Rising China Consumer Spending to Boost Steel Demand, Gerui CFO Meng Says

By Bloomberg News - Aug 5, 2010 China Gerui Advanced Materials Group Ltd., a specialty steel producer, is “very optimistic” about demand for its products as domestic consumption grows along with wages, according to Chief Financial Officer Edward Meng.

Gerui aims to double its production capacity to 500,000 tons a year by December 2011 and increase its chromium-plating capability to 250,000 tons to meet increased demand, Meng said.

“We’re very optimistic and there’s more demand than we can currently handle,” he said in a phone interview from Washington. “We’re running at near full utilization and see revenues getting a boost as we add capacity.”

China’s leaders have pledged to expand the role of domestic demand in the economy in a bid to reduce the reliance on exports after the global financial crisis hurt trade. The government unveiled a $585 billion stimulus package in November 2008, extended subsidies for purchases of household appliances and automobiles and raised minimum wages in provinces.

There’ll be “limited” effects on the company’s business with a roll-back of subsidy programs as increased wages will boost demand, Meng said.

The Henan, China-based company supplies materials used in products ranging from beverage cans and beer-bottle caps to fibre-optic cable insulation wrapping and household appliances.

Domestic prices of hot-rolled coil fell for seven straight weeks to July 16, as government measures to curb property speculation damped demand for steel. Prices have since gained 6.9 percent to 4,159 yuan a metric ton, according to Beijing Antaike Information Development Co.

China Gerui shares have climbed 3.6 percent this year on the Nasdaq stock exchange, compared with the USX China Index’s 2.8 percent advance.

--Chua Kong Ho in Shanghai. Editors: Allen Wan, Linus Chua