GrafTech International Ltd. (NYSE: EAF) announced the permanent closure of its graphite electrode manufacturing facility in Monterrey, Mexico, with production expected to conclude early in the second quarter of 2027.

The company plans to wind down Monterrey operations in phases, citing global structural overcapacity in the graphite electrode industry, driven by capacity expansion in China and India that has outpaced demand growth. The closure will reduce GrafTech's annual graphite electrode production capacity by approximately 51 thousand metric tons, bringing total annual capacity to approximately 127 thousand metric tons from approximately 178 thousand metric tons.

GrafTech expects the closure to generate annual cash cost savings of $20 million to $25 million, with the full benefit anticipated in 2028. The company also projects a reduction in annual capital expenditure requirements of approximately $5 million beginning in 2027, and a one-time working capital release of approximately $20 million to $25 million. Total one-time cash costs related to the closure are estimated at $20 million to $25 million, covering severance, equipment relocation, and other facility expenses, with most expenditures expected by the end of 2027.

Customer requirements currently served by Monterrey will be transitioned to GrafTech's facilities in Calais, France, and Pamplona, Spain. Pin stock production, currently centered in Monterrey, will move to Pamplona. GrafTech will retain a North American presence through its petroleum needle coke operations in Seadrift, Texas, and its electrode machining and distribution facility in St. Marys, Pennsylvania.

"Given the persistent imbalance between global graphite electrode supply and demand, maintaining underutilized capacity that requires ongoing capital investment is neither economically sustainable nor in the long-term interests of GrafTech or our stakeholders," said Timothy Flanagan, Chief Executive Officer and President.

Following the wind-down, GrafTech intends to sell the Monterrey property, with any proceeds to be applied toward debt reduction. The company noted those potential proceeds are not included in the financial benefits outlined above.