10-K: GrafTech Reports Wider 2025 Loss Amid Pricing Pressure, Eyes 2026 Volume Growth

GrafTech International Ltd. reported a significantly wider net loss in 2025 due to persistent pricing pressure and a substantial deferred tax valuation allowance, despite an increase in sales volume and cost reduction efforts, while projecting modest volume recovery for 2026.

Summary

• Net loss widened significantly to $219.8 million in 2025, up from $131.2 million in 2024, primarily due to a 13% decrease in weighted-average realized graphite electrode prices and a $42.6 million deferred income tax expense from establishing a full valuation allowance against U.S. and Switzerland deferred tax assets.
• Sales volume increased by 6% to 109.2 thousand metric tons (MT) in 2025 compared to 2024, while production volume rose by 15% to 112.3 thousand MT, leading to an increase in capacity utilization to 63% from 55%.
• Weighted-average realized price for graphite electrodes decreased by 13% to approximately $4,100 per MT in 2025, reflecting competitive pressures and the substantial completion of long-term agreements (LTAs).
• Cash cost of goods sold per MT decreased by 11% to $3,807 in 2025, contributing to a cumulative decline of 31% since the end of 2023, driven by ongoing cost reduction initiatives.
• Liquidity as of December 31, 2025, stood at $340.0 million, comprising $101.6 million in revolving credit facility availability, $100.0 million in delayed draw term loan availability, and $138.4 million in cash and cash equivalents.
• Total debt remained approximately $1.1 billion as of December 31, 2025.
• For 2026, the company projects a 5-10% year-over-year increase in sales volume, with approximately 65% already committed in its order book, and expects a low single-digit percentage-point decline in cash cost of goods sold per MT.
• A 1-for-10 reverse stock split was effected on August 29, 2025, to maintain compliance with the NYSE's minimum bid price requirement.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a challenging period for GrafTech, marked by significant financial losses and persistent pricing pressures. While operational improvements and long-term market trends offer some optimism, the immediate financial performance and outlook for continued pricing pressure warrant a cautious sentiment.

Positives

• Sales volume increased by 6% to 109.2 thousand MT in 2025.
• Production volume increased by 15% to 112.3 thousand MT in 2025.
• Capacity utilization improved to 63% in 2025 from 55% in 2024.
• Cash cost of goods sold per MT decreased by 11% to $3,807 in 2025, achieving a cumulative 31% decline since the end of 2023.
• Strategic shift of sales volume to the United States boosted the weighted-average selling price by approximately $135 per MT in 2025.
• Anticipated modest recovery in global (excluding China) steel demand for 2026, with expected increases in the U.S. and E.U.
• Projected 5-10% year-over-year increase in sales volume for 2026, with 65% already committed in the order book.
• Long-term demand growth for graphite electrodes is expected due to the steel industry's decarbonization efforts and increased adoption of EAF steelmaking.
• Demand for petroleum needle coke is expected to accelerate due to its use in synthetic graphite for EV and ESS lithium-ion batteries.
• Total recordable incident rate (TRIR) improved to 0.41 in 2025 from 0.59 in 2024, indicating enhanced health and safety performance.
• A $3.8 million gain was recognized in 2025 from the write-off of the remaining Tax Receivable Agreement liability.
• Pension and OPEB plans recognized $2.9 million in mark-to-market gains in 2025, compared to losses in 2024.

Negatives

• Net loss widened significantly to $219.8 million in 2025 from $131.2 million in 2024, a 68% increase.
• Weighted-average realized price for graphite electrodes decreased by 13% to approximately $4,100 per MT in 2025.
• Adjusted EBITDA declined to a loss of $9.1 million in 2025 from a positive $1.6 million in 2024.
• Free cash flow worsened to a use of $120.5 million in 2025 from a use of $74.4 million in 2024.
• Net cash used in operating activities increased to $81.6 million in 2025 from $40.1 million in 2024, primarily due to a $40.2 million decrease in cash provided by working capital.
• Interest expense increased by 22% to $104.1 million in 2025, reflecting a full year of interest on new debt facilities.
• Income tax expense was $49.4 million in 2025, compared to a benefit of $22.1 million in 2024, primarily due to a $42.6 million non-cash expense for a full valuation allowance against U.S. and Switzerland deferred tax assets.
• Industry-wide graphite electrode pricing levels remain unsustainably low, with aggressive competitor pricing expected to continue into 2026.
• Global (excluding China) steel production was relatively flat in 2025 due to geopolitical uncertainty and record high steel exports from China.
• The company suspended its quarterly cash dividend of $0.01 per common share on August 2, 2023, with no assurance of resumption.
• The stock repurchase program saw no activity in 2025, and its ability to repurchase shares is restricted by debt covenants.
• A full valuation allowance of $92.2 million was recorded against certain deferred tax assets as of December 31, 2025, indicating uncertainty about future taxable income.

Risks

• Dependence on the highly cyclical global steel and electric arc furnace (EAF) steel industries.
• The cyclical nature of the business and selling prices of products, which may remain depressed or further decline, potentially leading to prolonged periods of reduced profitability and net losses or adversely impacting liquidity.
• Sensitivity of business and operating results to economic conditions, including any recession, and the possibility that others may not fulfill obligations.
• Inability to effectively implement business strategies, including increasing/maintaining prices and shifting sales to higher-priced regions.
• Continued overcapacity in the global graphite electrode industry, particularly from China, which may further adversely affect prices, sales, margins, and profitability.
• Competitiveness of the graphite electrode industry, potentially leading to price reductions or increased R&D spending.
• Dependence on the cost and availability of manufacturing inputs, including raw materials (decant oil, petroleum needle coke), energy, and freight, with potential disruptions in supply or significant cost increases.
• Primary reliance on one facility in Monterrey, Mexico, for manufacturing connecting pins, with potential for operational disruption.
• Volatility in the cost of electric power and natural gas, particularly in Europe.
• Manufacturing operations are subject to hazards such as explosions, fires, severe weather, industrial accidents, and equipment failures.
• Legal, compliance, economic, social, and political risks associated with substantial operations in multiple countries, including currency fluctuations, tariffs, trade barriers, and exchange controls.
• Potential for substantial disruption of manufacturing operations for an extended period due to equipment failure, climate change, regulatory issues, natural disasters, public health crises, political crises, or other catastrophic events.
• Risks and uncertainties associated with litigation, arbitration, and contractual disputes, including the ongoing Brazil Clause IV litigation.
• Dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing, and logistics services.
• Information technology systems failures, cybersecurity incidents, network disruptions, and breaches of data security, including with third-party suppliers and business partners.
• Inability to recruit or retain key management and plant operating personnel or successfully negotiate with labor unions, potentially leading to strikes or work stoppages.
• Sensitivity of long-lived assets on the balance sheet to changes in the market.
• Dependence on protecting intellectual property and the possibility of third parties claiming infringement.
• Impact of inflation and the ability to mitigate its effect on costs.
• Impact of macroeconomic and geopolitical events on business, results of operations, financial condition, and cash flows, and supply chain disruptions.
• Uncertain shifts in domestic and foreign trade policies and the imposition of customs duties, tariffs, and trade barriers.
• Risks associated with strategic transactions, including acquisitions, divestitures, joint ventures, equity investments, and debt issuances.
• Indebtedness could limit financial and operating activities, or cash flows may be insufficient to service debt.
• Current or future borrowings may subject the company to interest rate risk.
• Risks and uncertainties associated with the ability to access capital and credit markets.
• Restrictive covenants in financing agreements could restrict or limit operations.
• Stringent health, safety, and environmental laws and regulations, including greenhouse gas (GHG) regulations, could result in substantial compliance costs, sanctions, or material liabilities.
• Global data and privacy protection laws (e.g., GDPR) require substantial compliance costs, and failure to comply could result in significant liability.
• Certain provisions in the Amended Certificate of Incorporation and Amended By-Laws could hinder, delay, or prevent a change in control.
• The stock repurchase program may not be fully consummated or enhance long-term stockholder value and could increase stock volatility or diminish cash reserves.

Future Outlook

The company anticipates a modest recovery in global (excluding China) steel demand in 2026, driven by favorable domestic trade policies in the U.S. and increased trade protections in the European Union. This is expected to lead to a slight increase in global UHP graphite electrode demand. GrafTech projects a 5-10% year-over-year increase in its sales volume for 2026, with approximately 65% already committed in its order book, and expects a low single-digit percentage-point decline in cash cost of goods sold per MT. Longer term, the company is confident that steel industry decarbonization efforts will increase EAF steelmaking adoption, driving demand for graphite electrodes, and that petroleum needle coke demand will accelerate due to its use in EV and ESS battery anodes.

Management Comments

• We expect to achieve a 5-10% year-over-year increase in our sales volume for 2026 on a full-year basis, as we continue to gain market share reflecting our compelling customer value proposition and our ongoing focus on delivering on the needs of our customers.
• Specific to the first quarter of 2026, we expect a year-over-year increase in our sales volume of approximately 10%.
• While we are encouraged by our ongoing strong volume performance, industry-wide pricing levels remain unsustainably low.
• Challenging pricing dynamics, most notably aggressive competitor pricing behavior, increased further during the fourth quarter of 2025 and we expect that pressure to continue into 2026.
• We will continue to execute actions to accelerate our path to normalized levels of profitability and support our ability to invest in our business.
• This includes further optimizing our order book by continuing to shift the geographic mix of our sales volume to regions where there is an opportunity to capture higher average selling prices, particularly in the United States, while also maintaining our disciplined approach of foregoing volume opportunities where margins are unacceptably low.
• We estimate that the higher mix of United States volume in 2025 compared to the prior year boosted our weighted-average selling price approximately $135 per MT on a full-year basis.
• We expect to build on this achievement with a low single-digit percentage-point decline in our cash cost of goods sold per MT for 2026 compared to 2025.
• We anticipate our full-year 2026 capital expenditures will be approximately $35 million, which we believe is an adequate level to maintain our assets at current utilization levels.
• We remain confident that the steel industrys efforts to decarbonize will lead to increased adoption of the electric arc furnace method of steelmaking, driving long-term demand growth for graphite electrodes.
• We also anticipate the demand for petroleum needle coke, the key raw material we use to produce graphite electrodes, to accelerate driven by its utilization in producing synthetic graphite used in anodes for lithium-ion batteries that power electric vehicles and energy storage systems.
• We believe that the near-term actions we are taking, supported by an industry-leading position and our sustainable competitive advantages, including our substantial vertical integration into petroleum needle coke via our Seadrift facility, will optimally position GrafTech to benefit from that long-term growth.

Industry Context

StockSavvy.ai notes that GrafTech's performance in 2025 reflects the broader challenges in the global steel industry, particularly outside China, where geopolitical uncertainties and high Chinese steel exports constrained production. The company's strategic focus on EAF steel production aligns with the industry's long-term trend towards decarbonization, which favors EAF over basic oxygen furnaces due to lower carbon emissions. The anticipated growth in demand for petroleum needle coke for EV and ESS battery anodes positions GrafTech to capitalize on the burgeoning electric vehicle and energy storage markets, diversifying its demand drivers beyond traditional steelmaking. However, the persistent overcapacity and aggressive pricing in the graphite electrode market, exacerbated by Chinese exports, continue to exert significant pressure on profitability, a common theme for manufacturers in this sector.

Comparison to Industry Standards

• GrafTech's stated production capacity of approximately 178 thousand MT represents about 23% of the global (excluding China) graphite electrode production capacity of 771 thousand MT, indicating a significant market share among the five largest global producers who collectively represent 75%.
• The company's vertical integration into petroleum needle coke through its Seadrift facility is a unique competitive advantage, as it is the only large-scale graphite electrode producer with substantial vertical integration, insulating it from raw material market volatility that affects peers.
• GrafTech's UHP graphite electrode capacity of 178 thousand MT contributes to the global (excluding China) UHP capacity of approximately 660 thousand MT, positioning it strongly in the high-quality segment.
• The average graphite electrode spread over petroleum needle coke of approximately $4,000 per MT (2006-2025, inflation-adjusted) provides a benchmark, though recent spreads have been narrower, indicating a challenging pricing environment compared to historical norms.
• The EAF steelmaking method, which GrafTech serves, accounted for 51% of global (excluding China) steel production in 2024, up from 44% in 2015, demonstrating its growing importance relative to BOF steelmaking.
• EAF steelmaking produces 75% fewer carbon dioxide emissions compared to BOF steelmaking, aligning GrafTech with global environmental sustainability trends.
• The company's total recordable incident rate (TRIR) of 0.41 in 2025, an improvement from 0.59 in 2024, suggests a strong commitment to safety, potentially outperforming some industry peers.

Management Changes

Corporate Governance

Legal Proceedings

• Brazil Clause IV Litigation: Ongoing litigation in Brazil where employees seek additional wage amounts and interest from 1989-1990. Brazilian Supreme Court ruled in favor of the employees union in 2019. A related action against GrafTech Brazil, initially ruled in favor of employees by a state court, was overturned by an appellate court in 2020 and upheld in 2021. Employees filed a further appeal in September 2022. The company intends to vigorously defend its position, but the potential loss is currently unassessable as claims do not specify damages.
• Brazil Income Tax Audit: GrafTech Brazil received an income tax assessment notice totaling approximately $32.4 million (including $19.2 million in interest and penalties) for 2019-2020. The assessment disallowed an investment tax incentive and the use of a VAT benefit. The Regional Judgment Office fully upheld the assessment in October 2025. The company believes the assessment is incorrect and intends to appeal, not deeming a loss probable.

Related Party Transactions

• Tax Receivable Agreement: The company entered into an agreement on April 23, 2018, with Brookfield (sole Pre-IPO stockholder) to pay 85% of cash savings from U.S. federal and Swiss tax utilization of pre-IPO Tax Assets. The remaining $3.8 million liability was written off in Q2 2025 due to a full valuation allowance against U.S. deferred tax assets, as related foreign tax credits are not expected to be utilized.

Stakeholder Impact

• Shareholders: Negative impact from widening net loss, suspension of dividends, and no stock repurchases in 2025. The 1-for-10 reverse stock split aimed to maintain NYSE listing, but does not inherently improve underlying value. Long-term potential from EAF steel growth and EV/ESS markets.
• Employees: Stable employment numbers (1,071 employees), good union relations, and improved safety record (TRIR 0.41). Ongoing investment in training and development. However, cost rationalization plans (announced Feb 2024) could imply workforce adjustments.
• Customers: Continued focus on product quality, delivery reliability, and technical service (ArchiTech system). Company aims to be a preferred supplier. Shift to short-term/spot agreements after LTA expiry offers flexibility but also exposes customers to market price volatility.
• Suppliers: Dependence on key raw materials like decant oil and petroleum needle coke. Seadrift facility provides internal supply, but external suppliers are still used. Supplier finance program in Mexico (SFP) provides early payment options for suppliers.
• Creditors: Total debt of $1.1 billion, with new notes and term loans issued in 2024. Compliance with debt covenants as of Dec 31, 2025, is positive, but operating performance has reduced revolving credit availability. The company expects to draw $100 million in delayed draw commitments.

Next Steps

• Draw the remaining $100.0 million from the Delayed Draw Commitments under the Initial First Lien Term Loan Facility prior to its expiration in July 2026.
• Continue to optimize the order book by shifting sales volume to regions with higher average selling prices, particularly the United States.
• Maintain a disciplined approach of foregoing volume opportunities where margins are unacceptably low.
• Expand initiatives to improve the cost structure, aiming for a low single-digit percentage-point decline in cash cost of goods sold per MT for 2026.
• Prudently manage working capital levels and capital expenditures, with anticipated full-year 2026 capital expenditures of approximately $35 million.
• Vigorously defend the company's position in the ongoing Brazil Clause IV litigation and appeal the Regional Judgment Office's decision regarding the Brazil Income Tax Audit.
• Continue to assess the impact of ASU 2024-03 on financial statements and disclosures.
• Hold the 2026 Annual Meeting of Stockholders on or about May 7, 2026.

Key Dates

Recommendation

GrafTech's 2025 results show significant financial deterioration with a widening net loss and negative adjusted EBITDA, primarily driven by persistent pricing pressure in the graphite electrode market and a substantial non-cash tax expense. While the company demonstrates operational improvements in sales volume, production efficiency, and cost reduction, and has a clear long-term strategy tied to EAF steel growth and EV/ESS demand, the immediate outlook for continued aggressive pricing and low profitability is concerning. The recent debt restructuring provides some liquidity, but the suspension of dividends and lack of share repurchases reflect ongoing financial constraints. A 'hold' recommendation is appropriate as the long-term potential is compelling due to its vertical integration and market position in critical materials for growing industries, but the near-term financial headwinds and market volatility suggest caution. Investors should monitor pricing trends, successful execution of cost optimization, and the realization of projected volume growth in 2026.

Keywords

Graphite Electrodes, EAF Steel, Petroleum Needle Coke, Industrial Materials, Carbon Anodes, Lithium-ion Batteries, Electric Vehicles, Energy Storage Systems, Manufacturing, Global Steel Industry, Supply Chain, Debt Restructuring, Financial Performance, SEC Filing, 10-K, GrafTech