Steel Markets
GrafTech to curtail electrode capacity on weak demand, pricing
Written by Laura Miller
February 14, 2024
Weak demand and pricing for graphite electrodes, combined with higher costs, have forced GrafTech to cut costs and reduce production across its facilities.
GrafTech International Ltd.
Fourth quarter ended Dec. 31 | 2023 | 2022 | % Change |
---|---|---|---|
Net sales | $137.1 | $247.5 | -45% |
Net earnings (loss) | ($217.4) | $50.3 | -532% |
Per diluted share | ($0.85) | $0.20 | -525% |
Year ended Dec. 31 | |||
Net sales | $620.5 | $1,281.2 | -52% |
Net earnings (loss) | ($255.2) | $382.9 | -167% |
Per diluted share | ($0.99) | $1.48 | -167% |
The Brooklyn Heights, Ohio-based electrodes producer reported significantly lower fourth-quarter and full-year 2023 results.
For Q4’23, GrafTech posted a net loss of $217 million on sales that slipped 14% sequentially to $137.1 million. It had net income of $50.3 million in the same quarter of 2022.
For 2023, the company lost $255.2 million vs. net income of $383 million in 2022. Sales of $620.5 million were down by more than 50% y/y.
“2023 was a challenging year for our business, marked by soft industry demand, the residual impact of the temporary suspension of our operations in Mexico that occurred in late 2022, and significantly higher costs,” explained Timothy Flanagan, GrafTech’s interim CEO and president. “Against this backdrop, results fell short of our expectations.”
Reducing costs
Flanagan added that the company was seeing ongoing softness in business, with weak demand and pricing for graphite electrodes.
In response to these weak market conditions, GrafTech announced it would suspend most of the production operations at its St. Marys, Pa., facility. The company said it would also cut overhead costs and reduce production across the rest of the company.
At the end of 2023, GrafTech’s reported production capacity for graphite electrodes was 202,000 metric tons (mt). With these most recent curtailments, capacity will be reduced by 12% to 178,000 mt.
Company-wide capacity utilization was just 38% in 2023 compared to 68% in 2022.
Outlook
“As we enter 2024, we expect demand for graphite electrodes in the near term will remain weak, reflecting persistent softness in the commercial environment as steel industry production remains constrained by global economic uncertainty,” the company noted in its earnings report.
GrafTech said it expects a modest improvement in sales volumes for 2024 compared to last year.
With soft demand and challenging pricing dynamics, the company said it is in the short term being selective in the opportunities it chooses to pursue. In the long term, GrafTech thinks it is positioned to benefit from growing demand. That growth come thanks to the ongoing transition toward more EAF steelmaking.
“As prior cycles have demonstrated, the anticipated recovery in graphite electrode demand in coming years will help ease the current competitive pricing pressures,” Flanagan said on the company’s quarterly earnings call on Wednesday, Feb. 14.
Flanagan said demand for graphite electrodes outside of China is estimated to grow at a CAGR of 3-4% over the next five years.
Laura Miller
Read more from Laura MillerLatest in Steel Markets
Steady architecture billings signal improving conditions
The November ABI decreased month over month but was still the third-highest reading of the past two years.
Fitch warns more tariffs will pressure global commodity markets
“New commodity-specific tariffs, mainly on steel and aluminum products, could widen price differentials and divert trade flows,” the credit agency forewarned.
Slowing data center, warehouse planning drives decline in Dodge index
The Dodge Momentum Index (DMI) slid further in November as planning for data centers and warehouses continued to decline.
Latin America’s steel industry grapples with declining demand, rising imports
With climbing imports and falling consumption, the Latin American steel industry has had a challenging 2024, according to an Alacero report.
CRU: Trump tariffs could stimulate steel demand
Now that the dust has settled from the US election, as have the immediate reactions in the equity, bond, and commodity markets, this is a prime opportunity to look at how a second Trump presidency might affect the US steel market.