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Investment in Hong Kong

In: Business and Management

Submitted By peggy1030
Words 718
Pages 3
China’s crude steel production during the Year reached approximately 683 million tons, an increase of approximately 8.9% compared to the Last Year. China’s copper cathode production during the Year was approximately 5.5 million tons, an increase of approximately 15.5% compared to the Last Year. However, the penetration of scrap metals consumption in China during the Year was still at a low level when compared with the figures in developed countries. Therefore, there exists a great potential for increasing penetration of recycled metals in China.

For the Eastern China operation, benefiting from the expanding operations in Jiangyin city and Ningbo city and with the benefit of being one of the best metal recycling markets in China, business flow has been strong in the region. The Group has continued its growth momentum in the revenue of the Eastern China region during the Year. Margins have improved as compared to the Last Year as a result of the ramp up operation and the increase in regional market share. Jiangyin port has been the regional logistic and distribution hub supporting the Group’s recycling base in the Eastern China region and connecting its operations in other regions.

For the Northern China operation, business flow has continued to increase as a result of the smooth execution of the operation. The joint venture with 天津鋼管集團股份有限公司(Tianjin Pipe (Group) Corporation) and 11 regional recyclers (the “Tianjin Joint Venture”) has started business operation and will create a “Strong-Strong” alliance by combining the competitive advantages of the shareholders. In addition, the Group formed a 55%-owned joint venture with 包頭市利吉隆貿易有限責任公司(Baotou Lijilong Trading Company Limited) (together with its group companies “Lijilong Group”) (the “Baotou JV”) in February 2012. Leveraging off the rich natural resources in Inner Mongolia, Baotou City is one of the major heavy industrial cities in the Northern China region and also a city with great supply and demand of scrap metals. With a designed annual capacity of 250,000 tons, Lijilong Group is one of the leading metal recyclers in Baotou City. Lijilong Group has a long operating history in the region and established a base of quality customers such as 包頭鋼鐵(集團)有限責任公司(Baotou Iron and Steel Group Co. Ltd) and 內蒙古北方重工業集團有限公司(Inner Mongolia North Heavy Industries Group Co. Ltd) and an extensive suppliers’ network. It also has a major vehicle dismantling licence. The Baotou JV has a 500,000 tons capacity. Both initiatives will greatly enhance the Group’s bargaining and managing power in the Northern China region.

For the Southern China operation, business has been stable. The Zhongshan site expanded the Group’s collection coverage and contributed an additional capacity of 300,000 tons. On 15 March 2011, the Company entered into a non-binding memorandum of understanding with 廣東物資集團公 司(Guangdong Materials Group Corporation) (“GDWZ”) to set up a joint venture to engage in the recycling business in the Southern China region. The discussion is ongoing. The proposed co-operation would help the Group create an integrated metal recycling system that combines the recycling and dismantling of scrap metals, electrical appliances, motor vehicles, vessels and aircrafts.

For the Central China operation, the Wuhan site has been ramping up. The Group has been expanding its regional suppliers network to meet the demand from one of the major customers, 武漢鋼鐵(集團)公司(Wuhan Iron and Steel (Group) Corporation).

Prospects:
The Group’s future development strategy is to further enhance the Group’s competitive advantages to 1) continue to strengthen the Group’s strategic national network and product categories in order to establish an integrated metal recycling system that combines the recycling and dismantling of scrap metals, electrical appliances, motor vehicles and vessels, so as to fully support the State government’s target of establishing a comprehensive recycling system under the 12th Five-Year Plan; 2) develop a diversified sales and procurement network to enlarge the Group’s market share; 3) continue to invest in advanced machineries and environmental protection facilities to ensure operational efficiency and economies of scale; and 4) increase investment in the Group’s staff to enhance management quality and strengthen the Group’s overall operational and business integration capability. The strategy of combining both organic and inorganic approaches of corporate development to maintain the Group’s relative first-mover advantage will continue to reinforce the Group’s leadership position in the metal recycling industry in China.

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