Mar 12 2013
General Steel Holdings, Inc., a leading non-state-owned steel producer in China, today announced its principal manufacturing facility, Shaanxi Longmen Iron and Steel Co., Ltd. ("Longmen Joint Venture") has begun construction of an additional continuous advanced-rebar-rolling production line.
The additional production line is expected to begin operations in the fourth quarter of 2013 and will expand Longmen Joint Venture's total annual continuous rebar rolling capacity by 1.2 million metric tons ("MMT"). With the continuous rolling capacity at the same facility in which steel billet is produced, Longmen Joint Venture expects to further eliminate intermediate transportation, re-heating costs, and outsourced-processing cost, thereby reducing overall unit production cost by up to RMB 70 per metric ton for the 1.2 MMT rebar rolling line. Once construction of the new rebar lines is completed, Longmen Joint Venture will have a total continuous rolling capacity of 4.3 MMT, including 3.3 MMT of rebar and 1.0 MMT of high-speed wire.
"The construction of additional rebar capacity to further reduce unit production cost is an extension of our operating philosophy adopted in 2012," said Henry Yu , Chairman and Chief Executive Officer of General Steel. "In reviewing our 2011 financial results, we learned that prices for raw materials did not decrease as fast as prices for steel, these dynamics had pressured gross margin for the entire industry, and along with the overall industry, we also incurred losses for the fourth quarter of 2011.
"Although 2011 profitability was disappointing, demand for steel products in General Steel's core Western China market remained solid, as our 2011 sales volume increased by 2.3 million metric tons, or 58.1% year-over-year, to 6.2 million metric tons. We believe that our geographic location in China's western region continues to provide us strong competitive advantages, and we have set sustainable growth and profitability as our top priority. We are glad to see an improving trend for China's steel industry in late 2012, which provides us with cautious optimism for 2013," Mr. Yu concluded.
John Chen , Chief Financial Officer of General Steel, added, "Despite the improving but still challenging environment, we believe it is essential to grow our business organically with a focus on improving production efficiencies and increasing operating leverage. To leverage the economic of scale, we reallocated two rolling lines, including one 1.2 MMT rebar line and one 1 MMT high-speed wire line, from our Maoming Hengda facility to Longmen Joint Venture. These two lines have been in commercial production in 2012 and we expect unit costs saving of up to RMB 40 per metric ton for each line. In addition, in September 2012, we started construction of another 0.9 MMT1 rebar rolling line at Longmen Joint Venture, with anticipated unit costs saving of up to RMB 100 per metric ton. We believe by continuous rolling rebar and high-speed wire where steel billet is produced, the eliminated intermediate production costs should incrementally contribute to our gross margin recovery."