Graftech International Ltd Q2 FY2025 Earnings Call

Good morning, everyone, and thank you for joining GrafTech's Second Quarter 2025 Earnings Conference Call and Webcast. I would now like to hand the call over to Mike Dillon, Vice President of Investor Relations and Treasurer. Please proceed.

Thank you, Jenny. Good morning, and welcome to GrafTech International's Second Quarter 2025 Earnings Call. On with me today are Tim Flanagan, Chief Executive Officer; Jeremy Halford, Chief Operating Officer; and Rory O’Donnell, Chief Financial Officer. Tim will begin with opening comments. Jeremy will then discuss safety, the commercial environment, sales and operational matters. Rory will review our quarterly results and other financial details, and Tim will close with additional comments on our outlook. We will then open the call to questions. Turning to our next slide. As a reminder, some of the matters discussed on this call may include forward-looking statements regarding, among other things, performance, trends, and strategies. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by forward-looking statements are shown here. We will also discuss certain non-GAAP financial measures, and these slides include the relevant non-GAAP reconciliations. You can find these slides in the Investor Relations section of our website at www.graftech.com. A replay of the call will also be available on our website. I'll now turn the call over to Tim.

Good morning, and thank you for joining GrafTech's second quarter earnings call. Today, we'll provide an overview of our second-quarter performance, share key operational and commercial updates, and discuss our outlook for the remainder of 2025 and beyond. But before we dive into the details, I'd like to begin with an update on the proactive steps we are taking as it relates to the evolving industry dynamics and heightened macro uncertainty. We have outlined a series of strategic initiatives to meet our key commercial, operational, and financial objectives. Our objectives are clear and include increasing sales volume and regaining market share, improving our average pricing through a combination of price increases and shifting the geographic mix of our volume to higher-priced regions, reducing costs and working capital requirements, and ultimately to improve our liquidity and strengthen our overall financial foundation. Our initiatives have been designed to strengthen our competitive positioning, enhance our resiliency and ensure we remain well positioned to generate strong returns as the market recovers. The team is delivering on all fronts, and the results have been impressive. Allow me to highlight a few examples from our second-quarter performance. We grew sales volume by 12% year-over-year in the second quarter and 16% sequentially compared to the first quarter. In fact, our sales volume in the second quarter was our highest level since the third quarter of 2022. Likewise, our capacity utilization rate increased to 65%, also the highest level in nearly three years. We achieved a 13% year-over-year decline in our cash COGS per metric ton, and we expect to exceed our initial cost reduction guidance for the full year. We generated positive EBITDA for the first time since the second quarter of last year. And lastly, our cash flow performance and quarter-end liquidity position exceeded our expectations. Overall, we're very pleased with these second-quarter results. However, I want to be clear; that doesn't mean we're satisfied with the current level of performance. However, we do view these results as a positive step in the right direction. These are signs of progress and momentum, providing a solid platform to build upon for continued improvement. As market conditions recover, we will remain well positioned to accelerate our path back to normalized levels of profitability. With that introduction, let me expand on our initiatives and performance in a few of these areas, starting with the commercial efforts. We are actively leveraging our strong customer value proposition and capitalizing on the commercial momentum we have built to expand our market share and drive continued volume growth. With the second-quarter performance I referenced earlier, our year-to-date sales volume is up 7% compared to 2024. Further, we remain on track to increase our sales volume by approximately 10% on a full-year basis for 2025 compared to last year. This will result in cumulative sales volume growth of approximately 25% since the end of 2023. This is impressive growth in any market, but is particularly noteworthy given the graphite electrode demand has remained relatively flat for the past two years. It's a clear indication that our strategy is working and that we're outperforming the broader market. However, we continue to face challenging pricing dynamics in nearly all of our regions. While this is partially attributable to the flat market demand, it further reflects the increased level of low-priced graphite electrode exports from China and others that we've spoken to previously, which has resulted in excess electrode capacity in the rest of the world. To navigate these headwinds, we are closely monitoring market developments and remain focused on disciplined execution across all areas within our control. To that end, we have taken and will continue to take decisive actions to improve our overall financial performance. These efforts include ongoing actions to strategically shift the geographic mix of our sales volume towards regions where we see opportunities to capture higher selling prices. In some cases, this means making deliberate decisions to walk away from volume opportunities where margins are unacceptably low and we're not being compensated for the value proposition we provide. This is consistent with our commitment to a disciplined value-focused growth, not volume for volume's sake. A key element of this strategy is to grow our volume and market share in the United States, which remains our most profitable region. In the second quarter, we increased our sales volume in the United States by 38% year-over-year. This represents another step change in our U.S. market share and is providing significant support to our average selling price. For the second quarter, our weighted average price was approximately $4,200 per metric ton. Comparing this to the fourth quarter of 2024, where our average selling price for non-LTA volume was approximately $3,900 per metric ton, this represents an increase of nearly 8%. As overall market pricing has remained relatively flat over this period, the growth in our average selling price is attributable to the successful execution of this strategy. While optimizing the geographic mix of our sales volume is an important step towards improving the quality of our order book, the reality is the absolute level of pricing across the industry must increase to more accurately reflect the underlying cost, the value delivered, and the essential nature of graphite electrodes. Earlier this year, we informed our customers of our intention to increase prices by 15% on uncommitted volume for 2025. This increase is the first necessary step on the path to restoring pricing and therefore, profitability to levels that will support our ability to invest in our business. Our customers recognize that graphite electrodes are a relatively small piece of their overall cost structure, but are just as important as the scrap they put in their mill or the electricity that powers their furnace. They appreciate the significant steps taken by GrafTech to improve the health of our business before coming to them with a price increase. While capturing higher pricing in a soft commercial environment is never easy, we're encouraged that we're starting to see price stability across many of our key regions. As we finalize customer negotiations related to volume for the balance of 2025 and head into discussions with our customers on their needs for 2026, we look forward to discussing the unmatched value we provide to our customers beyond just supplying electrodes of the highest quality. This includes the reliability of supply and our world-class technical services, all which support a higher price point. We are unwavering in our commitment to serve our customers with excellence and be the most trusted value-added supplier of high-quality graphite electrodes, consistent with our focus on nurturing long-term partnerships built on performance, reliability, and mutual success.

Thank you, Tim, and good morning, everyone. I'll begin with an update on safety, which is one of our core values and a non-negotiable priority across our organization. We are pleased to have maintained strong momentum in this area, putting us on track for our best safety performance ever. This positive trend is a direct result of our team's vigilance, accountability, and shared commitment to a culture of safety. As we move through the rest of the year, sustaining and building on this momentum will remain a key focus. While we're proud to be among the top safety performers in the broader manufacturing industry, we are not satisfied. Our ultimate goal is zero injuries, and we will continue working relentlessly toward that standard every single day. Let me now turn to the next slide to discuss the commercial environment. On a global basis, steel production outside of China was approximately 210 million tons in the second quarter of 2025, which was down 1% compared to the second quarter of last year. This resulted in a global utilization rate for the second quarter of approximately 67%. Looking at some of our key commercial regions using data published by the World Steel Association earlier this week. For North America, steel production was down 1% year-to-date compared to the prior year. Specific to the U.S., World Steel reported that production grew 1% year-to-date through June. For the balance of the year, reflecting the impact of U.S. tariffs on the level of steel imports, we expect further growth in this region on a full-year basis. In the EU, steel output decreased 3% year-to-date compared to the same period in 2024 and remains well below historical levels of steel production and utilization for that region. With that background, let's turn to the next slide for more details on our results. Starting with our operations, our production volume in the second quarter was approximately 29,000 metric tons. This resulted in a capacity utilization rate of 65%, representing our highest utilization rate since the third quarter of 2022. In addition, our teams continue to do extraordinary work in identifying and executing cost reduction opportunities across various components of our cost structure. While Rory will share details on the numbers, let me highlight a few examples. We continue to leverage our decades of research and development and innovation to bring down usage rates and find alternatives for certain raw materials without compromising the quality of our products. We're also capitalizing on our recent technology investments to reduce our overall energy consumption while simultaneously benefiting from optimized production scheduling to take advantage of reduced electricity pricing during off-peak hours. We've also made tremendous progress in executing our procurement strategy, diversifying our supplier base to further reduce raw material costs. And finally, our cost structure continues to benefit from our actions to lower fixed costs. And these reductions are further amplified by the improved fixed cost leverage that comes with the increased production volumes. Importantly, all of this is being accomplished without compromising our product quality and reliability nor our commitment to the environment or to safety. Turning to our commercial performance. In the second quarter, our sales volume was approximately 29,000 metric tons. As Tim noted, this was a 12% year-over-year increase and represented our highest sales volume performance in 11 quarters. Of particular note is our success in actively shifting a significant portion of our volume to the U.S. as we have discussed. Year-to-date, we've grown sales volume in this region by 32% compared to last year. This is an especially impressive result given that year-to-date steel production in the U.S. is up just 1%, as I mentioned earlier. Our average selling price for the second quarter was approximately $4,200 per metric ton, which represented a 12% year-over-year decline. This decrease was largely driven by the substantial completion in 2024 of the higher-priced LTAs, as well as persistent challenges with industry-wide pricing that we have discussed. Our focus remains on mitigating these impacts in the near-term, including the previously mentioned geographic mix shift toward the U.S. Similar to all regions, average pricing in the U.S. is below year-ago levels, but it remains our strongest region for graphite electrode pricing. In fact, we estimate that the higher mix of U.S. volume boosted our weighted average selling price for the second quarter by approximately $80 per metric ton and by $110 per metric ton on a year-to-date basis. As a result, when comparing our second-quarter weighted average price of $4,200 per metric ton to the more comparable non-LTA price of $3,900 per metric ton that we reported for the fourth quarter of last year, we saw an increase of nearly 8%, as Tim referenced earlier. Further, our weighted average price for the second quarter represented a 2% sequential increase over the first quarter of this year. Overall, our commercial momentum despite a muted demand environment underscores the success of our customer engagement strategy and the compelling value we deliver to our customers. As we have noted, our value proposition is built on a number of key pillars, including unmatched technical capabilities related to our architect furnace productivity system and world-class customer technical services team, ongoing investments in research and development, which continue to expand GrafTech's leading position in graphite electrode and petroleum needle coke technology, our unique vertical integration into needle coke, providing surety of supply for our key raw materials and further supply reliability, enabled by our integrated and flexible global production footprint, an increasingly critical advantage amid evolving global trade policies. Ultimately, we're committed to building and strengthening long-term customer relationships, focused on delivering mutual value and shared success for years to come. As I conclude my comments, let me take a moment to note that the continued progress and momentum we are seeing across our business is a testament to the hard work and attention to detail of our more than 1,000 global employees, and I want to personally thank them for their efforts.

Thank you, Jeremy, and good morning, everyone. For the second quarter, we had a net loss of $87 million or $0.34 per share. This included a $43 million non-cash income tax charge in the second quarter to establish a valuation allowance against certain deferred tax assets. We recorded this valuation allowance based on historical operating results. But to be clear, this does not reflect a change in our future projections regarding taxable income as our confidence in recovering to normalized levels of profitability in the coming years remains intact. For the second quarter, adjusted EBITDA was $3 million. This compares to $14 million of adjusted EBITDA in the second quarter of 2024, which included a $9 million benefit in connection with the favorable outcome of an arbitration. The remaining year-over-year decline was modest and reflected the lower average selling prices, mostly offset by a 13% reduction in cash costs on a per metric ton basis. Expanding on the cost favorability, we continue to outperform our expectations in this area and are increasing our full-year cost savings guidance. We now anticipate a 7% to 9% year-over-year decline in our cash COGS per metric ton for 2025 on a full-year basis compared to our previous guidance of a mid-single-digit percent decline. Using the midpoint of the updated guidance range, this would translate into cash COGS per metric ton of approximately $3,950 for the full year. While this is above our year-to-date run rate, as we have noted previously, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts. However, we are pleased to be outperforming our initial expectations for the year and that our cost structure continues to trend in the right direction. Turning to cash flow. For the second quarter, cash used in operating activities was $53 million, while adjusted free cash flow was also a use of $53 million. This reflected $39 million of cash interest in the second quarter, including $34 million of semiannual interest payments on the company's notes, which drive quarter-to-quarter fluctuations in our cash flow performance. For the second quarter, the year-over-year impact of changes in working capital was relatively neutral. However, taking a step back, we had a $45 million build in our net working capital level through the first six months of the year, most notably driven by inventory as year-to-date production has exceeded sales volumes. This was planned and is timing related. As we have previously noted, we plan to build inventory in the first half of the year, reflecting one of our cost savings initiatives, which is to level load our production for the year. On a full-year basis, our expectation remains to balance production and sales volume levels. Further, we continue to expect working capital will be favorable to our cash flow performance for the full year of 2025. This will be realized through a combination of production cost improvements and inventory management while maintaining adequate safety stock of pins and electrodes. Overall, we are tracking ahead of our initial cash flow projections for 2025 and are encouraged by our momentum in this area as we enter the back half of the year. Turning to the next slide and expanding on this point. We ended the second quarter with total liquidity of $367 million, consisting of $159 million of cash, $108 million of availability under our revolving credit facility, and $100 million of availability under our delayed draw term loan. As a reminder, this untapped portion of our delayed draw term loan is available to be drawn until July of 2026, and our expectation remains that we will draw on this residual portion prior to its expiration. As it relates to our $225 million revolving credit facility, which matures in November of 2028, we had no borrowings outstanding as of the end of the quarter. However, based on a springing financial covenant that considers our recent financial performance, borrowing availability under the revolver remains limited to approximately $115 million, less currently outstanding letters of credit, which were approximately $7 million at the end of the quarter. Overall, our strong liquidity position, along with the absence of substantial debt maturities until December of 2029, will support our ability to manage through near-term industry-wide challenges, which is consistent with our thesis for our recent capital transactions. Finally, let me conclude by joining Tim and Jeremy in expressing appreciation for the remarkable efforts and dedication of our entire team around the globe. I will now turn the call back to Tim for some final comments on our outlook.

Thanks, Rory. To summarize, we have a clear and disciplined plan to address the current challenges in the industry, and we are actively implementing that plan. Our goals include increasing sales volume, regaining market share, raising our average price, cutting costs, lowering working capital, and strengthening our financial foundation. We are making significant progress in all these areas. Our recent successes demonstrate our focus on controllable factors, allowing us to maintain flexibility and be prepared for a market recovery. We are optimistic about the long-term trends supporting the shift towards electric arc furnace steelmaking. According to the World Steel Association, the EAF method of steelmaking's market share rose to 51% of steel production outside of China in 2024, continuing a trend of steady growth over the years. This trend is expected to persist due to decarbonization initiatives. In the U.S., where steel production is about 80 million tons annually, over 20 million tons of new EAF capacity has recently come online or is planned for next year, with more announcements expected. Our strong commercial momentum in the U.S. positions us well to meet this rising demand. In the EU, steel production is still below historical norms, but there are indications of a potential recovery in the near to medium term. Actions by the EU Commission to create a more supportive policy environment for the steel industry and investments in infrastructure and defense are expected to significantly boost steel demand in Europe in the coming years. While some European producers have delayed their EAF transition plans, others are moving forward, and we anticipate a notable shift towards EAF steelmaking in the EU over the longer term. Additionally, low graphite electrode inventories in Europe suggest that increased EAF steel production will lead to a substantial rise in graphite electrode demand. Given the anticipated demand growth and existing tariff protections, the EU remains a key strategic area for GrafTech, and we are actively adjusting our sales mix accordingly. In fact, year-to-date through June, we have increased our sales volume in Western Europe by about 27% compared to last year, even with overall decreased European steel production. This growth in our market share positions us favorably for a recovery in the region. More broadly, we believe that electric arc furnaces will continue to gain market share, which will lead to higher demand for graphite electrodes. As demand for petroleum needle coke, our primary raw material, is also expected to grow, our vertical integration provides us with a competitive advantage. The growth in the needle coke market is primarily driven by the development of a Western supply chain for electric vehicles and energy storage. While this supply chain is still in its early stages, we think the tariffs and potential trade disruptions underscore the importance of reducing reliance on foreign sources for critical minerals like graphite and advancing domestic supply chains with policy support. Recently, the U.S. Department of Commerce issued a preliminary ruling in a trade case regarding graphite active anode material imported from China, resulting in preliminary antidumping tariffs of 93.5% on these imports, with a final ruling expected in December. This adds to previously announced tariffs, yielding a total of 160% on Chinese anode materials. We view this development positively, along with recent initiatives concerning rare earth sourcing, which reflect the U.S. government's commitment to building an ex-China supply chain for critical minerals. We are closely monitoring these issues while enhancing our technical capabilities and demonstrating them to key market participants. With our expertise in needle coke and synthetic graphite, we are confident in our position as a strategic partner in this sector. In conclusion, this is a crucial time for GrafTech. We have made substantial progress on our strategic initiatives, which reinforces our confidence. We are well-positioned to leverage the long-term trends shaping our industry's future, and we are excited about the opportunities ahead. We remain dedicated to executing our strategy, delivering value to our customers, and driving sustainable growth for our shareholders. This wraps up our prepared remarks, and we will now take questions.

And our first question is from Bennett Moore from JPMorgan.

It's nice to see the continued share gains in the U.S. Does this still stand at around 50% for the company's overall exposure? And is there any room to gain further share this year potentially from Indian suppliers? Or is this more of a 2026 contract opportunity?

Yes, Bennett. So, I would say U.S. or the Americas as a whole represent a little bit more than 50% of our overall revenue. And certainly, as we continue to look to grow our share, which is up 31% year-over-year in the U.S., that will continue to drive that percentage higher as we move forward. I think as we look at the back half of the year, I think we'd expect demand in the U.S. to remain robust given the tariff landscape and those 232 steel tariffs that are already in place. How it impacts the supply side on electrodes is still yet to be seen as the reciprocal tariffs and all of those kind of work through the system and continue to evolve. But net-net, I think we feel very good about our position, both with what we've done thus far and also how we think about the value proposition and what we offer our customers as we look forward. So, we look forward to continued growth in this market.

Great. And then my quick second one here relates to the Chinese antidumping duties. Do you feel this is potential to lift local needle coke prices and ultimately cost support for U.S. pricing? Or is this kind of a further dated opportunity just given how immature the Western supply chain still is?

Yes. I mean, I'll start, and I'll let Jeremy chime in as well. But I think the way you asked the question kind of answered it in some respects, right? There isn't any anode production of material of note within the United States right now. But I think the backdrop of the previous ITC ruling and now the most recent Department of Commerce ruling on the 93.5% really sets a foundation that will allow for more confidence in moving forward with these projects and the development of the supply chains in the West, which, again, I think we feel good about where we sit in terms of a raw material supplier and our technical capabilities, both on the raw materials and the graphitization as well, which is an important kind of first step to get the supply chains established. So, I think it will support medium to long-term, but it's not an immediate impact to pricing in the short run. Jeremy, anything you want to add?

Yes. No, I think you hit the key points there, Tim. The only other thing that I would note is that while there is a variety of announced projects that we hope come online for additional anode production domestically, there's been no announced new projects for needle coke other than, of course, our permitted expansion at our Seadrift facility. And so we do think that this will lead to an eventual tightening up of that market, but that's still quarters into the future, as Tim mentioned.

Congrats on the EBITDA improvement and the cost reductions as well. So, I guess maybe the first question would just be on pricing and the pricing environment. It looks like there was a tick up in your production and volumes. So, and the utilization rate may be slightly better as well in the U.S., especially. So, would you say that overall kind of pricing expectations have bottomed and maybe kind of very, very small room for improvement? Or how would you kind of characterize the pricing environment as you look into, say, the next 6 months or so for electrodes?

Yes, and I appreciate that, and thanks for the comments. Listen, the pricing environment remains very competitive. We've talked about the oversupply, especially coming out of China, which has put pressure on the rest of the world and the global demand environment with some puts and takes in certain regions outperforming others, but overall, global demand is pretty flat. I think though, despite this, we are growing our volume, and we did grow our ASP by 8% over the fourth quarter last year. So I think we are starting to see price stability globally, but it's still not at a level where we think it's sustainable for the long term, right? So whether it's our actions to change our mix and focus our energies on those markets that again will compensate us for the value we provide in our healthier production markets as a whole, or if it's through the continued pressure of raising our prices and driving higher prices and getting compensated again for the services and the value provided to our customers, we're going to keep pushing the envelope to drive prices higher. It's a challenging market, but we're starting to see some success. We've seen some flattening out of the pricing curves, which throughout all of 2024 were downward sloping. So, we hope that we've hit bottom and will now start to see some recovery in the back half of this year, but then more importantly, as we get into 2026.

Okay. And could you also offer any thoughts on needle coke? There was a lot of oil-based volatility in the quarter, especially from a geopolitical standpoint. But does that affect needle coke? And then what is kind of the outlook? We've had somewhat slightly good EV demand in China, but not necessarily that great outside of China. And so I'm not sure if that's been a drag on needle coke supply-demand? Or how would you characterize the needle coke supply-demand and pricing outlook as well?

Thank you for that, Arun. We are observing continued stability in the needle coke market. Pricing has remained quite stable over the last several quarters. Looking ahead, we do not anticipate any significant catalysts in the short term. However, as we consider the future and begin to see some of the developments in the Western supply chain coming online, we believe these could lead to improvements. At this moment, the situation remains fairly flat compared to previous periods.

Yes, Arun, I would just add, if we go back to prior to the Trump administration, you had a lot of support, EV mandates and such. Now, you're seeing it more on standing up the EV industry through trade and tariff actions and even more so as you think about the recently announced deal with MP Materials from the Department of Defense, right, where you've seen a creative and very transformational public-private partnership that really is going through kind of the government or Washington's efforts to stand up domestic production and onshoring kind of the production of these critical minerals. So, like those were the things that I think we'll see start to drive needle coke pricing and the demand in the West, which will ultimately help us beyond just the growth of EAF consumption of electrodes as we look out going forward. So, all in all, I think those are two really positive developments that we're seeing in the market right now as it relates to needle coke.

Okay. So given that you expect a flattish needle coke environment, you are driving your own cost lower. You were able to accomplish positive EBITDA this quarter. Do you expect that positive EBITDA trajectory to continue and you see some sequential improvement as you get into Q3? And then maybe it falls off just seasonally a little bit in Q4. And then next year, you continue to expect some modest continued improvement in EBITDA. Have you kind of bottomed and you're kind of heading now towards improved results each period? Or where are you kind of in your evolution here?

Sure, Arun. So as you saw in our release, our cash cost for the first half of the year was about $3,700. We revised our guidance for a full-year cash cost of about $3,950. So you're right, you'll see some cost uptick in the second half of the year, which is driven by a couple of things. It's driven by fixed cost leverage we lose in the second half because of some of our summer shutdowns. It's driven by some of the higher cost of inputs like labor and energy in the second half of the year. And it's also driven by kind of the back half being loaded up with our view on tariffs currently. We're also not getting as much of a benefit from our LCM utilization, LCM reserve utilization as we had previously. So, that's a little bit of a headwind. But all in, I think you can expect that the full year, if you bake all that together, we'll probably be at or slightly above a breakeven type EBITDA number. As far as where we go, in years ahead. As you know, a lot of our negotiations are coming up in the fourth quarter. So, we're looking forward to that. I think we've proven our value beyond just the electrode, but also from a CTS perspective and technical service perspective. So, we're looking forward to that. And as that develops, we'll give more views as to how we see the upcoming year.

Arun, I would just, sorry, I was just going to add. I mean, I think what Rory has outlined is 100% accurate in the sense that the next six months are what they are. This is all about us stacking quarter after quarter of improved performance. And the team has been doing that now for a number of quarters in a row. It's not always going to be a straight line up and to the right, but we think we've started to develop the momentum. We're seeing stickiness in our cost reduction efforts. The commercial efforts, again, are paying dividends. And we think as we head into '26, we're happy with the momentum we're creating.

I wanted to follow up on the potential opportunity in anode materials. It feels like this has been discussed for many years, probably at least five, and there hasn’t been any significant progress announced. How would you describe the current state of discussions? Are they still active? We’ve seen others advance, like T66 partnering with NOVONIX and receiving funding from the DOE. So, I'm curious about the current status. Where do things stand?

Yes. Thanks, Alex. Listen, we have been talking about the anode opportunity for a while. And we've also been consistent in saying this isn't something that we necessarily will do on our own or have the balance sheet to go alone and have outlined a number of areas and ways that we think we can participate in this market and think those still exist, whether it be a raw material supplier, whether it be a graphitization supplier to the market given the capacity that we have. But I think as we've also gone through this last, call it, three or four years, we've also continued to develop our capabilities to kind of go soup to nuts on the production of anodes and think we have opportunities. So, I think the change potentially that's coming and the way I would think about it is what I mentioned before with what we just saw last week with MP Materials, right? Again, a fairly transformative public-private partnership, kind of a very creative use of federal dollars from the Department of Defense to unlock value. And also, I mean, they're generating returns for taxpayers. So, they're kind of going about it in different ways where they're not just handing out money to whoever has the best application, but they're really looking for those that are well positioned to be cornerstones in the industry. And again, I think as GrafTech, our existing capabilities, the fact that we're vertically integrated could potentially position us to be an attractive partner with the Department of Defense. So, we are continuing our efforts. We're not going to slow down. We'll continue to probe and look for all opportunities. I think this is a bit of a game-changer from a sense of the government is putting real dollars behind standing up businesses in an industry versus trying to pull demand through tax incentives and such like that. So, I think that's where you start to see this change.

Tim, like not to put you on the spot, I'm not sure what you could say. But based on those comments, I would interpret that to mean that you are in active discussions with the government over potential partnership type opportunities. Would that be fair?

Yes, Alex. I won’t comment further, except to say that we believe we are well positioned. We welcome the chance to advocate for various opportunities, whether it’s related to funding, trade protections, or improving our relationships with customers. The MP Materials deal was just announced last week, and it’s still very new to the market. We’ll continue to explore it as we deem appropriate.

Yes, Alex. I'm not going to comment other than saying we think we're well positioned. We welcome the opportunity to continue to advocate on all fronts, whether it's for funding opportunities, trade protections, or our position with customers to improve our standing. The MP Materials deal was just announced last week, and this is all very new and recent to the market. So, we'll continue to explore it as we see appropriate.

At the end of the first quarter, you saw a transaction to move one of the plants to a financial fund or a strategic fund or whatever. We'll see how that plays out in terms of what their intentions are for that plant. I don't think necessarily that capacity has disappeared completely. However, I believe that all of the European capacity is operating at quite low utilization rates, which is why we are pleased to have increased ours to 65% and think we're beginning to build some momentum there.

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

Thank you, Jenny. I'd 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.