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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