UPDATE: J.P. Morgan Downgrades GrafTech International Ltd. on Cut 2014 EPS Forecast

In a report published Wednesday, J.P. Morgan analyst Michael F. Gambardella downgraded the rating on GrafTech International Ltd. GTI from Neutral to Underweight, and lowered the price target from $6.50 to $6.00. In the report, J.P. Morgan noted, “Although GTI is the only graphite electrode producer vertically integrated into needle coke, the company has yet to deliver the expected leverage from its 2010 Seadrift acquisition. We attribute this in part to persistent economic volatility and worldwide steel utilization rates, which over the last three years weighed on sentiment during annual needle coke and graphite electrode price negotiations in the back half of the year. In our view, the industry's pricing structure will not likely change in the near future, thus remaining highly sensitive to macro level factors during the negotiations. We expect annually negotiated pricing will result in lower 2014 prices, especially given increasingly heavy competition in graphite electrode markets and needle coke to a lesser extent. Currently the company is seeking roughly a 15% hike in needle coke and a 20% hike in average graphite electrode prices, which appear to be a stretch in our opinion based on the concentration of needle coke supply with one supplier and excess electrode capacity with more scheduled near the end of 2014 from Showa Denko in South Carolina.” GrafTech International Ltd. closed on Tuesday at $8.62.