We came across a bullish thesis on GrafTech International Ltd. (EAF) on Substack by Dominick D’Angelo. In this article, we will summarize the bulls’ thesis on EAF. GrafTech International Ltd. (EAF)’s share was trading at $1.13 as of March 5th. EAF’s trailing and forward P/E were 7.12 and 6.80 respectively according to Yahoo Finance.
A miner gathering graphite samples from a mining area in Coosa County, Alabama.
GrafTech International (EAF) is navigating a difficult market environment as excess Chinese steel and graphite electrode exports continue to suppress global prices. China, a dominant low-cost producer, has ramped up steel exports due to a real estate slowdown, flooding international markets with cheap supply. In 2024, China exported 110.72 million tonnes of steel—a nine-year high—driving down domestic steel demand in key importing regions like Southeast Asia and the Middle East. This has directly impacted graphite electrode demand, as electric arc furnace (EAF) mills worldwide struggle against the influx of cheaper Chinese steel. China remains the largest exporter of graphite electrodes, exacerbating pricing pressures on Western producers like GrafTech, HEG, and Showa Denko. While Chinese electrode export volumes were relatively stable in 2024, they exhibited high volatility, with shipments plunging mid-year before rebounding in December, reflecting shifting global steel demand and trade policy responses.
GrafTech’s latest earnings report underscored these challenges, with spot graphite electrode prices declining 4.9% quarter-over-quarter to $3,900 per metric ton, well below the company’s breakeven price of $4,900. Management has secured 60% of 2025 volume commitments, guiding for low double-digit growth to approximately 116,000 metric tons, up from 103,100 metric tons in 2024. However, all contracts are now at spot prices, as long-term agreements have fully rolled off. The company’s ability to execute a 15% price increase in the second half of 2025 remains uncertain but would indicate a pricing floor has been established.
A key development is HEG’s accumulation of a significant stake in GrafTech, purchasing 21.175 million shares at an average price of $1.40, amounting to 8.2% of outstanding shares. This suggests growing strategic interest, with the potential for HEG to increase its position further. Additionally, Marathon Asset Management recently acquired 14.2 million shares (5.5% of shares outstanding), contributing to heightened trading activity in February. If EAF’s valuation remains depressed, HEG may bid for the entire company.
Trade policy shifts could provide further upside. The European Union, South Korea, Japan, and Vietnam have all introduced anti-dumping duties on various Chinese steel and electrode products. In the U.S., recent executive orders have reinstated a 25% steel tariff and increased aluminum tariffs, effective March 12. These protectionist measures could help stabilize Western electrode pricing. Additionally, a potential resolution to the Russia-Ukraine war could revive European industrial demand, alleviating cost pressures and improving EAF’s profitability. If market conditions improve, GrafTech’s strategic position and recent insider buying signal a compelling turnaround opportunity.
GrafTech International Ltd. (EAF) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held EAF at the end of the fourth quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of EAF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EAF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.