In addition to the above, these initiatives will also allow us to reduce future maintenance capital expenditures. We are targeting annual maintenance at our graphite electrode plants to be reduced by approximately 25 percent or over $10 million annually. This would be a result of fewer stand-alone graphite electrode production facilities.
Mr. Shular commented, “While these are difficult choices as they impact members of our worldwide team, these initiatives will enable GrafTech to drive operating efficiencies and be more competitive globally, and continue to provide our customers with the highest quality electrodes. Our aim is to ensure that GrafTech is very well positioned as the global economies and steel demand recover.”
- Positioning for future growth
As part of our strategy to grow our low-cost, advantaged manufacturing footprint, we have identified debottlenecking opportunities through Lean/Six Sigma efforts at our other four graphite electrode plants. These four graphite electrode facilities offer best-in-class production capabilities and can expand their capacity, in increments, up to a total of approximately 60,000 metric tons to respond to growth in demand. We currently estimate that the average cost to increase capacity across our graphite electrode production network is approximately $2,500 per metric ton, which compares very favorably to industry averages for comparable expansion projects.
The first increment of potential expansion has been identified at our Monterrey, Mexico plant, one of our most advantaged facilities, strategically located 350 miles from our needle coke plant in Seadrift, Texas. As economic conditions improve and graphite electrode demand recovers, our Mexico facility could increase capacity by 15,000 metric tons in 9 to 12 months with minimal headcount additions. Growing this low-cost production site would further lower our overall graphite electrode cost structure.
Our team regularly reviews global customer demand and, as the European Union (EU) and other key markets recover, we will determine the best timing to commence the Mexico debottlenecking initiative.