Friday, September 5, 2014

Armco Metals Holdings, Inc.’s (AMCO) Diversified Presence in Metals & Ore, Logistical Efficiency is Key to Chinese Market Success

Armco Metals Holdings saw a pretty solid Q2 this year with a 19% jump in revenues over the same quarter last year, raking in $32.9 million despite a glut of iron ore from Australia making the company’s core component, steel scrap, look expensive (about $32/mt more). The removal of the 70% rebate on the 17% VAT for steel scrap recyclers issued in 2011 continues to depress the scrap market, highlighting a policy inconsistency that could be quite bullish for AMCO longer-term.

Steel scrap utilization in China fell 6% from 2012 to 2013 (steel scrap utilization was only 11% in 2013 compared to over 32% back in 1994), and despite tighter carbon dioxide emission targets by the Chinese government, the use of steel scrap offsetting 1.6 mt per tonne when used in steelmaking has gone largely overlooked by officials, according to The China Association of Metalscrap Utilization (CAMU). CAMU has been lobbying the central government to curb the 17% tax on steel scrap, noting further that 3 mt of solid wastes is eliminated from the steelmaking equation for every tonne of steel scrap used and urging Chinese authorities to re-examine the issue last weekend at the 7th China International Metal Recycling Conference in Beijing.

Part of the reason for Armco’s success has been its highly efficient recycled scrap steel architecture, from its core 32-acre facility in Jiangsu province’s Lianyungang Economic and Technological Development Zone to its operations in four other key locations in geographically ideal regions. Lianyungang is designated as the waste iron and scrap steel recycling pilot region for China (China Iron and Steel Association and CAMU), giving Armco a serious advantage in terms of access to government incentive. Jiangsu has 11 surrounding steel mills that produce some 20 million metrics tons per year, or 2.5% of China’s total output projected for this year (according to a senior executive at Fengli Group Co. Ltd., who spoke at the conference last weekend).

Armco is primarily focused on sustainable scrap steel but also handles metal and non-ferrous metal ore, including chrome, iron, nickel and manganese ore. The company also has a sophisticated system between its five subsidiaries, which handle everything from sourcing and importing to processing and distribution. Armco has established tight-knit relationships with more than 10 different international suppliers from some of the most ore-saturated regions around the world, including Australia, India, Brazil and the United States.

The company’s extensive network of proven sales and distribution channels, handling of metal and non-ferrous metal ores in addition to its core recycled scrap steel business, allows Armco to largely weather the storm of oversupply in the iron ore market and other concomitant factors. The company’s subsidiaries are located in logistically optimal areas, and with output for scrap going to over 100 different small- to mid-sized steel producers as well as some of the big state-run producers throughout the country, Armco enjoys a highly cost-effective and resilient foothold in the Chinese metal market.

For more information visit www.ArmcoMetals.com

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