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GrafTech International (EAF 31.28%) has been cleared to resume production at its Mexican facility, resolving a major issue that had hung over the shares of the graphite electrode maker. The company’s shares spiked higher as a result, trading up as much as 23% on Monday morning.
GrafTech is responsible for one of the key components in electric-arc steelmaking, which is a fast-growing part of the steel industry because it is costs less and requires less energy. The company makes the graphite electrodes that power electric-arc furnaces.
But GrafTech’s ability to supply the industry came into doubt in September, when Mexican regulators suspended production at its Monterrey facility due to alleged noncompliance with regulations. GrafTech shares plunged on the news. The Mexican operation represents about 60,000 metric tons of production annually, or about 30% of GrafTech’s total annual production.
Late Friday, GrafTech announced the conditional lifting of that suspension, allowing it to resume production immediately.
“We are pleased to have received an order that allows for the immediate restart of our operations in Mexico,” CEO Marcel Kessler said in a statement. “We remain committed to being a good corporate citizen and positively supporting the communities in which we operate, and we look forward to expanding our engagement with the Monterrey community for many years to come.”
The resumption is contingent on GrafTech adhering to a number of conditions set by local regulators, and submitting an environmental impact study. The company said the suspension will impact its ability to fulfill about 10,000 to 12,000 metric tons of customer orders.
GrafTech plans to discuss what the suspension will mean to 2023 early next year, when it releases fourth-quarter results. The company’s Mexican operations should remain on investor radars, but for now the market is breathing a sigh of relief that the suspension was not worse.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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