Xiwang Special Steel to Invest RMB 400 Million on Upgrading Two EAFs
Resource from: CBCC Likes:3068
Jun 01,2012
May 30th, Xiwang Special Steel announced to invest RMB400 million on upgrading its two EAFs for stainless steel production.
By focusing on long products (wire rods and steel bars) of stainless steel instead of flat products which are already common in the market, the Directors of Xiwang Special Steel believe the Group has a niche in the stainless steel market. Also, as stainless steel is needed in numerous high growth industries, the Directors believe the growth of stainless steel market will be higher than that of the ordinary steel and other special steels.
In sum, the Directors believe that the development of stainless steel is in line with the strategy of the Group to becoming a leading special steel manufacturer. The production of stainless steel enriches the Group’s product mix and customer base. In the event that the Group decides to switch its production to other types of special steel products, the short-flow production process of the Group’s EAFs allows this to be done efficiently.
Thus, the group to upgrade and modify the Group’s two EAFs. The Directors estimated that the modification will take up to about eight months from now. It is estimated that upon completion of the modification, each of the EAFs is able to produce 500,000 tonnes of stainless steel per annum, which means the Group would have an aggregate stainless steel production capacity of 1,000,000 tonnes per annum. It is estimated that the development costs of stainless steel, including the costs associated with the modification, will be approximately RMB 400 million, and such costs will be funded by the Group’s internal reserves and, if necessary, bank borrowing. The Directors therefore do not anticipate any change to the planned use of proceeds from the global offering as disclosed in the Company’s prospectus dated 13 February 2012.
As the Group’s EAFs have undergone trial production of stainless steel since April 2012 and ceased the production of other special steel products temporarily, and that further modification to the EAFs will take place in the coming eight months, the utilization of the Group’s EAFs is expected to be significantly lowered to around 25% to 50% during the modification period.
Therefore, the production volume of the Group’s special steel products would decrease while unit production cost would increase. As a result, the Directors expect that the Group’s financial performance for the six months ending 30 June 2012 is likely to be adversely affected.
As the modification would only be made to the EAFs, the operation of the Group’s rolling lines is unaffected and so does the Group’s production of ordinary steel products.
As the production of stainless steel requires precious metals as raw materials and involves a more complicated manufacturing process, the cost of production will be higher than that of the other special steel products the Group previously produced. However, due to its uniqueness of material properties and specific application industries, stainless steel in general has a higher average selling price in the PRC which is approximately two to three times to that of the other special steel products. Accordingly, the Directors believe in the long run, the gross profit of stainless steel products will be higher than that of other special steel products the Group previously produced.
The Company will by way of further announcements keep its shareholders and potential investors informed of further development regarding the aforesaid matters as and when appropriate and necessary.
In view of the above and the financial impact to our Group as discussed under the section headed “Effect on the Group’s Business” above, shareholders of the Company and potential investors are advised to exercise caution in dealing in the securities of the Company.
(CBCC)
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
2.All news edited and translated by us are specially noted the source"CBCC".
3.For investors,please be cautious for all news.We don't bear any damage brought by late and inaccurate news.
4.If the news we published involves copyright of yours,just let us know.
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