BOF
BranchOut Food Inc. Common Stock
stock NASDAQ

**Description of recommendation:**
I am recommending the equity of the largest competitor in a cyclical, concentrated, industry that is trading at record lows, but that has two major long-term tailwinds: re-shoring supply chains and environmental sustainability.
**Description of industry/business:**
Graftech has been written up here in the past, but to summarize it is the dominant non-China manufacturer of graphite electrodes. It was levered by Brookfield and then IPO’d at a cyclical peak with long term agreements in place. When the cycle turned, Graftech burned bridges with longtime customers, and it has been dealing with a debt-ridden balance sheet and Chinese overcapacity ever sense.  Along with UHP electrode capacity of 178K tons, Graftech owns Seadrift Coke, one of two US companies capable of producing petroleum needle coke. Seadrift produces 140K tons currently, with approved permits for expansion. 
Graphite electrodes are carbon products required to make steel using an electric arc furnace – 1.7 kg on average to produce 1 ton of steel. Greenfield electrode plants have not been added in decades outside of China. 
After COVID hit and China’s real estate bust led to exporting overcapacity, prices and volumes for Western suppliers have been lousy. Today, Graftech is unpopular, down almost 95% from its 10 year high during the last cyclical peak. I believe electrode prices are now past their trough, volumes are increasing, and as a highly leveraged stub, Graftech’s equity value is so low that it has the potential to appreciate greatly if the supply/demand balance improves. 
The supply demand picture excluding China (discussed later) is clear, there are 771K tons of supply and 650K tons of demand (of those 771K tons 660K are UHP where Graftech primarily competes). Graftech accounts for roughly 23% of supply, followed by 4 competitors (two Indian, two Japanese) that account for another 50%, and the remainder by small producers. Excluding China, supply and demand are in balance, however the issue over the last few years is the flood of Chinese exports. Graftech estimates that China produces 800K tons of UHP electrodes per year, of which a little less than 400K are exportable for use in western arc furnaces. They estimate that China is now serving 1/3 of annual demand excluding China—leading to an excess western supply of 216K ton.
Two primary reasons that I believe Graftech will sell many more electrodes at higher prices over the next five years:  
1)        China’s excess 200K tons are being tariffed/dutied out: 
a.        The USA  currently has an antidumping/CVD case against Chinese/Indian competitors that supply an estimated 20% of US market--that I estimate to be approximately 114K tons of electrodes per year (94 million steel tons, 72% arc furnace). Rates are not final, but there’s a decent possibility that China will effectively be locked out of US market which will increase western supplier demand by 20K tons.
b.        A similar trade case is happening in Brazil that could potentially increase western demand by 15K tons of electrodes (34 million steel tons, 24% arc furnace)
c.        In the EU, sales from Chinese suppliers are now unprofitable with antidumping rate for final seller raised from 23% to 74.9%. They also just put a 75% anti-dumping duties on artificial graphite blocks/cylinders that were being imported semi-finished to avoid duties. 
d.        In Japan, an anti-dumping duty of 95% was placed on Chinese electrodes that may increase western supplier demand by up to 35K tons (81M tons, 25% arc furnace).
e.        I believe more countries are likely to diversify from Chinese electrodes.
2)        Organic growth in arc furnace – world blast furnace capacity is 1.5 billion tons a year. HEG Ltd expects another 100M tons of arc furnace steel to come online between now and 2030 increasing electrode demand by 150-200K. That in of itself, without removing a single Chinese electrode from western market, will bring parity to the supply/demand balance. The EU has passed legislation, effective 2026, that adds a carbon tax to BOF produced steel, making it more expensive to import than arc furnace by an estimated 45 Euros per ton. This should nudge non-EU countries to utilize more arc furnace. Reshoring steel production from China, which produces 10% of steel by arc furnace to western countries that produce arc furnace steel at higher rates, should also lead to natural electrode demand. The EU is decreasing tariff free steel quota reductions by 47% in July and doubling its tariff rate from 25 to 50%. For example, if the EU grows domestic utilization from 67% to goal of 80%, that 25M ton increase @ 50% arc furnace adds 21K tons to electrode demand. In the US, Nippon Steel purchased US Steel and paid recognition to the fact that the US only produces 55% of steel demanded given imports of finished products containing steel, and they except that number to increase in the future.
To summarize, China is going to be excluded from at least 70K tons they now fill (enough to get Graftech to 100% capacity) and \~200K tons are being added organically. 
It’s notable that the industry’s two Indian competitors, HEG and Graphite India, each purchased  \~ 10% of its equity in the open market—Graphite India adding to its position as recently as Q1 2026. The fact that Graftech’s two main competitors each took a 10% stake in the equity is telling – these Indians are not going to piss away money for the sake of it. 
**Financials**
Graftech’s has $1.1B coming due at the end of 2029, $120M cash, with plans to draw an additional $208M this year. Their yearly cash burn consists of  $90M of interest/benefit expense, $35M of annual cap-ex, and $60M SGA/R&D. While not as low as their Indian competitors with government subsidized electricity, their cash COGS is approximately $3700 per ton. This year they expect to sell around 117K tons at an average price of around $4400/ton, not including their March price increase on uncommitted volume of $600-1200/ton. What will be important to watch is how their upcoming negotiations for 2027 unfold. If the US’s antidumping/CVD rates against China/India limit their sales in the US, Graftech can potentially sell ½ their 2027 supply at $7000K a ton and share the market with Resonac Graphite and Tokai Carbon. This will leave them to sell roughly 50K tons into the EU at what we expect to be materially higher prices as EU’s policies stick. Revenue of $700M and EBITDA of $200M is very possible, not accounting for potential sales volume gains.  
The debt appears high now at this point in the cycle, but a combination of retiring/refinancing should not be a problem so long as volumes and prices track higher in 2027 and beyond. 
**Valuation**
At a current market cap of $203M, Graftech’s EV is only priced at $6600 per ton of capacity, not including Seadrift. 
 During the last cyclical upturn in 2018 and 2019, Graftech had operating income of $1.1B and $970M respectively. Its low market value relative to debt makes this a leveraged play that will produce outsized returns if thesis proves correct. They’re capable of $1B in revenues if they run at 80% capacity at an average sales price of $7000 a ton, which is what management expects they should trade at in relation to current steel prices in US/EU. By all measures, the company is incredibly cheap and there’s asymmetric upside to the equity if conditions improve. Incremental price betterment all drops to the bottom line. 
In 2018 they estimated capacity replacement cost to be $10K/ton. Adjusted for inflation today puts that at $13.5K/ton + Seadrift at $1.07B (purchased for $700M in 2010)= $3.47B. Subtracting $1.1 in debt gives equity value of $2.37B ($91/share).
Recently, Graftech recently filed a $150M shelf and has contracted Evercore to place $50M. It’s too early to speculate what this will do to shares outstanding, not knowing if they’re putting this in place for unexpectedly good news. In a bear scenario, they issue 5M shares at $10, lowering adjusted replacement cost to $75/share. I cannot rule out this capital will be used to produce more volume for 2027’s orders.
**Thesis Risks**
China continues to flood the market with cheap electrodes and the west cannot stop them. I don’t see this happening given the reshoring momentum and worldwide anger from China dumping. Countering this, China does want to expand their arc furnace production to 20% by 2030, which will soak up an excess 153K tons of electrodes. Same logic applies to India, as their producers are now being lumped with China’s for dumping and unfair government subsidies. 
The biggest risk is that they run out of cash before the cycle truly turns. If they do run out of money, I think there’s a strong case that in a China ring-fenced industry, even ½ of their 2018 replacement cost of $10,000 per mt capacity + Seadrift gets to a value of $1.6B, $400M more than its current enterprise value. 
Obvious macro risks are that the economy slows and steel demand dips. There is also the possibility that new arc furnace plants are delayed or cancelled, although flat-out cancellation is not likely.
 
 

**Description of recommendation:**
I am recommending the equity of the largest competitor in a cyclical, concentrated, industry that is trading at record lows, but that has two major long-term tailwinds: re-shoring supply chains and environmental sustainability.
**Description of industry/business:**
Graftech has been written up here in the past, but to summarize it is the dominant non-China manufacturer of graphite electrodes. It was levered by Brookfield and then IPO’d at a cyclical peak with long term agreements in place. When the cycle turned, Graftech burned bridges with longtime customers, and it has been dealing with a debt-ridden balance sheet and Chinese overcapacity ever sense.  Along with UHP electrode capacity of 178K tons, Graftech owns Seadrift Coke, one of two US companies capable of producing petroleum needle coke. Seadrift produces 140K tons currently, with approved permits for expansion. 
Graphite electrodes are carbon products required to make steel using an electric arc furnace – 1.7 kg on average to produce 1 ton of steel. Greenfield electrode plants have not been added in decades outside of China. 
After COVID hit and China’s real estate bust led to exporting overcapacity, prices and volumes for Western suppliers have been lousy. Today, Graftech is unpopular, down almost 95% from its 10 year high during the last cyclical peak. I believe electrode prices are now past their trough, volumes are increasing, and as a highly leveraged stub, Graftech’s equity value is so low that it has the potential to appreciate greatly if the supply/demand balance improves. 
The supply demand picture excluding China (discussed later) is clear, there are 771K tons of supply and 650K tons of demand (of those 771K tons 660K are UHP where Graftech primarily competes). Graftech accounts for roughly 23% of supply, followed by 4 competitors (two Indian, two Japanese) that account for another 50%, and the remainder by small producers. Excluding China, supply and demand are in balance, however the issue over the last few years is the flood of Chinese exports. Graftech estimates that China produces 800K tons of UHP electrodes per year, of which a little less than 400K are exportable for use in western arc furnaces. They estimate that China is now serving 1/3 of annual demand excluding China—leading to an excess western supply of 216K ton.
Two primary reasons that I believe Graftech will sell many more electrodes at higher prices over the next five years:  
1)        China’s excess 200K tons are being tariffed/dutied out: 
a.        The USA  currently has an antidumping/CVD case against Chinese/Indian competitors that supply an estimated 20% of US market--that I estimate to be approximately 114K tons of electrodes per year (94 million steel tons, 72% arc furnace). Rates are not final, but there’s a decent possibility that China will effectively be locked out of US market which will increase western supplier demand by 20K tons.
b.        A similar trade case is happening in Brazil that could potentially increase western demand by 15K tons of electrodes (34 million steel tons, 24% arc furnace)
c.        In the EU, sales from Chinese suppliers are now unprofitable with antidumping rate for final seller raised from 23% to 74.9%. They also just put a 75% anti-dumping duties on artificial graphite blocks/cylinders that were being imported semi-finished to avoid duties. 
d.        In Japan, an anti-dumping duty of 95% was placed on Chinese electrodes that may increase western supplier demand by up to 35K tons (81M tons, 25% arc furnace).
e.        I believe more countries are likely to diversify from Chinese electrodes.
2)        Organic growth in arc furnace – world blast furnace capacity is 1.5 billion tons a year. HEG Ltd expects another 100M tons of arc furnace steel to come online between now and 2030 increasing electrode demand by 150-200K. That in of itself, without removing a single Chinese electrode from western market, will bring parity to the supply/demand balance. The EU has passed legislation, effective 2026, that adds a carbon tax to BOF produced steel, making it more expensive to import than arc furnace by an estimated 45 Euros per ton. This should nudge non-EU countries to utilize more arc furnace. Reshoring steel production from China, which produces 10% of steel by arc furnace to western countries that produce arc furnace steel at higher rates, should also lead to natural electrode demand. The EU is decreasing tariff free steel quota reductions by 47% in July and doubling its tariff rate from 25 to 50%. For example, if the EU grows domestic utilization from 67% to goal of 80%, that 25M ton increase @ 50% arc furnace adds 21K tons to electrode demand. In the US, Nippon Steel purchased US Steel and paid recognition to the fact that the US only produces 55% of steel demanded given imports of finished products containing steel, and they except that number to increase in the future.
To summarize, China is going to be excluded from at least 70K tons they now fill (enough to get Graftech to 100% capacity) and \~200K tons are being added organically. 
It’s notable that the industry’s two Indian competitors, HEG and Graphite India, each purchased  \~ 10% of its equity in the open market—Graphite India adding to its position as recently as Q1 2026. The fact that Graftech’s two main competitors each took a 10% stake in the equity is telling – these Indians are not going to piss away money for the sake of it. 
**Financials**
Graftech’s has $1.1B coming due at the end of 2029, $120M cash, with plans to draw an additional $208M this year. Their yearly cash burn consists of  $90M of interest/benefit expense, $35M of annual cap-ex, and $60M SGA/R&D. While not as low as their Indian competitors with government subsidized electricity, their cash COGS is approximately $3700 per ton. This year they expect to sell around 117K tons at an average price of around $4400/ton, not including their March price increase on uncommitted volume of $600-1200/ton. What will be important to watch is how their upcoming negotiations for 2027 unfold. If the US’s antidumping/CVD rates against China/India limit their sales in the US, Graftech can potentially sell ½ their 2027 supply at $7000K a ton and share the market with Resonac Graphite and Tokai Carbon. This will leave them to sell roughly 50K tons into the EU at what we expect to be materially higher prices as EU’s policies stick. Revenue of $700M and EBITDA of $200M is very possible, not accounting for potential sales volume gains.  
The debt appears high now at this point in the cycle, but a combination of retiring/refinancing should not be a problem so long as volumes and prices track higher in 2027 and beyond. 
**Valuation**
At a current market cap of $203M, Graftech’s EV is only priced at $6600 per ton of capacity, not including Seadrift. 
 During the last cyclical upturn in 2018 and 2019, Graftech had operating income of $1.1B and $970M respectively. Its low market value relative to debt makes this a leveraged play that will produce outsized returns if thesis proves correct. They’re capable of $1B in revenues if they run at 80% capacity at an average sales price of $7000 a ton, which is what management expects they should trade at in relation to current steel prices in US/EU. By all measures, the company is incredibly cheap and there’s asymmetric upside to the equity if conditions improve. Incremental price betterment all drops to the bottom line. 
In 2018 they estimated capacity replacement cost to be $10K/ton. Adjusted for inflation today puts that at $13.5K/ton + Seadrift at $1.07B (purchased for $700M in 2010)= $3.47B. Subtracting $1.1 in debt gives equity value of $2.37B ($91/share).
Recently, Graftech recently filed a $150M shelf and has contracted Evercore to place $50M. It’s too early to speculate what this will do to shares outstanding, not knowing if they’re putting this in place for unexpectedly good news. In a bear scenario, they issue 5M shares at $10, lowering adjusted replacement cost to $75/share. I cannot rule out this capital will be used to produce more volume for 2027’s orders.
**Thesis Risks**
China continues to flood the market with cheap electrodes and the west cannot stop them. I don’t see this happening given the reshoring momentum and worldwide anger from China dumping. Countering this, China does want to expand their arc furnace production to 20% by 2030, which will soak up an excess 153K tons of electrodes. Same logic applies to India, as their producers are now being lumped with China’s for dumping and unfair government subsidies. 
The biggest risk is that they run out of cash before the cycle truly turns. If they do run out of money, I think there’s a strong case that in a China ring-fenced industry, even ½ of their 2018 replacement cost of $10,000 per mt capacity + Seadrift gets to a value of $1.6B, $400M more than its current enterprise value. 
Obvious macro risks are that the economy slows and steel demand dips. There is also the possibility that new arc furnace plants are delayed or cancelled, although flat-out cancellation is not likely.