Graphite Electrode Market Share

　　We estimate that about 65% of the EAF steel makers worldwide (other than in China, for which reliable information is not generally available) and about 77% of the EAF steel makers in the U.S. and the markets where we have manufacturing facilities, purchased all or a portion of their graphite electrodes from us in 2006. For 2006, we further estimate that we supplied about 36% of all graphite electrodes purchased in the U.S. and the markets where we have manufacturing facilities, and about 16% worldwide (including China), and about 20% in markets in which we compete. We estimate that the worldwide market for graphite electrodes was approximately $3.8 billion in 2006 (including China).

　　We estimate that, in 2006, we sold graphite electrodes in about 70 countries. Sales in the United States and South Africa account for approximately 18% and 10%, respectively, of total net sales of our graphite electrode segment. No other country accounts for more than 10% of the total net sales of our graphite electrode segment.

　　Graphite electrodes are consumed primarily in electric arc furnace steel production, the steel making technology used by all “mini-mills,” typically at a rate of one graphite electrode every eight to ten operating hours. Electric arc furnace steel makers are called “mini-mills” because of their historically smaller capacity as compared to basic oxygen furnace steel makers and because they historically served more localized markets. We believe that mini-mills constitute the higher long term growth sector of the steel industry. Graphite electrodes are also consumed in the refining of steel in ladle furnaces and in other smelting processes such as production of titanium dioxide.

　　Electrodes act as conductors of electricity in the furnace, generating sufficient heat to melt scrap metal, iron ore or other raw materials used to produce steel or other metals. The electrodes are consumed in the course of that production.