Good morning. My name is Virgil, and I will be your conference operator today. At this time, I would like to welcome everyone to the GrafTech First Quarter 2018 Earnings Conference Call. [Operator Instructions].

Thank you. Quinn Coburn, CFO of GrafTech, you may begin your conference. .

Thank you, Virgil. Good morning, and welcome to GrafTech International's First Quarter Conference Call. On the call with me today is GrafTech's Chief Executive Officer, Dave Rintoul..

As a reminder, some of the matters discussed during this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please note that the cautionary language about our forward-looking statements contained in our press release, that same language applies to this call.

Also, to the extent that we discuss any non-GAAP financial measures, you will find reconciliations in our press release that is posted on our website, in the Investor Relations section..

In particular, on this call, we will be discussing for the periods reported, the non-GAAP financial items of EBITDA and adjusted EBITDA. For your reference, a replay of the call will be available on our website..

And now I'm pleased to turn the call over to Dave. .

Thanks, Quinn. Good morning, everyone, and thank you for joining GrafTech's First Quarter 2018 Earnings Call, our first earnings call since becoming a publicly traded company. We are very pleased with the recent completion of our initial public offering and welcome our new shareholders. .

Today, we will review our first quarter results, give an update on the market and on our initiatives, and then open it up to questions. But first, I would like to thank our global team of approximately 1,300 employees. Having just recently joined GrafTech, I am highly impressed with the talent and dedication of our team.

I would like to thank them for their concerted efforts to work safely and productively..

the safety of our employees; providing our customers with best-in-class products and services; and the value we generate for our shareholders. Let me take a moment to speak to each of these..

First, safety. This is a core value of GrafTech, and I am pleased to share that our safety record continued to improve in the first quarter. We are in the process of executing several noteworthy safety initiatives, which will assist in driving toward our goal of 0 injuries.

These initiatives include significant focus on leading indicators on safety through the engagement and participation of all team members who are implementing proactive initiatives that facilitate continuous improvement. .

Another paramount priority is providing world-class products and services to our customers. We believe that customer satisfaction and loyalty is achieved by providing the best service, the highest-quality products and the highest level of reliability.

We are intensely focused on providing our customers with unmatched services and state-of-the-art solutions. We aim to be the industry leader in product quality by providing the most durable electrodes for the most demanding applications. .

And finally, we aim to be the most reliable supplier in the industry. Security of supply is absolutely crucial for our customers.

We believe that our vertical integration and our new commercial strategy of providing customers with 3- to 5-year sales contracts gives an unparalleled ability to provide a reliable, secure supply of electrodes to our customers.

These 3- to 5-year contracts have been widely adopted across our customer base, and we actually have had more demand for these contracts than we can supply. .

In summary, our mission is to be a trusted and indispensable business partner by providing unparalleled service, quality and reliability..

Our third paramount priority is to create shareholder value. We have been very successfully -- successful in fundamentally restructuring our company. However, we fully understand our work is not done. The spirit of continuous improvement is alive and well at GrafTech. .

We are fully committed to continuing to drive earnings growth. We will continue to pursue initiatives that improve output and increase productivity in a cost-effective manner. We will do this through constant operational improvements and specific targeted investments in the business.

We will maintain a strong capital structure to ensure operational and strategic flexibility. .

Lastly, we are committed to robust and efficient returns of capital to shareholders. I'll now turn the call over to Quinn to review some of our financial results. .

Thanks, Dave. We're very pleased with our first quarter and the strong start to the year. Net sales for the quarter came in at $452 million compared to $105 million in the first quarter of 2017.

This significant improvement was primarily driven by an increase in the weighted average realized price of electrodes, which rose to $10,124 per metric ton for the quarter. These stronger electrode prices have had a dramatic impact on our profitability.

Our first quarter net income improved to $224 million or $0.74 per diluted share compared to a loss in the first quarter of 2017..

Our adjusted EBITDA from continuing operations climbed to $310 million for the quarter compared to $4 million in the prior year period. .

During the first quarter of 2018, our cash flow from operations increased to $141 million. This increase was despite a use of cash for working capital of $151 million during the quarter. This increase in working capital was primarily due to increased accounts receivable balances as a natural result of our increased net sales..

Our capital expenditures in the quarter amounted to $14 million.

For the full year of 2018, we expect our capital expenditures to be approximately $65 million to $70 million, which includes approximately $35 million of maintenance CapEx and $35 million to $40 million of capital for our debottlenecking initiative and other productivity improvement projects. .

The board has declared a dividend of $0.0645 per share payable on June 29, 2018 to shareholders of record as of the close of business on May 31, 2018. This represents a prorated dividend from the date of our initial public offering until June 30, 2018. .

Now turning to the balance sheet. During the quarter, we completed a refinancing of our debt and credit facility. The refinancing was completed with strong support from our lenders and represents an important step in building a strong capital structure with ample liquidity to provide operational and strategic flexibility.

Specifically, we entered into a $1.5 billion term loan, at 7-year and at senior secured. The term loan has a interest rate of LIBOR plus 3.5%. .

In addition, we entered into a $250 million senior secured revolving credit facility. This revolving facility provides us with significant amount of available liquidity.

As of the end of the quarter, our total available liquidity was $381 million, which consisted of $243 million of availability on our credit facility and $138 million of cash and cash equivalents. .

Now I'll turn the call back to Dave. .

In summary, we are very pleased with our first quarter results, which gives us a strong start to the year. Pricing levels were strong and benefits somewhat from a small part -- and we've benefited somewhat from a small portion of our electrodes being sold on a spot basis at attractive price levels.

The supply and demand relationship remains tight and we believe this will remain along with the subsequent influence upon pricing..

Looking ahead to the remainder of the year, we note that as a result of our 3- to 5-year contract initiative and other sales commitments, approximately 96% of our 2018 production capacity is now contracted or committed by purchase orders.

The weighted average selling price of our currently contracted and committed orders for the remaining quarters of 2018 is expected to be approximately $9,650 per metric ton. This represents a combination of our 3- to 5-year take-or-pay contracts as well as other committed business for 2018, which was mostly negotiated in 2017..

Turning to cost. As you know, our vertical integration provides us with the majority of our needle coke requirements, while we purchase the remainder from third-party needle coke suppliers. As you're also aware, the third -- the cost of third-party needle coke has increased in 2018.

As we previously shared with you during the IPO process, the increase on this portion of our needle coke requirements will begin to flow through our cost of goods sold in the second quarter. On the other hand, due to our hedging of decant oil, we expect the cost of producing our own needle coke to remain relatively stable..

Now let's turn to the current market dynamics. The global steel market remained strong and the overall production growth in the first quarter at 4.1% according to the World Steel Association.

We estimate that electric arc furnace production growth in 2017 was 8% to 10%, resuming a long-term trend of EAF production growing faster than overall steel production. .

The growth in EAF steel production continues to drive increased demand for electrodes. This strong demand, along with the limited supply of electrodes and needle coke, continued to cause tightness in the electrode and needle coke markets, resulting in a strong pricing environment.

Pricing for petroleum needle coke continues to be elevated, reflecting strong demand from graphite electrode producers as well as lithium ion battery manufacturers..

Our vertically integrated business model continues to be a significant competitive advantage, with the majority of our coke coming from our Seadrift facility. Demand for electrodes remains strong and is above the levels that we are actually able to supply. .

We have been very pleased with the success of our new commercial strategy. During the first quarter, 60% of our revenue was generated from these contracts. We expect the percentage of revenue from these contracts to be even higher for the remainder of the year. .

Our electrode plants continue to run very efficiently. During the first quarter of 2018, we produced approximately 43,000 metric tons of electrodes and operated at a capacity utilization rate of approximately 98%. To enable this high level of capacity utilization, we have ongoing preventive maintenance programs at each of our facilities.

In addition, we have an annual maintenance program, which we will perform in the third quarter. .

We continue to make solid progress on our debottlenecking initiative, which remains on track to increase our annual production capacity by approximately 35,000 metric tons by the end of the year..

We also continue to have discussions with third-party providers regarding securing petroleum needle coke to feed our warm idle St. Marys graphite electrode manufacturing facility, and we will plan to provide an update on those discussions in upcoming quarters. .

We are proud of the whole GrafTech team, which has been working diligently to execute our strategy. Our first quarter results demonstrate that we have the right plan in place and continue to drive value for all shareholders..

This concludes our prepared remarks. We'll now open up the call for questions. .

[Operator Instructions] The first question comes from Curt Woodworth from Crédit Suisse. .

First question is on -- just regarding your needle coke sourcing arrangements. Can you comment on the sort of duration of those contracts for your merchant buy? And what is the timing when you would start to renew those contracts, so that's typically done on a 6-month or annual levels? That's my first question. .

Thanks for your question. In terms of our needle coke supply for 2018, we believe we have the requirements that -- for that time period currently addressed for the balance of this year. We have begun discussions with our third-party suppliers for the future. And as I said earlier in our prepared comments, we'll keep you abreast of those developments. .

What's the timing of these contracts? So is that typically done on a calendar year basis? And it just seems like given how tight the electrode market is today, you may have incentive to try to layer in more spot business for '19 at this point, but I guess, would it be a gaining factor for you to do that before you would have your merchant needle coke supply or pricing locked in, or have a better view of that for '19?.

Well, Curt, our position on '19, and our strategy around the restart of St. Marys is consistent with what we shared on the roadshow in the IPS is dependent upon our ability to ensure that we have appropriate levels of needle coke lined up from our third-party suppliers. We're in the midst of those conversations.

And as such, in respect to those people, I probably don't think I want to say much more than that other than the -- assure you that it is something we're currently, and I am personally engaged in. .

Okay. And then just -- I guess, with respect to your open book for, I think you have very little spot tons for the remainder of this year to sell.

But into '19, can you comment on sort of your commercial strategy and when you're going to start a more meaningful, I guess, discussion internally about how you would look to price those tons? Like would you plan on doing some open auctions, third quarter, fourth quarter, just so we can get a sense of maybe when we'll get a little bit more visibility on how you're going to layer in those tons for '19.

.

The way I would address that will really reflect significantly back to our needle coke supply negotiations. St. Marys is something we are hopeful to be working on in 2019 in terms of a startup.

But until we have the needle -- excuse me, the needle coke, we're a bit hesitant to begin to make promises for that facility and the subsequent production that would come out of it. So I'm not deflecting your question.

The reality is we need to have the needle coke situation with a high degree of visibility prior to beginning to make a lot of promises about '19.

Although it is absolutely our intent to drive in that direction, we believe that by the end of the year, we'll be at that higher run rate with the debottlenecking that takes us to approximately 200,000 -- just a little over 200,000 metric tons, and then layer on that during the year, the restart of St. Marys.

But in terms of specific timing, it's very difficult today for us to be exact about that 2019 timing until we get the needle coke situation and a little bit greater degree of clarity. And that's why we are working on it as we speak to achieve that clarity. .

Your next question comes from Arun Viswanathan from RBC Capital Markets. .

I wanted to ask about the industry, you said that there's been a great capacity for your customers to accept the longer-term contracts and you expect more of your mix, you made up there.

Have you seen -- what kind of behavior have you seen from your competitors? And what are the dynamics there, back to Curt's question around needle coke contracting? Do you think your customers would be able -- or sorry, your competitors would be able to offer similar long-term contracts? Or does the needle coke contracting being shorter than that period a limiting factor?.

Thanks, Arun. Our belief is, at this point in time, that all the manufacturers of graphite electrodes are essentially running at maximum capacity with little, if you will, excess or spare spot ability to service spot requests, if you will. .

Now in terms of what they're going to do with the longer-term contracts going forward, I don't think it's appropriate for us to try and project our guess on this call, what our competitors are going to do, recognize that they're not, we're the only ones that are fully integrated.

And that's a key part of our strategy, and we believe, a competitive advantage. What remains to be seen to what extent they do or do not follow our lead in that way.

We think in a very real way, the longer-term contracts, not only provide stability to the market but provides a degree of service to our end-use customers because they know exactly out into the future what the cost structure of their electrodes will be. And we think that is a good thing for them as well as us, quite frankly. .

As a follow-up, just to understand that point then.

If the industry is a little bit more reluctant to move towards long-term contracts or unable to do so, it appears that there's a possibility that you would be the only producer who has that structure, in which case, if your customers -- I mean, if you've gotten strong confidence from your customers that they would honor the long-term contract? And what are your recourses if prices had lower and your competitors are offering shorter contracts? What are the recourses you have to make your customers honor that long-term contract?.

Well, first, let me begin by stating that we believe that the make-up of our customer base is very good, made up of honorable men and women that will honor their contract requirements just as we intend to.

I can share with you that we put a lot of time and effort into the wording of these contracts, given the take-or-pay nature that they are, and believe that they're fair to both parties, but are very clear on the responsibility of both parties, both ours in terms of supplying a product, and the customers in terms of both taking the product and the payments thereof.

So while I understand your question, I think, we've done a good job in awarding of these contracts and we have a very strong customer base. So hopeful that we never get ourselves in a situation that you're referencing. .

Okay, great. And then lastly, just on that point, you referenced capital return. Could you just give us a little bit more detail on what your plans are for the future as far as returning capital to shareholders.

Would it be considerable to -- or favorable to consider a plan to buy back program or a larger dividend to demonstrate the kind of surety in cash flows that you see over the next 3 to 5 years?.

This is Quinn, Arun. Certainly, our primary objective with the cash will be to return to shareholders. And exactly how we do that, we'll do that in the most efficient manner possible, and that will really be a manner that's determined by our Board of Directors going forward.

But as you note, one of our priorities is to return that excess cash to shareholders. .

Your next question comes from Brett Levy from Seelaus. .

Great quarter. I give you credit because clearly, in a given period, my personal EBITDA went from $400-and-change million or whatever to $310 million. I'd be a little more excited. [indiscernible] very professional about it. So -- But I guess the question would be, you guys are expanding capacity.

I don't know how to put it, but if it's not broke, don't fix it. Why would you or SGL or anybody else expand capacity unless you're trying to fend off somebody else's capacity? Again, if the world just stayed the way it is for you guys, that would be perfect.

So why change it?.

Well, Brent, thank you for your question. The unfortunate thing I think for all of us is that while we might want the world to stay just the way it is, life has a funny way of not letting that happen. And so we need to be sure that it -- we don't sit on our hands and get caught by an unexpected set of circumstances.

So the expansion and the work we're doing is extremely capital-efficient. And the debottlenecking brings on a 21% increase in throughput by the end of the year. We're only spending $35 million this year associated with that project. So the fact that it's still CapEx-efficient is in the best interest of our shareholders. .

The other thing I would say is that, clearly, there's a -- the supply and demand relationship right now is not in balance. There is more demand than there is supply.

And because one of those things happen, ultimately, Adam Smith's invisible hand takes over, we figured that it's best for us to be the ones to facilitate that market dynamic that the supply and demand is pushing towards. So we'd like to be the ones to help the market out and address the supply and demand situation.

And as such, we think -- and we think and we know we can do it very cost effective, so that's our rationale, Brett. .

And the other thing I would add is, the EAF industry has grown significantly, and we project that it will continue to grow significantly. So just to match the need for the growth into supply, the growth to the EAF industry, there will need to be some increases. So we're going to be first in line for that. .

And the second question is, obviously, the economics of putting in new capacity is so prohibitive that no one would ever do it.

But anything that has been idled, that can easily be restarted? Talk about the restart of recently re-idled plant risk?.

So that's a great question. Know that during the difficult days, roughly 20% of the industry capacity as China was in fact taken off-line, our belief is that the vast majority of that has been permanently removed in some way, shape or form and, in fact in some cases, actually bulldozed. We think that us with St.

Marys are the leaders in terms of having the ability to bring some capacity on board. We think the others have only very marginal opportunities. But again, we need to be, I think, responsible and careful on this call not to be, trying to speak for our competitors in terms of what they may or may not do.

But we're not aware of anybody having something the size of St. Marys to bring back online at this point in time, for the knowledge that we currently possess ourselves. .

Your next question comes from [ John Egrech ] from [ Luminox ]. .

I just wanted to revisit the needle coke commentary.

Maybe you can give us a sense of kind of where needle coke kind of was last year and what it's looking like now, and what's your best guess of what the spot market looks like for '18 and '19, just so that we can have a sense of the magnitude of what's going on for other players and for yourself on the merchant side?.

So last year, in Q4, needle coke pricing was in the range of $1,000 to $1,500. As we sit here today, we know that somewhere between $2,500 and $3,500. So I'm not going to try and take out my crystal ball and project beyond what we have solid knowledge of today.

But certainly, it's a constrained raw material, and one that's very valuable to our competitors as well as us and the battery guys. So I'll let you take your own shot at where you think the future might take us. .

Okay.

And then maybe just kind of to that, then, since it's so constrained, is there anything you can do kind of, at the Seadrift level to maybe debottleneck that and get another 10,000 or 20,000 tons and expand your capacity that way?.

We are looking very hard at Seadrift right now. We have a couple of projects that we're working on now that will give us some incremental gains over the next 9 to 12 months. Those numbers are more like, 4,000 or 5,000. I wish they were 15,000 or 20,000, but they are more like 4,000 or 5,000.

However, I can share with you that beyond those projects, we have a deep dive going on at Seadrift now to say, okay, if -- what could we do at various degrees of CapEx, and does that become practical? But it would be irresponsible for me this morning to lead you to believe that yes, we've got something on our back pocket that's going to give us that 15,000- or 20,000-ton a month.

We're doing what you expect as responsible business people. We're studying it very hard beyond the smaller projects that we've already identified and actually already have in the Hopper.

And we'll continue to keep everyone abreast on our call and our development of that because as you've alluded to, or others have alluded to, making changes in these kind of facilities to get a step change like that can be quite expensive and we need to be sure that we continue our mantra of being extremely efficient with whatever CapEx we use. .

Got it, Okay. And then maybe just last one to help us out with kind of modeling. What should the cadence of production look like as we go through the year? You produced about 43% in 1Q.

Is it flat in 2Q? How much does it go down for the maintenance in 3Q? And then what should we total the whole year out?.

So the debottlenecking, by and large, doesn't get 100% done until we're well into the fourth quarter. As you might imagine, there are -- because all 3 plants are involved in that, some of them come on a little earlier than that, but we have one that won't be till near the end of the fourth quarter.

And in the midst of that, we do need to take these maintenance shutdowns, not only to maintain equipment, but in some cases, they're kind of tied in to finishing some of the debottlenecking. .

So I'm hopeful that our throughput will remain relatively stable through the second quarter.

We'll take these outages that our -- to couple of weeks, in some cases, in the third quarter, and then we'll enjoy some of the benefits in the fourth quarter so that the year will come out very much in line with where we talked about in the IPO and the roadshow.

There might be a little bumpiness in the third and fourth quarter, with -- the third quarter, with the outages and then the fourth quarter will overcome that. So I think the total will be fairly predictable. We just have to account for, as I said, that outage work in the third quarter. .

Your next question comes from Kenneth Pounds from Castlebury Advisory. .

[indiscernible] A question raised a little bit on the fourth quarter with a trend, or did you say 20% from the debottlenecking by the end of the fourth quarter?.

So I recognize that's a -- what we said is a run rate number. So I guess to get very accurate in all the material we used during the roadshow, your memory is quite good, we said 21%. .

Okay good. 21%, great. And also maybe you could give us a little background about why there was such a dramatic increase in the pricing on your product.

Was that all the Chinese supply coming off? Or were there a few other factors?.

Well, if you think about it in the context, then you pretty much have to on the last couple of years. As I said earlier, 20% of the capacity in the industry was taken off during the difficult period. So that reduced the ex -- that's ex-China capacity. China reduced a little bit as well. But we'll speak to, primarily here, ex-China. .

And then on the heels of that, the EAF industry, we found it in '17 by 8% to 10%, and you put all these things together and you find that the supply is no longer commensurate with the demand, with the EAFs back up and running and the economy appearing to be pretty stable.

So the combination of those factors that lead to where we find ourselves right now as well as the fact that the needle coke is short. So it's not any one specific item, but a combination of all of these things being together, putting this in a place where there's more demand than supply at this point in time. .

Your next question comes from Rahul Murkya from Jefferies. .

So I just wanted to know, for this debottlenecking, which we're talking about, of 35,000, do we have enough needle coke for that?.

So thanks, Rahul, for your question. We have the needle coke we need for the balance of this current year lined up. And as I indicated earlier, we're in discussions with our third-party needle coke suppliers to line up 2019.

So we'll keep all of you abreast on these calls as we progress in achieving that goal of lining 2019 and, perhaps, even beyond that in terms of needle coke requirements. .

The reason why I asked is because earlier you mentioned that same ratings would not come up until unless we have 6 plants for needle coke.

So could this be a possibility that we do this -- we complete this debottlenecking and still we would not be able to operate this plant because of unavailability of needle coke?.

Well, we're hopeful that that's not the case. Just to refresh your memory, the debottlenecking brings us up to just over 200,000 tons, and then St. Marys would add an additional 28,000 tons to get us in the 230,000 range. So were looking at St.

Marys from a perspective that we would want to be assured that we have the needle coke for the additional capacity that St. Marys brings online, as well as the normal run rate, post-debottlenecking. So the St. Marys decision will await our ability to procure and secure the 2019 needle coke to allow that to come to fruition. .

Okay.

And the second question would be, can you just guide us on what are the current spot prices are? I mean, what the merchant rates are right now? And any guidance on what -- until what time you see this tight demand-supply situation for the graphite electrodes to continue? Until what time range do you see that this tight demand-supply situation will continue?.

Well, regarding the first part of your question, look, there's a lot of.

[Audio Gap].

marketplace on pricing because electrodes are short. So the outcome of that is you tend to get spot numbers that have a very wide distribution depending one, on the type of electrode, the size, et cetera, et cetera. We know that -- we've heard spot pricing in the $17 to $23 range lately.

That doesn't mean that all of it's being transacted in all those values, but that's not an uncommon spread number on spot business, remembering that there's not a great deal of capacity for any of the electrode producers to supply spot business. I think that's one of the reasons you see such volatility and variability in the number. .

In terms of when does this supply-demand relationship change, well, we believe that the economy is continuing generally to be favorable. And as long as there's some degree of growth in the economy, that would mean that there has to be some degree of growth in steel production.

So even if it's a very, very small amount, if the GDP grows by somewhere between 1.5% to 3%, and that's a big spread that I'm giving you as well, one would expect that there'll be some amount of steel growth to support the world GDP growth.

And as such, we believe that there would be continuing upward trajectory on demand, even if that trajectory is in a much less rate than what we saw over the last couple of years. We're not aware of, today, of plants being built outside of China. And so it's difficult to be sure when this supply-demand changes.

I don't think we're brave enough today to make a bold prediction on how far out it goes.

We can't see yet a point at which it's changing because it would require some significant investment on the part of folks to build plants to address it, and there hasn't been enough announced to lead anybody to believe that there's going to be change anytime soon. .

Fair enough. So just one clarification.

You mentioned that for the remaining quarter, the realizations or the selling price you see is at $9,650 per ton?.

Yes. Our -- that comes out of a combination of our contracted business, as well as our 3- to 5-year contracts, as well as some business that would have already been promised and agreed to last year before the 3- to 5-year contracts had been consummated. .

Okay.

So the share of this -- the businesses, I mean, are these also electrode-selling -- selling electrodes, or it's something else?.

No. It's electrodes. We are focused on our core competency, which is the production of graphite electrodes. Graphite electrodes is us. .

Okay.

So you mean to say that the -- this portion would have been contracted at very low prices as compared to 3 to 5 years contract?.

Well, unfortunately, some of the -- our crystal ball a year ago or 9 months ago didn't provide the degree of clarity about this year that we now have. And some of those numbers are in fact lower than the 3- to 5-year numbers. And as I said earlier on this call, just like our customers are men and women of their word, so is GrafTech. .

Your next question comes from David Gagliano from BMO Capital Markets. .

Just a quick follow-up. When you are discussing needle coke supplies for the St. Marys expansion for 2019, and procuring the supplies, is it a function of actually obtaining the needle coke, or is it a function of price? First question.

And then second question, geographically, I'm assuming that the suppliers are North American-based? Is that correct? Or is it reasonable to expect that to potentially come from elsewhere?.

Well, let me start with the last one first. We would not restrict ourselves to just the North American continent. That wouldn't be a good business move. So we're looking across the globe. And in terms of the supply of needle coke, look, volume and price sometimes end up going hand in hand, right? So there is a relationship there.

And we're working hard with the third parties to determine, going forward, how we deal with both of those components of the supply, both the volume side and the price side, because we need to have both of them tended to in order to have a successful partnership.

Our goal is to, as we partner with our customers, we should also partner with our raw material suppliers. .

Okay, I mean, and it's actually, I was really just trying to get at it. Is there -- at the right price is there enough needle coke supply to expand St. Marys? It's not an issue of supply, but it's an issue of price.

Is that fair?.

No. I don't think it's quite that simple. I'm not sure that -- it's difficult to be sure that at any price, you could get necessarily what you needed unless you have the relationship with the third parties.

Look, there was -- everybody looks at their customer base and wants to be sure that they're doing people with the folks that have good stability, longevity and are best-in-class.

And we think we bring those attributes as a customer to the third-party needle coke suppliers, and as such, think that, that places us in a position where they're more inclined to do business with us than not. So I don't think it's just matter of slapping down a big number and thinking that's going to save the day.

And we're not inclined to do that because at the end of the day, our shareholders expect us to run our business in the most effective and efficient way possible. And you don't do that by simply trying to get into bidding wars that no good comes of at the end of the day. .

This concludes the time for our question-and-answer session. I will now hand the call back over to Mr. Rintoul for closing comments. .

Thank you, Virgil. In conclusion, we believe that we are well positioned to leverage our strengths and our strategy in this improving industrial environment. We will continue to seek to maximize the advantages of our vertical integration, our low-cost production platform and new commercial strategy.

Again, thank you for joining our earnings call today, and we look forward to speaking with you in the next quarter. Thank you very much. .

This concludes today's call, and you may now disconnect..