What happened

Shares of GrafTech International  (EAF -6.10%) were down more than 10% on Monday after an analyst issued a double downgrade of the graphite materials producer and cut his price target by nearly 30%. The sell-off continues a pattern of volatility for GrafTech in the year since the company's IPO, with the stock now down more than 16% since the offering.

So what

GrafTech shares were under pressure after Citi analyst Alexander Hacking lowered the shares to sell from buy and lowered his price target to $12 from $17. Hacking is worried about capacity expansion in China, which he says is likely to put added pressure on graphite electrode pricing.

The price cut is Hacking's second in a month. On April 1, the analyst lowered his target to $17 from $21 but kept a buy rating on the shares.

An investor reacts in dismay looking at a red stock chart.

Image source: Getty Images.

It's been a tumultuous few months for GrafTech shareholders. The stock fell by more than 11% on March 5 after the company said it was launching a secondary offering to allow majority shareholder Brookfield Business Partners (BBU -0.10%) to sell down its stake in the company.

Brookfield, which took GrafTech private in August 2015 and returned it to the public markets via an IPO in April 2018, reversed course on the offering on March 27. GrafTech shares had slowly climbed since that reversal, only to give back much of the gains since March 27 on Monday.

Now what

GrafTech is one of the two largest producers of graphite electrodes -- used in steel production -- outside of China, accounting for about 24% of non-Chinese global production capacity. The company had a relatively strong fourth quarter, reporting on Feb. 8 earnings of $0.79 per share, one cent ahead of estimates, on revenue of $532.79 million that was up 176% year over year and $56 million better than expectations.

In theory, GrafTech is set up to be a reliable cash producer, but as Hacking notes, the company's success is very much tied to electrode pricing. Add in the market's knowledge that Brookfield is interested in selling down some of its stake and GrafTech's relatively small float of about 1.24 million shares traded daily, and you have a recipe for continued volatility.