GrafTech International (NYSE:EAF) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/833501560
Summary
GrafTech International reported a net loss of $43 million for Q1 2026, with adjusted EBITDA at negative $14 million, primarily due to a decline in average pricing.
The company announced a price increase for graphite electrodes by $600 to $1,200 per metric ton, aiming to restore pricing levels and safeguard supply continuity.
Despite geopolitical uncertainties, the company maintains strong liquidity of $329 million and expects modest year-over-year improvement in cash costs.
GrafTech is actively engaged in supporting trade cases in the U.S. related to unfairly priced imports, with potential rulings expected by mid-2026.
The company is positioning itself for long-term growth, capitalizing on trends like decarbonization and the shift to electric arc furnace steelmaking.
Full Transcript
JL (Operator)
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 International's first quarter 2026 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press Star one again. I would now like to turn the conference over to Mike Dillon, Vice President of Investor Relations and Treasurer. You may begin.
Mike Dillon (Vice President, Investor Relations and Treasurer)
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 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.GrafTechh.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
Tim Flanagan (Chief Executive Officer)
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 steel makers in the US And Europe have announced cumulative price increases over the past five 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 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 1/2 of 1% 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 US 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 decan oil prices, the key raw material for petroleum, needle coke. While the needle coke market has been relatively flat for the past two years, we anticipate that higher input costs and potential disruptions in decan oil availability for certain needle coke producers will provide a catalyst for needle coat 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 decan oil needs from domestic producers. Lastly, regarding the impact of the conflict on Graftex 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 cogs consistent with our guidance at the beginning of the year. However, the extent and 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 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 US and the EU as begin to develop a joint Critical Minerals Action Plan. This action plan establishes a framework for the two 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's 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 sport for materials that are critical for national and economic security are an absolute must. Against this backdrop, graphtec continues to take proactive measures that seek to capitalize on these emerging opportunities. These include ongoing engagement with the US 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. 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 US capacity utilization rate hit 80% for just the second time in the past two 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 extent 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 US 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 incentive industries. In addition, key policy initiatives in the EU are expected to support higher levels of steel production in this important commercial region for Graftec. 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 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. Graphtex 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 insert 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 zero 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 O'Donnell (Chief Financial Officer)
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 provide good visibility as this is tracking ahead of where we were at this point last year. Turning the 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 EAS steelmaking, all of which is positioning graphtec to capture significant long term value as fundamentals continue to improve. Turning to the next Slide 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 commitments 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 cost 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 pricing during the 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 turn 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 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 draftech 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.
Tim Flanagan (Chief Executive Officer)
This remains a pivotal time for graphtec in our broader industry. Near term demand fundamentals are beginning to improve. Our price increase actions, favorable trade rulings, supportive policy action and strong EAS dealmaking 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 the 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 graphtec 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 the remarkable efforts, resilience and and commitment during this pivotal time. That concludes our prepared remarks and we'll now open up the call for questions.
JL (Operator)
Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Bennett Moore of J.P. morgan. Your line is open.
Bennett Moore (Equity Analyst at J.P. Morgan)
Good morning, Tim and Mori. Thank you for taking my questions. Morning Ben. 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?
Rory O'Donnell (Chief Financial Officer)
Yeah. Thanks Bennett. So on the EU energy costs, you're right. We are nearly fully hedged on those. We have, 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 our total production cost is around 25% of it. The, the pricing that we realize on decant oil is not necessarily directly correlated to just the Brent curve. We we price off of other index as well, such as the deals or HSFO and the like and there's also premiums and discounts applied based on quality and such as. So it's dangerous to correlate exactly the forward curve on Brent to our cost of decant oil or 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 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 decan 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 facilities. So a lot of our oil purchases were brought forward in the first quarter in anticipation of that so we can exit turnaround at Seadrift with 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
Tim Flanagan (Chief Executive Officer)
previous point cost reduction guidance. And Bennett, maybe I'll chime in on the needle coke market as a whole. You know, I think, you know, the oil markets certainly have moved up and while we, you know, source from different things and have a number of constructs that help us keep our pricing in check, you know, I think it is a bit of a proxy for what some of the other decan 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 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 coat 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 per needle Coke and I think that's largely a reflection of people fulfilling already committed tons here early on, but would certainly expect that market to move quite a bit in the back half of the year.
Bennett Moore (Equity Analyst at J.P. Morgan)
Great, thanks for that. 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 one Q could be, you know, a trough for the year? You know, one might we start to see it inflect at least directionally higher within your results?
Tim Flanagan (Chief Executive Officer)
Yeah, thanks Bennett. And won't I'll give you directional commentary. Won't get into specific levels, but I think we're pleased with where the, the price increase adoption is at this point in time. Right. We're, we're now a little bit more than a month out since we made the announcement of six to twelve hundred dollars across various regions. And, and we're seeing success in that in all the regions that, that we, 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 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.
Arun
Great. Thanks for taking my question. You guys are well. So a few questions. So first off, I think I heard you say that your cash cost should be in a 36 to $3,700 range. And so if I think about your average price in Q1, which was 3,900, you know, and then maybe I take the midpoint of what you've announced, 900 and so that would get you to 4800. Is that, is that the Right. Way to think about maybe Q3, Q4 potential pricing. And, and then, you know, given that, that, and, and would you be at that cash cost level? So maybe you could see kind of a, you know, thousand dollar per EBITDA per ton range or maybe you can kind of just help us frame, you know, what the path to profitability is or, you know, and what, what that looks like and maybe a timeline, maybe Q3 or Q4.
Tim Flanagan (Chief Executive Officer)
Yeah, thanks, Arun. And let me try to add some clarity to that. So, you know, I think it's a fair proxy to take the midpoint of the range because again, that range is over all 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 in 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 US 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.
Arun
Okay, thanks for that. 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 cook production in that region. So however, we know from, you know, following what's going on on the chemical side, there's been massive disruptions and many of those facilities are down. So, you know, electrodes have suffered from weak pricing for a little while. And our explanation would be oversupply in the electrode market. But, you know, has the conflict potentially, would it, could it result in maybe some, 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?
Tim Flanagan (Chief Executive Officer)
Thanks. Yeah, I mean, it's hard to say what the conflict is going to do, but I think certainly in 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, you know, 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'll be, it'll be yet to be seen what it looks like globally for the long term. But certainly, you know, 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.
Arun
Okay, and then just lastly, maybe you can comment on 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, you know, 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, you know, you know, your multi year share recovery journey. So where are you on that as well? And do you foresee any, any headwinds in, in recovering that share now with increased competitive activity or not?
Tim Flanagan (Chief Executive Officer)
Yeah, thanks, Arun. And you know, I don't think I can comment or will comment on how other companies or competitors are thinking about their pricing strategies. But you know, what I would say is, you know, 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 one 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. You know, so if there are people out there looking at this as a volume player or share grab, you know, 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. Again, which are a few months out. But, you know, that's probably what I'd say there, I think, just for reference. Right. If we think about history here, you know, 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 US or the euro, you know, pricing should be somewhere in the neighborhood of $7,000 a ton. So there's certainly the disconnect in the market, and I think the market participants understand that and see that and, and that's why we're having some success on the price increase.
Arun
Got it. Thanks a lot.
Abe Landa (Equity Analyst at Bank of America)
Your next question comes from the line of Abe Landa of Bank of America. Your line is open. Good morning. 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, 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 all that potential exposure. What is fixed? Obviously it sounds like energy is fixed and what is potentially variable.
Rory O'Donnell (Chief Financial Officer)
Yeah. Thanks, Abe. So I would say beyond decant oil, of course, energy, electricity, 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, 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, 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, you know, 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.
Abe Landa (Equity Analyst at Bank of America)
That's very helpful. And then I know decan is 25%. Do you have a similar number for electricity, nat gas? It's kind of like those other elements,
Rory O'Donnell (Chief Financial Officer)
those Two together, about 15, 10 to 15%.
Abe Landa (Equity Analyst at Bank of America)
Very helpful. And then kind of continue on this Middle east conflict theme, I guess, within the Middle east. Like, I mean, we've seen stories, you know, 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?
Tim Flanagan (Chief Executive Officer)
Yeah, 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 you know, from our perspective, you know, 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 Europe, European market, as well as Japan, Korea and Taiwan. But yeah, so not a lot of volume going into that region and certainly seeing a disruption and maybe that presents some opportunity when and if, you know, the conflict gets resolved and there's some, some inventory rebuild that needs to take place. In terms of spillover into other regions. No, I think there's probably been some, 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.
Kirk Liedtke (Analyst at Imperial Capital LLC)
Your next question comes from the line of Kirk Liedtke of Imperial Capital llc. Your line is open. Hello, Tim, Rory. Mike, thanks for the, thanks for the call. Just a couple follow ups with respect to the. You provided a, a rule of thumb pricing to liquidity. I think it was $100ametric ton to 12 million of liquidity is what would, what would be. Is there a. Can you put that in terms of EBITDA instead of liquidity?
Rory O'Donnell (Chief Financial Officer)
Yeah, I consider that the 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, 120 range for the year. So that's where the 12 million comes from. $100 times 120 is 12 million of.
Kirk Liedtke (Analyst at Imperial Capital LLC)
Okay, great, thank you. And then you mentioned some steel makers are shortening supply lines. Can you maybe elaborate on that? You know, is that in anticipation of higher pricing due to some of these trade actions or is that actually concerns about the ability to deliver?
Tim Flanagan (Chief Executive Officer)
Yeah, I think there's a few things going on in the market. You know, first and foremost, transit times again have extended by a couple weeks out of Asia into Europe and that's, you know, providing some opportunity. I think the uncertainty of the market, the markets as a whole have maybe started to have some steel makers thinking more regionally and trying to buy closer and managing less complex or less involved supply chains. You know, 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, they're consuming down some of their inventory thinking that, you know, 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 you know, overall I think, you know, market conditions we're seeing some demand pick up and pretty pleased with where we're sitting right now.
Kirk Liedtke (Analyst at Imperial Capital LLC)
Great, thank you. And then last lastly, the, 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, it will, if you think it'll come in time for the 2027 price negotiations.
Tim Flanagan (Chief Executive Officer)
Yeah, so the, you know, that large diameter, so again it covers imports into the US against the Chinese and the Indians and anything greater than 425 millimeters or 16 and a half 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 anti dumping, which is certainly the larger of the two, 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.
Kirk Liedtke (Analyst at Imperial Capital LLC)
Got it. And those two are what, 20% of the U.S. market? I appreciate it. Thank you.
Bennett Moore (Equity Analyst at J.P. Morgan)
Our next question is a follow up from Bennett Moore of J.P. morgan. Your line is open. Thanks for taking my follow up. I wanted to stick with the theme of the trade policy here and guess I'm wondering kind of the scenarios you think could, 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?
Tim Flanagan (Chief Executive Officer)
Yeah, thanks. And I think let's start in the U.S. you know, certainly it's both a volume opportunity, you know, because I think it does impact the desire and the willingness to import those tons. But more importantly, it's a, it's a price impact for the broader US market which, you know, certainly is supportive and I think is just another thing that's changing the momentum and the trajectory of the market as we sit here today. You know, and I think we've long advocated, whether it's the US or any of the jurisdictions that we have operations in for fair trade and supporting, you know, the operations that we have. So, you know, I think there's actions going on in Brazil that, you know, I think are taking shape that we'll see some output here on later this year and. Yeah, 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. You know, one, one thing that's probably worth spending a second on is, you know, what's going on the broader critical minerals front, you know, so, so we're taking action on the trade front in the US because that's, you know, closest to where we're at right now. But certainly as the US continues to develop and partners with the EU and the other trading bloc countries around critical minerals and thinking about how they, they kind of decouple or break the ties to, to China in particular, you know, I think that can have a significant impact on the graphite electrode pricing and anode material pricing, again, both which are supportive to our business, both as we think about the electrodes as well as, you know, the value of the needle coke operation we have down 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.
JL (Operator)
Thank you. That concludes our Q and A session. I will now turn the conference back over to Tim Flanagan, CEO, for closing remarks.
Tim Flanagan (Chief Executive Officer)
Thank you. JL I'd like to thank everyone on this call for your interest in graphtec. We look forward to speaking with you next quarter. Have a great day.
JL (Operator)
That concludes today's conference call. You may now disconnect.
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