Use Of Graphite Electrodes In Electric Arc Furnaces(II)

　　Graphite electrodes are currently the only known commercially available products that have the high levels of electrical conductivity and the capability of sustaining the high levels of heat generated in an electric arc furnace producing steel. Therefore, graphite electrodes are essential to the production of steel in electric arc furnaces. We believe there is currently no commercially viable substitute for graphite electrodes in electric arc furnace steel making. We estimate that, on average, the cost of graphite electrodes represents about 2% of the cost of producing steel in a typical electric arc furnace.

　　Electric arc furnace steel production for the last five years has grown at an estimated average annual growth rate of about 5%. We believe that EAF steel production will continue to grow at an average annual long term growth rate of about 3% to 4%. Electric arc furnace steel production was approximately 365 million metric tons in 2006, representing approximately a third of the world’s steel production. We estimate that steel makers worldwide added 17.1 million metric tons of new EAF capacity in 2006, not all of which was fully operational in 2006. We are aware of about 29.7 million metric tons of announced new electric arc furnace steel production capacity that is scheduled to be added in the 2007 through 2009 time period, approximately 10% of which is replacement capacity. Additionally, not all of such capacity is expected to be fully operational during this time period.