GrafTech International will shutter its graphite electrode manufacturing facility in Monterrey, Mexico, in a move to address structural overcapacity in the graphite electrode industry.

The company said it will wind down operations at the facility in phases through the second quarter of 2027 and intends to pursue a sale of the property once the facility is closed.

GrafTech said its decision was a response to overcapacity in the industry, driven by capacity expansion in China and India that outpaced demand, as well as increased exports from the two countries increasing competition. Graphite electrodes are widely used to conduct power in electric arc furnaces.

"These factors have weighed on graphite electrode pricing and industry returns for several years," the company said Monday. "While GrafTech and certain other industry participants have taken steps to reduce capacity, the Company believes that further supply discipline is necessary to support a healthier industry and a more sustainable supply-demand balance."

The company will incur one-time costs of around $20 million to $25 million, reflecting mostly severance and employee-related costs and expected to occur by the end of next year.

The move will also unlock around $20 million to $25 million in annual cash savings by 2028, excluding the impact of the one-time costs, as well as a $5 million reduction in annual capital expenditures beginning next year, the company said.

GrafTech also expects to realize a one-time release of $20 million to $25 million in working capital, expected to be mostly recognized in 2028.

The company said the closure will directly reduce its annual graphite electrode production capacity by around 35,000 metric tons, and that a change in the production mix of a facility in Pamplona, Spain will reduce the capacity by another roughly 16,000 metric tons. In total, it expects an annual production capacity of around 127,000 metric tons following the closure.

GrafTech said that production in Pamplona and another facility in Calais, France are expected to meet current and projected customer demand for graphite electrodes following the closure of the Monterrey facility.

Shares of GrafTech rose 5.3% to $7.58 in after-hours trading on Monday. The stock closed down 2.8% at $7.20, down 54% this year.