Summary of Graphite Electrode Industry Chain Call Industry Overview - The call focused on the **Graphite Electrode**, **Needle Coke**, and **Electric Arc Furnace (EAF)** sectors, providing insights into their current status and future outlook [1] Key Insights Graphite Electrode Industry - The graphite electrode industry is perceived to be at a **cyclical bottom**, with low inventories and limited downside risk [1] - Near-term price recovery is primarily influenced by **raw material costs** rather than steel demand [1] - The **EU Carbon Border Adjustment Mechanism (CBAM)** and expansion of overseas EAFs are expected to provide a medium-term export advantage for Chinese high-power electrodes, which may help counteract weak domestic EAF performance [1] Needle Coke Market - The demand for **needle coke** is increasingly driven by **battery anode** requirements, marking a significant shift in the market dynamics [1] - Effective supply is constrained, and as import dependence decreases, profitability in the needle coke market is anticipated to rise over the next **2-3 years** [1] - The average price of needle coke in 2025 increased by approximately **RMB 1,000/ton** year-over-year, primarily due to raw material costs rather than demand [7] - The industry remains slightly unprofitable, with only low-cost inventory firms performing better [7] - Exports remained stable at **303kt**, with declines to Japan and the U.S. offset by gains in Italy, the Middle East, Southeast Asia, and Russia [7] - The 2026 outlook suggests a stable supply-demand balance, with prices still linked to costs and a modest improvement expected compared to 2025 [7] - By 2028, anode demand is projected to reach **1.6-1.8 million tons**, while electrode demand is expected to be around **0.5 million tons**, leading to total demand exceeding **2.2 million tons** [7] EAF Steel Production - EAF steel output for 2025 is projected at **105 million tons**, reflecting a **2.9% year-over-year decline**, with penetration rates at approximately **10.45%**, significantly below earlier policy expectations of **15%** [5] - The decline in coking coal and iron ore prices has restored the cost advantage of **Blast Furnace-Basic Oxygen Furnace (BF-BOF)** processes, putting pressure on EAF margins [5] - EAF operating rates are around **40%**, compared to **70%** for blast furnaces [5] - The product mix is shifting from rebar to higher-value products like **Hot-Rolled Coil (HRC)**, stainless, and specialty steels, which improves long-term quality but does not boost near-term volumes [5] - The outlook for EAF steel production indicates gradual growth from **2026 to 2028**, primarily driven by specialty steel EAFs, with no sharp policy-driven surges expected [5] Additional Important Points - The **UHP electrodes** now account for over **60%** of total production, indicating a shift towards higher performance products [5] - The decline in carbon prices from over **RMB 400/ton** to around **RMB 50/ton** has diminished the monetizable low-carbon advantage for EAFs [5] - The potential for a **seller's market** in needle coke may emerge if the growth in battery anode demand and feedstock tightness continue [7] This summary encapsulates the critical insights from the call, highlighting the current state and future expectations of the graphite electrode and needle coke industries, as well as the EAF steel production landscape.

Financial Data and Key Metrics Changes - The company reported a net loss of $39 million or $0.15 per share for Q1 2025, with adjusted EBITDA at negative $4 million compared to flat adjusted EBITDA in Q1 2024 [32] - Cash COGS per metric ton was approximately $3,650 for Q1 2025, reflecting a 21% year-over-year reduction [34] - Total liquidity at the end of Q1 2025 was $421 million, consisting of $214 million in cash and $207 million in available credit [36] Business Line Data and Key Metrics Changes - Sales volume increased by 2% year-over-year in Q1 2025, with a notable 25% increase in the U.S. market [7][10] - Average selling price for Q1 2025 was $4,100 per metric ton, representing a 20% year-over-year decline [28] - Production volume for Q1 was 28,000 tons, with a capacity utilization rate of 63%, a more than 500 basis point increase from the prior year [25][26] Market Data and Key Metrics Changes - Global steel production outside of China was approximately 209 million tons in Q1 2025, slightly below the previous year [24] - U.S. steel production saw a 1% reduction in Q1 2025, while the EU experienced a 3% decrease year-to-date [24][25] - The company increased sales volume in Western Europe by more than 40% year-over-year in Q1 2025 [30] Company Strategy and Development Direction - The company is focused on increasing sales volume, regaining market share, and improving financial performance through strategic initiatives [6][9] - A key goal is to grow volume and market share in the U.S., which is the highest-priced region in the industry [9][10] - The company plans to increase prices by 15% on uncommitted volumes for 2025 to restore pricing and profitability levels [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenging near-term market conditions but expressed optimism about future opportunities [6][7] - The company is well-positioned to capitalize on potential recovery in the EU market due to supportive policy changes and infrastructure investments [39][40] - Management emphasized the importance of a healthy graphite electrode industry for the steel industry and the need for improved pricing dynamics [8][10] Other Important Information - The company has made significant strides in reducing costs, achieving a 23% year-over-year reduction in cash COGS per metric ton in 2024 [13] - The company is actively managing its production and inventory levels to align with sales expectations [26][35] - Ongoing assessments of global trade policies and tariffs are being conducted to mitigate potential impacts on the business [14][18] Q&A Session Summary Question: Has the introduction of tariffs on Indian material changed the pace of pricing declines in the U.S. market? - Management indicated that tariffs on Indian imports could significantly impact the availability of competitors in the U.S. market, potentially benefiting the company [46][47] Question: What percentage of sales are now coming from the U.S. and Western Europe? - Management confirmed that over 50% of sales are now derived from the U.S. and Western Europe combined [54] Question: How much of the graphite electrodes sold in the U.S. are sourced from outside the U.S.? - Management estimated that roughly half of the production coming into the U.S. is from the Monterrey facility, with the balance from European facilities [81] Question: What is the outlook for pricing of graphite electrodes and needle coke? - Management expressed optimism for future pricing stability, citing potential support from tariffs and ongoing negotiations with customers [72][75]

Financial Data and Key Metrics Changes - The company reported a net loss of $39 million or $0.15 per share for Q1 2025, with adjusted EBITDA at negative $4 million compared to flat adjusted EBITDA in Q1 2024 [32] - Cash COGS per metric ton was approximately $3,650 for Q1 2025, reflecting a 21% year-over-year reduction [34] - Total liquidity at the end of Q1 2025 was $421 million, consisting of $214 million in cash and $107 million available under the revolving credit facility [36] Business Line Data and Key Metrics Changes - Sales volume increased by 2% year-over-year in Q1 2025, with a total of 25,000 metric tons sold [27] - The average selling price for Q1 2025 was $4,100 per metric ton, representing a 20% year-over-year decline [28] - Sales volume in the U.S. grew by nearly 25% year-over-year in Q1 2025, significantly increasing market share [10][27] Market Data and Key Metrics Changes - Global steel production outside of China was approximately 209 million tons in Q1 2025, slightly below the previous year [24] - U.S. steel production saw a 1% reduction in Q1 2025, while EU steel output decreased by 3% year-to-date [25] - The capacity utilization rate for the company was 63%, a more than 500 basis point increase from the prior year [26] Company Strategy and Development Direction - The company is focused on increasing sales volume, regaining market share, and improving financial performance through strategic initiatives [6][8] - A key goal is to grow volume and market share in the U.S., which is the highest-priced region in the industry [9] - The company plans to increase prices by 15% on uncommitted volumes for 2025 to restore pricing and profitability levels [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that current market conditions remain challenging, but expressed optimism about future opportunities [7] - The company is well-positioned to capitalize on potential recovery in the EU market due to supportive policy changes and infrastructure investments [39] - Management emphasized the importance of a healthy graphite electrode industry for the steel industry and the need for pricing improvements [8][10] Other Important Information - The company has made significant strides in reducing costs, achieving a 23% year-over-year reduction in cash COGS per metric ton in 2024 [13] - The company is actively assessing global trade policies and tariffs to mitigate potential impacts on its business [14][18] - The company maintains a strong focus on safety, achieving a reduction in total recordable incident rates [23] Q&A Session Summary Question: Impact of tariffs on U.S. market pricing - Management noted that tariffs on Indian materials could significantly impact their availability in the U.S. market, potentially benefiting the company [46][47] Question: Market share recovery and growth potential - Management indicated that they are ahead of previous market share levels and expect continued growth throughout the year [47][49] Question: Sales percentage from U.S. and Western Europe - Management confirmed that over 50% of sales now come from the U.S. and Western Europe combined [54] Question: Pricing acceptance for the 15% increase - Management expressed optimism about customer acceptance of the price increase, emphasizing the importance of their value proposition [58][60] Question: Long-term outlook for steel utilization rates - Management remains cautiously optimistic about steel utilization rates, citing potential opportunities for growth despite current uncertainties [68][70] Question: Pricing guidance for electrodes and needle coke - Management indicated that while there is uncertainty, they expect some price stability and potential increases in both needle coke and electrode pricing [75][76]