Jul 29 2010
China Gerui Advanced Materials Group Limited (Nasdaq: CHOP) ("China Gerui," or the "Company"), a leading niche and high value-added steel processing company that utilizes advanced technology to produce specialty steel products in China, today provided an update on its production capacity expansion plan.
As previously announced, by December 2011, the Company plans to double its existing production capacity to 500,000 tons per annum, and increase its chromium plating capability to 250,000 tons per annum, covering 50% of its total annual steel production capacity. Phase I of the expansion plan is the construction of two new cold-rolled wide-strip steel production lines with 150,000 tons of total annual capacity and a chromium plating line capable of processing 200,000 tons of cold-rolled steel per annum. The Company expects total capital expenditures for Phase I of $42 million, of which approximately 65% has been spent to date. The foundation for the building housing the two new cold-rolled steel production lines is expected to be completed by the end of July 2010; the building is expected to be completed by mid-August 2010; and the two cold-rolling machines are expected to be completed by October 2010. The acid pickling, annealing, and temper rolling facilities relating to the Company's new steel production lines are expected to be completed by the end of September 2010. As for the chromium plating line, the building to house this line is expected to be completed by September 2010; installation is currently underway; testing is scheduled for mid-September 2010; and the line is expected to be ready to begin production in mid-October 2010. The chromium plating line can handle both narrow and wide-strip cold-rolled steel.
For Phase II of the project, the Company expects to construct a third cold-rolled wide strip steel production line with 100,000 tons of capacity by the end of the third quarter of 2011. The Company expects the capital expenditures for Phase II to total $12 million.
"We are very pleased with the progress of our expansion project," said Mr. Mingwang Lu, Chairman and Chief Executive Officer. "Our existing production facilities continue to run at near full capacity and so we very much look forward to having additional cold-rolling capacity and chromium plating capability come online later this year. While projects with similar size and technical complexity as our Phase I expansion usually take almost two years to complete, we expect ours to be ready in less than twelve months. Our June 2010 and November 2009 capital raises, together with our internally generated cash, have provided us with additional resources to finance our expansion plan and to accelerate the build-out of the 200,000-ton chromium-plating line from 2011 to 2010.
"We believe that our new facilities will enable us to sell high quality and higher margin wide strip products. Our business continues to benefit from the fact that the demand for the end uses of our finished steel products are driven by the domestic Chinese economy in areas that continue to exhibit robust growth such as consumer electronics, food and beverage packaging, and telecommunications cable and equipment. In addition, although there may be a surplus capacity of raw steel in China, there is still a domestic shortage of the type of high precision cold-rolled steel products that we produce. With our new capacity, we will be able to continue to provide our customers with the ability to replace imports with our domestically made products, which we believe are of the same quality but at lower cost. In addition, we believe that we will be able to meet the increasing demand from our customers for both narrow and wide-strip cold-rolled steel for a wider range of end applications."