Graphite Electrode Producer GrafTech Aims to Raise US$907 Million in IPO

Graphite electrode producer GrafTech International is seeking to raise US$907 million in an IPO, the company announced on Wednesday (April 4).

The offering is expected to be priced between US$21 to US$24 per share, with 37.8 million shares released. GrafTech, which intends to list on the New York Stock Exchange under the symbol “EAF,” is targeting a valuation of up to US$7.3 billion.

According to the regulatory filing, the bankers on the deal have the option to exercise an overallotment that could bring the total proceeds from the offering to more than US$1 billion. JPMorgan (NYSE:JPM) and Credit Suisse (NYSE:CS) are acting as joint lead underwriters for the offering.

GrafTech makes graphite electrode products, which are used to melt scrap in electric arc furnaces to produce new steel. Founded in 1886, it has manufacturing facilities in France, Spain, Mexico and the US.

The Ohio-based company was bought by Brookfield Asset Management in 2015 with an equity investment of about US$855 million. At the time, steel prices were under pressure on the back of record exports by China.

That said, graphite electrode prices have been surging recently due to strong demand and a shortage in supply. In fact, about 20 percent of graphite electrode industry capacity outside of China has been closed since 2014, supporting an uptick in prices.

As a result of this improvement in market conditions, GrafTech expects to increase its production capacity by 21 percent to reach 202,000 MT in 2018. Total global production capacity outside of China is approximately 800,000 MT, the company said.

GrafTech’s contracts averaged about US$4,500 per MT from 2006 to 2016, but its weighted average contract price has more than doubled since then, reaching US$9,700 per MT, Brookfield said in February.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.