What changed in this filing

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Item 1. Business

2022-02-22 compared with 2021-02-23 · 106 added, 188 removed, 219 unchanged (57% of the section changed)

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This unique position provides us with competitive advantages in product quality and cost.

Founded in 1886, we have 135 years of experience in the research and development (“R&D”) of graphite- and carbon-based solutions, and our intellectual property portfolio is extensive.

Founded in 1886, we have over 135 years of experience in the research and development (“R&D”) of graphite- and carbon-based solutions, and our intellectual property portfolio is extensive.

We currently have graphite electrode manufacturing facilities in Calais, France, Pamplona, Spain, Monterrey, Mexico and St.

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Graphite electrodes are an industrial consumable product used primarily in EAF steel production, one of the two primary methods of steel production and the steelmaking technology used by all “mini‑mills.” Electrodes act as conductors of electricity in the furnace, generating sufficient heat to melt scrap metal, iron ore or other raw materials used to produce steel or other metals.

We estimate that, on average, the cost of graphite electrodes represents only approximately 1% to 5% of the total production cost of steel in a typical EAF, but they are essential to EAF steel production.

We estimate that, on average, the cost of graphite electrodes represents less than 5% of the total production cost of steel in a typical EAF, but they are essential to EAF steel production.

Graphite electrodes are currently the only known commercially available products that have the high levels of electrical conductivity and the capability to sustain the high levels of heat generated in EAF steel production.

As a result, EAF steel manufacturers require a reliable supply of high-quality graphite electrodes.

Graphite electrodes are also used in steel refining in ladle furnaces and in other processes, such as the production of titanium dioxide, stainless steel, aluminum, silicon metals and other ferrous and non‑ferrous metals.

With the growth of EAF production, electrode production has become focused on the manufacture of UHP electrodes.

Graphite electrodes are also used in steel refining in ladle furnaces and in other processes, such as the production of titanium dioxide, stainless steel, silicon metals and other ferrous and non‑ferrous metals.

With the growth of EAF steel production, graphite electrode production has become focused on the manufacture of UHP electrodes.

The production of UHP electrodes requires an extensive proprietary manufacturing process and material science knowledge, including the use of higher quality needle coke blends.

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As a leading producer of graphite electrodes, we believe we are well-positioned to be a key provider to the EAF steel making industry.

In 2018, we completed an operational improvement and debottlenecking initiative to increase production capacity at our three primary operating facilities in Calais, France, Pamplona, Spain, and Monterrey, Mexico, by approximately

20% to a total of 202,000 metric tons (“MT”).

1 We have begun a series of projects at our Monterrey and St.

Marys facilities that will shift graphitization and machining of additional volume of semi-finished product from Monterrey to St.

these projects will further optimize our manufacturing footprint by improving environmental performance and production flexibility at both facilities and also leverage cost efficiencies at our St.

Marys facility.

Our production capacity is approximately 200,000 metric tons ("MT") 1 through our primary manufacturing facilities in Calais, France, Pamplona, Spain, and Monterrey, Mexico.

In 2021, we shifted graphitization and machining of a portion of semi-finished products from Monterrey to St.

Marys, Pennsylvania, in order to improve environmental performance, production flexibility and overall cost efficiencies across the two facilities .

Graphite electrodes are an essential consumable in the EAF steel production process and require a long lead time to manufacture, and our strategic customers are highly focused on securing certainty of supply of reliable, high-quality graphite electrodes.

We believe we are uniquely capable among graphite electrode producers to pursue our long-term take‑or‑pay contracting strategy due to our substantial vertical integration into petroleum needle coke production.

We believe we are uniquely capable among graphite electrode producers to pursue our LTA contracting strategy due to our substantial vertical integration into petroleum needle coke production.

On August 15, 2015, we became an indirect wholly owned subsidiary of Brookfield Asset Management Inc.

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In April 2018, we completed our initial public offering ("IPO").

Our common stock is listed on the NYSE under the symbol “EAF.” Brookfield owned approximately 55.3% of our common stock as of December 31, 2020 and 47.8% as of February 16, 2021.

Our common stock is listed

1 Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage.

Actual production may vary.

on the New York Stock Exchange ("NYSE") under the symbol “EAF.” Brookfield owned approximately 24% of our common stock as of December 31, 2021.

Our executive offices are located at 982 Keynote Circle, Brooklyn Heights, Ohio 44131 and our telephone number is (216) 676‑2000.

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Of the graphite electrode manufacturing facilities currently operating, we estimate that our three primary operating manufacturing facilities represent approximately a quarter of estimated production capacity for graphite electrodes outside of China, making us a critical supplier to global EAF steel manufacturers.

Our manufacturing facilities are located in the Americas and EMEA, providing us with access to low‑cost and reliable energy sources, logistical and freight advantages in sourcing raw materials and shipping our graphite electrodes to our customers compared to our competitors, and excellent visibility into the large North American and European EAF steelmaking markets.

Our manufacturing facilities are located in the Americas and EMEA, providing us with access to reliable energy sources, logistical and freight advantages in sourcing raw materials and shipping our graphite electrodes to our customers compared to our competitors, and excellent visibility into the large North American and European EAF steelmaking markets.

Our experience in producing graphite electrodes for a varied global customer base positions us to meet customer requirements across a range of product types and quality levels, including support and technical services, further distinguishing us from our competitors.

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We believe we have the industry’s most efficient production platform of high production capacity assets with substantial vertical integration.

Over the past decade, we have rationalized inefficient plants during the downturn and more recently completed a manufacturing footprint optimization program.

From 2014 to 2016, we rationalized inefficient plants during the downturn and more recently completed a manufacturing footprint optimization program.

We believe that the optimization of our graphite electrode plant network will continue to drive improved fixed cost absorption.

Moreover, our Calais, Pamplona, Monterrey and St.

Marys facilities each provides unique cost advantages given its scale and access to low cost, reliable energy sources.

Seadrift provides a substantial portion of our petroleum needle coke supply needs internally at a competitive cost and allows us to maximize capacity utilization more efficiently than competitors, who may be more constrained by a limited or

1 Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance outage.

Actual production may vary.

costly petroleum needle coke supply.

Marys facilities each provides unique cost advantages given its scale and access to reliable energy sources.

Seadrift is one of only five petroleum needle coke facilities in the world outside of China, and we believe it is one of the largest petroleum needle coke producers in the world.

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Our production of petroleum needle coke specifically for graphite electrodes provides us the opportunity to produce super premium petroleum needle coke of the highest quality and allows us to tailor graphite electrodes for customer requirements.

Seadrift has approximately 140,000 MT of petroleum needle coke production capacity, which we believe makes it one of the largest petroleum needle coke producers in the world.

Sourcing the majority of our petroleum needle coke internally allows us to offer our customers certainty of supply, further enhancing our competitive position and supporting our long-term take‑or‑pay contracts strategy.

To align with our long-term contract profile, we have hedged the decant oil required to produce substantially all of the graphite electrodes sold under these contracts, providing us with substantial visibility into our future raw material costs.

Seadrift has approximately 140,000 MT o f petroleum needle coke production capacity, which we believe makes it one of the largest petroleum needle coke producers in the world.

Sourcing the majority of our petroleum needle coke internally allows us to offer our customers certainty of supply, further enhancing our competitive position and supporting our LTA strategy.

To align with our LTA profile, we have hedged the decant oil required to produce substantially all of the graphite electrodes sold under these contracts, providing us with substantial visibility into our raw material costs.

We believe our use of petroleum needle coke is a further competitive advantage, as the use of pitch needle coke, an alternative raw material, results in longer bake times during graphite electrode production.

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We utilize our own R&D facility as well as process engineers located at plant sites to constantly work at process and product improvements.

This work has yielded the development of new products over the last 18 months, which have improved our competitive position.

This work has yielded the development of new products, which have improved our competitive position.

In addition, we believe that our ArchiTech Furnace Productivity System (“ArchiTech”) continues to provide a competitive advantage.

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Our executiv e and manufacturing leadership have led manufacturing companies through many cycles and are focused on positioning us for profitable growth in any environment.

We have undertaken strategic investments to increase our production capacity in a capital‑efficient manner while reducing our cost position.

We have undertaken strategic investments to increase our production capacity in a capital‑efficient manner while positively impacting our cost structure.

Graphite electrode industry

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The size of the electrodes varies depending on the size of the furnace, the size of the furnace’s electric transformer and the planned productivity of the furnace.

In a typical furnace using alternating electric current and operating at a typical number of production cycles per day, three electrodes are fully consumed (requiring the addition of new electrodes), on average, every 8 to 10 operating hours.

UHP graphite electrodes are consumed at a rate of approximately 1.7 kilograms per MT of steel production in EAF facilities.

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Based on our experience, high capacity manufacturing facilities can have a significant operating cost advantage as compared to low capacity manufacturing facilities, encouraging producers to consolidate facilities in order to reduce costs.

We believe the majority of the production capacity reduction was permanent due to the demolition, long-term environmental remediation and repurposing of most of these lower capacity facilities.

Notwithstanding the current market challenges, the consolidation and production capacity reductions in the graphite electrode industry, along with the EAF steel industry’s recovery since 2016, lead us to believe that the graphite electrode industry will resume its long-term growth trajectory as the global steel industry recovers from the pandemic.

The majority of the production capacity reduction was permanent due to the demolition, long-term environmental remediation and repurposing of most of these lower capacity facilities.

These consolidation and production capacity reductions in the graphite electrode industry, along with the EAF steel industry’s recovery, lead us to believe that the graphite electrode industry will continue its long-term growth trajectory.

Demand trends

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EAF steelmaking has historically been the fastest-growing segment of the global steel market.

According to the WSA, global EAF steel production grew at a 3.1% compound annual growth rate from 1984 to 2019, while taking market share from other methods of steelmaking in most regions of the world, outside of China.

According to the WSA, global EAF steel production grew at 2.9% compound annual growth rate from 1984 to 2020, while taking market share from other methods of steelmaking in most regions of the world, outside of China.

EAF steel producers benefit from their flexibility in sourcing iron units, being able to make steel from either scrap or alternative sources of iron like direct reduced iron and hot briquetted iron, both made directly from iron ore.

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There is no widely accepted graphite electrode reference price.

Historically, between 2008 and 2017, our weighted average realized price of graphite electrodes was approximately $4,800 per MT (on an inflation-adjusted basis using constant

2020 dollars).

During the last demand trough in 2016, our weighted average realized price of graphite electrodes fell to approximately $2,500 per MT in 2016.

Following the significant rationalization of graphite electrode production globally, the resumption of growth in EAF steel production, falling scrap prices, reductions in Chinese steel exports, and constrained supply of needle coke, graphite electrode spot prices began to increase in late 2017 and reached record high prices in 2018.

These record high spot prices began to retreat in 2019, falling 25% during the year.

Prices continued to decline throughout 2020.

During the fourth quarter of 2020, our average price from long-term agreements ("LTAs") was approximately $9,600 per MT and our average price for non-LTA business was approximately $4,900 per MT.

Market prices for graphite electrodes declined throughout 2020, including through the fourth quarter and into the early part of the first quarter of 2021.

Historically, between 2007 and 2021, our weighted average realized price of graphite electrodes, excluding LTAs, was approximately $5,700 per MT (on an inflation-adjusted basis using constant 2021 dollars).

In 2019 and in 2020, market prices declined from the peaks of 2017 and 2018.

The prices continued to decline into the first half of 2021 before starting to recover in the second half of the year.

During the fourth quarter of 2021, our average price for non-LTA business was approximately $5,000 per MT, 10% higher than in the third quarter of 2021.

The non-LTA sales price reflects a mix of annual agreements negotiated in the fourth quarter of the prior year, semi-annual and quarterly agreements negotiated earlier in the year along with spot agreements.

There is a lag between the time we negotiate price for non-LTA sales and when our electrodes are delivered and recognized in revenue.

We estimate that our non-LTA price for electrodes delivered and recognized in revenue for the first six weeks of 2021 averaged approximately $4,200 per MT.

Given this impact, for the first half of 2021 we anticipate earnings per share and adjusted EBITDA will decline by high single digits, on a percentage basis, compared to the first half of 2020.

We believe market prices for graphite electrodes are now improving and expect this to positively impact our financial results beginning in the second half of 2021.

We expect our first quarter 2022 non-LTA prices to increase 17 to 20% over the fourth quarter of 2021 as the price of annual and semi-annual agreements have now been reset to the current market conditions.

Needle coke industry

Needle coke is the primary raw material for the production of graphite electrodes used by EAF steelmakers and producers of aluminum, stainless steel, silicon metals and other ferrous and non-ferrous metals, and is also a primary raw material in the production of lithium-ion batteries used to power electric vehicles.

Needle coke is the primary raw material for the production of graphite electrodes used by EAF steelmakers and producers of stainless steel, silicon metals and other ferrous and non-ferrous metals, and is also a primary raw material in the production of lithium-ion batteries used to power electric vehicles.

Needle coke is derived from two carbon sources.

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Management estimates

Previously, producers of petroleum needle coke typically agreed to supply petroleum needle coke in twelve-month contracts;

however, since 2017, producers of petroleum needle coke have typically used six-month contracts.

Previously, producers of petroleum needle coke typically agreed to supply petroleum needle coke in 12 month contracts;

however, since 2017, producers of petroleum needle coke have typically used three to six month contracts.

As a result, our competitors must continually renegotiate supply agreements in response to changing market conditions.

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Industry trends

Petroleum needle coke production capacity outside of China has remained unchanged for at least the last ten years due to the capital intensity, technical know-how and long lead times required to build greenfield needle coke production facilities and the stringent regulatory process associated with building new needle coke production capacity.

Petroleum needle coke production capacity outside of China has remained relatively flat for the last several years due to the capital intensity, technical know-how and long lead times required to build greenfield needle coke production facilities and the stringent regulatory process associated with building new needle coke production capacity.

Furthermore, we believe that brownfield expansion opportunities in developed countries are generally not available as petroleum needle coke manufacturing is a continuous process with significant costs associated with shutting down and restarting facilities for maintenance or capital investment.

While the vast majority of petroleum needle coke is used in the production of graphite electrodes, the use of needle coke in lithium-ion batteries for electric vehicles is growing with the increased production of these vehicles.

According to the International Energy Agency ("IEA"), the global electric car fleet exceeded seven million in 2019, as compared to 17,000 in 2010.

According to the International Energy Agency ("IEA"), the global electric car fleet exceeded 10 million in 2020, as compared to 17,000 in 2010.

The IEA projects that global annual sales of electric cars may range between 13 million and 20 million by 2025.

Most electric vehicles rely on lithium-ion batteries as their key performance component.

Many manufacturers of lithium-ion batteries for electric vehicles use needle coke as a raw material for carbon anodes in their batteries due to advantages in terms of charging rate and capacity.

Some manufacturers of lithium-ion batteries for electric vehicles use needle coke as a raw material for carbon anodes in their batteries due to advantages in terms of charging rate and capacity.

According to IEA, battery pack capacity has been increasing in recent years and is expected to continue.

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Contracts and Customers

In 2017, we reoriented our commercial strategy around a long-term take-or-pay contract framework and restructured our sales force incentives.

We sell our products under LTAs and under short-term purchase agreements, either annual, semi-annual or quarterly.

We also sell electrodes under spot purchase orders for limited quantities at a time.

The LTAs were entered into between the end of 2017 and early 2019.

As graphite electrodes are an essential consumable in the EAF steel production process and require a long lead time to manufacture, we believe our strategic customers are highly focused on securing certainty of supply of reliable, high-quality graphite electrodes.

Prior to our long-term take-or-pay contract initiative, our sales of graphite electrodes were generally negotiated annually through purchase orders on an uncontracted, nonbinding basis.

The majority of our customers sought to secure orders for a supply of their anticipated volume requirements each upcoming year.

The remaining, small balance of our graphite electrode customers purchased their electrodes as needed throughout the year at industry spot prices.

We believe we are uniquely capable among graphite electrode producers to pursue our long-term take-or-pay contracting strategy due to our substantial vertical integration into petroleum needle coke production.

We believe we are uniquely capable among graphite electrode producers to pursue our LTA contracting strategy due to our substantial vertical integration into petroleum needle coke production.

All of our petroleum needle coke production is used internally and is not sold to external customers.

Demand for petroleum needle coke increased due to the use of needle coke in lithium-ion batteries for electric vehicles, as well as increased demand for graphite electrodes.

Demand for petroleum needle coke increased due to an increased demand for

IEA Global Electric Vehicle Outlook 2020 for electric vehicle sales and battery pack capacity.

This also assumes approximately 0.8 kilogram anode material per kilowatt-hour of battery pack capacity.

Anode material is assumed to be approximately 50% synthetic and 50% natural graphite, with a yield of 50%.

graphite electrodes and the use of needle coke in lithium-ion batteries for electric vehicles.

Consequently, we expect this limited availability of petroleum needle coke will restrict new graphite electrode production.

Seadrift, our wholly-owned subsidiary acquired in 2010, provides the majority of our petroleum needle coke requirements and produces sufficient needle coke to supply substantially all of the graphite electrode production that we have contracted under our long-term take-or-pay contracts.

We have also hedged the decant oil required to produce substantially all of the graphite electrodes sold under these contracts, providing us substantial visibility into our future raw material costs.

We have also hedged the decant oil required to produce substantially all of the graphite electrodes sold under these contracts, providing us substantial visibility into our raw material costs.

Because the market price of graphite electrodes may be based, in part, on the current or forecasted costs of key raw materials, periods of raw material price volatility may have an impact on the market price.

In particular, as petroleum needle coke represents a significant percentage of the raw material cost of graphite electrodes, the price of graphite electrodes has historically been influenced by the price of petroleum needle coke.

See “Risk Factors—Risks related to our business and industry—Pricing for graphite electrodes has historically been cyclical, current prices are receding from recent highs, and the price of graphite electrodes may continue to decline in the future.” The fixed prices under our contracts prevent us from passing along changes related to our costs of raw materials to our customers.

See “Risk Factors—Risks related to our business and industry—Pricing for graphite electrodes has historically been cyclical, and the price of graphite electrodes may decline in the future.” The fixed prices under our contracts prevent us from passing along changes related to our costs of raw materials to our customers.

See “Risk Factors—Risks related to our business and industry—We are dependent on the supply of petroleum needle coke.

Our results of operations could deteriorate if recent disruptions in the supply of petroleum needle coke continue or worsen for an extended period.” However, as described above, we believe our ability to source all of our petroleum needle coke requirements for these contracts from our Seadrift facility and our hedging of our purchases of decant oil mitigates the impact of periodic shortages and price fluctuations of raw materials.

All of our long-term take-or-pay contracts have fixed prices.

Within this contract framework, our customers agree to purchase a specified volume of product at the price under the contract.

Contract customers are unable to renegotiate or adjust the price under the contract.

Our results of operations could deteriorate if recent disruptions in the supply of petroleum needle coke continue or worsen for an extended period.” However, as described above, we believe our ability to source substantially all of our petroleum needle coke requirements for these contracts from our Seadrift facility and our hedging of our purchases of decant oil mitigates the impact of periodic shortages and price fluctuations of raw materials.

All of our LTAs have fixed prices.

Within this contract framework, our customers are contractually bound to purchase the specified volume of product at the price under the contract.

These fixed prices under the contracts also prevent us from passing along any changes related to the costs of raw materials to contract customers.

As a result of the long-term take-or-pay obligation of the contracts, the

IEA Global Electric Vehicle Outlook 2020 for electric vehicle sales and battery pack capacity.

This also assumes approximately 0.8 kilogram anode material per kilowatt-hour of battery pack capacity.

Anode material is assumed to be approximately 50% synthetic and 50% natural graphite, with a yield of 50%.

customer must purchase the annual contracted volume (or annual volume within the specified range).

As a result of the LTA obligation of the contracts, the customer must purchase the annual contracted volume (or annual volume within the specified range).

In the event the customer does not take delivery of the annual volume specified in the contract, our contracts provide for a capacity payment equal to the product of the number of MTs short of the annual volume specified in the contract multiplied by the price under the contract for that contract year.

In addition to defining annual volumes and prices, these long-term take-or-pay contracts include significant termination payments (typically, 50% to 70% of remaining contracted revenue) and, in certain cases, parent guarantees and collateral arrangements to manage our customer credit risk.

In most cases, the customer can only terminate the contract unilaterally:

In addition to defining annual volumes and prices, these LTAs include significant termination payments (typically, 50% to 70% of remaining contracted revenue) and, in certain cases, parent guarantees and collateral arrangements to manage our customer credit risk.

In most cases, the customer can terminate the contract unilaterally only:

(i) upon certain bankruptcy events;

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Therefore, the likelihood that we will fail to deliver the contracted volume is significantly reduced due to our substantial vertical integration.

For a discussion of certain risks related to our long-term take-or-pay contracting initiative, see “Risk Factors—Risks related to our business and industry—We may be unable to implement our business strategies, including our initiative to secure and maintain long-term take-or-pay customer contracts, in an effective manner.”

For a discussion of certain risks related to our LTA contracting initiative, see “Risk Factors—Risks related to our business and industry—We may be unable to implement our business strategies, including our initiative to secure and maintain LTAs, in an effective manner.”

During the challenging market conditions in 2020, we were able to work with our customers to develop mutually beneficial solutions to their challenges, including volume commitments.

We have negotiated LTA modifications with many of these customers.

We also worked to preserve our rights under the LTAs in a few arbitrations that arose from some non-performance and other disputes during the year.

In addition to the LTAs, we continue to sell available volumes under annual, semi-annual, quarterly and spot purchase orders.

2021 Revenue and production by region and end market

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We sell our products in every major geographic region globally.

Sales of our products to buyers outside the United States accounted for approximately 79% of net sales in 2020 and 77% of net sales in each of 2018 and 2019.

Sales of our products to buyers outside the United States accounted for approximately 79% of net sales in both 2021 and 2020 and 77% in 2019.

Overall, in 2021, we generated 89% of our net sales from EMEA and the Americas .

We believe our long-term take-or-pay contracting strategy provides us with cash flow visibility and has secured a high-quality customer base.

We believe our LTA contracting strategy provides us with cash flow visibility and has secured a high-quality customer base.

We perform financial and credit reviews of all eligible potential customers prior to entering into these contracts.

Less creditworthy customers are required to post a bank guarantee, letter of credit or significant cash prepayment.

Sales from our long-term take-or-pay contracts represented 87% and 80% of our net sales in 2020 and 2019, respectively.

Sales from our LTAs represented 77% and 87% of our net sales in 2021 and 2020, respectively.

Sales and customer service

We differentiate and sell the value of our graphite electrodes primarily based on price, product quality and performance, delivery reliability and customer technical service.

We have a large customer technical service organization, with supporting application engineering and scientific groups and more than 30 engineers and specialists around the world serving in this area.

We have a large customer technical service organization, with supporting application engineering and scientific groups and approximately 30 engineers and specialists around the world serving in this area.

We believe that we are one of the industry leaders in providing value-added technical services to our customers.

Our direct sales force currently operates from ten sales offices located around the world.

Our direct sales force currently operates from 11 sales offices located around the world.

We sell our graphite electrodes primarily through our direct sales force, independent sales representatives and distributors, all of whom are trained and experienced with our products.

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We deploy various demand management and inventory management techniques to seek to ensure that we can meet our customers’ delivery requirements while still maximizing the capacity utilization of our production capacity.

We can experience significant variation in our customers’ delivery requirements as their specific needs vary and change through the year.

We can experience significant variation in our customers’ delivery requirements as their specific needs vary and change throughout the year.

We generally seek to maintain appropriate inventory levels, taking into account these factors as well as the significant differences in manufacturing cycle times for graphite electrode products and our customers’ products.

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Our locations allow us to serve our customers in the Americas and EMEA efficiently.

We believe that we have approximately 202,000 MT of graphite electrode production capacity at our operating sites in Calais, France, Pamplona, Spain, and Monterrey, Mexico.

3 In addition to these three facilities, we have a fourth graphite electrode manufacturing site in St.

Marys, Pennsylvania.

We have begun a series of projects at our Monterrey and St.

Marys facilities that will shift graphitization and machining of additional volume of semi-finished product from Monterrey to St.

We expect these projects will further optimize our manufacturing footprint by improving environmental performance and production flexibility at both facilities and also leverage cost efficiencies at our St.

Marys facility.

Our production capacity is approximately 200,000 MT through our primary manufacturing

facilities in Calais, France, Pamplona, Spain, and Monterrey, Mexico 3 .

In 2021, we shifted graphitization and machining of a portion of semi-finished products from Monterrey to St.

Marys, Pennsylvania, in order to improve environmental performance, production flexibility and overall cost efficiencies across the two facilities .

We believe that our business has the lowest manufacturing cost structure of all of our major competitors, primarily due to the large scale of our manufacturing facilities.

Our manufacturing facilities significantly benefit from their size and scale, work force flexibility, access to attractively-priced sources of power and other key raw materials, and our substantial vertical integration with Seadrift.

Our Calais, Pamplona, Monterrey and St Marys facilities have access to low-cost sources of electricity with essential logistical infrastructure in place, which is a significant element of our manufacturing costs.

Our manufacturing facilities significantly benefit from their size and scale, work force flexibility, access to reliable sources of power and other key raw materials, and our substantial vertical integration with Seadrift.

Our Calais, Pamplona, Monterrey and St.

Marys facilities have access to reliable sources of electricity with essential logistical infrastructure in place, which is a significant element of our manufacturing costs.

Our Seadrift facility currently produces the majority of our petroleum needle coke requirements for our graphite electrode production, allowing us to source our primary raw material internally and at cost, a significant advantage relative to our peers.

Seadrift also produces sufficient needle coke to supply substantially all of the graphite electrode production that we have contracted under our long-term take-or-pay contracts.

Seadrift also produces sufficient needle coke to supply substantially all of the graphite electrode production that we have contracted under our LTAs.

Manufacturing

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The manufacturing process includes six main processes:

screening of raw materials (needle coke) and blending with coal tar pitch followed by forming, or extrusion, of the electrode, baking the electrode, impregnating the electrode with a special pitch that improves strength, re-baking the electrode, graphitizing the electrode using electric resistance furnaces, and machining.

screening of raw materials (needle coke) and blending with coal tar pitch followed by forming, or extrusion, of the electrode;

baking the electrode;

impregnating the electrode with a special pitch that improves strength;

re-baking the electrode;

graphitizing the electrode using electric resistance furnaces;

and machining.

The first baking process converts the pitch into hard coke.

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To improve graphite electrode quality, the electrode is then impregnated with additional coal tar pitch to fill the porosities and baked a second time.

After impregnation and re-baking, the manufacturing process continues with graphitization as the electrodes are heated at 5000° F in a special longitudinal furnace to

3 Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance outage.

Actual production may vary.

convert the carbon into graphite.

After impregnation and re-baking, the manufacturing process continues with graphitization as the electrodes are heated at 5,000° F in a special longitudinal furnace to convert the carbon into graphite.

The graphitization cycle removes additional impurities and improves the electrodes’ key qualities:

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While Seadrift has purchased a substantial majority of its raw material inventory from a limited number of suppliers in recent years, we believe that there is a large supply of suitable decant oil in the United States available from a variety of sources.

In addition, we use derivatives to hedge the decant oil required to produce substantially all of the graphite electrodes sold under our long-term take-or-pay contracts, providing us with substantial visibility into our future raw material costs.

In addition, we use derivatives to hedge the decant oil required to produce substantially all of the graphite electrodes sold under our LTAs, providing us with substantial visibility into our raw material costs.

We purchase the electric power used in our manufacturing processes from local suppliers under contracts with pricing based on rate schedules or price indices.

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Research and development

We have 135 years of experience in the R&D of graphite- and carbon-based solutions.

We have over 135 years of experience in the R&D of graphite- and carbon-based solutions.

By focusing our management’s attention and R&D spending exclusively on the graphite electrode business, we have been able to improve the quality of our graphite electrodes, repositioning ourselves as an industry leader and improving our relationships with strategic customers.

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We believe that the above strengths and capabilities provide us with a competitive advantage.

3 Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage.

Actual production may vary.

Intellectual property

We believe that our intellectual property, consisting primarily of patents and proprietary know-how, provides us with competitive advantages and is important to our growth opportunities.

Our intellectual property portfolio is extensive, with over 150 carbon and graphite U.S.

and foreign patents and published patent applications, which we believe is more than any of our major competitors in the businesses in which we operate.

Our intellectual property portfolio is extensive, with over 135 U.S.

and foreign patents and published patent applications.

We own, have the right to use or have obtained licenses for various trade names and trademarks used in our businesses.

For example, the trade name and trademark UCAR are owned by Union Carbide Corporation (which was acquired by Dow Chemical Company) and are licensed to us on a worldwide, exclusive and royalty-free basis until 2025.

This particular license automatically renews for successive ten-year periods.

For example, the UCAR trademark is owned by Union Carbide Corporation ("Union Carbide") (which was acquired by Dow Chemical Company) and is licensed to us on a worldwide, exclusive and royalty-free basis until 2025.

This particular license automatically renews for successive 10 year periods.

It permits non-renewal by Union Carbide at the end of any renewal period upon five years’ notice of non-renewal.

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Regulatory Matters

Environmental

Our facilities and operations are subject to a wide variety of federal, state, local and foreign environmental laws and regulations.

These laws and regulations relate to air emissions, water discharges and solid and hazardous waste generation, treatment, storage, handling, transportation and disposal;

the presence of wastes and other substances;

the reporting of, responses to and liability for, releases of hazardous substances into the environment;

and the import, production, packaging, labeling and transportation of products that are defined as hazardous or toxic or otherwise believed to have potential to harm the environment or human health.

These laws and regulations (and the enforcement thereof) are periodically updated and are becoming increasingly stringent.

We have incurred substantial costs in the past, and will continue to incur additional costs in the future, to comply with these legal requirements.

We believe that we are currently in compliance in all material respects with the federal, state, local and foreign environmental laws and regulations to which we are subject.

We have experienced some level of regulatory scrutiny at most of our current and former facilities and, in some cases, have been required to take or are continuing to take corrective or remedial actions and incur related costs, and may experience further regulatory scrutiny, and may be required to take further corrective or remedial actions and incur additional costs, in the future.

Although it has not been the case in the past, these costs could have a material adverse effect on us in the future.

Further, laws and regulations in various jurisdictions impose or may impose, as the case may be, environmental monitoring, reporting and/or remediation requirements if operations cease or property is transferred or sold.

We have sold or closed a number of facilities that had operated solid waste management units (landfills) on-site.

In most cases where we divested the properties, we have retained ownership of on-site landfills.

When our landfills were or are to be sold, we negotiate for contractual provisions providing for financial assurance to be maintained, which we believe will be adequate to protect us from any potential future liability associated with these landfills.

When we have closed landfills, we believe that we have done so in material compliance with applicable laws and regulations.

We continue to monitor these landfills and observe any reporting obligations we may have with respect to them pursuant to applicable laws and regulations.

To date, the costs associated with the retained landfills have not had, and we do not anticipate that future costs will have, a material adverse effect on us.

We have received and may in the future receive notices from the U.S.

Environmental Protection Agency (“EPA”) or state environmental protection agencies, as well as claims from other parties, alleging that we are a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (the “Superfund Act”) and similar state laws for past and future remediation costs at waste disposal sites and other contaminated properties.

Although Superfund Act liability is joint and several, in general, final allocation of responsibility at sites where there are multiple PRPs is made based on each PRP’s relative contribution of hazardous substances to the site.

Based on information currently available to us, we believe that any potential liability we may have as a PRP will not have a material adverse effect on us.

Certain of our U.S.

facilities have been or will be required to comply with reporting requirements under the Federal Clean Air Act and standards for air emissions that have been or may be adopted by the EPA and state environmental protection agencies pursuant to new and revised regulations, including the possible promulgation of future maximum achievable control technology standards that apply specifically to our manufacturing sector(s), or more generally to our operation(s) or equipment.

Achieving compliance with the regulations that have been promulgated to date has resulted in the need for additional administrative and engineered controls, changes to certain manufacturing processes, and increased monitoring and reporting obligations.

Similar foreign laws and regulations have been or may also be adopted to establish new standards for air emissions, which may also require best available control technology on our manufacturing operations outside the United States.

Based on information currently available to us, we believe that compliance with these regulations will not have a material adverse effect on us.

International accords, foreign laws and regulations, and U.S.

federal, state and local laws and regulations have been enacted to address concerns about the effects that CO2 emissions and other identified Green House Gases ("GHGs") may have on the environment and climate worldwide.

These effects are widely referred to as climate change.

The international community has taken actions to address climate change issues on a global basis.

In particular, in December 2015, the 21st Conference of Parties for the UNFCC concluded with more than 190 countries adopting the Paris Agreement, which then came into force and was legally binding on the parties in November 2016.

The Paris Agreement sets a goal of limiting the increase in global average temperature and consists of two elements:

a legally binding commitment by each participating country to set an emissions reduction target, referred to as “nationally determined contributions” (“NDCs”), with a review of the NDCs that could lead to updates and enhancements every five years beginning in 2023, and a transparency commitment requiring participating countries to disclose in full their progress.

Our activities in the European Union ("EU") are subject to the EU

Emissions Trading Scheme (“ETS”), and it is likely that requirements relating to GHG emissions will become more stringent and will continue to expand to other jurisdictions in the future as NDCs under the Paris Agreement are implemented.

After withdrawing from the Paris Agreement in 2019, the United States is now rejoining this global initiative.

The EPA currently requires reporting of GHG emissions from certain sources and, in the future, the EPA or states may impose permitting obligations on new sources or existing sources that seek to modify their operations that would otherwise result in an increase in certain GHG emissions.

In the EU, the ETS, which was initially enacted under the provisions of the 1997 Kyoto Protocol, requires certain listed energy-intensive industries to participate in an international “cap and trade” system of GHG emission allowances.

A third phase of the EU ETS under Directive 2009/29/EC, covers the period 2013 to 2020 and instituted a number of program changes.

EU Member States brought into force the necessary laws, regulations and administrative provisions to comply with this EU Directive.

Carbon and graphite manufacturing is still not a covered industry sector in the revised Annex 1 of directive 2009/29/EC.

However, one of our European manufacturing operations was required to comply with these provisions under a more general fuel combustion category, because its combustion units met the applicability levels.

The operations subject to these provisions were eligible to receive free CO2 emission allowances under the member state allocation program.

On November 9, 2017, to implement the EU’s NDC under the Paris Agreement and other GHG commitments, the European Parliament and Council announced a provisional agreement to revise and make more stringent the ETS during the Phase 4 period of 2021 to 2030.

Among other changes, the Phase 4 provisions would further accelerate reduction in the current oversupply of allowances in the ETS market and establish further protections against the risks of carbon leakage.

After extensive negotiations, the European Parliament and the Council formally supported the revision in February 2018.

The revised EU ETS Directive (Directive (EU) 2018/410) entered into force on April 8, 2018.

The EU’s current target for 2030 is to achieve a GHG reduction of at least 40% compared to 1990 levels.

In addition, in December 2019, the European Commission presented the Communication on The European Green Deal announcing several upcoming legislative proposals for the EU 2050 climate neutrality objective and for increasing the EU 2030 GHG emissions reduction target to at least 50% and towards 55% compared to 1990 levels.

Implementation of Phase 4 could increase the cost of our current GHG allowances and require us to obtain additional allowances.

Based on information currently available to us, we believe that compliance with international accords, U.S.

and foreign laws and regulations concerning climate change which have been promulgated, or that could be promulgated in the future, including Phase 4 and any further GHG initiatives of the ETS, will not have a material adverse effect on us.

Some of our products (including our raw materials) are subject to extensive environmental and industrial hygiene regulations governing the registration and safety analysis of their component substances.

For example, in connecting with the EU's REACH or the EU’s Classification, Labelling and Packaging Regulation, any key raw material, chemical or substance, including our products, could be classified as having a toxicological or health-related impact on the environment, users of our products, or our employees.

Coal tar pitch, which is classified as a substance of very high concern under REACH, is used in certain of our processes, but in a manner that we believe does not require us to obtain a specific authorization under the REACH guidelines.

Similarly, the U.S.

and other countries are currently enacting new or amending existing chemical control laws.

As a company with global operations, we are subject to the laws and regulations of the United States and the multiple foreign jurisdictions in which we operate or conduct business as well as the rules, reporting obligations and interpretations of all such requirements and obligations by various governing bodies, which may differ among jurisdictions.

These include federal, state, local and foreign environmental laws and regulations, increasingly complex and changing laws and regulations enacted to protect business and personal data in the United States and other jurisdictions, including the European Union's General Data Protection Regulation, anti-corruption laws, import/export controls, anti-competition laws, U.S.

securities laws and a variety of regulations including work-related and community safety laws.

We believe we operate in compliance in all material respects with applicable laws and regulations, and maintaining compliance with them is not expected to materially affect our capital expenditures, earnings and competitive position.

Estimates of future costs for compliance with U.S.

and foreign environmental protection laws and regulations, and for environmental liabilities, are necessarily imprecise due to numerous uncertainties, including the impact of potential new laws and regulations, the availability and application of new and diverse technologies, the extent of insurance coverage, the potential discovery of contaminated properties, or the identification of new hazardous substance disposal sites at which we may be a PRP and, in the case of sites subject to the Superfund Act and similar state and foreign laws, the final determination of remedial requirements and the ultimate allocation of costs among the PRPs.

and foreign environmental protection laws and regulations, and for environmental liabilities, are necessarily imprecise due to numerous uncertainties, including the impact of potential new laws and regulations, the availability and application of new and diverse technologies, the extent of insurance coverage, the potential discovery of contaminated properties, or the identification of new hazardous substance disposal sites at which we may be a potentially responsible party ("PRP") and, in the case of sites subject to the Comprehensive Environmental Response, Compensation and Liability Act and similar state and foreign laws, the final determination of remedial requirements and the ultimate allocation of costs among the PRPs.

Subject to the inherent imprecision in estimating such future costs, but taking into consideration our experience to date regarding environmental matters of a similar nature and facts currently known, we estimate that our costs and capital expenditures (in each case, before adjustment for inflation) for environmental protection regulatory compliance programs and for remedial response actions will not be material over the next several years.

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We adjust the accrual as new remedial actions or other commitments are made, as well as when new information becomes available that changes the prior estimates previously made and we believe our existing accruals are reasonable.

We are required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data in the United States and other jurisdictions.

This includes the EU’s General Data Protection Regulation ("GDPR"), which enforces rules relating to the protection of processing and movement of personal data.

The interpretation and enforcement of such regulations are continuously developing and evolving, and there may be uncertainty with respect to how to comply with them.

Foreign Corrupt Practices Act ("FCPA") prohibits bribery of public officials to benefit business interests.

We are also subject to similar anticorruption laws in other countries where we do business.

We operate and sell our products in countries that are rated as high-risk for corruption, which creates the risk of unauthorized conduct by our employees, distributors, or other third-party intermediaries that could be in violation of the FCPA or similar local regulations.

We comply with the FCPA’s requirements to make and keep books and records that accurately and fairly reflect our transactions and to devise and maintain an adequate system of internal accounting controls.

Import/Export Controls

We are subject to import/export controls, tariffs, and other trade-related regulations and restrictions in the countries in which we have operations or otherwise do business (whether directly or through resellers).

In particular, our business activities must comply with U.S.

Export Administration Regulations and sanctions administered by the Office of Foreign Asset Controls of the U.S.

Treasury Department ("OFAC").

These regulations are complex and require extensive compliance efforts and expenditures.

Furthermore, our compliance with these regulations is subject to audit or investigation by governmental authorities and, from time to time, we receive formal and informal inquiries from government agencies and regulators regarding our compliance.

These controls, regulations, and restrictions have had, and we believe may continue to have, an impact on our business.

Anticompetition Laws

We are subject to competition laws in the various jurisdictions where we operate.

In the U.S., this includes the Sherman Antitrust Act and related federal and state antitrust laws.

These laws and regulations generally prohibit competitors from fixing prices, boycotting competitors, or engaging in other conduct that unreasonably restrains competition.

In many jurisdictions, compliance with these competition laws is of special importance to us, and our operations may come under scrutiny by competition law authorities due to our competitive position in those jurisdictions.

Securities Laws

We must comply with a wide variety of federal and state securities laws and Delaware corporate law, as well as NYSE rules and regulations.

We continue to engage in collaboration with key stakeholders to adapt to changing regulatory expectations.

We are subject to a variety of regulations including work-related and community safety laws in the U.S.

and other jurisdictions where we operate.

In the U.S., the Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees and established the Occupational Safety and Health Administration ("OSHA") in the Department of Labor.

Government regulations are subject to change in the future, and accordingly we are unable to assess the possible effect of compliance with future requirements or whether or our compliance with such regulations will materially impact our business, results of operations, or financial condition.

Human Capital Resources

As of December 31, 2021, we had 1,353 employees (excluding contractors), 867 of which were hourly employees.

A total of 423 employees were in Europe (including Russia), 607 were in Mexico and Brazil, two were in South Africa, 247 were in the United States and six were in the Asia Pacific region.

A total of 481 employees were in Europe (including Russia), 573 were in Mexico and Brazil, two were in South Africa, 290 were in the United States and seven were in the Asia Pacific region.

As of December 31, 2021, approximately 557 employees, or 41%, of our worldwide employees, were covered by collective bargaining or similar agreements that expire, or are subject to renegotiation, at various times through December 31, 2022.

We believe that, in general, our relationships with our employees' unions are good and that we will be able to renew or extend our collective bargaining or similar agreements on reasonable terms as they expire.

We believe that, in general, our relationships with our employees' unions are good and that we will be able to renew or

extend our collective bargaining or similar agreements on reasonable terms as they expire.

We have not had any material work stoppages or strikes during the past decade.

The health and safety of our global team is our highest priority and is a core value of the Company.

The health and safety of our global team is a top priority and is a core value of the Company.

Our comprehensive programs strive to achieve zero injuries and no harm done.

Leading indicator metrics include training, risk identification and remediation, pre-task planning and planned job observations.

Managers report weekly on their key contacts with employees to emphasize our shared commitment to Health, Safety & Environmental performance.

In the spirit of

continuous improvement, regular inspections, internal reviews and corporate audits are conducted to foster compliance with our high standards.

Our global Health, Safety and Environmental Protection ("HS&EP") Policy applies to all employees, contractors, and visitors, and governs our actions and decisions every day.

We also have a Code of Conduct and Ethics for Suppliers and Contractors that includes HS&EP guidelines required for doing business with GrafTech.

GrafTech’s focus on HS&EP is a top priority for all employees.

We have built risk recognition into our HS&EP programs.

From pre-job planning, safety walks and inspections, planned job observations, or training employees on health and safety best practices, we strive to identify and mitigate risks.

In the spirit of continuous improvement, regular inspections, internal reviews and corporate audits are conducted to foster compliance with our high standards.

Available Information

We make available, free of charge, on or through our web site, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file them with, or furnish them to, the U.S.

We make available, free of charge, on or through our website, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after we electronically file them with, or furnish them to, the U.S.

Securities and Exchange Commission (“SEC”).

We maintain our website at http://www.graftech.com .

The information contained on our web site is not part of this Report.

The information contained on our website is not part of this Report.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business