity for some supply reduction in the market. Which plants and which competitors in that, 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 Seadrift and how we view Seadrift as an asset, certainly by reducing our electrode capacity that gives us a little bit more capacity or excess capacity out of Seadrift and certainly allows us to continue to explore how we partner 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 we continue to work in the background as we have been saying for the last couple of years, Antora is the first example of kind of all this work by our development and 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 will allow us to use the needle coke at Seadrift and pretty excited about where that will land longer term.

Your next question comes from the line of Abe Landa with Bank of America.

Maybe just some housekeeping items. The cost to achieve the Monterrey closure of the $20 million to $25 million, what is cash versus noncash? And how do you split that up between COGS and SG&A?

That is a cash cost of $20 million to $25 million. So I would -- 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 is the other half. So you probably think about that mostly as COGS. But we'll be isolating that to report it separately for you as we go forward.

Sorry, maybe the $20 million, $25 million of cost saves, I guess, how would you split the cost saves between COGS and...

[indiscernible] your question, I think.

No, no, I think I misspoke. I misspoke over here.

That cost savings will be primarily cost of goods sold. We're lowering our overall book.

And there's no long-term liability cleanup costs that are kind of associated with closing the Monterrey?

Yes, there's a lot of $20 million to $25 million floating around. So that first $20 million to $25 million was the cash cost expected from the closure, which would incorporate all the site closure costs and other decision-based costs. And the $20 million to $25 million of cost savings going forward would be COGS savings. Hope that clarifies.

Yes, it does. You kind of mentioned that you thought realized prices would be up mid-single digits quarter-on-quarter in the fourth quarter. I guess if we were just to look at those open contracts where you're able to actually enable cost increases or price increases, what was the percent change on those on those volumes on a quarter -- first quarter basis or expected change?

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 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.

Okay. And that is essentially what you're saying is that's flowing through into the fourth quarter, and that's why we're getting to like the mid-single digits.

Yes. So if you think about the way -- 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 it was 30% in September-ish time frame, that's going to then flow through 1Q 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 then starting 2027, am I, kind of, thinking about the various parts correctly?

Yes. So that will be a step change as 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 change as we get into Q1 deliveries. And again, typically, it's more 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 U.S. 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.

And maybe just touching on in the U.S., the antidumping countervailing duties that were -- at least the preliminary was provided since your last call. It seems like especially in India, it was kind of lower versus your expectations. Maybe if those are reaffirmed, how do you expect U.S. graphite electrode import volumes to be impacted and maybe the impact on pricing within the U.S.?

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 do a complete and thorough investigation before they announce their final ruling in Q1 of next year.

In terms of market, I think certainly, we saw the competitors have, call it, 10% to 15% of the U.S. market a few years ago. And with all of the turmoil and trade talk over the last year or 1.5 years, I think that maybe has pulled back some. But how that plays out going forward, I mean, 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 U.S. and Europe globally and 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.

And then my last question. You said earlier that pet needle coke prices are being driven by graphite electrode demand, but then also other markets. Can you just describe what's going on in those other markets and maybe kind of any other aspect supply and demand perspective on pet needle coke?

Yes. So I mean, I think there's a few things, right? Obviously, needle coke 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 coke 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 decant oil, less decant oil means less needle coke 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 coke prices up as well. So it's kind of a push and pull on that front.

There are no further questions at this time. I will now turn the call back to Tim Flanagan, CEO and President, for closing remarks.

Thank you, Kenneth. And I'd like to thank everyone on this call for joining us this morning. We look forward to speaking with you again next quarter. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello everyone, thank you for joining us and welcome to the GrafTech's Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions]

I will now hand the conference over to Mike Dillon, Vice President of Investor Relations and Treasurer. Please go ahead.

Good morning and welcome to GrafTech International's second 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. We'll begin with opening comments on our key strategic initiatives. Rory will then provide color on our quarterly results, outlook, and other financial matters. After 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 that 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 in these slides, including the relevant non-GAAP reconciliations. You can find these slides in the Investor Relations section of our website at graftech.com. A replay of the call will also be available on our website.

I'm now turning the call over to Tim.

Good morning everyone, and thank you for joining us today. The second quarter marked another period of meaningful progress for GrafTech. We delivered strong sales volume growth, increased production and capacity utilization, and further improved our manufacturing cost structure. We also reaffirmed our full year sales volume and cost expectations while advancing the commercial and strategic initiatives we introduced earlier this year to improve both profitability and strengthen our business.

In addition, we believe the underlying fundamentals of our end markets are moving in a positive direction. We are taking decisive actions to strengthen our business in the areas where we can make the greatest difference today. Taken together, we believe that this positions GrafTech to deliver stronger financial performance as industry conditions continue to improve.

This morning, I'd like to begin with an update on our strategic priorities, then provide our perspective on the steel market and broader industry environment before discussing safety and turning the call over to Rory for a review of our financial results.

When we spoke with you 3 months ago, we introduced a series of strategic initiatives designed to strengthen GrafTech's earnings power while supporting healthier long-term industry fundamentals. Those priorities build on the commercial, operational, and financial improvements we have made over the past several years, and I'm pleased with the progress we are making across each of them.

First on the commercial front, we are pleased to have delivered 8% year-over-year sales volume growth this quarter, including a 29% increase in the United States, which remains our strongest commercial region. We continue to implement our previously announced price increases on uncommitted volume, which represents an important first step to restore pricing to the levels that safeguard regional graphite electrode production and the continuity of supply for our customers.

As noted in our earnings release, since announcing these pricing actions near the end of the first quarter, we have secured customer commitments at prices that are on average more than 15% above those achieved prior to the announcement. With more than 90% of our anticipated volume already committed in our order book, mostly at price points that reflect market pricing at the end of the fourth quarter of 2025. This will not translate immediately into higher realized pricing as we've previously discussed.

However, these higher price commitments will be reflected in our financial results over time as those shipments occur. Ultimately, the acceptance of higher prices is a strong indicator that our customers recognize the importance of securing a reliable supply of high-quality graphite electrodes backed by world-class technical support.

Second, with respect to trade policy, we continue to advocate for fair trade and more balanced competitive conditions across the industry, as evidenced by our support of graphite electrode trade cases in key commercial jurisdictions. This includes the trade case filed earlier this year in the United States related to imports of large diameter graphite electrodes at unfair prices. We remain confident that the Department of Commerce and International Trade Commission will complete a thorough investigation and take meaningful and necessary actions to address these unfair trade practices. This will further support long-term market stability.

As a reminder, in April, the ITC announced its preliminary determination that the domestic industry is being materially injured by imports from China and India. And that case is now with Commerce for its investigation. Commerce is expected to announce its preliminary countervailing duty determination early next week, with any such duties becoming effective on a provisional basis shortly thereafter. More importantly, we expect Commerce will announce its preliminary determination on anti-dumping duties by the end of September. As we previously noted, the trade petition filed earlier this year estimated dumping margins for Chinese and Indian electrode imports of 147% and 74% respectively.

Third, with respect to our operations, over the past several years, we've significantly improved the efficiency and competitiveness of our manufacturing network through higher productivity, improved operating discipline, and ongoing cost improvement initiatives. That progress continued during the second quarter as we increased production, achieved our highest quarterly capacity utilization level since 2022, and further improved our manufacturing cost structure. For the full year, despite cost headwinds driven by ongoing geopolitical conflicts, we are reconfirming our guidance of a modest year-over-year reduction in our cash COGS.

These improvements strengthen our competitiveness in today's market while positioning GrafTech to generate greater earnings and cash flow as industry conditions continue to improve. Ultimately, as we assess the progress of our strategic initiatives and the broader market environment, we continue to evaluate both the production capacity we maintain and the volume we deliver to the market. As an industry leader, we are prepared to take actions to align supply with sustainable industry economics and support the long-term viability of our business.

Finally, with respect to emerging opportunities, we're positioning GrafTech to capitalize on what we believe is an important inflection point across the graphite electrode and petroleum needle coke industries. Recognition of the strategic importance of synthetic graphite for both economic and national security purposes continues to grow.

And that's being driven by 2 major trends. First, graphite electrodes are indispensable to electric arc furnace steelmaking, which continues to gain share globally. Second, the growth in demand for synthetic graphite for use in defense applications, as well as for anode materials that are central to the development of Western supply chains for batteries used in electric vehicles and energy storage applications.

Together, these trends are expected to support long-term demand, not only for synthetic graphite, but also for high-quality petroleum needle coke required to produce it. At the same time, higher decant oil costs and the recent supply disruptions in the Middle East are highlighting the limited availability and increasing strategic value of high-quality petroleum needle coke. We believe these dynamics reinforce the value of GrafTech's vertical integration, which enhances supply reliability for our graphite electrode customers and positions us to benefit from improving needle coke market fundamentals. The reality is that economic and national security risks associated with dependence on concentrated and non-market-based supply chains are becoming increasingly clear.

Against this backdrop, we welcome the efforts of policymakers in the U.S. and the EU as they develop a joint critical mineral action plan. This action plan establishes a framework for the 2 trading partners to coordinate policies that support resilient supply chains for critical materials, such as synthetic graphite, while exploring potential trade mechanisms, including border-adjusted price floors.

Evidence in trade cases demonstrates that appropriate pricing support is essential, both to establish critical supply chains that do not yet exist outside of China, and to preserve strategic industries that already operate in the West. With that, GrafTech is taking proactive measures to capitalize on these emerging opportunities. These include ongoing engagement with the U.S. administration at various levels to help inform and shape critical mineral policies as they relate to graphite electrodes and battery materials. And specifically as it relates to GrafTech, actively exploring the opportunity to leverage existing industrial assets and available graphitization capacity, we'll demonstrate our leadership in carbon and graphite technology and stressing the importance of preserving this know-how.

Within the EU, this includes supporting the ongoing efforts of the European Carbon and Graphite Association as they advocate for a stronger European steel and graphite electrode industry. And more broadly, continuing to demonstrate our technical capabilities through ongoing engagement with research institutions and commercial partnerships, which include collaboration with those in the energy storage industry to utilize our expertise and capacity to further their strategic objectives and evolving business models.

Turning to slide 5, let me spend a few minutes discussing the broader steel market because the health of the steel industry remains the primary driver of long-term graphite electrode demand. Although conditions vary by region, the overall direction remains encouraging. Global steel production, excluding China, increased approximately 2% compared to the second quarter of last year. In the United States, steel production is up 6% year-to-date, supported by favorable trade policy and resilient domestic demand. Reflecting these dynamics, quarterly steel capacity utilization in the U.S. reached 80% for the first time since the second quarter of 2022. Conditions in Europe remain more challenging, although we continue to see signs of recovery, as I'll discuss further in a moment. Overall, the data we're seeing today is increasingly consistent with the view we've shared over the past couple of quarters, that steel fundamentals outside of China are steadily improving.

Looking beyond today's market conditions, we continue to believe the medium and long-term outlook for the steel industry remains constructive. As shown on this slide, a number of factors have the potential to support stronger steel demand over the coming years. These include continued infrastructure investment, increasing defense spending, the implementation of the Carbon Border Adjustment Mechanism in Europe, easing monetary policy, improving macroeconomic conditions, and additional trade protections in several key regions. No single catalyst will determine the pace of recovery. Rather, it's the combination of these factors that gives us confidence in the industry's longer-term trajectory. That perspective is also reflected in the World Steel Association's most recent steel demand outlook, which calls for modest growth in 2026, followed by a more meaningful acceleration in 2027 for steel demand outside of China.

Let me expand briefly on the EU. Europe represents one of our most important commercial regions, and several recent policy initiatives have the potential to materially strengthen steel production over time. Specifically, provisions in the Carbon Border Adjustment Mechanism, or CBAM, implemented in early 2026 will make certain steel imports into the EU less competitive. Further, measures adopted by the EU to significantly increase trade protections on steel became effective at the beginning of July.

These measures significantly reduce tariff-free import quotas, increase above-quota duties to 50%, and strengthen enforcement through melt and pour disclosure requirements. Together, these measures are expected to boost domestic steel production, with some analysts projecting capacity utilization rates in the EU could increase from current levels of just over 60% to potentially 75% or higher over time. We believe these protections and a more predictable steel production outlook will give EU steelmakers greater confidence to plan beyond the near term and rebuild graphite electrode inventories to more normalized levels. Ultimately, the timing of a broader market recovery is beyond our control.

What is within our control is how we position GrafTech to benefit as that recovery gains momentum. That is why we remain focused on executing the priorities we discussed this morning, strengthening our commercial performance, improving our manufacturing efficiency, maintaining financial flexibility, and positioning GrafTech to capitalize on a stronger market environment.

Before turning the call over to Rory, I'd like to briefly discuss an area that will always remain our highest priority, which is safety. I've always believed that no business objective is ever more important than ensuring our people return home safely at the end of every shift. And I'm proud of the continued focus our employees have demonstrated across our global operations. Year-to-date, our total recordable incident rate has improved to 0.35, continuing the significant progress that we've made over the past several years. That improvement reflects a culture in which safety is embedded in every aspect of how we operate and not simply a metric we report 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 every day. Their commitment is the foundation of everything we accomplish as a company.

With that, I'll turn the call over to Rory to review our second quarter results and our outlook in greater detail.

Thank you, Tim, and good morning everyone. I'll begin with our second quarter financial performance before discussing liquidity and our financial outlook. Our second quarter results reflected continued progress in several important areas of the business, including higher sales volume, improved manufacturing performance, and lower cash costs per metric ton.

Starting with our operations, our production volume exceeded 33,000 metric tons during the quarter, resulting in capacity utilization of 74%, the highest quarterly level we have achieved since 2022. Year-to-date, our production volume has exceeded sales volume by approximately 4,000 metric tons. This was planned as we build inventories in advance of our summer maintenance activities at our European operations.

Our expectation remains to balance production and sales volume levels on a full year basis. However, we are encouraged by the strength of our order book and the commercial momentum that Tim discussed earlier. Expanding on this point, sales volume increased to approximately 31,000 metric tons, representing growth of 8% compared to the prior year quarter and 10% sequentially. Importantly, our second quarter and year-to-date performance is consistent with our expectation for full year sales volume growth of between 5% and 10%.

In the United States, we delivered 29% year-over-year sales volume growth for the second quarter. This reflects our ongoing focus on value over volume, as we continue to prioritize business that meets our margin expectations while expanding our presence in higher value regions. Net sales for the quarter were $127 million, down 3% compared to the second quarter of last year. The benefits of higher sales volume were offset by lower weighted average realized pricing, reflecting the continued pricing pressure across much of the graphite electrode industry.

During the second quarter, our weighted average realized pricing was approximately $3,900 per metric ton, which, as expected, was flat sequentially and down approximately 7% compared to the second quarter of last year. With more than 80% of our anticipated 2026 volume already committed at the time we announced our pricing action in late March, current realized pricing continues to reflect commitments secured prior to the announced price increase. However, we are encouraged by the higher pricing on new orders, as Tim discussed earlier.

As we have previously indicated, while the impact on 2026 reported pricing will be modest, as those newer commitments convert into shipments over future quarters, they will begin contributing to higher realized pricing. Most importantly, the acceptance of these higher prices in recent tenders provides a stronger starting point for our 2027 contract discussions than we would have had just a few months ago.

To put the opportunity into perspective, based on current utilization rates, each $100 improvement in our average selling price would equate to approximately $12 million of incremental annual cash flow, thereby further supporting our liquidity position. Combined with the other strategic initiatives Tim discussed earlier, improved pricing has the potential to contribute meaningfully to our financial performance beginning in 2027.

Turning to slide 9, cash costs of goods sold per metric ton declined approximately 9% sequentially and 6% compared to the prior year quarter, reflecting improved production efficiency, higher utilization, and continued cost improvement initiatives across our manufacturing network. As we have noted in prior calls, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts. However, our underlying cost structure is materially lower than it was just a few years ago. While inflationary pressures remain on certain raw materials, energy, and logistics costs as a result of geopolitical disruptions, our operations teams continue identifying opportunities to improve productivity and offset these external pressures wherever possible.

Importantly, we continue to achieve this while maintaining our dedication to product quality and reliability, as well as upholding our commitments to environmental responsibility and safety. In addition, as production volumes continue to recover, we expect these structural cost improvements to provide increasing operating leverage. Overall, these improvements reinforce our expectation for a low single-digit percentage reduction in cash costs of goods sold on a per-metric ton basis for the full year. As we move ahead, while our teams remain focused on cost control, sustained increases in key input costs will need to be reflected in graphite electrode pricing, beyond the pricing actions we have already announced.

Turning from our internal cost performance to the broader industry cost environment, reflecting the ongoing conflict in the Middle East, higher oil-related feedstock costs and potential disruptions in decant oil availability for certain needle coke producers are beginning to place upward pressure on petroleum needle coke pricing following several years of relatively stable market conditions. Needle coke and graphite electrode pricing have historically been closely correlated, and we believe improving needle coke fundamentals could provide an additional catalyst for higher electrode pricing. Importantly, our substantial vertical integration positions GrafTech to benefit both directly through our needle coke operations and indirectly as higher needle coke pricing supports higher graphite electrode pricing.

Turning to the next slide, our second quarter financial results remain consistent with our expectations. Adjusted EBITDA was $2 million during the quarter compared to $3 million in the prior year period. While pricing continued to pressure earnings, improved operating performance and cost management partially offset that impact. Net cash used in operating activities during the second quarter was $69 million, while adjusted free cash flow was negative $75 million compared to negative $53 million in the prior year quarter.

As a reminder, we make semiannual interest payments of approximately $34 million on our second lien notes in the second and fourth quarter of each year. The year-over-year increase in cash usage primarily reflected timing changes in working capital, including the planned inventory build that we have discussed. Importantly, we expect the second quarter to represent our highest level of cash usage during 2026. Consistent with the seasonal nature of our working capital requirements, we expect operating cash flow to improve during the second half of the year as inventory levels normalize and working capital investments moderate.

On a full year basis, we continue to expect a modest increase in working capital to support higher sales volume. We also continue to expect approximately $35 million of capital expenditures during the year, consistent with maintaining our assets at current operating levels and supporting targeted investments in plant capabilities and productivity improvements.

Turning to the next slide to discuss liquidity. As planned, during June, we drew the remaining $100 million available under our delayed draw first lien term loan prior to the expiration of that commitment. We ended the quarter with approximately $253 million of total liquidity consisting of $145 million of cash and approximately $108 million of available borrowing capacity under our revolving credit facility. Importantly, we have substantially no debt maturities until December of 2029. Taken together, this provides the financial flexibility to continue executing our strategy while navigating the current industry environment.

Lastly, during the second quarter, we filed a shelf registration to expand the financing tools available to us as we evaluate opportunities to strengthen our balance sheet and support long-term shareholder value. Subsequently, we established an at-the-market equity program. While usage has been modest to date, the ATM provides additional optionality to access capital in a measured and disciplined manner when we believe market conditions are appropriate.

In closing my remarks, I would like to thank our team members around the world for their outstanding commitment and hard work. Their efforts have enabled the commercial, operational, and financial progress we have discussed today.

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

Before we open the call for questions, let me leave you with 3 observations. First, GrafTech is executing well. We continue to grow volume, optimize our commercial mix towards higher value regions, lower manufacturing costs, improve utilization, and maintain financial discipline.

Second, the strength we have been seeing in the steel industry fundamentals in the U.S. is becoming more evident across other regions. Steel production outside of China continues to strengthen, trade protections are increasing across multiple regions, and our own pricing actions are gaining traction in the marketplace.

And finally, while the timing of broader pricing recovery remains uncertain, we are not waiting for it. Every decision we're making today is intended to ensure GrafTech emerges from this cycle as a stronger, more competitive company. That conviction is grounded in the advantages that differentiate GrafTech, including our vertical integration, global manufacturing footprint, technical expertise, and longstanding customer relationships.

Together, these strengths position us to benefit meaningfully as market conditions normalize. We're confident in our strategy. We're confident in the long-term fundamentals of our industry. And most importantly, we're confident that the actions we're taking today will create meaningful long-term value for our shareholders.

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

[Operator Instructions] Your first question comes from the line of Bennett Moore with JP Morgan.

Shipments came in a bit better than expected. I know you referenced the U.S. share growing 29% year-over-year, but could you unpack this a bit? Was this primarily U.S. customers pulling forward slightly? And if so, is this a trend you expect to maybe persist through the balance of the year, just given the tightness in the U.S. steel market?

Yes, thanks, Ben. So the U.S. market obviously continues to run very well. Utilization rates, again, are over 80%. So all of our customers are operating well. As we alluded to in the first quarter call, we are seeing some pull into the second quarter for volumes in the U.S., which to us is a sign of a strengthening demand, but we're also seeing new orders come in for additional volumes needed in the third and fourth quarter. So it's -- we expect kind of the back half of the year to continue with strength in the U.S. as we look forward.

You know, reference costs rising 10% to 15% and needle coke anywhere up from $200 to $300 a ton. So just wondering if you're seeing a similar magnitude of change on needle coke and if you could kind of just update on broader inflationary pressures, maybe to what extent decant oil has moved higher as well?

Ben, can you repeat your question? I think you may have cut out for just a second at the beginning. I want to make sure we get the full context of your question.

Yes, sure. Can you hear me all right?

Yes.

Okay. So I was just referencing comments from one of your peers yesterday that pointed to cost inflation of around 10% to 15%, and they also mentioned needle coke up anywhere from $200 to $300 a ton. So wondering if you're seeing a similar magnitude of change on needle coke, and then if you could kind of update us to what extent decant oil has also been moving higher since re-escalation in the Middle East?

Ben, this is Rory. Good morning. So the peer you're referencing, I think we're seeing similar market intelligence just for the broader group. We're happy to have our captive supply of needle coke down in Port Lavaca, Texas. So we're not really subject to some of the needle coke pricing pressures that others may be experiencing, but yes, $200 to $300 price increases on shipments to date, into the middle of the year and into the third quarter is what we're seeing. We expect something of similar magnitude going forward.

As you know, we're 1 of 4 ex-Chinese needle coke producers, and we know that a lot of the Asia Pacific producers rely heavily on the Middle East oil feedstock for their petroleum needle coke production. That tightening supply, delays and logistics, and all those matters related to the Middle East conflict are certainly causing tightness in supply. So we're happy to have our availability.

I will tell you that from an availability standpoint, there has been some inbounds received to determine whether or not there's availability of our supply in Texas to provide to the market. So there's a lot of signs pointing towards availability tightening, and we expect that to support higher prices going into the back half of the year from those that have already been realized.

More broadly, I just want to say that, as I said in my prepared remarks, we're holding our cost per ton guidance for the full year. That contemplates our current views on cost inflation, raw material inflation, including decant oil for the remainder of the year. The team has been doing a great job offsetting the impacts with not just innovation but strong procurement strategies. As we've said in the past, we've been able to diversify our supplier base as far as feedstock for decant oil over the past couple of years. We're happy to have all of our sourcing vis-a-vis American refineries. So not really getting as impacted by our procurement of decant oil as some others may be.

So all good signs, and we're hopeful that the strategic advantage of our vertical integration is starting to emerge back to as normal conditions kind of emerge.

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

I guess my question is, maybe I'll start with the utilization rates. I think you referenced maybe a mid-70s utilization rate for your own system and yet about an 80% rate for U.S. steel utilization, do you see those kind of converging, namely? And maybe you can comment on the global side as well. And I guess I'm just curious if there's any actions you can take to bring industry utilization rates in electrodes closer to, you know, maybe a tight or balanced market. You know, do you think the industry needs some rationalization of capacity? And could you potentially be in a position to do that?

Yes, thanks, Arun. I appreciate the question. So I think if you think about our utilization rate, first and foremost, and the fact that we are at 74% for the quarter, is reflecting of the planned inventory build that Rory alluded to that led to a little bit of a working capital use in the quarter, and that's really preparing for not only the European shutdowns that happen seasonally at the end of July and into August, but also what we anticipate is continued improving conditions going forward. So it gives us a little bit more flexibility as we go into the back half of the year.

Thinking about it relative to U.S. steel production, right? I don't know if you can necessarily measure those 2 off of one another, just given that U.S. steel production is just one piece of kind of a global market. But I think if you talk broadly about overall supply in the electrode space, yes, it's still a market that is oversupplied, and I think we have a lot of conviction around the steps that we've taken from our actions, both restricting supply back in 2024, improving our cost structure, bringing down our SG&A by $20 million over the last few years, all of those actions and the shift in our mix on the commercial side really are what's driving what we think will lead to improved financial performance. But certainly -- stand by the comments we made in our prepared remarks and we've commented on the last couple of calls. If the market dictates that supply needs to come out of the market, we'll continue to execute and behave like an industry leader and we'll adjust our production accordingly. And do that when the time's appropriate.

Okay. So it sounds like there could be some opportunities for temporary idling and cutback of production, if I heard you correctly. And then I guess just on pricing. So it sounds like you guys are being disciplined and are very much committed to bringing up your returns and enacting the price increases. So maybe you can just give us your perspective on where you are in that process. What's kind of the outlook for success on future price increases, especially just given that oversupply situation? I guess, is it going to depend on just kind of macro improvement, or is there anything else that you guys can take action on to, again, improve the pricing outlook?

Yes, I mean, you know, so I think the pricing story is one that we've been consistently stating that we don't think we're getting paid for the value that we deliver to our customers, and the level of pricing doesn't support the investment needed for new products coming to the market to support more demanding applications and newer technologies.

So what we did in the first quarter really was the first step of what we think is a number of steps going forward to get pricing back to a level that is reflective of that and gets where we think the earnings potential of this company should be. So more to come as we get into the negotiations, but I think we've seen definitely a shift in momentum for the first time in a while in the electrode space, right? We saw falling prices over the last few years and into Q1 and with the announced price increase and the stickiness of it that we've seen thus far, we have some momentum going into negotiations in the fourth quarter and we'll continue to do that.

On a broader scale with respect to the oversupply, again, I think there's still opportunity for some consolidation or supply rationalization from the market as a whole. I think we've seen a decline of about 10% in Chinese exports and certainly that helps. But I think more broadly too, you have to think about trade policy as well and creating a little bit of buffered regions, if you will. Think about the broader steel market as being oversupplied, but yet U.S. steel prices are up 50% since February of 2025. Europe's about 25% higher since that same timeframe. And that's really the result of effective trade policy and tariff actions and preventing product from being dumped into those markets.

So the combination of disciplined execution, both operationally, but more importantly, commercially, as well as trade policy, as well as a little bit of supply reduction and export reductions out of China. All of those things I think lead to a more constructive pricing environment.

And then as Rory alluded to previously as well, we're seeing higher needle coke prices in the marketplace, both in the third quarter, and I think we'll continue to see upward pressure on those into the fourth quarter. And as you know, there's been a typical historical spread between needle coke pricing and electrode pricing. So, again, I think that supports higher pricing going forward, even absent the supply issues.

Your next question comes from the line of Kirk Ludtke with Raymond James.

I know you're holding your cost per ton guidance for this year flat, but I'm curious -- I know costs are -- at least some of your costs are headed higher, particularly electricity. And I'm wondering if you could maybe elaborate on the timing of those contracts, the lag effect, and maybe most importantly how much would realized price per ton have to go up to offset where prices -- where your costs are today?

Thanks, Kirk. So yes, certainly, there are some headwinds developing. I think if you anchor yourself in our long-term view of our cash costs per ton, we're still sticking with $3,600 to $3,700 a ton. You saw a better result, of course, during the second quarter just based on our heavy production. So some of our fixed costs got pinned down. We have some fixed cost leverage there to get us down to $3,500. The quarters will be lumpy, but you continue to anchor yourself in that $3,600 to $3,700.

When you think about the lag effect of some of the inflation that we're experiencing in the second quarter and potentially in the second half, we expect that to slowly manifest itself in our earnings, but a lot of the back half inflation, if it comes in, will most likely be a key focus point of our 2027 price negotiations. So we will be expecting to recover beyond what the price is that we've announced so far -- the price increased announced so far.

I would say that to build yourself -- your question on how far do prices need to go up to cover that inflation? I say that's to be determined. If you think about our cost stack, the energy, commodities type inputs to our process, I would say is about half of the cost. So there could be -- you can do the math and figure out how much we'd need to increase our price to cover some of that, putting in some assumptions.

As far as electricity, energy, power, gas, I want to remind you that in the EU, we actually have some fixed price contracts to cover almost 70% of our requirements for the back half of the year between our 2 plants in Spain and France. So some of that volatility in the European markets, where we have a little bit of a cushion against, pretty large cushion against. So all in holding that cash guidance is a result of our effective procurement, our timely procurement of our oils and our other petroleum based raw materials, but also certainly, we've locked in with some of the fixed price contracts on power and gas in Europe.

Yes, Kirk, I'd just add to that. The teams have done a really good job over the last 3 years of not only reducing our costs, but really offsetting inflationary headwinds that have persisted in the market for the last few years and fully expect that we'll continue to do that. And then to add to Rory's point, there should be no expectation in the market that we're going to bear that inflationary impact of the input costs or energy costs. Those will be passed through to customers through pricing going forward.

That's helpful. How much below market do you think you -- for instance, your electricity costs are currently?

Depending on the region, and the input, I would say probably 10% to 25%, perhaps percentage-wise, on the base price for gas and electricity. It's a little hard to gauge that just given the volatility of natural gas prices here. You know, they've spiked, dropped down significantly and spiked again. So I think that's a fair average around the second quarter price -- into the end of the second quarter price, not today.

Got it. I appreciate it. And I guess your other point was you're -- everyone's experiencing the same. Do you feel like you're similarly situated vis-a-vis your competitors? Like everyone's contracts are about the same and they all roll off at about the same times?

I don't think I can -- yes, I'm not sure we can comment on how they're procuring energy and raw materials and such, other than, you know, again, the biggest differentiator we have is vertical integration with needle coke, which is again, 40% of our costs.

Yes. And with the Resonac and Tokai, the lack of visibility into their electrode business, I would say that you're left with the Indian producers, which do have kind of a national cost advantage to some of us -- or to us and others based on just their national energy programs.

Got it. I appreciate it. And then maybe just one last one. What percentage of the U.S. market do you think will be impacted by these new duties in the U.S. -- antidumping duties?

Yes, so we would typically say that 15% to 20% of the volume sold in the U.S. is coming from imports. So I think this presents the -- the trade actions present not only a volume opportunity because of the desire to import and pay those tariffs, the juice may not be worth the squeeze, so to speak. Conversely, it does help establish better pricing support or a price floor at a minimum that we'll operate from going forward.

Your next question comes from the line of Bennett Moore with JP Morgan.

I just wanted to piggyback real quick on the energy discussion. I know, Rory, you just outlined 70% fixed in the EU through the back half, but how should we think about your hedging program or strategy next year? Have you started to lock in any of those prices? Any color you could give on that front.

We have, we started negotiations on that recently. I would rather not give you figures since we're still involved in it, but I would say that we're aiming for similar protections against market volatility, as well as volume coverage. So, I mean, I guess I should leave it at that until we finalize our discussions, but we're working in the same manner with the same objectives as we were when we locked in the prices for '26.

Is it fair to assume these are at directionally higher levels versus what you locked in this year?

Yes, it's fair to assume that directionally.

There are no further questions at this time. I will now turn the call back to Tim Flanagan, CEO and President, for closing remarks. Please go ahead, Tim.

Thank you, Lucas. I'd like to thank everyone on this call for your interest in GrafTech. Look forward to speaking with you again next quarter. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

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's First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Mike Dillon, Vice President, Investor Relations and Treasurer. You may begin.

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 that 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.grafech.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 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 steelmakers in the U.S. and Europe have announced cumulative price increases over the past 5 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 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 0.5% 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 U.S. 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 decant oil prices, the key raw material for petroleum needle coke. While the needle coke market has been relatively flat for the past 2 years, we anticipate that higher input costs and potential disruptions in decant oil availability for certain needle coke producers will provide a catalyst for needle coke 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 decant oil needs from domestic producers.

Lastly, regarding the impact of the conflict on GrafTech's 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 costs, consistent with our guidance at the beginning of the year. However, the extended 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 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 U.S. and the EU as we begin to develop a joint Critical Minerals Action Plan.

This action plan establishes a framework for the 2 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 is 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 support for materials that are critical for national and economic security are an absolute must. Against this backdrop, GrafTech continues to take proactive measures that seek to capitalize on these emerging opportunities.

These include ongoing engagement with the U.S. 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 and 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 U.S. capacity utilization rate at 80% for just the second time in the past 2 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 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 U.S., 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-intensive industries. In addition, key policy initiatives in the EU are expected to support higher levels of steel production in this important commercial region for GrafTech.

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 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. GrafTech 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 Incident 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 0 injuries.

But with that, I'm going to turn it over to Rory, who will provide more color on our commercial and financial performance for the quarter. Rory?

Thank you, Tim, and good morning, everyone. Starting with our operations. Our production volume for the first quarter was 29,000 metric tons, resulting in a capacity utilization rate of 65% for the quarter. On the commercial front, our sales volume in the first quarter was 28,000 metric tons, an increase of 14% compared to the prior year. As we remain focused on value over volume, we continue to prioritize business that meets our margin expectations while expanding our presence in higher-value regions, particularly the United States.

To that end, we delivered 37% sales volume growth year-over-year in the U.S. for the first quarter. For the full year, we remain on track to achieve our original guidance of a 5% to 10% year-over-year increase in total sales volume, reflecting further market share gains. Of our anticipated 2026 volume, we have more than 85% committed in our order book to-date, which provides good visibility as this is tracking ahead of where we were at this point last year.

Turning to price. Our average selling price for the first quarter was approximately $3,900 per metric ton, which represented a 5% decline compared to the prior year and sequentially a 2% decline compared to the fourth quarter. As we take stock of our pricing action, we are encouraged to see that the trajectory of our pricing is beginning to turn.

While we continue to operate with disciplined commercial standards, we are encouraged by the positive pricing momentum, which, in addition to our pricing actions, also reflects the improving backdrop in EAF steelmaking, all of which is positioning GrafTech to capture significant long-term value as fundamentals continue to improve.

Turning to the next slide and expanding on costs. For the first quarter, our cash costs on a per metric ton basis were $3,848. While above the level reported in the first quarter of 2025, this represented a 4% sequential decline from the fourth quarter. As we have noted in prior calls, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts.

However, our underlying cost structure remains significantly improved compared to the prior periods. And we will remain focused on further optimization opportunities, including procurement and production efficiency and cost management across the organization, including in response to the geopolitically driven cost pressures that Tim spoke to.

Importantly, we continue to achieve all of this while maintaining our dedication to product quality and reliability as well as upholding our commitment to environmental responsibility and safety. Overall, cost discipline remains a cornerstone of our strategy, and we are pleased with our ongoing progress towards achieving our long-term expectation of cash costs being approximately $3,600 to $3,700 per metric ton.

Turning to the next slide and factoring all of this in. For the first quarter, we had a net loss of $43 million or $1.66 per share. Adjusted EBITDA was negative $14 million compared to negative $4 million in the prior year, primarily due to the decline in our average price. Turning to cash flow. For the first quarter, cash used in operating activities was $15 million. Adjusted free cash flow was negative $27 million compared to negative $40 million in the first quarter of 2025 as the prior year reflected a planned inventory build in the first quarter compared to a more neutral impact of working capital in the current year.

On a full year basis, we continue to project a modest increase in our net working capital levels, reflecting our anticipated volume growth. As we have noted, to the extent that conflict-driven impacts on the oil and energy markets result in sustained increases in the carrying cost of our inventory, this will need to be reflected in our graphite electrode pricing moving forward.

Lastly, regarding CapEx, we continue to anticipate a full year spend will be approximately $35 million, which we believe is an adequate level to maintain our assets at current utilization levels and support targeted investments in productivity capital. Turning to the next slide. We ended the first quarter with total liquidity of $329 million, consisting of $120 million of cash, $108 million of availability under our revolving credit facility and $100 million of availability under our delayed draw term loan.

As a reminder, the untapped portion of our delayed draw term loan is available to be drawn until July of 2026, and our expectation remains to draw on this residual portion, most likely by the end of the second quarter. As it relates to our $225 million revolving credit facility, which matures in November of 2028, we had no borrowings outstanding as of the end of the quarter.

However, based on a [ springing ] financial covenant that considers our recent financial performance, borrowing availability under the revolver remains limited to approximately $115 million less currently outstanding letters of credit, which were approximately $7 million at the end of the first quarter.

More broadly, as it relates to our liquidity position, our pricing actions announced in the first quarter will set the stage for a more constructive pricing going forward, particularly as it relates to 2027 negotiations that are set to begin in the back half of 2026. As a reference point, based on current utilization rates, each $100 improvement in our average selling price would equate to approximately $12 million of incremental liquidity.

In conjunction with the other key initiatives that Tim spoke to, it is expected to result in a marked improvement on our financial performance in 2027 and beyond. As such, we believe our $329 million liquidity position, along with the absence of substantial debt maturities until December of 2029, provides a strong foundation from which to execute our strategy, capitalize on improving market conditions and position GrafTech for meaningful long-term value creation.

In closing my remarks, I would like to extend my gratitude for the outstanding commitment and hard work demonstrated by our team members worldwide and thank our customers and our investors for their continued partnership.

I will now turn the call back to Tim for a few closing comments.

Thank you, Rory. This remains a pivotal time for GrafTech and our broader industry. Near-term demand fundamentals are beginning to improve. Our price increase actions, favorable trade rulings, supportive policy action and strong EAF steelmaking trends from key customers are all reinforcing the pricing recovery thesis.

Further, long-term growth drivers, including decarbonization, the continued shift to electric arc furnace steelmaking and the growing demand for needle coke and synthetic graphite are firmly in place. As the only pure-play graphite electrode producer outside of India and China, we remain firmly resolved to support the continuation of these dynamics.

To that end, we will continue to operate with urgency, adaptability and the conviction to act decisively in the pursuit of long-term value, all of which will position GrafTech to capitalize on the structural trends that are set to shape the future of our industry and to deliver long-term shareholder value. To that end, I want to sincerely thank our entire team around the world for their remarkable efforts, resilience and commitment during this difficult time.

That concludes our prepared remarks, and we'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Bennett Moore of JPMorgan.

I wanted to start on the cost inflation side. I think all your EU energy needs are covered for this year, but if you could confirm that. And then maybe if you could help frame what sort of inflation you're seeing from decant oil? And has this started to put upward pressure on needle coke? And if not, when do you think we could start to see that flow through?

Yes. Thanks, Bennett. So on the EU energy costs, you're right. We are nearly fully hedged on those. We have fixed price contracts going through the end of the year. So that's a good thing for us. We're happy to have that in place. Moving on to the decant oil question. Just to dimensionalize it, and I think we've talked about this before, decant oil as a percentage of our total production cost is around 25% of it.

The pricing that we realize on decant oil is not necessarily directly correlated to just the Brent curve. We price off of other index as well, such as the HSFO and the like. And there's also premiums and discounts applied based on quality and such. So it's dangerous to correlate exactly the forward curve on Brent to our cost of decant oil and needle coke. But I will tell you, I'm very happy to say that we've taken a good look at the futures markets.

We've looked at analyst consensus. and we've built that into our cost forecast, which, as you saw in our release this morning, we're maintaining our cost guidance for a low single-digit improvement over 2025. So luckily -- or not luckily, but very prudently, we've managed working capital, which has given us a little bit of a cushion to tolerate some of these headwinds on the decant oil market if those assumptions come true.

Again, our supplier diversification and the timing of our purchases is important to managing that cost. So we'll continue to do that. A reminder from our year-end call, we're in the middle of planned major maintenance at our Seadrift facility. So a lot of our oil purchases were brought forward in the first quarter in anticipation of that, so we can exit the turnaround at Seadrift with enough inventory of decant oil to produce.

So that's another factor to consider. But we have headwinds as does everyone else. It's dangerous to index right off of the Brent curve if you're looking forward, but we've incorporated all this into our guidance, and we're happy to maintain that previous cost reduction guidance.

And Bennett, maybe I'll chime in on the needle coke market as a whole. I think the oil markets certainly have moved up. And while we source from different things and have a number of constructs that help us keep our pricing in check, I think it is a bit of a proxy for what some of the other decant oil producers globally are experiencing and other needle coke producers are experiencing globally.

So I think that combination of higher oil prices at this point in time as well as just the overall supply disruption, right? A number of the needle coke producers source their oil out of the Middle East, the Chinese and some of the Japanese producers. And so that disruption is going to have an impact on the market as well.

So I would expect as we get into the second half of the year, you'll see a marked increase in needle coke prices on the merchant side, which, again, being vertically integrated for us helps us out and would expect that market to tighten up quite a bit.

Thus far, we haven't seen huge moves. I think we've seen about $175 or $200 increase in the Chinese market for needle coke. And I think that's largely a reflection of people fulfilling already committed tons here early on, but we certainly expect that market to move quite a bit in the back half of the year.

Great. And then coming to pricing, it's great to hear that momentum is moving in the right direction following the recent hikes. I know you don't want to probably get into the detail of quarterly guidance on pricing, but do you think 1Q could be a trough for the year? When might we start to see it inflect at least directionally higher within your results?

Yes. Thanks, Bennett. I'll give you directional commentary. I won't get into specific levels. But I think we're pleased with where the price increase adoption is at this point in time, right? We're now a little bit more than a month out since we made the announcement of $600 to $1,200 across various regions, and we're seeing success in that in all the regions that we sell into.

I will tell you that right now that there's limited volumes that will actually be delivered in the second quarter, and that's just the phasing of when we made the announcement, when our negotiations took place. So probably 90% of the volume that will be impacted by the price increase will happen in the second half of the year.

So I wouldn't expect to have a big change in ASP in the second quarter, but would really see that start to materialize in the third and fourth quarter. But again, pleased with where that's at, at this point in time.

Next question comes from the line of Arun Viswanathan of RBC Capital Markets.

So a few questions. So first off, I think I heard you say that your cash costs should be in a $3,600 to $3,700 range. And so if I think about your average price in Q1, which was $3,900, and then maybe I take the midpoint of what you've announced, $900. And so that would get you to $4,800.

Is that the right way to think about maybe Q3, Q4 potential pricing? And then given that -- and would you be at that cash cost level, so maybe you could see kind of $1,000 EBITDA per ton range or maybe you can kind of just help us frame what the path to profitability is and what that looks like and maybe a time line, maybe Q3 or Q4?

Thanks, Arun, and let me try to add some clarity to that. So I think it's a fair proxy to take the midpoint of the range because, again, that range is over all of the regions and the jurisdictions that we sell. But let me remind you, when we made the announcement of the price increase, we were approximately 80% committed, right? So the 20% of the sales we have to go would be influenced or impacted by that price increase.

And again, we're pleased with where those negotiations are and the uptake we're seeing from customers at those price levels. But you can't just apply it to all the tons. You can only apply it to the incremental tons. But what's really important about this is how it sets up the third quarter and the fourth quarter negotiations and the momentum.

I mean this is the first time we've seen in a number of years, quarters, any sort of positive price momentum on the electrode side. And really, that's a reflection of not only just market conditions, but better demand. We mentioned that you saw utilization rates in the U.S. ticked up over 80% last week.

I think there's concerns around supply security, just given some of the disruption in the transit markets and just overall geopolitical elements that are going on in the world as well as the cost pressures that are front and center for everybody. So this is really about positioning for that next major round of cost or price negotiations for customers as we head into '27. But certainly, anywhere that we can push pricing here in the back half of the year, we will.

Okay. And if I could just ask a follow-up. So Obviously, there is a lot of electrode production by Japanese producers and Koreans, also Korea is involved and there's a fair amount of needle coke production in that region. So however, we know from following what's going on, on the chemical side there's been massive disruptions and many of those facilities are down.

So electrodes have suffered from weak pricing for a little while, and our explanation would be oversupply in the electrode market. But has the conflict potentially -- could it result in maybe some permanent structural reduction of capacity, especially in that region? And could that help kind of the long-term supply-demand balance and pricing power that you expect in electrodes going forward?

Yes. I mean it's hard to say what the conflict is going to do. But I think certainly in the -- what it's going to do to long-term supply and demand balance. I mean, I think it all depends on the extent and duration of the war and the impact.

But certainly, as you look at oil inventories globally coming way down and the continuation of the supply disruption, I would expect that you would certainly see a marked or meaningful impact in the second half of the year in terms of not only pricing but potentially supply for those who are struggling to get needle coke and other raw materials that are important to produce electrodes.

So it will be yet to be seen what it looks like globally for the long term. But certainly, I think there'll be some disruption in the back half of the year. And again, I think that's why we like our position where we've maintained Seadrift as a meaningful part of our portfolio and the vertical integration that it provides our operations and what we can offer customers from a surety of supply perspective.

Okay. And then just lastly, maybe you could comment on the -- your expected success on these price increases, is it -- do you feel like competitors are in the same boat and are using this as an opportunity -- and are they acting rationally or is there oversupply?

And would they use this opportunity more as an opportunity to reclaim share? And I know you guys have been on a multiyear share recovery journey. So where are you on that as well? And do you foresee any headwinds in recovering that share now with increased competitive activity or not?

Yes. Thanks, Arun. And I don't think I can comment or will comment on how other companies or competitors are thinking about their pricing strategies. But what I would say is there have been tenders in the market since we've announced the price increase, and we find those tenders in all of the regions.

And we have won more of those tenders than we've lost at this point in time, which would suggest that customers are acknowledging either the value proposition that we're delivering or the essential nature of electrodes to their operations and are willing to pay a higher price to ensure that they get that.

So if there are people out there looking at this as a volume player or share grab, I think we're still having success on what we're seeing from a tender perspective. And that's what gives us the positive viewpoint and outlook as we head into the back half of the year and start negotiations again, which are a few months out, but that's probably what I'd say there.

I think just for reference, right, if we think about history here, if I'm a steel producer, if we looked over the last 20 years, electrodes represent roughly 1.1% of the selling price of finished steel. Today, that sits at 0.74%.

And if we took where finished steel is right now, whether it's in the U.S. or the EU, pricing should be somewhere in the neighborhood of $7,000 a ton. So there certainly is a disconnect in the market. And I think the market participants understand that and see that, and that's why we're having some success on the price increase.

Your next question comes from the line of Abe Landa of Bank of America.

Maybe just focusing again on this like Middle East conflict, potential exposure, et cetera. Just kind of breaking out more the direct and indirect exposure within the cash COGS. I think you broke out decant 25%. That's helpful, so we don't have to explore that.

But maybe between energy, logistics, maybe some other indirect exposure or direct exposure. And then I guess, of that potential exposure, what is fixed? Obviously, it sounds like energy is fixed and what is potentially variable?

Yes. Thanks, Abe. So I would say beyond decant oil, of course, energy, electricity and natural gas are probably the next biggest chunk. I mentioned when Bennett chimed in about the fixed price contracts we have in place for most of our consumption for the rest of the year in Europe. So not a lot of direct exposure there.

As far as natural gas goes, same thing in Europe, we have the same type of strategy around that. But between decant oil and the electricity, that's a big, big chunk of our variable costs. So from a fixed standpoint, there's a small amount of things that are exposed to the disruption in that market or the market shock of some of that pricing.

But we're pretty comfortable that we have operational strategies, production scheduling tactics and things like that to take advantage of some of the rates that are available to us in other jurisdictions as far as time of consumption, extent of consumption, congestion credits, things like that.

So I would say that focusing on the energy costs and our strategies around that as well as the comments I made earlier on our risk mitigation and our estimates around exposure to the oil markets, that covers the majority of that direct or indirect exposure to the impacts of the conflict.

That's very helpful. And then I know decant is 25%. Do you have like a similar number for electricity and nat gas, kind of like those other elements?

Those 2 together are about 10% to 15%.

Very helpful. And then kind of continuing on this Middle East conflict theme. I guess within the Middle East, like -- I mean, we've seen stories of steelmaking being disrupted in that region. I mean, are you seeing that kind of reduced demand for electrodes in that market?

I know it's a pretty popular market for imports of Chinese, Indian graphite electrodes. Are you seeing disruptions within the Middle East market? And then are you seeing any potential spillover to other markets related to the conflict?

Yes. I think certainly, steel production in that region as well as the accessibility of that region, most of the product that we would sell into the Middle East would go via vessels and the availability of vessels and the cost and the access to that is pretty limited right now. So from our perspective, we're not moving a lot of volume into the Middle East right now.

It's not a big market for us relative to the U.S., the European market as well as Japan, Korea and Taiwan. But yes, so not a lot of volume going into that region and certainly seeing a disruption and maybe that presents some opportunity when and if the conflict gets resolved and there's some inventory rebuild that needs to take place.

In terms of spillover into other regions, no, I think there's probably been some modest opportunities in Europe for volumes that were otherwise coming out of the Asian market that either because of extended transit times or just supply disruptions as a whole, maybe we've been able to pick up some spot volumes in Europe as a result of that.

Your next question comes from the line of Kirk Ludtke of Imperial Capital LLC.

Just a couple of follow-ups. With respect to the -- you provided a rule of thumb pricing to liquidity. I think it was $100 a metric ton to $12 million of liquidity. What would be -- is there a -- can you put that in terms of EBITDA instead of liquidity?

Yes, I consider that EBITDA impact. It would flow through. So if you're talking -- with our volume growth that we've guided to, it puts you kind of in that $115 million, $120 million range for the year. So that's where the $12 million comes from, $100 times $120, it's $12 million of EBITDA.

Okay, great. And then you mentioned some steelmakers are shortening supply lines. Can you maybe elaborate on that? Is that in anticipation of higher pricing due to some of these trade actions or is that actually concerns about the ability to deliver?

Yes. I think there's a few things going on in the market. First and foremost, transit times, again, have extended by a couple of weeks out of Asia into Europe, and that's providing some opportunity.

I think the uncertainty of the market, the markets as a whole have maybe started to have some steelmakers thinking more regionally and trying to buy closer and managing less complex or less involved supply chains. I think both of those are having an impact. But I also think we're seeing a little bit of maybe a wait-and-see game from some steel producers trying to defer purchases.

So they're consuming down some of their inventory, thinking that they'll have an opportunity to buy in a more favorable market condition later in the year, which, again, I think becomes a bit of a dangerous game just given the lead time that's needed to build electrodes and some of the demand we're seeing in other regions. So overall, I think market conditions, we're seeing some demand pick up and pretty pleased with where we're sitting right now.

Great. And then lastly, the trade action in front of the ITC seems to be moving in the right direction. Can you maybe talk about the potential timing of that and if it will -- do you think it will come in time for the 2027 price negotiations?

Yes. So the -- that large diameter, so again, it covers imports into the U.S. against the Chinese and the Indians and anything greater than 425 millimeters or 16.5 inches. It's through the initial ITC. It's on the Commerce. Commerce will do their investigation. We would expect that the Countervailing duties ruling could be implied or applied no later than the end of July.

And then as we look at the antidumping, which is certainly the larger of the 2 would come in mid-September. And both of those would be in advance of kind of the bulk of the negotiations that will take place in the back half of the year and certainly will have an impact on those negotiations. And just for reference, I think the preliminary margin impact or ask on those was 74% against Indian imports and then 147% against Chinese imports.

Got it. And those 2 are, what, 20% of the U.S. market?

Roughly, yes.

Our next question is a follow-up from Bennett Moore of JPMorgan.

I wanted to stick with the theme of the trade policy here. And I guess I'm wondering kind of the scenarios you think could play out for negotiations later this year, assuming success on the trade case.

Do you view this more as like a market share gain opportunity from the India imports or really more of a price action opportunity? And then maybe if you could also just touch on opportunities in other markets. I think you guys have initiated something down in Brazil, but what about Mexico and elsewhere?

Yes. Thanks. And I think let's start in the U.S. Certainly, it's both a volume opportunity because I think it does impact the desire and the willingness to import those tons. But more importantly, it's a price impact for the broader U.S. market, which certainly is supportive and I think it's just another thing that's changing the momentum and the trajectory of the market as we sit here today.

And I think we've long advocated whether it's the U.S. or any of the jurisdictions that we have operations in for fair trade and supporting the operations that we have. So I think there's actions going on in Brazil that I think are taking shape that we'll see some output here on later this year.

And yes, but continue to advocate for fair trade across the board as well as supporting the ECGA's efforts in terms of the campaign they have going on right now about supporting the domestic graphite industry in Europe as well as supporting the broader steel initiatives in Europe. One thing that's probably worth spending a second on is what's going on in the broader critical minerals front.

So we're taking action on the trade front in the U.S. because that's closest to where we're at right now. But certainly, as the U.S. continues to develop and partners with the EU and the other trading block countries around critical minerals and thinking about how they kind of decouple or break the ties to China in particular, I think that can have a significant impact on the way people think about graphite electrode pricing and anode material pricing, again, both of which are supportive to our business, both as we think about the electrodes as well as the value of the needle coke operation we have now in Seadrift.

So that's an area that we're spending a lot of time as well on ensuring that people understand the essential nature of electrodes and the role that electrodes play in the steel production process and how that translates into economic security and National Security. but the same on the anode side, right?

And the only way you can start a new supply chain in this environment is to have some sort of price support. So I think as we look out, it seems to make a lot of sense from an overall governmental policy perspective to have a broader trade protection beyond even what's going on with the ITC.

That concludes our Q&A session. I will now turn the conference back over to Tim Flanagan, CEO, for closing remarks.

Thank you, JL. I'd like to thank everyone on this call for your interest in GrafTech, and we look forward to speaking with you next quarter. Have a great day.

That concludes today's conference call. You may now disconnect.

[Technical Difficulty] and I will be your conference operator today. At this time, I would like to welcome everyone to the GrafTech International Fourth Quarter 2025 Earnings Call. [Operator Instructions] Thank you.

I would now like to turn the call over to Mike Dillon, Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to GrafTech International's Fourth Quarter and Full Year 2025 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 2025 performance and an update on the commercial environment. Rory will then provide more details on our quarterly results and other financial matters, and Tim will close with additional comments on our outlook. 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 relevant non-GAAP reconciliations. You can find these slides in the Investor Relations section of our website at www.graftech.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 joining GrafTech's fourth quarter earnings call. We are operating one of the most challenging environments the graphite electrode industry has seen in almost a decade, marked by global overcapacity, aggressive competitor behavior, geopolitical uncertainty and steel production trends that remain subdued in many regions. Despite these headwinds, our team continued to deliver for our customers, manage our cost structure aggressively, operate safely and make meaningful progress on the priorities we laid out at the beginning of 2025.

One of our primary objectives for the year was to continue to grow our volumes and market share and improve our geographic mix by shifting more business towards regions with stronger pricing fundamentals, particularly in the United States. Our team executed this strategy effectively. On a full year basis, we increased sales volume by 6%. As we have shared, our commercial strategy includes making deliberate decisions to walk away from volume opportunities that do not meet our margin requirements. This discipline is essential to protecting our long-term value, and we at GrafTech refused to follow some of our competitors in the race to the bottom. While this meant that our full year volume finished below our most recent guidance range, it was a right decision for our business and consistent with our commitment to about value-focused growth, not volume for volume's sake.

As it relates to our geographic mix shift in the United States, our sales volume grew 48% for the full year. And in the fourth quarter alone, our U.S. volume was up 83% versus the prior year. The shift towards the U.S., which remains the highest priced region globally, helped mitigate some of the pricing pressure we experienced in other markets as we'll speak to later. Cost management was another key area of focus for 2025 and we delivered meaningful results without compromising our commitment to quality, safety or the environment. For the full year, we achieved 11% reduction in our cash cost of goods sold per metric ton. This brings the cumulative reduction since the end of 2023 to 31%, a remarkable achievement over a 2-year period.

Our ongoing cost management initiatives, including enhanced procurement strategies, energy efficiency improvements and disciplined production scheduling have been instrumental in driving these results. In addition, a key element of our strong cost performance in 2025 was the effective management of the impact of tariffs on our cost structure. Overall, our cost management efforts have created a more agile, more efficient manufacturing footprint that positions us well to control our production costs while navigating a volatility in demand. These actions, combined with the effective management of our working capital and capital expenditure levels resulted in full year cash flow performance and the year-end liquidity position that exceeded our expectations.

To that point, including cash on the hand of $138 million, we ended 2025 with a liquidity position of $340 million, a level which enables us to maintain stability despite the persistence of industry-wide challenges. Lastly, we delivered on all of these objectives while achieving meaningful improvement in our safety performance.

Turning to the next slide and building on this point. As you can see, our total recordable incident rate improved to 0.41 in 2025, representing our best safety performance on record. As we enter 2026, sustaining and building on this momentum must remain a critical focus. Our ultimate goal is 0 injuries, and we will continue to work relentlessly towards that standard every single day. Looking back at all that was accomplished in 2025, I want to sincerely thank our entire team around the world for their remarkable efforts, resilience and commitment during this pivotal time.

Turning to the next slide. Let me provide our current thoughts on steel industry trends as context for the rest of our discussion on our performance and outlook. Global steel production outside of China was 843 million tons in 2025, up less than 1% compared to the prior year, with global utilization rate of approximately 67% on a full year basis for 2025.

Looking at some of our key commercial regions using data recently published by the World Steel Association, for North America, steel production was up 1% in 2025 compared to the prior year driven by 3% year-over-year growth in the United States. Conversely, in the EU, steel output in 2025 decreased 3% compared to 2024, remaining well below historical levels of steel production and utilization for that region. In fact, with 126 million tons of steel production within the EU in 2025, this represented a decline of more than 15% compared to the historical high levels of EU steel production achieved in 2021. Further, we estimate that steel utilization rates within the EU average just over 60% in 2025, which is well below the global average.

Although the overall steel sector is still experiencing short-term challenges, as we've mentioned previously, there are indicators of rebound in the steel market have started to appear. Based on World Steel's most recent short-range outlook for steel demand, globally, outside of China, World Steel is projecting 2026 steel demand to grow at 3.5% year-over-year. For the U.S., where the steel industry has experienced relative stability, World Steel is projecting a 1.8% steel demand growth in 2026. Along with this demand growth, favorable trade policies are expected to further support U.S. steel production.

In Europe, where the steel industry has been more challenged, World Steel is projecting a return of steel demand growth in the near term, forecasting demand growth of 3.2% to 2026. This reflects some of the demand drivers we've discussed in the past, including initiatives to increase infrastructure investments, defense spending, representing some of the key steel-intensive industries. In addition, provisions within the carbon border adjustment mechanism for CBAM implemented at the beginning of 2026 as well as new carry protection measures that will be effective later this year, are expected to support higher levels of production in this key commercial region for GrafTech.

Against this backdrop, we estimate that globally outside of China, demand for graphite electrodes will increase slightly in 2026 with all major regions expected to contribute. That said, it's not the level of electrode demand that's the key factor holding back our industry today. It's the supply side and balance and ultimately, pricing. This supply imbalance is driven by the gross overcapacity that has been built in both China and India, with Indian manufacturers expressing plans to bring additional and unneeded capacity to the market. Combined, they are flooding the markets with cheaply priced exports, which to continue to distort the competitive landscape and threaten to destabilize the entire supply chain.

In response, pricing behavior of other competitors have become increasingly aggressive and arguably irrational. All of this has translated into realized prices for the graphite electrode industry that have declined significantly over the past few years. For some time, we've been clear that the pricing levels are unsustainably low and not aligned with the indispensable nature of an electrode, let alone the level of investment required to maintain a stable reliable supply of graphite electrodes for the steel industry. Further, the level of capacity rationalizations that have been announced by ex Chinese electric producers to date has been inadequate to address the structural overcapacity issue within our industry. As a result, we saw a deterioration of competitor pricing discipline in the fourth quarter and expect that pressure to continue into 2026. This has happened even as steel makers in the U.S. and Europe announced price increases from finished steel products, reinforcing the disconnect between value creation and the steel industry and the pricing environment for graphite electrodes, a mission-critical consumables.

Ultimately, the current market dynamics and danger long-term liability of the graphite electric industry. Given these realities, structural change on the supply side is long overdue and a failure to change the current course of the electrode industry will undoubtedly result in equilibrium that will harm the steel industry for the long term.

As the only pure-play in graphite electrode producer outside of India and China, we remain committed to actively shifting this dynamic in order to support our customers who rely on us for quality and reliable products. To that end, let me send a clear message to all of our stakeholders. As a leader in the graphite electrode industry, GrafTech has and will continue to act decisively. In light of the prolonged downturn in the market environment, management with the support of our Board continues the evaluation of a number of areas, including optimizing our manufacturing footprint, opportunities for trade or policymaking support on a number of fronts as well as other potential strategic partnerships and sources of capital. The focus of these efforts is to identify opportunities to enhance efficiency preserve optionality and position GrafTech for long-term value creation.

With that, I'm going to turn the call over to Rory, who will provide some more color on our commercial and financial performance for the fourth quarter. I'll then wrap up our prepared remarks with further comments on our outlook, after which we'll take your questions. Rory?

Thank you, Tim, and good morning, everyone. Starting with our operations. Our production volume for the fourth quarter was approximately 28,000 metric tons, resulting in a capacity utilization rate of 60% for the quarter. This brought our full year production level and utilization rate to 112,000 metric tons and 63%, respectively. On the commercial front, our sales volume in the fourth quarter was approximately 27,000 metric tons. This was flat to the prior year and fell short of our original expectations for the quarter. While a portion of the shortfall was attributed to the timing of certain shipments that shifted into the first quarter of 2026 as Tim noted, it also reflected our commercial strategy to not pursue certain volume opportunities that do not meet our margin and expectations, particularly in the Middle East and in Europe.

In the U.S., we grew our sales volume in the fourth quarter by 83% year-over-year, reflecting our ongoing success in shifting a significant portion of our volume to this key region, as we have discussed. For the full year, our sales volumes in the U.S. grew 48% compared to 2024, which is an impressive result given that steel production in the U.S. was up only 3% in 2025. As a result, shipments to our U.S. customers represented 31% of our full year sales volume in 2025 compared to 22% in the prior year.

Turning to price. Our average selling price for the fourth quarter was approximately $4,000 per metric ton, which represented a 9% decline compared to the prior year and sequentially, a 5% decline compared to the third quarter. The year-over-year decrease was driven by the substantial completion in 2024 of higher-priced long-term agreements, while the sequential decline reflected the competitive pricing dynamics that Tim discussed. Our strategy to shift more of our geographic mix towards the U.S. helped to partially mitigate these impacts. In fact, we estimate that the higher mix of U.S. volume compared to the prior year boosted our weighted average selling price for the fourth quarter by nearly $200 per metric ton and by approximately $135 per metric ton on a full year basis.

Turning to costs. For the fourth quarter, our cash cost on a per metric ton basis were $4,019 representing a 2% year-over-year decline. While this is higher than our cost per metric ton reported in the first 3 quarters of the year, as we have noted in prior calls, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts, and this sequential increase was anticipated. For the full year, our cash costs were just over $3,800 per metric ton, an 11% reduction compared to 2024. This exceeded our previous guidance of a 10% year-over-year decline and remarkably, resulted in a 2-year cumulative decline in our cash COGS per metric ton of 31% compared to 2023.

Our continued outperformance in this area reflects the team's extraordinary work in identifying and executing cost reduction opportunities across various components of our variable and fixed spending in order to control production costs at various levels of demand. These include drawing on our extensive experience in research and development to reduce the consumption of specific raw materials. Executing procurement initiatives related to broadening of our supplier network, helping us to minimize our variable costs even further and capitalizing on our volume growth to enhance our fixed cost leverage. Further, we are achieving all of this while maintaining our dedication to product quality and reliability as well as upholding our commitments to environmental responsibility and safety. Overall, we are pleased with this ongoing progress towards achieving our long-term expectation of cash cost being approximately $3,600 to $3,700 per metric ton.

Turning to the next slide and factoring all of this in. For the fourth quarter, we had a net loss of $65 million or $2.50 per share. This compares to a net loss of $49 million or $1.92 per share in the prior year as the reduction in our costs only partially offset the year-over-year decline in weighted average price. For the fourth quarter, adjusted EBITDA was negative $22 million compared to negative $7 million in the prior year, with the change reflecting the same drivers I just noted.

Turning to cash flow. For the fourth quarter, cash used in operating activities was $21 million, while adjusted free cash flow was negative $39 million. As a reminder, our semiannual interest payments of approximately $34 million related to our senior notes occurs in the second and fourth quarters of each year. In addition, our CapEx spending for 2025 was heavily weighted toward the fourth quarter with $18 million of our $39 million full year spend coming in the fourth quarter. These factors were partially offset by a favorable change in net working capital for the fourth quarter as was expected. Overall, as Tim noted, on a full year basis, we performed ahead of our cash flow projections for 2025 and exceeded our year-end liquidity expectations.

Turning to the next slide and expanding on this point. We ended the year with total liquidity of $340 million, consisting of $138 million of cash, $102 million availability under our revolving credit facility and $100 million of availability under our delayed draw term loan. As a reminder, the uncapped portion of our delayed draw term loan is available to be drawn until July of 2026, and our expectation remains to draw on this residual portion. As it relates to our $225 million revolving credit facility, which matures in November of 2028, we had no borrowings outstanding as of the end of the year. However, based on springing financial covenant that considers our recent financial performance, borrowing availability under the revolver remains limited to approximately $115 million, less currently outstanding letters of credit which were approximately $14 million as of the end of the year. Overall, we believe our $340 million liquidity position, along with the absence of substantial debt maturities until December of 2029 will support our ability to manage through near-term industry-wide challenges and provide strategic flexibility as we evaluate options to ensure the long-term viability of our business.

In my closing remarks, I would like to echo Tim's sentiment and extend my gratitude for the outstanding commitment and hard work demonstrated by our team members worldwide and thank our customers and our investors for their continued partnership.

I will now turn the call back to Tim.

Thank you, Rory. I'll conclude our prepared remarks with some further comments on our outlook. As we've noted, given the persistent market challenges, we must evaluate and take decisive actions to preserve the long-term sustainability of our business. I want to be clear that while doing so, we remain committed to safety, product quality, delivering on our financial objectives and ultimately meeting the needs of our customers who rely on us for high-quality and reliable products. To that end, we've established a number of strategic priorities and objectives for 2026 that leverage the commercial, operational and financial progress that we've made over the past couple of years. These include building on our commercial momentum to further grow our volume and market share in 2026. For the year, we expect to grow our sales volume by 5% to 10% year-over-year, including a further shift in our geographic mix towards the United States.

Currently, of our anticipated 2026 sales volume, we have approximately 65% committed in our order book following the completion of customer dentitions that occurred in the fourth quarter of each year, which is tracking slightly ahead of where we were at this point last year. Specific to the first quarter of 2016, we'd expect the year-over-year increase in our sales volume of approximately 10%. In addition, we will continue to expand our initiatives to improve our cost structure. As we've noted, our cash cost per metric ton have declined by a cumulative 31% since the end of 2023. While this level of savings is not repeatable by continuing to enhance the efficiency of our production and other measures to optimize production costs, we anticipate a low single-digit percent year-over-year decline in our cash costs per metric ton for 2026.

Further, we'll continue to prudently manage our working capital levels and capital expenditures. For 2026, reflecting our anticipated volume growth, we expect a modest increase in our net working capital levels for the full year, most notably in the first half of the year, reflecting the timing of planned plant maintenance and other timing factors. Lastly, we anticipate our full year 2026 capital expenditures to be approximately $35 million which we believe is an adequate level to maintain our assets at current utilization levels.

While much of our commentary today has been focused on near-term challenging market dynamics in our response, it's important to not lose sight of the fact that we participate in an industry that is mission-critical to electric arc furnace steel production with structural tailwinds that will support long-term demand growth. According to the most recent full year data published by the World Steel Association, the EAF method of Steel making further increased its market share in 2024, accounting for 51% of the steel production outside of China. This is a continuation of the steady share growth that the EAF industry has experienced for a number of years. And driven by decarbonization efforts, we expect this trend to continue.

In the U.S., which produces 80 million tons of steel annually, over 20 million tons of new EAF capacity has either recently come online or is planned for the coming years with further announcements expected as we move ahead. This will further drive share gains for the EAF steel production in this key region. In the EU, while some European steelmakers have announced temporary delays in their EAF transition plans, other projects continue to move forward. And we continue to expect a meaningful mix shift towards EAF steelmaking within the EU in the medium to longer term.

Given the expected growth in demand and tariff protections impacting certain for and graphite electrode producers, the U.S. and the EU remain important strategic regions for GrafTech for the long term. With our strong commercial momentum in these regions and our focus on meeting the evolving needs of our customers, we are well positioned to capitalize on this demand growth.

Let me now briefly speak on the topic of trade, which continues to be an evolving landscape. We are continuously assessing a range potential tariff outcomes and how those scenarios could influence steel industry trends and shape the commercial environment for graphite electrodes and more broadly, synthetic graphic. Specific to the U.S., we continue to be encouraged by the steps the administration has taken to create a more level playing field from a trade perspective and to protect critical industries. As it relates to the steel industry, the expanded Section 232 tariffs that have been implemented on steel imports into the U.S. continue to have the desired impact of higher domestic steel production and supporting manufacturing initiatives within the United States. With respect to critical minerals and more importantly, synthetic graphite made from petroleum needle coke, steel makers remain critically reliant on graphite electrodes and need a stable and healthy supply base.

As noted, we expect to see growing demand in this market driven by the growth in EAF steelmaking and expect further synthetic graphite demand to result from the building of Western supply chain for battery needs, whether for electric vehicles or energy storage applications. However, the establishment of those Western supply chains remains in early stages as this is an industry that is suffering from overcapacity in China.

We believe that the potential for international trade disruption further highlights the strategic importance of strengthening supply chains, and that the West reducing its reliance on China for critical minerals such as synthetic graphite and to accelerate the development of the domestic supply chain with the support of further policy While additional policy measures are needed, we welcome the action of the U.S. Department of Commerce and the preliminary antidumping tariffs against graphite active anode material from China, along with recent announcements related to initiatives on the sourcing and pricing of rare earth and other critical minerals.

All of this demonstrates a strategic intent on part of the U.S. government to foster an ex China supply chain for these key materials. As it relates to GrafTech, given the fluid nature of global trade policy and the heightened attention on critical minerals, we are taking proactive measures that seek to: One, minimize the risk for GrafTech; two, capitalize on emerging opportunities; and lastly, promote fair trade in our key markets. All of this is consistent with our approach on advocating for ourselves in order to optimally position GrafTech and its stakeholders for long-term success.

In closing, this is a pivotal time for GrafTech in our broader industry. Near-term demand fundamentals are beginning to improve and long-term drivers including decarbonization, the continued shift to EAF steelmaking, the growing demand for needle coke and synthetic graphite are firmly in place. However, the supply side remains structurally on a balance and the pricing environment remains inconsistent with the indispensable nature of graphite electrodes and the level of investment required to maintain stable, reliable supply of graphite electrodes for the steel industry. As such, we must continue to operate with urgency, adaptability and a willingness to make difficult decisions.

To our stakeholders, we're committed to support our customers with dependable high-quality electrodes, protecting the long-term viability of our business by identifying opportunities to enhance efficiencies and preserve optionality. Being transparent about the challenges and decisions ahead, and ultimately position GrafTech for the long-term value creation by capitalizing on the structural trends that are set to shape the future of our industry.

Lastly, I want to again thank our entire GrafTech team. Their dedication and resilience coming to confidence in our ability to navigate this period and emerge stronger.

That concludes our prepared remarks. With that, we'll now open the call for questions.

[Operator Instructions] Your first question comes from Bennett Moore with JPMorgan.

You've highlighted continued aggressive competitive pricing. I'm just wondering if these dynamics have worsened at all, particularly in the U.S.? And if so, is this being driven by imports or other local players?

Yes. So I guess with respect to pricing and the commentary about the aggressive nature, I'm sure you can understand that we're not going to provide a ton of specifics around geographies and levels or any specific names or actions. But I mean at the end of the day, what we're seeing is across the globe pressure on pricing and behaviors that when you take a step back, and you think about what role electrodes play and the production of steel and the indispensable nature of electrodes in the production of steel. Again, remember, you can't produce 70 million tons of steel in the U.S. or 65 million tons of steel in Europe without an electrode. The level of pricing that people are quoting and behaving within the market doesn't reflect the asset nature -- asset-intensive nature of our business. Doesn't incentivize R&D spending, and it really doesn't reflect or allow for adequate returns to generated for shareholders. So that's what we're seeing in the market, and I think that's problematic as we look out into the future.

To finish the second half of your question, and is it being driven by imports, I think it's being driven across the globe. So it's not specific to a particular region, imports and certainly, the amount of material that's coming out of China and India both at relatively low prices is certainly problematic across the globe. I think you've seen some trade protections put in place in the U.S. in particular, and now you're seeing actions taking place in Europe as well that will help with that. But it's really just the amount of material that's being dumped into the market.

And I guess just bringing those comments together, you've talked about expectations of improving demand, but that being more than offset by excess supply and competitive pricing. You've got 65% of your U.S. book already locked in, which is the highest pricing. I mean, is it reasonable to assume that in 2026 realized pricing is at least going to be another directionally lower year for GrafTech?

Yes. And again, Ben, thanks for the question. Sticking to our practice of not providing specific price guidance, I think it would be fair to say based on what we disclosed for 2025 and our commentary that we just provided around the state of the market and to my answer to your previous question, I think it's fair to say that absolute pricing that we're observing thus far as we head into '26 isn't better than what we're seeing at the '25 level.

Your next question comes from Arun Viswanathan with RBC.

Just on the pricing. So it sounds like you guys are being disciplined and it sounds like some of the competition is bordering on not being disciplined and maybe even some rational tactics. So it seems like there's been some capacity additions as well in India and China. For a very long time, I guess, we've been under the impression that the quality of those electrodes were on par, but it seems like there's a lot of customers who are now, okay, using those electrodes. So is that the case? And if that is the case, then you are walking away from some competitively priced dynamics. How do you win back share from here? So is it service? And because it doesn't seem like there's going to be a halt in that supply addition? And maybe you can just also discuss kind of the oncoming supply if you see any there.

Thanks, Arun. And as always, you packed a lot into a single question, so hopefully, I can hit all the high points there. Let me start with supply, right? And we've talked about the oversupply that exists in the market. I don't think we've seen any incremental supply come on into the market here in 2025. But you've heard the announcements made by some producers that they intend to bring on additional capacity here over the next couple of years, which, again, we've provided commentary in our thoughts on terms of the need for that in the market. So it's not additional supply in '25, but certainly some announcements that aren't otherwise favorable.

I think if you think about the overall pricing dynamics and where we're focusing our energies, we've stated that -- we will continue to focus our attention in moving volumes into the U.S. market and to a lesser extent, the European market. This has been a commercial strategy we've talked about for the better part of 1.5 years now. And we've had a lot of success. Again, we've seen tremendous growth in the U.S., and we'll continue to do that.

We fully expect, as we head into '26 to grow our volumes. We're guiding to a 5% to 10% increase in our volumes year-over-year, but that's being done with discipline. Again, we're not chasing volume for volume's sake. And certainly, as we stated around the Q4 results, we have walked away, and we'll continue to walk away from volumes that don't meet our objectives from a margin perspective. Where that pressure is the greatest on us is certainly those regions outside of the U.S. and Europe. And if you think about Southeast Asia, the Middle East, South America, those are regions where we have to be much more selective.

To your point of how do we win market share. This really comes down to the value proposition we've talked about a lot here over the last 2 years and what the team continues to try to do in terms of improving our value proposition. Again, as the pure-play electrode player outside India and China, we focus a lot of time on R&D, bringing new products. We spend a lot of money and effort on our customer technical service teams and architect and really look to partner with our customers and add value to their furnaces and their steelmaking processes. We think that, along with the quality of electrodes, we produce certainly will continue to allow us to gain market share in those regions that value that. Regions where they're buying just purely on price, those are going to be the regions again, we have to be much more selective and maybe don't have as much opportunity to grow our share.

Okay. I appreciate that. And just as a follow-up. So -- you're also in a unique position where you have the backward integration into needle coke. And so theoretically, if the market is oversupplied, what is your ability to shift away from the graphite electrode market and repurpose your needle coke capacity into the EV battery side or ESS batteries? There's definitely very robust growth on that side? And is that something that you can pivot towards. I know you've talked about it in the past, but is there a little heightened focus there and any time line or any milestones that we can think about that you're pursuing?

Yes. Thanks for that. And I would start by saying that there's a heightened focus on every element of our business, both our core business of producing and selling graphite electrodes, but also how we can become a more significant player in these establishment of supply chains outside of China for anode material. Weather again, like you stated, going into energy storage applications or in the EVs. I think we're well positioned to do that with C. drift. We've spent a lot of time in the past talking about our technical capabilities and our ongoing work with those looking to develop anode plants, both in the U.S. and Europe. And I think if you look at the trade landscape that continues to develop in Washington right now, in particular. You've got an anode case that rounding third and heading home in terms of finalization against the Chinese. I think those hearings are here and better in February and will be finalized in the month of March. Again, I think that's very constructive for the battery makers who are looking to establish and put plants in the U.S., and I think we'll be well positioned to help them as they move forward.

And I think more broadly, if you think about synthetic graphite and what the government is doing around price floors or pricing mechanisms, some recent announcements around the Vault and stockpiles. -- all of this is, I think, a good parallel to what we can do on the synthetic graphite front. And again, I think we're well positioned. We're just in the early innings of the development of some of these markets and some of this demand here in the U.S.

Okay. And then just lastly, given that you are in the early innings there, we do have -- we've seen some price declines, and I know you're calling for a volume uplift, but understanding that it's still relatively low utilization rates globally at 67%. How much liquidity do you guys have to wade through and this downturn from here? And then if conditions get worse, what are some of the plans? And then similarly, are you in a position to actually pursue that development from a financial standpoint? Or is that going to depend on a stronger recovery?

Yes. Let me start with the last part of your question. I think we've been consistent all along as we've talked about our aspirations and the role that we can play in the establishment of the Western supply chains, right? This is not an area where GrafTech is going to be able to make multibillion-dollar investments on a stand-alone basis, right? But we think that we possess a unique set of skill sets and assets and capabilities as a leader in synthetic graphite that allows us to partner with those that are out raising capital and building plants. And again, that can be in a number of areas within their own value chain, whether it's raw material supply out of Seadrift, providing graphitization capacity or expertise or also just some of our own technological advancements that our R&D team has been working on. So it will likely come in the form of a partnership or a series of partnerships as we think about how that develops for us going forward.

You asked about liquidity and kind of what we're feeling or thinking about there. I mean at the end of the day, we have $340 million of liquidity as of December 31. But I think more importantly, is kind of our comments around as a company over the last 2 years, we've acted decisively, right? We've taken a lot of steps to preserve our liquidity, to enhance our liquidity, right? You think back to the beginning of '24, we idled some capacity we streamlined our overhead structure. We readjusted our commercial structure. We've aggressively caught structure. We've aggressively cut costs and managed our balance sheet. So all of those things are things that we'll continue to do and just need to reiterate to shareholders and stakeholders at large that we'll continue to take the actions necessary for as long as this downturn exists. And that's the message here for today.

Your next question comes from Abe Landa with Bank of America.

Maybe first one. You kind of alluded to this when talking about the U.S. environment. Obviously, there had been some pretty significant Indian tariffs kind of through fourth quarter and obviously, it's somewhat changed. I guess what was the impact of Indian tariffs on the U.S. contracting overall process? And kind of how do you expect some of the newly sized Indian trade deal to kind of impact the U.S. market specifically?

Yes. I mean if you think about the way that the U.S. market tends to contract, they go out in the fourth -- third and fourth quarter and contract a sizable amount of their full year volume for the next year. We are largely through that at this point in time. So while we think that the repealing of the 50% tariff against the Indian down to 18% is probably a step too far. We're comfortable with the position that we're in heading into 2026 with respect to our U.S. customers. Again, fully anticipate overall volume growth for the business in '26 and fully anticipate continuing to grow our U.S. business.

And again, if you think about the strength of the U.S. steel market as it exists today and the operating levels where they're at, quality carries today and service carries today. And we think that's what differentiates GrafTech from some of the competitors in the marketplace and think that ultimately, that's why customers will choose us going forward. We'll continue to enhance that value proposition and are confident that we'll continue to be able to grow that market share as we look out to the future.

That's helpful commentary. And then maybe shifting regions to Europe, kind of mentioned that volumes overall for the full year didn't hit your expectations and partially on aggressive pricing in Europe. I know there's a number -- there's been a number of like capacity movements there. And obviously, you have 2 of your 3 main plants there. So I guess can you just kind of maybe discuss a little bit within Europe kind of supply and demand environment and how that relates to what you're seeing in terms of pricing within Europe and early into '26?

Yes. I mean Europe still is and will remain a key market for us. If you just think about the amount of steel made via EAFs in Europe, while overall steel production was down in Europe year-over-year and is down 15% from the high in 2021. Europe is still a big steel producing area. And given the proximity to our two plants in France and Spain remains a key area for us. So I think the Europeans are finally starting to take some action on the trade front and the protectionism, if you want to call it that, with both CBAM and some of the announced tariff actions last quarter. But it's still a challenged market from an overall demand standpoint because of power pricing and just the overall level of competition.

So again, it's a lower-priced market for us. It's a market that we continue to focus our energies on it. Again, the European buyers are also value buyers versus just price buyers. So I think the value proposition that I just spoke to, again, differentiates us in the market. And again, we think we're confident in our position in Europe, and we'll continue to push to grow volumes in Europe as well. I don't know if the pricing in Europe is any more aggressive than it is elsewhere in the world, but there certainly is some pressure there.

Another question on -- you kind of alluded to China overcapacity kind of impacting or their exports kind of impacting the Rest of the World. obviously, always kind of tough to kind of get a good read on what's going on within China. But can you just maybe talk about what's going on with the supply picture of graphite electrodes coming out of China -- like today, any future capacity they're looking to add, what you're seeing in the export front from China?

Yes, sure. I think when you talk about China, you really have to talk about two elements of China and their export behavior. One is the headline, which is Chinese steel exports hitting over 120 million tons this year and flooding the world with steel, which just puts pressure on a lot of our customers around the globe. So that's one element of it. And you see a lot of trade action being taken in certain geographies to protect domestic steel, both in the U.S. and EU, again, very important regions for us.

On the electrode side, the Chinese continue to export at increasing levels on an annual basis. And I'd say they're over 300,000 tons of UHP or 300,000 tons of total exports and some are in the 200 to 250 range of UHP exports here over the past year. And they probably represent maybe 1/3 of the non-Chinese market right now in terms of total demand. Whether or not there's additional capacity coming online in China or not is kind of irrelevant given the size of that overall market, which is well overbuilt for what their domestic EAF needs are, right?

If you think about China produces probably 90 million tons via the EAF and they have probably 800,000 tons of electrode capacity. Most of that is idled or not exportable given its location or the quality. But there's a tremendous amount of volume there that sits in the market. So maybe that's a little bit of color in terms of where the Chinese are at. How much capacity more did they have to export, it's hard to say, but certainly, we feel the pressure of the Chinese exports globally right now.

And then -- maybe last question, and thank you for digging the time being a little bit more correct. But are you having conversations regarding Project Vault or any kind of related government type support programs? And maybe can you quantify that opportunity within the synthetic graphite?

Sure. Yes. I'm not going to comment on any of the nature of discussions we're having. I think we've spoken in the past about like any other company. Government advocacy, whether at the state or federal level is something that we engage in, and we're not going to provide specifics around what departments and whom we're speaking to. But I can say that we continue to advocate for the benefit of GrafTech and the broader industry, and it really focuses around a number of areas.

Trade and promoting -- fair trade and the importance of ensuring that domestic markets are strong. I think we've spent time educating various constituencies about the role in synthetic graphite as a credible mineral plays, both on the steel industry and the indispensable nature of a graphite electrode. That's not a linkage that everybody gets on the surface. So we've spent some time explaining that to folks, as well as synthetic graphic in the form of powder and the role that can be played there. So -- we'll continue to talk about who we are and what we do and our strengths relative to the market and what the needs are, but I certainly think that this is an area that we'll continue to spend time on.

Your next question comes from Kirk Ludtke with Imperial Capital.

You mentioned a couple of times that you thought quality and service carried the day. Are you able to price your products at a premium or is it more that you win ties?

Yes. I think it depends in the market. I mean, ultimately, right, we think that our value proposition is superior in a number of cases, and there are competitors that we would put on the same tier is from a quality standpoint and you price competitively against those and you hope that your service and offerings are what breaks highs. There's still a quality and market differential between the Tier 2 and Tier 3 producers, both the Indians and the Chinese. But again, it depends on the end market ultimately that you're selling into. Certain markets are price buyers and only price buyers and those markets are head to head. And those are the markets that we want to focus our energies on.

Got it. What percentage of the demand out there -- I know this is probably a tough question to answer, but what percentage of the demand out there do you think is sensitive to quality and service?

Well, I mean, at the end of the day, 100% of the demand is sensitive to quality, right? No steelmaker wants an electrode braking in the furnace. It cost some money at the end of the day. The question is how much are they willing to pay for the incremental quality and that's a tough question to answer. But again, that is the underpinning of our commercial strategy and why we focused on the markets we're focusing on. And willing to walk away from those folks that just demonstrate pure price buying in other regions.

Got it. On this $12 billion critical material fund. Is that enough to move pricing in any of your end markets?

Yes. I mean I think it's hard to say or maybe it's too early to say in terms of exactly how all these roll out. I mean I think in the totality of whether it's the Vault, whether it's the initiatives that the Department Award is rolling out, whether it's the initiatives from the Department of Energy whether it's what you see from some of the larger banks rolling out, infrastructure and critical mineral funds. All of those things in totality and a conscious effort towards the establishment of supply chains and creating a constructive environment, all of those will have a positive uplift. Which one has the bigger weighting or which one drives more of that across the board, it's tough to say. But I think we're happy to see from a market participant perspective that, a, that people are recognizing synthetic graphite as a critical mineral; b, that the government is taking action and decisive action and moving swiftly and not getting bogged down with bureaucracy and decision-making and really working towards establishing supply chains and supporting the domestic infrastructure.

And then lastly, we talked a lot about capacity additions. Are there any -- do you have any expectation that your competitors might reduce -- other competitors might reduce capacity?

Other than what you hear publicly and that's the same thing that we hear. So in terms of expectations, I'm not sure that there's anything that is pending in the market as we speak. But I think broadly speaking, and part of our commentary was aimed at this. In a market that isn't rewarding producers for producing a product that is essential and allowing for investment in an asset-intensive industry and allowing for returns to shareholders, at some point in time, that log jam or that capacity surplus has got to come offline. People will start to make decisions based on that.

There are no further questions at this time. I'll now turn the call back over to Tim Flanagan for closing remarks.

Thank you, Carlin. And I'd like to thank everyone on this call for your interest in GrafTech, and we look forward to speaking with you next quarter. Have a wonderful day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the GrafTech Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Mike Dillon, Vice President of Investor Relations. You may begin.

Thank you, Desiree. Good morning, and welcome to GrafTech International's Third Quarter 2025 Earnings Call. With me today are Tim Flanagan, Chief Executive Officer; and Rory O’Donnell, Chief Financial Officer. Tim will begin with opening comments, including an update on the commercial environment. Rory will then provide more details on our quarterly results and other financial matters, and Tim will close with additional comments on our outlook. We will then open the call to questions.

Turning to our next slide. As a reminder, some of the matters discussed on this call 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.graftech.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 joining GrafTech's third quarter earnings call. Today, we'll provide an overview of our third quarter performance, share key operational and commercial updates and discuss our outlook for the remainder of 2025 and beyond.

I'm pleased to share that GrafTech delivered another quarter of meaningful progress in the third quarter of 2025, reflecting our team's commitment to disciplined execution and operational excellence in a challenging market environment.

During the quarter, we achieved 9% year-over-year increase in sales volume, reaching nearly 29,000 metric tons. To achieve this, we are actively leveraging our strong customer value proposition and capitalizing on the commercial momentum we have built to expand our market share and drive continued volume growth. In fact, reflecting our full revised full year 2025 sales volume guidance that Roy will speak to in a few moments, we are on track to achieve cumulative sales volume growth of over 20% since the end of 2023.

This is impressive growth in any market but is particularly noteworthy given that graphite electrode demand has remained relatively flat for the past 2 years. It's a clear indication that our customer value proposition is compelling and we're outperforming the broader market. In addition, we continue to focus on optimizing our geographic sales mix, particularly in the United States, where our sales volume grew by 53% year-over-year in the third quarter. This strategic shift towards the U.S. market, which remains the strongest region for graphic electrode pricing is a direct result of our efforts to capture opportunities in regions with more favorable pricing dynamics and to strengthen our competitive position.

On the cost side, we delivered a 10% year-over-year reduction in our cash cost per metric ton for the third quarter and increased our full year guidance for cost reductions, as Rory will discuss. As a result, for the full year of 2025, we're on track more than a 30% cumulative reduction in our cash cost per metric ton since the end of 2023. This achievement underscores our ability to control our production costs and adapt our operations to varying levels of demand.

Regarding profitability, we generated positive EBITDA adjustment positive adjusted EBITDA of $13 million for the quarter. We also generated $25 million in net cash from operating activities and $18 million in adjusted free cash flow, further strengthening our liquidity position to $384 million as of the end of September. This cash flow performance and ending liquidity position exceeded our expectations for the third quarter.

While we're encouraged by these reported results, and as we've previously noted, we'll never be satisfied with this level of performance. Yet we view this as a further demonstration of growing momentum and that these are constructive advances in the right direction, providing a solid platform to build upon as the market recovers.

Turning to the next slide. Let me provide our current thoughts on the broader steel industry. On a global basis, steel production outside of China was approximately 206 million tons in the third quarter of 2025, up nearly 2% compared to the third quarter of last year, resulting in a global utilization rate for the third quarter of approximately 66%. On a year-to-date basis, global steel production outside of China is relatively flat.

Looking at some of our key commercial regions using data published by the World Steel Association earlier this week. For North America, steel production was flat year-to-date compared to the prior year. Specific to the U.S., World Steel reported that on a year-to-date basis, steel production grew 2% compared to 2024. In the EU, steel output decreased 4% year-to-date compared to the same period in 2024 and remains well below historical levels of steel production and utilization for that region.

Although the overall steel sector is still experiencing short-term challenges, however, early indications of a rebound in the steel markets have started to appear, and recent developments have provided additional reasons for encouragement.

Earlier this month, World Steel published their most recent short-range outlook for steel demand. For the U.S., World Steel is projecting a 1.8% steel demand growth in 2026 behind a number of factors including pent-up demand for residential construction and easing financing conditions, while favorable trade policies will support domestic steel production.

In Europe, World Steel is projecting a return of steel demand growth in the near term forecasting demand growth of 3.2% for 2026. This reflects some of the demand drivers we have discussed previously, including initiatives to increase investment in infrastructure and defense spending, representing key steel [indiscernible] industries.

To further support the European steel industry earlier this month, the European Commission announced new trade protection measures that should drive higher levels of production in this key region for GrafTech. Specifically, the measures when effective next year, will cut steel import quotas by 47%, significantly increased the out-of-quota tariffs and introduce [indiscernible] provisions prevent circumvention. These measures are in addition to the provisions within the carbon border adjustment mechanism or CBAM that is expected to provide further support to the [indiscernible] steel industry once implemented at the beginning of 2026.

These developments are a structural positive for the EU steel industry with some analysts projecting the trade projections to drive this steel imports lower by more than 10 million tons on an annualized basis. This alone could drive EU steel capacity utilization rates, which have averaged just over 60% for the past couple of years to nearly 70%.

Finally, on a global basis, World Steel is projecting global steel demand outside of China to grow 3.5% year-over-year based on many of the same factors, a further easing of geopolitical tensions and improved macroeconomic conditions could support further growth. Against that backdrop, we are having active and ongoing dialogue with our customers on their needs for the upcoming year. While it's too early in the process to draw any conclusions, our compelling customer value proposition positions us well to continue the share gains we've achieved over the past 2 years, including further market share growth in the United States.

At the end of the day, we're unwavering in our commitment to serve our customers with excellence and be the most trusted value-added supplier of high-quality graphite electrodes. Consistent with our focus on nurturing long-term partnerships built on performance, reliability and mutual success. We look forward to sharing more on our 2026 outlook during our year-end call.

Before turning the call over to Rory, I want to sincerely thank our entire team around the world for their remarkable efforts resilience and commitment during this pivotal time. Their dedication continues to drive our progress and position us for long-term success. But most importantly, I want to thank our employees for their unwavering commitment to a culture of safety. This is a nonnegotiable priority across the organization, and we're pleased to have maintained strong momentum in this area, putting us on track for our best safety performance in years.

As we move through the end of the year and into next, sustaining and building on this momentum is a must and must remain a critical focus. Our ultimate goal is 0 injuries, and we continue to work relentless toward that standard every single day.

With that, let me turn the call over to Rory to provide more color on our commercial and financial performance.

Thank you, Tim, and good morning, everyone. Starting with our operations. Our production volume for the third quarter was approximately 27,000 metric tons, resulting in a capacity utilization rate of 63%, while representing a modest sequential decline in production compared to the prior 2 quarters. This was planned as annual maintenance activities at our European manufacturing facilities occurred during the third quarter, consistent with our historical practice. On a full year basis, our expectation remains to balance our production and sales volume levels.

Turning to our commercial performance. In the third quarter, our sales volume was approximately 29,000 metric tons. This is a 9% year-over-year increase and represented our highest sales volume performance in 12 quarters. Of particular note is our success in actively shifting a significant portion of our volume to the U.S. as we have discussed.

For Q3, our sales volume within the U.S. grew 53% year-over-year. Year-to-date, we have grown sales volume in this region by 39% compared to last year. This is an impressive result given year-to-date steel production in the U.S. is up less than 2%. On a full year basis, we now expect our total sales volumes to increase 8% to 10% in 2025. The modest change from our previous guidance of 10% year-over-year sales volume increase reflects our disciplined approach of foregoing volume opportunities where margins are unacceptably low.

To this last point, we continue to face challenging pricing dynamics across nearly all of our regions. While this is partially attributable to flat market demand, it further reflects the increased level of low-priced graphite electrode exports from China and others that we have spoken to previously, which has resulted in an unsustainable level of excess electrode capacity in the rest of the world. Against that backdrop, at times, we are making decisions to walk away from certain commercial opportunities where we are not being adequately compensated for our value proposition. This is consistent with our commitment to a disciplined, value-focused growth, not volume for volume's sake.

Expanding on the topic of price. Our average selling price for the third quarter was approximately $4,200 per metric ton, which represented a 7% decline compared to the prior year and sequentially was in line with the second quarter. The year-over-year decrease was largely driven by the substantial completion in 2024 of the higher-priced LTAs along with persistent challenges with market pricing that I just discussed. Our focus remains on mitigating these impacts in the near term, including the previously mentioned geographic mix shift towards the United States.

Similar to all regions, average pricing in the U.S. is below 2024 levels, but it remains our strongest region for graphite electrode pricing. In fact, we estimate that the higher mix of U.S. volume boosted our weighted average selling price for the third quarter by over $120 per metric ton and by a similar amount on a year-to-date basis. As a result, when comparing our year-to-date weighted average price of approximately $4,200 per metric ton, to the non-LTA price of $3,900 we reported in the fourth quarter of last year, we saw an increase of nearly 8%.

Despite the demand climate, our strong commercial progress highlights the effectiveness of our approach to engaging customers and demonstrates the significant benefits we provide them. Our value proposition is founded on several essential pillars. These include our unparalleled technical expertise associated with the architect furnace productivity system, which is further enhanced by the support of our exceptional customer technical service team. We also continue to make substantial investments in research and development, reinforcing GrafTech's leadership in graphite electrode and petroleum needle coke technology and innovation.

Another distinguishing factor is our unique vertical integration into needle coke, ensuring a reliable supply of this crucial raw material. Additionally, our flexible and integrated global manufacturing network provides enhanced supply dependability, an increasingly significant benefit given the changing landscape of global trade regulations. Ultimately, we are dedicated to fostering and enhancing lasting customer relationships, aiming to provide mutual benefit and ongoing shared achievements for the long term.

Turning to costs. For the third quarter, our cash costs on a per metric ton basis were $3,795, representing a 10% year-over-year decline. We continue to outperform our expectations in this area and are increasing our full year cost savings guidance. In response to our revised sales volume outlook, we have implemented additional measures to enhance the efficiency of our production schedules and further optimize production costs. We now anticipate an approximate 10% year-over-year decline in our cash COGS per metric ton for 2025 on a full year basis compared to our previous guidance of 7% to 9% decline. Achieving a full year 10% decline would translate into cash COGS per metric ton of approximately $3,860 for the full year.

While this is above our year-to-date run rate, as we have noted previously, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts. However, we are pleased to be outperforming our initial expectations for the year and that our cost structure continues to trend in the right direction. Remarkably, achieving our full year cost guidance would represent a 30% 2-year cumulative decline in our cash COGS per metric ton compared to the full year of 2023.

Our teams continue to do extraordinary work in identifying and executing cost reduction opportunities across various components of our variable and fixed costs. Let me highlight a few examples. Drawing on our extensive experience in research and development, along with our commitment to innovation, we are consistently working to reduce the consumption of specific raw materials, all while maintaining the high standards of our product. By leveraging our recent investments in technology, we are able to lower our total energy usage. In addition, we are optimizing our production schedules to make the most of lower electricity rates available during off-peak periods. Our efforts to implement procurement initiatives have also yielded impressive results. Notably through broadening our supplier network, helping us to minimize our variable costs even further.

Furthermore, our ongoing initiatives to reduce fixed costs have positively impacted our production costs while the higher volume has enhanced our fixed cost leverage. Lastly, our team continues to effectively manage the potential cost impacts caused by evolving global trade policymaking and specifically, the impact of U.S. tariffs. To expand on this point, as we have consistently noted, our integrated global production network gives us flexibility around where we can manufacture our products allowing us to serve end markets efficiently and reliably.

In addition, we maintained strategically positioned inventories across key geographies, allowing us to meet customer demand even in dynamic market conditions. As a result, we are well positioned to minimize the potential impacts imposed by current trade policies, and we continue to expect the impact of the announced tariffs to have less than 1% impact on our 2025 cost, which is reflected in our updated cash COGS guidance.

Overall, through disciplined execution and a relentless focus on efficiency, we've made remarkable progress in driving down costs and enhancing the overall agility of our operations in order to control production costs at various levels of demand. Further, we are achieving all this while maintaining our dedication to product quality and reliability as well as upholding our commitments to environmental responsibility and safety.

Turning to the next slide and factoring all of this in. For the third quarter, we had a net loss of $28 million or $1.10 per share. This compares to a net loss of $36 million, $1.40 per share in the prior year as the reduction of our costs more than offset the year-over-year decline in weighted average pricing. For the third quarter, adjusted EBITDA was $13 million compared to a negative $6 million in the prior year. As noted in our earnings release, our current quarter EBITDA included an $11 million noncash benefit from recognizing previously deferred revenue following the resolution of a long-standing commercial matter.

Turning to cash flow. We were pleased to report positive cash flow for the first time in 4 quarters. For the third quarter, cash provided by operating activities was $25 million, while adjusted free cash flow was $18 million, with both measures comparable to the prior year. Our positive third quarter cash flow reflected a favorable change in net working capital as was expected.

Taking a step back, we had a $45 million build in our net working capital through the first 6 months of the year, most notably driven by inventory as first half production exceeded sales volume. As we have previously noted, this was planned as we had intentionally built inventory in the first half of the year, reflecting one of our cost savings initiatives, which is to level load our 2025 production while balancing production and sales volume levels on a full year basis. As we unwind this inventory timing impact, our build in net working capital through the first 9 months of 2025 was reduced to $14 million despite an $11 million working capital impact in the third quarter from the noncash earnings related to the recognition of previously deferred [indiscernible].

With this strong working capital performance in the third quarter, on a full year basis, we remain on track for working capital to be favorable to our cash flow for 2025. This is being realized through a combination of production cost improvements and inventory management, while maintaining adequate safety stock of pins and electrodes. Overall, we continue to track ahead of our initial cash flow projections for 2025 and remain encouraged by our momentum in this area.

Turning to the next slide and expanding on this point. We ended the third quarter with total liquidity of $384 million, consisting of $178 million of cash, $107 million of availability under our revolving credit facility and $100 million of availability under our delayed draw term loan. As a reminder, this untapped portion of our delayed draw term loan is available to be drawn until July of 2026, and our expectation remains to draw this residual ports prior to its expiration.

As it relates to our $225 million revolving credit facility, which matures in November of 2028, we had no borrowings outstanding as of the end of the quarter. However, based on a springing financial covenant that considers our recent financial performance, borrowing availability under the revolver remains limited to approximately $115 million, less currently outstanding letters of credit which were approximately $8 million as of the end of the quarter. Overall, we believe our strong liquidity position, along with the absence of substantial debt maturities until December of 2029 and will support our ability to manage through near-term industry-wide challenges.

In summary, our focused execution, operational discipline and strategic positioning are enabling us to deliver results today while building for a strong foundation for long-term growth. I am proud of the progress we have made, and I am confident in our ability to continue creating value for our customers, our shareholders and all of our stakeholders. To that end, I would like to echo Tim's sentiments and extend my gratitude for the outstanding commitment and hard work demonstrated by our team members worldwide.

I will now turn the call back to Tim for some final comments on our outlook.

Thanks, Rory. In summary, we laid out a disciplined plan in response to evolving industry dynamics and heightened macro uncertainty, and we're executing against that plan. Our objectives are clear and include to increase our sales volume and gain market share, improve our average pricing, most notably by shifting the geographic mix of our volume to higher-priced regions, to reduce costs and working capital requirements and to ultimately improve our liquidity and strengthen our overall financial foundation.

As it relates to our third quarter, we're pleased that our efforts across all of these areas are beginning to translate into improved bottom line performance. This reflects signs of progress and momentum towards accelerating our path back to normalized levels of profitability as the market recovers. This is last point, I spoke earlier here to a number of potential catalysts to support a rebound of the steel market in the near term. Longer term, we remain bullish on the structural tailwinds that support the ongoing shift towards electric [indiscernible] furnace steelmaking.

Globally, based on data published by the World Steel Association, the EAF method of steelmaking further increased its market share in 2024, accounting for 51% of steel production outside of China. This is a continuation of the steady share growth that the EAF industry has experienced for a number of years. And driven by decarbonization efforts, we expect this trend to continue.

In the U.S., which produces approximately 80 million tons of steel annually, over 20 million tons of new EAF capacity has either recently come online or is planned for the coming years, with further announcements expected as we move ahead. This will drive further share gains for electric arc furnace steel production in this key region.

In the EU, while some European steelmakers have announced temporary delays in their EAF transition plans, other projects continue to move forward, and we continue to expect a meaningful mix shift towards EAF steelmaking within the EU in the medium to longer term. Further, with graphite electrode inventories remaining at low levels in Europe, an increase in European EAF steel production should lead to an outsized increase in graphite electrode demand. Given the expected growth in demand and tariff protections impacting certain form graphite electrode producers, the U.S. and the EU remain important strategic regions for GrafTech for the long term. With our strong commercial momentum in these regions and our focus on meeting the evolving needs of our customers, we are well positioned to capitalize on this demand growth.

Expanding briefly on the topic of trade protection. We are continuously assessing a range of potential tariff outcomes and how those scenarios could influence steel industry trends and shape the commercial environment for graphite electrodes and more broadly synthetic graphite.

Speaking to the U.S, we are encouraged by the steps that the administration is taking to create a more level playing field from a trade perspective and to protect critical industries. As it relates to the steel industry, with the expanded Section 232 tariffs that have been implemented on steel imports into the U.S., we continue to expect these tariffs will be stickier than the broader tariff programs that have continued to evolve. As it relates to critical minerals, which includes synthetic graphite made from petroleum needle coke, we expect to see growing demand in this market driven by the growth in the EAF steelmaking and the building of Western supply chains for battery needs, whether for electric vehicles or energy storage applications.

However, the establishment of those western supply chains from raw material manufacturer through to the remains in early stages and we're operating in an industry that is suffering from overcapacity in China. Against this backdrop of market dominance, earlier this month, China announced expanded export controls on synthetic graphite. While it remains too early to assess the longer-term impact of these measures, we believe that the potential for international trade disruptions further highlights the strategic importance of the West, reducing its reliance on China for critical minerals such as synthetic graphite to accelerate the development of the domestic supply chain with the support of policy making.

To that end, earlier this year, the Department of Commerce announced preliminary antidumping tariffs of 93.5% being imposed on graphite active anode material imports from China. This stacks on top of previously announced tariffs resulting in a combined tariff of 160% on Chinese anode material imported into the U.S. While further policy measures will be needed, we welcome this important development, which, along with recent announcements related to initiatives on sourcing of rare earth and other critical minerals, demonstrates a strategic intent on the part of the U.S. government to foster an ex China supply chain for these key materials.

As it relates to GrafTech, given the fluid nature of global trade policy, and the heightened attention on critical minerals, we are taking proactive measures that seek to minimize the risk to GrafTech, capitalize on emerging opportunities and promote fair trade in our key markets. All of this is consistent with our approach on advocating for ourselves in order to optimally position GrafTech and its stakeholders for long-term success.

In closing, this is a pivotal time for GrafTech. We made tremendous progress on our strategic initiatives, and that progress gives us confidence. We are in a strong position to benefit from the long-term structural trends that are set to shape the future of our industry. As a result, we're energized by the opportunities that lie ahead. We remain fully committed to executing our strategy, delivering value for our customers and driving long-term sustainable growth for our stakeholders.

This concludes our prepared remarks. We'll now open the call for questions.

[Operator Instructions] And our first question comes from the line of Arun Viswanathan with RBC Capital Markets.

So I guess, first off, I guess -- do we -- should we expect any other kind of deferred revenue benefits? Or where does that arise from? And is that kind of onetime in nature, I guess, first off?

This is Rory. You should not expect any further. I mean, we don't have anything deferred left on the balance sheet. You'll note that in the upcoming disclosures in our SEC filings. So consider it one time it relates long since collected receivable that is no longer going to impact the -- or the results going forward.

Sure. And then just on kind of price and volume. So your average price came in a little bit lower than what we were thinking. Mainly that was maybe our own kind of mismatching of your contract roll-offs. But I guess, what do you guys think about the current kind of demand and price environment? It does appear that utilization rates are still kind of globally at a point that wouldn't necessarily support higher electrode pricing? Or maybe you can just comment on that? And if you need to weave in some thoughts on needle coke and how that's progressing as well, that would be helpful?

Yes, Arun, I'll start by saying I'm going to be careful about talking too much about pricing. Certainly, anything forward-looking just given the fact that we're in the middle of our negotiations with customers, both in the U.S. and Europe and globally right now. But I mean, I think we commented quite a bit about this in the second quarter call. I mean it's an oversupplied market right now. And so therefore, that makes it challenging to push pricing in such a market. That being said, I think you're starting to see some positive momentum across the steel industry and whether that's because of infrastructure and defense spending in Europe, whether it's because of trade actions that have been ongoing for now more than 6 or 7 months in the U.S. and recently announced in Europe. .

I think we're starting to see some momentum where we expect not only steel demand, but also steel production predict to pick up in those regions. So all in all, it still remains a challenging market, but I think we're still optimistic that we'll start to see some more positive momentum on the pricing side as we look out going forward. And certainly, to the longer term, I think we still firmly believe that you're going to see a big influx of additional EAF production I commented on the 20 million tons or so that we're seeing in the U.S. right now already.

As it relates to needle coke, needle coke continues to remain relatively flat from an overall pricing perspective globally. And I think, again, that's a reflection of where the electrode market is right now. I think the trade case that you're seeing play out right now in the Department of Commerce against the active anode material in China. The 93.5% tariff rate that we mentioned that will be finalized depending on when the government reopens, Q1 of next year, I think that will start to underpin and give all of the producers of anode material more confidence to continue to invest in their projects. And I think that will continue to support the overall demand for needle coke, and you'll start to see that market tighten up and pricing improve, and that will have a knock-on effect into the electrode market. So where we are today, and I think greener pastures ahead as we look out into the future.

Great. And then if I could just ask on the idea of supplying into the battery-related materials market. I guess you just mentioned that the market is oversupplied for electrodes. So I guess, is there any way to accelerate the commercial applications? Where are you on that time line? And we've been in an oversupplied market on electrodes for a while now. So is there any limitations to moving forward to pivot some of your portfolio into that market as well? I think our understanding is that you guys have maybe 180,000 tons plus of capacity and maybe 130,000 tons is used in electrodes. So there does appear to be some latent capacity that you maybe you could direct into that market. What's taking this long? And where are you kind of in that journey?

Yes. No, I think that's a fair question, and I think consistent with what we've said in the past. We continue to develop our capabilities. I think where we have a distinct advantage to the market right now is the vertical integration with Seadrift and the ability to supply needle coke and raw materials into that market. As you noted, there is excess graphitization capacity, both in the U.S. and the EU, given that we're operating at roughly 60% to 65% utilization rates.

But to be able to maximize that, you need to have batteries being produced by those that want to be non-Chinese suppliers in those regions, right? And right now, all of the battery material continues to be supplied by the Chinese, which is why that trade case is so critically important to allow those that want to have broader aspirations of producing anode [indiscernible] battery factories in the U.S. and the EU to be able to support their financing activities and make a market that otherwise is competitive and constructive for them.

We've said all along that we don't see ourselves as a stand-alone add-on producer. We're somewhat balance sheet constrained from that standpoint. But I think that we would be a good partner for someone who's looking for raw material supply and/or someone who's looking for interim bridge supply of graphitization capability and/or graftization expertise given that, that's what we do. So we think there's still opportunities out there.

But that market is still developing, and it will take some time. I think the finalization of the trade case next year will be an important milestone to start to see that market unlock itself somewhat. And I think we're still pretty optimistic not only just because of batteries for EVs, but probably equally and almost more importantly, is energy storage systems as we look forward on the electricity needs that the world is going to face here, which has been a very popular topic of late.

Our next question comes from the line of Bennett Moore with JPMorgan.

Congrats on the solid quarter. I wanted to start quick on the 50% tariffs on India material. I think those have been in place since August. Have you seen any material impact on imports into the U.S. as a result? And do you think these tariffs could help drive share gains or some of your conversations regarding 2026 commitments?

Yes. Again, I think we're confident, as we said, that we will continue to see gains in the U.S. I think we have a full expectation that we'll continue to grow volume in whole or in total as we head into next year, but we'll continue to focus a lot of energy into the U.S. market. Really, again, as a market that I think customers recognize the value proposition, the technical services and all of the capabilities we bring to the table. So we certainly do think that, that remains an opportunity for us. .

With respect to the Indian tariffs, right, I think -- that presents an opportunity in the market, right? I think certainly, anybody facing a 50% tariff is going to have a hard time overcoming that economic hurdle and should be supportive for negotiations as we head into those negotiations here in the fourth quarter.

And maybe I'll take an opportunity to step back and editorial to realize a little bit, right? I mean I think both the Chinese and the Indians have really overbuilt their electrode capacity to multiples and multiples greater than their domestic EAF consumption could ever reach and I think if we look back to 2022, the Indians are exporting almost 60% more material than they did then. They've lowered their prices by 40%, the Chinese have lowered their prices by more than 30%. And I think a combination of those reasons and the ongoing ore in Russia and the financing of that were through the purchasing of oil as well as the supply of electrodes into the Russian market, really, to me, is a strong reason in basis or justification for keeping those tariffs in place and hope that they don't just become a bargaining chip as the Trump administration works to settle out the trade disputes that are ongoing. So it's an opportunity for us, but certainly look forward to the negotiations here in the fourth quarter with that as a backdrop.

That's great color. And then my last follow-up here is regarding some commentary last quarter, you discussed scrap type being an attractive candidate for public-private partnership. Since then, we've seen some additional deals unfold, including government entities, providing financial support for the graphite industry. So just wondering if GrafTech had any sort of new engagement on this for instance this last quarter?

Yes. Thanks for that question, Bennett. I think you really need to take a step back and think about the work that the government is doing on critical minerals as well as trade policy and take that all into consideration as we think about how we promote a strong and domestic industrial base and in particular, steel making, right? I mean 70% of this deal in the U.S. is made via the EAF. 50% of steel in Europe is made via EAF. You can't produce that steel without electrode. So it's really important that not only are we protecting the steel and the downstream industries for steel, but we also have to think about the supply chains and the base that supports the steel industry, and we really need to see a healthy electrode industry to support that.

As we think about what's going on and some of the announcements that you mentioned, we said this on the second quarter call and still stand by it that we're really applauding what the Trump administration is doing on that front and what the Department of War is doing to support the development of critical mineral supply chains, both in the U.S. and with its allies. We've talked about the 93%. So I won't go back down that path.

But I think just this trade tit for tat that you're seeing between the U.S. and China around critical minerals really highlights kind of that importance, again, of creating that strategic supply chain. And I think synthetic graphite squarely fits into what the aim of that is I think as it relates to GrafTech, I think we're uniquely positioned as a 139-year-old industry leader, technical innovator as well as being the only vertically integrated producer of synthetic graphite with Seadrift down in Texas.

And we're confident that will play a critical role in supporting the domestic supply chain now and into the future. I think we remain confident that we can be a good strategic partner in this space. and we'll continue our advocacy efforts to propose GrafTech's interest now and into the future. as it relates to any further commentary, I just think at this point, it wouldn't be appropriate or useful for me to comment further.

And our last question comes from the line of Jay Spencer with Stifel.

So you mentioned your selling price on average is $4,200 per ton. And you mentioned that the U.S. volumes, I believe you said boosted the average price by $120 per ton. Is that -- is it fair to say that U.S. pricing has improved sequentially from the prior quarter?

I would say -- this is Rory. I would say it's flat to slightly up compared to the prior quarter.

Remember that you typically see U.S. contracts negotiated on an annual basis. So you don't see a lot of price movement within the U.S. on an annual basis.

Got you. Okay. And as analysts looking for indicators of pricing, we've looked at China graphite electrode pricing on Bloomberg historically, even though that's not the price you guys actually realized that it was -- that provided some information in terms of directionality. But given the increase in tariffs for active anode material and given your focus on the U.S. Is that kind of that Bloomberg metric no longer useful? Or how should we think about that?

Yes. So that Bloomberg price we've seen quite a bit of volatility over the last 12 to 18 months. I think it serves at least as a directional indicator of what you're seeing in the market maybe not at those exact levels, just given kind of the delta between the domestic market, the export market and what that looks like.

But China pricing -- the Chinese export pricing is always going to be a proxy for what the rest of world pricing is. So those regions that are less focused on quality and are focused on buying the cheapest electrodes available to the market. So that Chinese pricing is going to see -- or have a bigger impact in the Middle East, Turkey, Africa, South America, in particular.

As it relates to the U.S. and the EU, it doesn't necessarily influence those prices to the same extent, just given the fact that you do already have trade protections in place against Chinese electrodes to some extent in the U.S. and certainly to a bigger extent in the EU. So it certainly is an influence, but it isn't the ultimate driver in those 2 end markets. what becomes the challenge is the amount of volume that gets put into the rest of world by the Chinese, exporting 300,000-plus tons of electrodes into the rest of world markets puts a lot of pressure on the western suppliers to focus their energies in the markets that have better pricing. And it just has this knock-on effect as you think about globally. So that's why the commentary on the excess capacity and exporting their excess capacity becomes so relevant.

That concludes the question-and-answer session. I would like to turn the call back over to our CEO, Tim Flanagan for closing remarks.

Thank you, Desiree. I'd like to thank everyone on this call for your interest in GrafTech, and we look forward to speaking with you next quarter. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.