Armco Metals Holdings, Inc. (AMCO) Continues to Make Itself Indispensable in Supply-Strapped Chinese Market for Recycled Steel

Armco Metals has been steadfastly hammering out a growing empire in Chinese metal recycling and ore importation over the past decade, subsequently establishing sales relationships to some of the most successful, growth-oriented steel foundries and mills in the business today. With a portfolio of products that range from ferrous/non-ferrous ores, including iron, chrome, copper, magnesium and nickel, to steel billet and recycled scrap metal, AMCO sources its product line from a growing global supply network encompassing locations in Brazil, India, Indonesia, Ukraine, the U.S., and beyond.

Currently one of the biggest metal recyclers in China, AMCO prides itself on establishing trusted relationships with operators in the end market and proving up sustainable supply chains that have a low impact on the environment. Steel made from scrap requires roughly 60% less energy on the whole than to make the stuff from scratch and AMCO has doubled-down on their commitment to the environment by building a massive 32-acre scrap metal recycling facility (Armco Renewable Resource Co., Ltd. – Lianyungang) equipped with the latest hardware and capable of doing some 1M metric tons a year. The Apr 16 acquisition this year of 100% of California-based Draco Resources, Inc., an explorer, miner and trader of minerals and iron ore, via a $46M stock exchange agreement, further enhances AMCO’s position in the space and adds a pretty major North American node to their overall sourcing footprint.

The Draco acquisition puts exclusive rights to manage, operate, distribute, and sell some 5M metric tons of iron ore (fine) from the state of Alabama, with the first 55k-ton order having already left the port for China back in March. Plans moving forward call for an additional one to three such shipments per month and current projections show a $20 to $30 profit on each ton of ore, a substantial cash flow addition for AMCO that will enable further expansion of the company’s thriving mineral trading business. This is all part of AMCO’s growing, diverse sales channel architecture which makes tremendously efficient use of both existing logistical infrastructure in China, as well as key price incentives and business relationships with geographically well-distributed companies throughout the country, complementing the company’s strategic placement of subsidiaries in key regions (like Henan Armco & Metawise Trading and Armco Metals Holding -Shanghai). AMCO has an impressive umbrella set up that covers over ten long-standing international metal supply relationships and well over 100 SME steel producer customers across China, giving the company an enviably stable, predictable pipeline that runs from the supply end of the business, all the way through to sales, where demand is consistently maintained by the distributed crop of smaller steel industry players.

The company also signed two important steel scrap supply agreements recently, one with Midland Resources Company Ltd. at the start of April, a JV with Shagang Steel Group based in Hong Kong that serves as Shagang’s exclusive HK sales agent, and another agreement around the start of march with Mitsui & Co. Ltd. out of Shanghai, a wholly-owned subsidiary of giant global conglomerate Mitsui & Co., Ltd., which has its hands in everything from energy and logistics, to chemicals, food, machinery, and textiles. On the one hand, Shagang is easily among the biggest steel scrap importers in China, with Midland handling over 400k tons of steel products for them last year alone. This agreement helps shore up growing demand for critically short supplies of steel scrap in China and the agreements (collectively) are well timed with regard to cyclical rebounding in the Chinese steel market projected for 2014. On the other hand, the Mitsui deal puts the volume of one of the biggest steel producers in Japan on the table for AMCO, with Mitsui Shanghai purchasing as much as 20k tons of scrap per month. The Mitsui deal opens up the Japanese market, as well as other markets accessible through Mitsui’s global presence, to AMCO for further expansion. A major expansion like this of steel scrap channels into Japan and beyond further cements AMCO’s already rock-solid foundations and will help to improve cash flow in support of the company’s daily operations.

Many industry analysts are pegging Chinese ferrous scrap demand projections over the long term as being grossly underestimated, with a Metal Bulletin Research report out late last year estimating a 7% increase in demand per year through 2021, driven in large part by China’s foundry sector. Despite slowing growth compared to the past, China’s steel industry is being cultivated by Beijing, with the tendency being to keep scrap flowing into the industry to feed growth rather than allowing it to go abroad, flying in the face of projections that indicate China could otherwise become a net exporter (rather than importer) as soon as 2020. Meanwhile, shortages projected over the same interval here in the U.S., particularly for high-quality prompt industrial scrap (expected to climb roughly 4% to 75.6M tonnes by 2021), will continue to drive bullish market fundamentals for AMCO.

More info on Armco Metals Holdings available at www.armcometals.com

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