GrafTech International Ltd.

Ladies and gentlemen, thank you for standing by and welcome to the graph tech second quarter 2021 earnings conference call and webcast. At this time, all participants are in a listen only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, simply press star followed by the number one on your telephone keypad. Please be advised that today's call is being recorded. If you require any further assistance, please press star zero. Thank you. I would now like to hand the conference over to Wendy Watson, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Graf Tech International's second quarter 2021 conference call. On with me today is Dave Rintoul, Graf Tech's Chief Executive Officer, Quinn Coburn, Chief Financial Officer, and Jeremy Halford, Senior Vice President, Operations and Development. Dave will begin with a review of our safety performance current industry conditions, and our demand and production levels. Jeremy will discuss operational matters and give an update on our ESG initiative. Quinn will cover financial details, and Dave will close with final remarks and open the call to questions. Turning to our first slide. As a reminder, some of the matters discussed on this call may include forward-looking statements regarding, among other things, results 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.graftec.com. A replay of the call will also be available on our website. I'll now turn the call over to Dave.

Thank you, Wendy. Good morning, everyone, and thank you for joining our second quarter earnings call. I hope you, your families, and your colleagues are all well. We begin, as we always do, with safety. Our year-to-date total recordable injury rate is 0.43 through the end of the second quarter, indicating our continued focus on the safety of each and every team member. Health and safety excellence is a core value of Graf Tech. As you can see from this chart, we have made meaningful improvement over the last few years, and our ultimate goal is zero injuries with every employee going home safely every day. Our team continues to be diligent and thorough in our COVID-19 controls and protocols. I am proud of the Graf Tech team and thank each of you for your continued focus and vigilance. Now turning to slide four. Industry conditions remain positive across key indicators. We continue to see improvement in both pricing and capacity utilization rates in the global steel markets during the second quarter. Steel industry pricing continues to increase with most types of steel at or near all-time highs. U.S. hot-rolled coal values are currently over $1,875 per ton, up $375 over an additional 25% since we reported first quarter 2021 earnings. The global steel manufacturing utilization rate outside of China was 75% in the second quarter compared to 73% in the first quarter of this year and 56% in the second quarter of 2020. In the U.S., the steel industry utilization rate improved to 80% in the second quarter from 77% in the first quarter of this year and continues to move upward. Global steel production outside of China was approximately 221 million tons in the second quarter of 2021 compared to approximately 216 million tons in the first quarter according to the World Steel Association. The continued improvement in the global steel industry utilization rates along with the normalization of steel producer inventories of graphite electrodes is driving increased demand for graphite electrodes across geographies. As a result of the increased demand, we are seeing a steady improvement in graphite electrode pricing after bottoming in the first quarter of this year. We are also seeing rising market prices for petroleum needle coke. The strong graphite electrode demand and rising prices continue to provide us with confidence in our outlook for higher realized non-LTA prices in the second half of 2021 and our expectation of continued improvement into 2022. As I mentioned, we are experiencing strong demand for our products and our commercial team remains focused on providing superior services and solutions to our valued customers in this improving environment. We have not changed our estimates for graphite electrode sales and volumes under our LTAs. Now turning to slide six. We are pleased with the sequential and year-over-year improvement we delivered in our second quarter production and sales volumes. In response to strong demand for our graphite electrodes, we produced 44,000 metric tons of electrodes in the second quarter, up 22% compared to the first quarter and 33% compared to the second quarter of 2020. Sales volumes of graphite electrodes rose to 43,000 metric tons in the second quarter, up 16% compared to the first quarter and 39% compared to the second quarter of last year. Our second quarter shipments were comprised of 27,000 metric tons of graphite electrodes under our LTAs, at an average approximate price of $9,500 per ton, and 16,000 metric tons of non-LTA sales at an average approximate price of $4,100 per metric ton. As a reminder, the pricing we recognize in sales and income lag negotiated prices. Thus, the second quarter $4,100 per ton average of non-LTA pricing represents price negotiations that actually took place in late 2020 and early 2021. Net sales in the second quarter increased 18% compared to the second quarter of 2020 to $331 million. I'll now turn the call over to Jeremy to discuss operating items and our ESG progress over the past quarter. Jeremy?