Good morning, ladies and gentlemen, and welcome to the GrafTech Second Quarter 2024 Earnings Conference Call and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Friday, July 26, 2024. I’d like now to turn the conference over to Mike Dillon. Please go ahead.

Thank you, Ace. Good morning, and welcome to GrafTech International's Second Quarter 2024 Earnings Call. On with me today are Tim Flanagan, Chief Executive Officer; Jeremy Halford, Chief Operating Officer; and Catherine Delgado, Interim Chief Financial Officer. Tim will begin with opening comments. Jeremy will then discuss safety, the commercial environment, sales and operational matters. Catherine will review our quarterly results and other financial details, and Tim will close with 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 in 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 will now turn the call over to Tim.

Thanks, Mike, and good morning, and thank you for joining GrafTech's second quarter earnings call. Let me start by saying that we operate in a cyclical industry, and we find ourselves in a challenging part of the cycle for our business and more broadly for our industry. Graphite electrode demand remains weak, industry-wide capacity utilization rates remain low, and consequently, cost per ton are high. At the same time, pricing discipline and inventory have been somewhat sacrificed to support volume. Against this backdrop, GrafTech, along with most others in our industry, are operating their electrode business at losses or low margins. We think these dynamics are well understood. We also believe it's well understood that these dynamics are not sustainable. We don't control all of these underlying forces, particularly the macro or the actions taken by others, but we do control our responses and our actions. We are engaging with our customers with a relentless focus on meeting their needs. We are adding to our customer value proposition. We are investing in technical capabilities and offerings. We are aggressively cutting costs without compromising quality, safety, or the environment. We are managing our working capital and capital expenditure levels. We've reduced our production capacity. We are proactively managing production to balance supply and demand, and we are actively pursuing opportunities to diversify our business and support long-term growth. At the end of the day, we are focused on controlling the controllable. We set out a plan at the beginning of the year to do just that, and we are executing against that plan. I'm proud of our team's efforts and thank them for their continued dedication. All of this said, we recognize that this won't translate into immediate recovery from a financial performance perspective. That wasn't our expectation, nor should it be yours, but they are the right actions to help us navigate the current challenges. Importantly, we participate in an industry that has many long-term and sustainable tailwinds. And it is very easy to lose sight of that when you are on the downward side of a cycle. But cyclical downturns eventually come to an end, and the long-term growth opportunities in front of us are very real. During our comments today, we'll expand on all of these concepts and why we believe we are taking the right actions to manage the current environment and preserve our long-term flexibility. Let me begin with an update on some of our key initiatives, starting in the commercial area. As I mentioned on our last call, we are instilling a renewed focus on a customer-first mantra, as meeting the needs of our customers must be central to everything we do. We continue to execute our customer engagement strategy, reinforcing the importance of our relationship with our customer and the investments we are making in our customer value proposition to further differentiate GrafTech from our competitors. For example, our initiative to expand our product offering by adding an 800-millimeter supersized electrode to our portfolio remains on track, with initial customer trials expected to occur later this quarter. We've expanded the breadth of our architect system as part of building upon our best-in-class technical service capabilities. We also continue to expand our first principles understanding of graphite electrodes, building on more than a 135-year legacy of research and development of graphite and carbon-based solutions. We've invested in our pin production capabilities and are the only graphite electrode producer with the capability to produce connecting pins on two different continents. In addition, we're building up our connecting pin inventory levels, and we are on track to have 12 months of pin inventory on hand by the end of this year. All of these examples demonstrate the investments we are making to support our ability to meet the needs of our customers now and into the future. And as demonstrated by the feedback I'm receiving from our customers, including a number of interactions, which have taken place in recent weeks, our investments in these areas are resonating. Our customer engagement efforts, coupled with our compelling value proposition, contributed to a 6% sequential improvement in our sales volume for the second quarter. Further, we continue to expect sales volume growth for the full year compared to 2023, as we continue to regain lost market share. But more importantly, our customer-centric mindset is all about the long term. It is about strengthening relationships with existing customers while fostering new relationships with prospective customers that are mutually beneficial for years to come. To that point, as we mentioned on our last call, we are pleased to have our long-standing and largest LTA arbitration behind us, removing a substantial risk to our financial position. And more importantly, it allows us to focus our energy on the commercial relationship with this customer. Beyond commercial, let me highlight a few accomplishments across other areas of our business. In operations, our facilities continue to run well as they execute our production plans, and we are doing this safely as our total reportable interest rate remains significantly low compared to the prior year level. Ultimately, this is the most important thing we do, and I commend the team for their ongoing commitment to safety. Our initiatives to address key elements of our cost structure are also progressing well. During the second quarter, we safely and thoughtfully wound down the production activities at St. Marys. In addition, we have completed the activities related to the reduction in our overhead structure. Overall, we are on track to achieve the projected $25 million of annualized cost savings from these initiatives. In addition, the other actions we have taken to reduce our variable costs and control overall spending levels are already paying off. We saw a further sequential decline in our cash cost on a per metric ton basis in the second quarter and have seen an 18% reduction in this metric in the first half of 2024 compared to the first half of 2023. We remain on track to achieve a mid-teen percentage point decline in our full-year cash cost on a per metric ton basis compared to 2023. In the EV space, we continue to progress our capabilities and participate in the growing demand for petroleum needle coke and synthetic graphite for anodes for lithium-ion batteries. During the second quarter, we received regulatory approval for the permit application we filed last year related to a potential expansion of Seadrift production capacity. At the same time, we are making investments within our R&D function, including pilot scale assets in our technical center. This will advance our capabilities as it relates to anode material. This remains a dynamic and exciting opportunity with our assets and expertise positioning us well to participate in this demand growth. In the area of sustainability, we continue to make good progress on our initiatives. Earlier this month, we published our latest sustainability report; I encourage everyone to take a look at it. We continue to be good stewards in the communities in which we operate, both from an environmental perspective and also having a positive impact through our community engagement efforts. In summary, in light of the challenging near-term industry dynamics, we set out a plan, and we are executing against it. We believe these are the right steps to position GrafTech to benefit as the global steel market rebounds. Longer-term, as decarbonization efforts further drive a shift to electric arc furnace steelmaking and higher graphite electrode demand, we are poised to capitalize on this anticipated growth. I will explain later in our prepared remarks. Overall, we are proud of our recent accomplishments and remain confident in emerging from this period as a stronger GrafTech. Now let me turn it over to Jeremy to provide more color on the current state of the industry and our commercial performance.

Thank you, Tim, and good morning, everyone. Before I provide an industry update, I'll start by briefly expanding on Tim's comments about our safety performance. Safety is a core value at GrafTech, and with a year-to-date recordable incident rate that shows significant improvement over our solid performance in 2023, we’re pleased with the ongoing momentum. Sending our employees home safely at the end of every day is our most important priority, and I’d like to join Tim in commending all of our team members for their focus on this objective. Let me now turn to the next slide to discuss the commercial environment. As Tim indicated, we operate in a cyclical industry and currently find ourselves in a challenging part of the cycle, reflecting a constrained global steel industry. Earlier this week, the World Steel Association published their most recent steel production statistics. On a global basis, steel production outside of China was approximately 212 million tons in the second quarter of 2024, which was essentially flat compared to the prior year. The global steel capacity utilization rate outside of China also remained flat at 69%. Looking at some of our key commercial regions, for North America, steel production was down 5% in the second quarter on a year-over-year basis reflecting a slight dip in what has been a relatively stable steel region. Steel output in the EU increased 3%, although it remains well below historical production and utilization rates for that region. These dynamics within the global steel industry have, in turn, resulted in persistent challenges in the commercial environment for graphite electrodes. Specifically, industry-wide demand for graphite electrodes has remained weak, with challenging pricing dynamics persisting in most regions. To expand on pricing, the graphite electrode industry continues to suffer from low capacity utilization. Despite the weak demand environment, we continue to see a healthy level of electrode exports from certain countries, including India and China, into non-tariff protected regions such as the Middle East. These typically lower-priced electrodes have seen prices declining further of late. As we've discussed in the past, with these export dynamics, we see a knock-on pricing effect in tariff-protected countries, such as those within the EU, as Tier 1 competitors have continued to lower prices in these regions to support volume. As we noted last quarter, we’re also seeing this dynamic play out in the US, with prices softening further of late, all of which represent challenges we must manage in return. With that background, let's turn to the next slide for more details on our results. Production volume in the second quarter of 2024 was 27,000 metric tons, which resulted in our capacity utilization rate increasing to 60%. Our sales volume was nearly 26,000 metric tons, which was above our stated outlook for the quarter. Shipments for the second quarter of 2024 included 23,000 metric tons of non-LTA sales at a weighted average realized price of approximately $4,300 per metric ton and approximately 3,000 metric tons sold under our LTAs at a weighted average realized price of approximately $8,300 per metric ton. Expanding on our weighted average price for non-LTA sales, this represented a 23% year-over-year decline and a sequential decline from the first quarter of approximately 2%. Net sales in the second quarter decreased 26% compared to the second quarter of 2023, driven by the lower pricing along with the ongoing shift in the mix of our business from LTA to non-LTA volume. Looking ahead, for the reasons already mentioned, we expect that industry-wide demand for graphite electrodes in the near term will remain weak and pricing pressures will persist. In response, we remain selective in the commercial opportunities we are choosing to pursue, with a focus on competing responsibly. We expect our sales volume in the third quarter of 2024 to be broadly in line with sales volume in the second quarter of 2024. Further, we continue to expect a modest year-over-year improvement in sales for the full year. Longer term, as the global steel market rebounds and the shift to electric arc furnace steelmaking continues, this will lead to an improved commercial environment for the graphite electrode industry. GrafTech remains well-positioned to capitalize as the electrode demand recovers. Our customer value proposition remains intact and includes a strategically positioned manufacturing footprint that provides operational flexibility and reach to key steelmaking regions. Being the only large-scale graphite electrode producer that is substantially vertically integrated into petroleum needle coke, best-in-class customer technical services and solutions that are offered to customers at no incremental cost, and a focus on continually expanding our commercial and product offerings, some of which Tim spoke to earlier. Overall, we believe we provide a compelling value proposition to our customers, and we will compete on more than just price.

Thank you, Jeremy. For the second quarter of 2024, we had a net loss of $15 million or $0.06 per share. Adjusted EBITDA was $14 million in the second quarter compared to adjusted EBITDA of $26 million in the second quarter of 2023. This decline reflected lower weighted average pricing and the continued shift in the mix of our business toward non-LTA volume. These factors were partially offset by an 18% year-over-year reduction in cash cost on a per metric ton basis. In addition, second-quarter results included a $9 million benefit related to the final award in a long-standing LTA arbitration. As this represented a reimbursement of legal fees and other related expenses, it was recorded as a reduction in selling and administrative expenses. Now let me expand on the topic of our cash cost of goods sold. As shown in the reconciliation provided in our earnings call materials posted on our website, our second-quarter 2024 cash COGS per metric ton were approximately $4,300, which was in line with our expectations for the quarter. Contributing to the 18% decline on a year-over-year basis was a benefit of $6 million in the second quarter or approximately $230 per metric ton, reflecting the portion of the lower cost of market inventory write-down recorded in prior periods that was related to the inventory sold in this quarter. However, the majority of the year-over-year cost improvement reflected two key drivers, and let me provide some color on each one. First, as part of addressing key elements of our cost structure, our efforts related to variable costs are already yielding benefits. Specifically, our technical and operational teams continue to work on engineering cost out of our manufacturing processes without compromising quality and performance. Additionally, we’re aggressively working with our existing supplier base and qualifying new suppliers as we enhance our procurement practices related to certain key input costs. Second, we had a year-over-year reduction in the level of fixed costs being recognized on an accelerated basis due to low production levels. As a reminder, these are costs recognized in the current period that would otherwise have been inventoried if we were operating at normal production levels. In the second quarter of this year, as utilization rates at our graphite electrode and Seadrift facilities increased, we recognized approximately $1 million of such costs compared to approximately $10 million in the second quarter of 2023. Lastly, the cost savings related to idling our St. Marys facilities are beginning to flow through in the second quarter. Reflecting the progress we are making on our cost structure, we continue to anticipate a mid-teen percentage point decline in our cash COGS per metric ton for 2024 compared to the full-year cash COGS per metric ton for 2023 of just over $5,500. For the first six months of the year, our cash COGS per metric ton was approximately $4,500, which is an 18% decline compared to the first half of 2023. Therefore, as the math would imply, we expect to see a sequential increase in our cash COGS per metric ton for the second half of 2024 compared to the first half of 2024. Among other factors, this expectation reflects first the benefit from the utilization of the previously recorded lower-cost supply write-down being more heavily weighted toward the first half of 2024. Second, seasonally higher energy costs for our European facilities in the second half of 2024. And third, the impact of upcoming plant production declines on fixed cost absorption. Specifically, this relates to normal summer shutdowns at our European electrode facilities and our planned turnaround activities at our Seadrift Needle Coke facility, which takes place every 18 months to three years. These planned maintenance events are scheduled to take place later in the third quarter. However, despite the quarter-to-quarter lumpiness in cost recognition, the key point is that with the actions we are taking, our overall cost structure is moving in the right direction for 2024, and we would anticipate costs to decline further as we look ahead to 2025. Now turning to cash flow. For the second quarter of 2024, cash used in operating activities was $37 million, and adjusted free cash flow was a cash usage of $44 million. As a reminder, our semi-annual interest payments of $34 million are made in the second and in the fourth quarter of the year. As it relates to working capital, inventory levels increased slightly during the second quarter. However, this was an intentional build in advance of the seasonal production declines, which I just spoke to. As we move through the back half of 2024, we remain focused on reducing our overall inventory levels as part of our initiatives. We continue to expect the net impact of working capital will be neutral to our full-year cash flow performance. Lastly, on cash flow, we continue to anticipate our full-year 2024 capital expenditures will be in the range of $35 million to $40 million. Moving to the next slide. We ended the second quarter with a liquidity position of $232 million, consisting of $121 million of cash and $111 million available under our revolving credit facility. This reflects the financial covenants that limit borrowing availability under our revolver in certain circumstances. More importantly, we do not anticipate the need to borrow against the revolver in 2024. Further, let me add that we have no debt maturities until the end of 2028.

Thanks, Catherine. To summarize our comments on the quarter and year-to-date results, while we're not satisfied with this level of performance, GrafTech continues to deliver on our stated outlook and initiatives to control the controllable. We are pleased with the team's execution and remain confident in our ability to manage the near-term headwinds. Furthermore, there are many reasons for optimism about the longer-term prospects for our company as we look ahead. While we remain cautious on the near-term steel industry trends, as we have mentioned, cyclical downturns eventually come to an end. The World Steel Association's most recent short-term forecast on global steel demand calls for low to mid-single-digit percentage increases in 2025 for nearly all of our key regions, including the EU, the Americas, the Middle East, and Africa. Longer term, as I noted earlier, decarbonization efforts are driving a transition in the approach to steelmaking with electric arc furnaces increasingly taking a larger share of total steel production. Based on updated production statistics published last month by the World Steel Association, the EAF method of steelmaking accounted for 50% of global steel production outside of China in 2023, an increase from 44% in 2015, with market share growth in nearly every region. This trend of EAF share growth is expected to continue. We are tracking approximately 200 announced projects from steel manufacturers regarding plans for new EAF facilities or expansion of existing facilities. Outside of China, these projects are expected to result in over 170 million metric tons per year of new EAF steel production capacity coming online by the end of the decade with much of this growth concentrated in our key commercial regions. This, in turn, is expected to drive incremental demand for graphite electrodes. In fact, 170 million metric tons of EAF steel capacity, even at conservative assumptions around utilization rates, could translate into about 200,000 metric tons per year of incremental demand for graphite electrodes. That would be more than 25% of the total manufacturing capacity that currently exists outside of China. All in, this would drive graphite electrode demand to increase at a compound annual growth rate of 3% to 4% through the end of the decade. Importantly, about 80% of that growth would take place in regions where we already have a strong presence. As the strategic actions we are taking to reduce costs have been designed to preserve our competitive advantage that we have spoken to, we view GrafTech as being well-positioned to capitalize on long-term industry tailwinds. Furthermore, anticipated demand growth for petroleum needle coke will also present a tailwind for our business given our substantial vertical integration. We expect this demand for high-quality needle coke to be driven by two factors. First, the demand for graphite electrodes from the ongoing shift to EAF steelmaking I just spoke to. Second, and more importantly, the demand for synthetic graphite anode material for use in electrical vehicle batteries where needle coke is a key precursor material. Growing demand for needle coke should result in elevated needle coke pricing, and given the high historical correlation between petroleum needle coke pricing and graphite electrode pricing, this trend should translate to higher market pricing for graphite electrodes. This again reinforces the key competitive advantage that our substantial vertical integration into needle coke affords us as it relates to our graphite electrode business. Beyond graphite electrodes, we continue to evaluate ways to leverage our assets and technical know-how to directly participate in the demand growth for anode material for the EV market. There is a strong desire by western OEMs, supported by western governments, to establish EV battery supply chains that are independent of the current reliance on China. Our unique manufacturing footprint would allow us to participate in the establishment of these supply chains in two potential ways. First is the supplier of petroleum needle coke, given that we are one of only two western manufacturers of its key material. Second, as one of the largest western operators of graphitization capacity, we could leverage these assets to convert needle coke into synthetic graphite. We continue to hold dialogue with leading participants in the space and remain excited about the opportunity and the development of the supply chain and our associated prospects. In closing, this is a pivotal time for GrafTech, with many challenges still in front of us. Yet, we are up to the challenge, and we continue to believe GrafTech will successfully manage through the near-term uncertainty and remain an industry-leading supplier of mission-critical products to the EAF industry. Longer term, we possess a distinct set of assets, capabilities, and competitive advantages to capitalize on growth opportunities. For these reasons, we are confident we can return GrafTech to the position of generating great value for its stockholders. This concludes our prepared remarks. We'll now open up the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question is from Bill Peterson from JPMorgan. Go ahead.

Yeah. Good morning team. Nice job on the continued efforts on the cost side. Although you mentioned before, the guidance does imply a step-up in costs through the back half of the year; you discussed the downtime. I believe you also may have seasonal energy impacts in Europe. But I guess first on these outages, how long are these outages planned to be? And then taking into account the shutdowns and maybe potential energy impacts, how should we think about the cash cost at an absolute level in the third quarter and then the fourth quarter? Should we assume higher in the third quarter than declining in the fourth quarter? How should we think about the cost from here?

Thanks. We'll split that up. I will start talking about the shutdowns and then Catherine can talk a little bit about the financial impact. So the shutdowns are typically two weeks to three weeks. We do it on a little bit of a rolling basis through the plants in order to make sure that we have some amount of staff on site, so that we can respond to any customer demands that may change over the course of the shutdown. I’d generally anticipate that for Europe; I think two weeks to three weeks for most of the operating action there. In Seadrift, it will be something similar, focused primarily on the calcination portion of the plant. And so again, think of roughly three weeks for that as well. But let me hand it over to Catherine to talk about the financial question.

Thank you, Jeremy. Yes, Bill. So we have maintained our full-year cost reduction estimate of a mid-teen percentage points decrease from the level of 2023, which was $5,500. As I indicated earlier, for the second half of this year, we expect a little bit of a sequential uptick versus where we landed for the first half. I mentioned that earlier: seasonally higher energy costs for our European facilities in the second half of 2024 will be a factor. Additionally, the benefit from the utilization of the previously recorded lower-cost of market inventory write-down was certainly more heavily weighted toward the first half of 2024 than it will be for the second half. Lastly, we also discussed the impact of the planned maintenance shutdown on the absorption of our fixed costs. Overall, I think the key point to keep here in mind is that, on a full-year basis, our overall cost structure is moving in the right direction, reflecting the actions we are taking. We anticipate further after in 2025 that our costs would continue coming down.

Okay. Thanks for that. Spot pricing fell another $100 per ton. So, I guess a less pronounced decline this quarter. However, on your commentary, it sounds like the competitive dynamics are still challenging; pricing remains challenging. How does the spot pricing decline compare to the latest needle coke prices you've been seeing? What are your directional pricing expectations both for your product as well as needle coke from here?

Thanks, Bill, and good morning. I appreciate the questions. From a pricing perspective, and I think we've said it a couple of times in our prepared remarks, the competitive market continues to be a challenge given the overall dynamics around supply and demand. Therefore, you're seeing that reflected in the spot pricing or the non-LTA pricing that we reported this quarter. I think those pressures are going to continue and they're going to persist. One thing I think you have to keep in mind is that we start to lose visibility around pricing this time of year, as the order book is largely locked in place and there is less volume being transacted broadly speaking. Our view is that challenging pricing is going to persist, and we will have a better read on that as we get into negotiations with customers here in the third and fourth quarters. Regarding the needle coke market, I would say we are still trading sideways compared to where we were in the second quarter, somewhere in or around that $1,100 to $1,300 range depending on the grade of coke in the market. The needle coke side has stabilized in many respects, but we hope to see that start to trend in the right direction, as you start to see demand pick up with potentially some better demand numbers out of the steel industry heading into 2025.

Great. Thanks for that. And just a bit of housekeeping. So adding back the $9 million SG&A, but I guess taking into account other actions you've been taking like belt-tightening and other productivity initiatives. Can you level set us on how we should think about SG&A for the third quarter and then the trajectory there on?

SG&A will remain at the run rate that you've seen; if you look at the first half of the year, excluding that $9 million benefit, I think we're seeing the impact of our rationalization activities. This has started to show in our underlying cost for the second quarter in SG&A. We would expect that run rate to continue over the rest of the year.

Our second question is from Alex Hacking from Citi Research. Please go ahead.

Hi, just to quickly follow up on the pricing outlook. Based on your comments, it sounds like this realized spot price would be weaker in the second half of the year than the first half of the year. Is that a fair assumption? Or am I reading it too negatively?

I think we continue to see challenges in pricing. Additionally, what's going to play into that is the mix, right, and where we're delivering tons on a relative basis because that average price, the $4,300 plus that we reported is an average over all of the regions that we ship to. I wouldn't sit here and say that we think there's a rosy outlook for pricing as we look into the back half of the year, but mix will play into it as well.

Bloomberg and some other media have reported that the company is working with advisers considering various options to improve liquidity. Could you maybe comment on that if you're able to, what's under consideration and what would be the timeline?

Thanks for that, Alex. Let me first reiterate the comments that Catherine made on the liquidity front. We ended the quarter with $121 million of cash and a little more than $111 million of availability on the revolver. So, $230-plus million of total liquidity here at the end of the second quarter. We don't see a need to borrow against the revolver and feel good about the cash position for the foreseeable future. More specifically to your question, I think we've tried to be proactive since I joined the company in November of '21. I think we've tried to be proactive with our capital structure around refinancing the revolver, refinancing the term loan. We continue to have conversations with advisers on various fronts around our capital structures and trying to be proactive. That's a prudent move for any company and organization regardless of whether you're in the downside of a cycle or the upside of a cycle. I think we're always looking at our existing capital structure. Beyond that, I won't comment on market speculation or rumors that are coming out of the media.

Okay, thanks. I’ll leave it and jump back in the queue.

Okay, thanks, Alex.

Our next question is from Andy Jones from UBS. Please go ahead.

Hi. Just on a bigger picture question on the structure of the industry. I mean we've clearly seen this significant downside in pricing. I don't think there would be too much pushback on your comments about the demand growth that will come from greater EAF penetration in Europe and the US and probably elsewhere. But on the supply side, there is an overcapacity issue that clearly persists. What in your view can be done to change that in your core markets? Is there any prospect of any sort of import protection coming at any point in the near future or any discussion about it? Or any of your competitors talking about or likely to be taking out capacity soon? What in your view can be done by the industry to actually help correct the course of the year because it is a pretty ugly price chart when you look at it on Bloomberg?

Thanks for that, and I will try to touch on all the points. Let's start with how we view market recovery both in the shorter-term and then into the medium and longer-term. It's really driven by four things. One is improvement in demand, particularly in the EU. If you look at EU steel production levels, they're probably down 20% from the peak back in 2021. Any sort of meaningful uptick in EU demand will help us, given our geographical footprint and, I would say, the western electrode industry more broadly. Two is the continued growth of EAF. We've talked about the 170 million tons of new capacity coming online over the balance of the decade. Some of that is front-end loaded, and we'll start to see new mills come online in the geographies in which we have a significant presence over the next couple of years. That continued growth and the move to some of the new products we are offering will help on the demand front as well. You mentioned supply reduction. Supply reduction and supply rationalization is an important piece and could be the thing that catalyzes changes in pricing. We started back in the first quarter in February, when we announced the idling of St. Marys and the rationalization of our footprint when we took down 24,000 tons of production. We've since seen one of our competitors take about 24,000 tons out of their footprint and announced the potential to take another 24,000 tons out of their footprint. Those are the moves that are needed when you find yourself in a market that's oversupplied in the West as it is today. There is also a need to look at China. It weighs most on pricing. They're driven by two factors—one, their domestic markets in terms of construction, their EV market, and overall steel production. Construction is currently 30% of China's overall GDP, and it's underperforming, which is weighing on the overall economy, thereby impacting steel production and graphite electrode consumption domestically. Their announced transition to EAF steel production has seen Chinese productions at around 10% of their steel via EAFs with a goal to increase to 15%. This transition could significantly impact EAF-produced steel and subsequently graphite electrode consumption. Therefore, all of these things combined could help move the market. Some are shorter-term, while others are structurally returning to where the market historically has been—about a $6,000 average price over the last 20 years. All of this is without considering the elements surrounding electric vehicle and needle coke demand, as we firmly believe there will be a robust western supply chain for electric vehicles established. The demand for needle coke will dramatically increase, driven by higher utilization rates, as we continue to expect volumes to go up from our perspective and align with the EV demands in the 2027 milestones from OEMs and others. All of this just solidifies our long-term conviction regarding where the business and the market are headed. It's just a matter of us executing in the short term.

That makes sense. And on the policy side, do you see any proposals or any measures that have been tabled either in the EU or on the US side that would potentially restrict imports from markets like China?

To level set right, there are trade restrictions on Chinese imports ranging from 25% to 150% in the US. The EU has restrictions on both Chinese electrodes and Indian electrodes, with Chinese tariffs ranging from 23% to 75% and Indian tariffs at a lower range of 7% to 15%, based on size and grade. These trade restrictions do have an impact and we think they work effectively as they exist today. Everybody is always looking at opportunities to strengthen their domestic positioning and support their businesses and the regions we operate in. Beyond that, I can't comment on status and where that stands, but certainly, it's something everyone is always monitoring.

Is there any risk that you see around the fact that in the EU, some right-wing populist parties are making progress in various countries, and obviously in the US, with a potential Trump presidency looking more likely? Could we see rollbacks on some proposed decarbonization initiatives and EV subsidies that you see as a material risk to the electrode market in the medium term?

I've made it a habit not to predict political outcomes throughout my career, so I won't start now. Yes, the impact of policy and regulation is something we monitor closely. However, we believe that the decarbonization story and the electrification of auto fleets, both in Europe and the US, is real, and these trends will continue. The chart continues to point upward, even if the trajectory isn't perfectly linear. We see this path as constructive for our business.

Our next question is from Abe Landa from Bank of America. Please go ahead.

Good morning, thanks for letting me ask some questions. I want to follow up on liquidity. You reiterated that you expect it to remain adequate for this year. What do you think about planning to obtain some additional liquidity for 2025? Is that something you look to do prior to the annual selling season in the fall, or would you wait until you see more visibility?

Thanks for that, Abe. Reiterating our liquidity position, we feel good about where we are. In the first half of the year, we utilized $54 million in cash, so about $27 million a quarter. We feel good about our position currently, and I think we will monitor it as we gather insights into our customer and economic indicators going into 2025. But otherwise, we feel good with where we are currently.

Regarding the lower-cost or market inventories, the second-quarter impact of the utilization of the lower cost market reserve was about a $230 benefit to our cash COGS. It was somewhat in the $200 range in the first quarter of this year. For the second half of the year, we could expect roughly about half of that benefit only on a per metric ton basis, so about $100 per metric ton would be the expectation moving into the second half. If we were to kind of reverse out in the second quarter, that $230 you could get to $4,550, give or take. You alluded to some potential improvements into 2025. What is your ability to improve from that, and what additional actions can we expect to take going forward? The biggest component affecting our long-term cost will be our fixed cost absorption and ultimately increasing production levels across our manufacturing sites. We've made great progress on variable costs, and if those improvements continue, this will remain into 2025. Therefore, the most crucial parameters going forward will be production levels to help with our fixed cost absorption.

While facing challenges right now, we continue to invest in our business, and part of those investments will help improve our overall costs. Projects that enhance our operational efficiencies, such as the ones reducing natural gas consumption, will continue to allow us to remain competitive and also set us up for long-term positioning.

You mentioned a competitor suggesting that prices for petroleum needle coke will increase in the second half of this year. Is that something you're also seeing? Is that in line with your view?

Regarding the broader needle coke market, it's relatively flat at this point in time. That being said, we expect to start seeing demand pickup in the back half of '24 based on higher utilization rates, as we expect our volumes to increase and supply chains to synchronize with objectives leading up to 2027 milestones. I project needle coke prices could improve as we head toward '25.

With respect to the shift towards EAF, can you quantify how much will come online in the very near term, such as the second half of this year and 2025?

While I cannot provide exact numbers year by year, I can say that we are tracking several projects in the US that could be coming online in the back half of '24, with some mills likely ramping up production significantly by 2025. We can provide specifics offline.

What is happening at the plant level in China that may suggest that this transition to EAF is different this time?

Other than the Chinese government's declaration that they are serious about this transition, it's too earlier to see observable changes in operating rates. We haven't seen a significant uptick in rates in the last month or two, but only time will tell. If China aims to actively engage in the global economy, their decarbonization efforts must be genuine.

Considering that you are not providing guidance, it seems as though spot pricing is sequentially weaker. Earnings will likely be down from the second to the third quarter. Would that assessment be accurate?

Yes, your assessment aligns with the pricing and cost discussions we've had regarding the expected sequential changes in earnings.

Is the increase in energy costs just seasonal, or do you have contracts rolling off that we should consider?

It would be categorized as seasonal; different markets have seasonal incentives, and we typically see higher prices in the summer months.

Do you have access to all cash, or are there limitations on moving cash around to service debt?

No, that's correct.

Thanks for taking my questions. To understand the pathway forward, if you remove that gain of about $9 million, you'd be at a $5 million run rate for EBITDA in this quarter. Do you see a path to possibly reaching $25 million to $50 million in the future? Given your volumes could increase, which could lower production costs, have you made projections about what that could mean for EBITDA? I'd like to better understand your journey and breakpoints.

We don't provide detailed guidance, but I can say that we are focused on regaining our market share. While we expect modest volume increases this year, we anticipate further volume increases into 2025. Overall, I believe that emerging drivers like EAF and needle coke demand will positively influence us into 2026 and beyond.

Do you believe the market has bottomed? Is there an indication that your market share recovery is also on the ascent?

I won't call a bottom, but there is observable stability. We're beginning to see results from our announcements of the St. Marys idling and other reductions. However, I won't speculate on exact market conditions or recovery timing.

This concludes our question-and-answer session. I will now hand the call back over to Mr. Flanagan for closing comments.

Thank you, Ace. I would like to thank everyone on this call for your interest in GrafTech. We look forward to speaking with you again next quarter. Have a great day.

Thank you, ladies and gentlemen. And this concludes our conference call. You may now disconnect.