General Steel Subsidiary Signs Materials Sourcing and Production Agreement
Jul. 18, 2012
General Steel Holdings, Inc., one of China's non-state-owned producers of steel products and aggregators of domestic steel companies, announced that its 99%-owned subsidiary, Maoming Hengda Steel Co., recently signed an agreement with Tianjin Products & Energy Resources Development Co., and Tianjin Linktone Co., under which Maoming Hengda will purchase steel billet from Linktone and sell rebar manufactured from this steel billet to Tianwu at a fixed markup of RMB 200 per tonne (approximately USD $31.85).
General Steel estimates that the rebar will be produced with conversion efficiency of approximately 95%, and any scrap steel generated in the manufacturing process is expected to become the property of Maoming Hengda for recycling or other applications.
"This agreement with Tianwu and Linktone represents another important step in our efforts to enhance our raw materials' sourcing efficiency and improve our gross margin performance, while further expanding our relationships with prominent state-owned enterprises," said General Steel Chairman and Chief Executive Officer, Mr. Henry Yu. "It enables us to establish a fixed markup for the rebar sold to Tianwu, which secures a stable gross margin under the agreement. We are discussing additional collaboration opportunities on both raw materials procurement and steel processing with Tianwu and Linktone and are excited about the long-term potential of this relationship."
General Steel Holdings, headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 7 million tonnes of crude steel production capacity under management, its companies serve various industries and produce a variety of steel products including rebar, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality.