GrafTech International Ltd. (EAF): 5 FORCES Analysis [Nov-2025 Updated]

You're digging into GrafTech International Ltd. (EAF)'s competitive moat right now, and what you'll find is a company balancing a significant structural advantage against immediate market headwinds. Honestly, its deep vertical integration into needle coke production is a huge asset, but that same core material is now seeing demand skyrocket at a 10.9% CAGR due to the EV battery boom, putting suppliers in the driver's seat. Meanwhile, customers-a concentrated group-pushed realized prices down 12% year-over-year in Q2 2025, making the pricing environment tough. This is a classic industrial tug-of-war. Let's map out exactly how the five forces framework defines GrafTech's path forward, from supplier leverage to the threat of new entrants.

GrafTech International Ltd. (EAF) - Porter's Five Forces: Bargaining power of suppliers

When you look at the supplier side for GrafTech International Ltd. (EAF), the story is dominated by one key input: petroleum needle coke. Because graphite electrodes are essential for the electric arc furnace (EAF) steelmaking process, the availability and cost of this raw material directly dictate a significant portion of GrafTech's cost of goods sold.

GrafTech is substantially vertically integrated into petroleum needle coke production via its Seadrift facility in Port Lavaca, Texas. This integration is a major structural advantage, insulating the company from the full impact of open-market price swings for non-captive supply. The Seadrift plant has a nameplate capacity to produce approximately 140 thousand MT of calcined petroleum needle coke. This capacity represents nearly one-fifth of the global petroleum needle coke industry capacity when excluding China.

The supplier landscape for the non-captive portion of needle coke is highly concentrated. Globally, excluding China, the industry is comprised of only four major producers: Phillips 66, GrafTech (via Seadrift), Petrocokes Japan Ltd., and ENEOS Holdings, Inc.. Seadrift itself is the second-largest producer outside of China, holding approximately 19 percent of that capacity.

Here's a quick look at the structure that influences the power of external suppliers:

The demand side for this critical input is accelerating, which tightens supply and shifts power toward suppliers. Needle coke market demand is projected to grow at a 10.9% CAGR from 2025 to 2030. This growth is heavily driven by the energy transition. Specifically, the lithium-ion battery application segment, which uses needle coke for synthetic graphite anodes, is expected to expand at a CAGR of 6.4% through 2025 to 2035. This increased competition for petroleum needle coke from the battery sector creates significant supply-demand tension for EAF operators like GrafTech who rely on the open market for a portion of their needs.

For the portion of petroleum needle coke GrafTech International Ltd. (EAF) must purchase on the open market, supplier power is amplified by feedstock price volatility. The cost of non-captive needle coke is directly tied to the prices of its precursors, crude oil and coal-tar pitch. You can see this volatility in the crude oil market in 2025:

• Brent crude oil prices were fluctuating, with forecasts for 2025 averaging around $76 per barrel, after trading near $75 per barrel in early 2025.
• This represents a swing from a Q2 2024 peak of around $90 per barrel.
• Geopolitical factors, such as sanctions and trade policies, are keeping energy markets, including oil, characterized by volatility throughout 2025.

This means that while GrafTech International Ltd. (EAF) has its Seadrift hedge, any unhedged or non-captive purchases are subject to these sharp, unpredictable swings in precursor costs. The company is actively trying to manage this by projecting a 7-9% year-over-year decline in its overall cash cost of goods sold per MT for the full year 2025 compared to 2024. Still, the underlying market dynamics suggest suppliers of non-captive coke hold considerable leverage.

GrafTech International Ltd. (EAF) - Porter's Five Forces: Bargaining power of customers

You're analyzing GrafTech International Ltd. (EAF) and the power its customers hold, which is a critical lens for understanding near-term revenue stability. Honestly, when you look at the electrode market, the customer side is inherently powerful because the product, while essential, is a component in a much larger, capital-intensive process for steelmakers.

The customer base for GrafTech International Ltd. is concentrated, with a few large EAF steel producers accounting for substantial demand. This concentration means that losing even one major account can significantly impact the top line, giving those remaining large buyers leverage in price negotiations. The persistent competitive pressures, especially from oversupply noted in regions like China, have kept the pricing environment unsustainably low across most commercial regions for GrafTech International Ltd..

The financial evidence from the second quarter of 2025 clearly shows this dynamic. For that quarter, GrafTech International Ltd.'s weighted-average realized price was approximately $4,200 per MT. This figure represented a 12% year-over-year decrease compared to Q2 2024. The year-over-year decline was primarily attributed to the substantial completion of higher-priced long-term sales agreements (LTAs) from prior years, coupled with those ongoing low-price industry dynamics.

Still, GrafTech International Ltd. is actively working to mitigate this buyer power by strategically shifting its sales mix. The company is focusing on the U.S. market, which management confirms remains the strongest region for graphite electrode pricing. This strategic pivot is showing results:

• U.S. sales volume increased 38% year-over-year in Q2 2025.
• Year-to-date U.S. sales volume growth through Q2 2025 was 32%.
• The Americas region accounted for a little bit more than 50% of overall revenue by Q2 2025.

This mix shift provided a sequential uplift, as the weighted-average realized price saw a 2% increase compared to Q1 2025, reaching that $4,200 per MT mark. To further counter the low pricing environment, GrafTech International Ltd. informed customers earlier in 2025 of its intention to implement a 15% price increase on uncommitted volumes for the remainder of 2025. This action directly challenges customer leverage by attempting to re-anchor prices to reflect underlying value and cost, rather than market oversupply.

Here's a quick look at the pricing environment as of Q2 2025:

The success of this strategy hinges on customers accepting the necessity of higher prices, which is a direct function of their perceived switching costs and the value GrafTech International Ltd.'s reliability provides over lower-cost, potentially less reliable, alternatives. Finance: draft 13-week cash view by Friday.

GrafTech International Ltd. (EAF) - Porter's Five Forces: Competitive rivalry

You're looking at a market where the established players are fighting hard for every ton of volume, especially given the persistent low pricing dynamics GrafTech International Ltd. has been dealing with. The competitive rivalry in the graphite electrode space is definitely intense, driven by a few major global entities.

GrafTech International Ltd. is actively engaged in regaining lost ground. For the full year 2025, the company expects to achieve an 8-10% year-over-year increase in sales volume, reflecting a focus on gaining market share through its customer value proposition. This is part of a larger effort, as this volume growth would represent a cumulative increase of approximately 25% since the end of 2023. Still, the pricing environment remains a challenge, leading GrafTech International Ltd. to exercise discipline by foregoing volume opportunities where margins are unacceptably low.

The overall market context shows underlying growth potential, which fuels this rivalry. The global graphite electrode market is projected to expand from $5.80 billion in 2024 to $10.34 billion by 2035, growing at a Compound Annual Growth Rate (CAGR) of 5.4% during the forecast period 2025-2035. This long-term outlook encourages current major players to invest aggressively now.

The major global players GrafTech International Ltd. competes against include Tokai Carbon, Showa Denko, Fangda Carbon, and HEG Limited. These competitors are not sitting still; they are actively boosting manufacturing capacity and investing in technology to improve electrode durability and efficiency, which directly pressures GrafTech International Ltd.'s market position. For instance, Tokai Carbon is executing structural reforms, including closing its Shiga Plant in Japan by July 2025 and transferring its German subsidiary, which involves a 30% production capacity reduction there by July 2025, while simultaneously targeting net sales of 484 billion yen for 2025 under its T-2025 plan.

Here's a quick look at how GrafTech International Ltd.'s volume goal stacks up against the market and competitor activity:

The competitive landscape is defined by these strategic moves. You see competitors like Tokai Carbon investing heavily-for example, 70 billion yen in facility renovation and 17 billion yen in environmental systems-to secure their operational base and meet future demands, which is a clear signal of long-term commitment to the sector. Also, Tokai Carbon is planning to relocate and start operations at a new plant in Thailand by the end of 2025.

GrafTech International Ltd.'s strategy to counter this rivalry involves specific commercial and operational shifts:

• Shifting geographic sales mix toward regions like the United States, where Q3 2025 volume grew 53% year-over-year.
• Implementing a 15% price increase on uncommitted volumes to improve profitability.
• Expecting an approximate 10% year-over-year decline in cash cost of goods sold per MT for the full year 2025.
• Achieving positive Adjusted EBITDA of $13 million in Q3 2025.

Ultimately, the rivalry is a tug-of-war between volume recovery, like GrafTech International Ltd.'s 8-10% target, and capacity/cost management from global rivals, all while the underlying market is set for significant growth over the next decade.

GrafTech International Ltd. (EAF) - Porter's Five Forces: Threat of substitutes

You're analyzing a core component of heavy industry, where switching costs are massive and the material science is unforgiving. Honestly, for the essential function of melting scrap steel in an Electric Arc Furnace (EAF), there is no direct, commercially viable substitute for graphite electrodes as of late 2025. The electrode is the conduit for the massive electrical energy required to create the arc that reaches temperatures exceeding 3,000°C.

The process that demands these electrodes, EAF steelmaking, is a long-term structural trend, not a fad. This shift is directly tied to global decarbonization efforts, which favor EAFs over traditional blast furnaces due to lower CO2 emissions. Global crude steel production is forecast to be 1.846 billion tonnes in 2025, and the EAF route, which was responsible for approximately 29% of global crude steel production in 2023, is projected to grow its share to around 40% by 2030.

While alternative EAF technologies are slowly emerging, such as research into different carbon injection sources like biomass or plastics, these focus on charge carbon, not the primary melting mechanism itself. Graphite electrodes remain the dominant and most cost-effective solution for arc stability and thermal conductivity. What this estimate hides is the intense competition for the raw material: petroleum needle coke, which is also vital for lithium-ion batteries in the growing electric vehicle market.

GrafTech International Ltd.'s focus on Ultra-High Power (UHP) electrodes is strategic because these are the most preferred product type for modern, high-efficiency EAFs. The company's own operational data shows a strong pull from the most advanced steelmakers, evidenced by its 53% year-over-year sales volume growth in the United States during Q3 2025. GrafTech's substantial vertical integration into petroleum needle coke provides a competitive buffer against raw material supply shocks, which is a key advantage when the end-use market is expanding.

Here's the quick math on the market that relies on this non-substitutable product:

The threat of substitution is low, but the threat of raw material substitution or competition is real. Consider these supporting facts:

• The global graphite electrode market is expected to grow at a 5.4% CAGR through 2035.
• GrafTech achieved a 10% year-over-year reduction in cash cost of goods sold per metric ton in Q3 2025.
• The U.S. market, a key focus for GrafTech, saw a 53% volume surge year-over-year in Q3 2025.
• In trials, nanoparticle binders improved arc stability by 12% over conventional electrodes.
• For 2025, GrafTech aimed for a low double-digit percentage increase in sales volume.

Finance: review the Q4 2025 working capital forecast by next Tuesday.

GrafTech International Ltd. (EAF) - Porter's Five Forces: Threat of new entrants

You're assessing the barriers to entry for the graphite electrode sector, and honestly, the hurdles for a true newcomer are formidable. This isn't a business you can start with a modest loan; it demands deep pockets and specialized know-how.

Entry requires massive capital investment in specialized manufacturing facilities with long lead times.

Setting up a facility to produce graphite electrodes, especially the high-demand Ultra-High Power (UHP) grades, requires substantial upfront capital. While specific Greenfield investment figures for a full UHP plant aren't public for late 2025, comparable projects show the scale. For instance, Superior Graphite revealed plans to invest USD 180 Million in a new facility for anode materials back in 2023, indicating the order of magnitude for carbon-based material production. The process involves high energy consumption and complex infrastructure, which translates to significant fixed costs before the first electrode is even sold.

New entrants face a significant barrier due to the technical complexity of producing ultra-high power (UHP) electrodes.

Producing UHP electrodes is a specialized science, not just a manufacturing process. These electrodes are designed for operation at current densities exceeding 25A/cm2. The technical barrier is reinforced by the high value and performance required, as evidenced by European pricing in mid-2025. For example, UHP graphite electrode (600mm) prices in France hit 3,700 USD/MT in June 2025, and in Germany, they were 3,470 USD/MT in June 2025. Achieving this quality level requires mastering the use of premium raw materials like petroleum needle coke and managing the complex, energy-intensive thermal treatment steps.

GrafTech's vertical integration into needle coke provides a significant cost and supply security advantage.

GrafTech International Ltd.'s position as the only large-scale graphite electrode producer substantially vertically integrated into petroleum needle coke via its Seadrift facility in Texas is a major deterrent to new entrants. This integration insulates GrafTech from the volatile pricing and supply constraints of this critical input, which is also seeing demand accelerate from the electric vehicle battery sector. GrafTech is projecting a mid-single digit percentage point decline in its cash cost of goods sold per MT for 2025 versus 2024, with a long-term cost expectation around $3,700 per MT. A new entrant would face the full brunt of open-market needle coke costs, which have been volatile.

New capacity additions by competitors are more likely expansions by incumbents than true new market entrants.

The market growth is currently being met by existing, established players increasing their footprint, rather than entirely new firms entering the fray. This suggests incumbents are the primary source of new supply, further solidifying the market structure. Here's a look at some of these incumbent capacity moves announced in 2025:

To be fair, HEG Limited had already expanded its plant capacity to 100,000 tonnes as of December 2024, showing the scale of investment incumbents are making to secure market share. These expansions, while adding supply, confirm that the path to entry is through out-competing or acquiring existing capacity, not establishing a new base from scratch.

Finance: review Q3 2025 working capital projections against expected capital deployment for maintenance CapEx, which was anticipated to be approximately $40 million for full-year 2025.