Today
before the opening bell, Armco Metals announced its subsidiary, Armco Metals
International, Inc., has inked an agreement with a Chilean supplier for a
woodchips purchase. The agreement was initiated on Tuesday, September 9, 2014.
The development was the culmination of Armco Metals’ efforts to add woodchips
to its trading business line portfolio.
The
agreement calls for Armco International to purchase a trial shipment of around
50,000 green metric tons (±10%) of Eucalyptus Nitens woodchips from the supplier.
Should this trial shipment prove successful, Armco International will move onto
a one-year total importation of 550,000 to 600,000 green metric tons. With the
current market price in China, 600,000 green metric tons of wood chips is worth
$63MM, and Armco Metals anticipates realizing 10% gross margins on the sales of
the product.
Armco
Metals inked the agreement while thinking of the woodchips’ market potential in
the Chinese economy. China is the world’s biggest producer of paper and
paperboard. But with the lack of sufficient quantity of high-quality domestic
wood fiber supply, new pulp mills in China have been looking to import greater
amounts of woodchips from plantation-rich countries to meet their growing
needs.
It
is estimated that China’s eucalyptus plantations doubled between 2006 and 2012.
However, this growth will not be enough to meet increasing demand due to
challenges with frost, pests, and disease due to a very narrow genetic base. As
domestic pulp production has grown, imports of woodchips to China have surged
during the past few years. As a result, China emerged as the world’s leading
importer of woodchips in Q2 2013.
Commenting
on the announcement, Kexuan Yao, Chairman and CEO of Armco Metals Holdings,
stated, “While keep confident in our metal ore trading and recycling business,
management has been making efforts to diversify our product line and develop
new profitable products into our business line. With the proven ability and
expertise of our team in international trading and sourcing, we have the unique
advantage to expand our business scope and carry new product which offers
mitigated risks and high return potential. We will capitalize on our formidable
business development team to develop the new product and expand into non metal
ore business that offer high growth potential, as well as higher profit
margins. We look forward to providing more updates on the developments and
anticipate unlocking considerable value for our shareholders.”
Mr.
Yao also referenced the experience and expertise of Armco Metals’ business
trading team. The team members have more than 10 years of experience in
international trading business and product sourcing, with plenty of bank
trading facility. They have also conducted extensive market and industry research
and feasibility studies, including but not limited to: international vendor and
product sourcing, shipping and logistics analysis, financing facility
arrangements, and customer identification and networking.
For
more information, visit: www.ArmcoMetals.com
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