China Metal Recycling establishes JV with Tianjin industry leader

Becomes the largest resources recycling platform in Northern China with annual production capacity of 5,000,000 tons.

China Metal Recycling (Holdings) Limited (“CMR” or “the Group”, stock code: 773), China’s largest scrap metal recycling company according to the China Association of Metal Scrap Utilisation, announced today that its wholly owned subsidiary CMR (Tianjin) Investment Co., Ltd. (“CMR Tianjin”) has entered into a shareholders agreement for the establishment of a joint venture in Tianjin, the PRC, to engage in the recycling of metals.

The joint venture will be a company established in the PRC to engage in the recycling, processing and sales of recycled metals, and also the dismantling of scrap home appliances and automobiles. The estimated total investment and registered capital of the joint venture are RMB900,000,000 (approximately HK$1,029.6 million) and RMB600,000,000 (approximately HK$686.4 million) respectively. A scrap metal processing base will be set up in Northern China with an annual processing capacity of 5,000,000 tons, according to a China Metal Recycling report.

CMR Tianjin will invest RMB200,000,000 (approximately HK$229,000,000) in cash, representing 33.33% of the registered capital of the joint venture.

Mr Jacky Chun, Chairman and CEO of CMR, said, “We believe the establishment of the joint venture will further reinforce our market presence in northern China. The joint venture will serve as a sound platform for the Group to efficiently manage the Northern China market and further develop its business in China, significantly increasing the Group’s influence on the PRC metal recycling industry.”

Tianjin Pipe is a subsidiary of Tianjin Pipe (Group) Corporation (“Tianjin Pipe Group”). Tianjin Pipe Group is majority owned by the Tianjin State-owned Assets Supervision and Administration Commission, principally engage in the manufacturing of seamless steel and copper pipes. With an annual capacity of 3,500,000 tons, Tianjin Pipe Group is the largest seamless pipe and seamless brass manufacturer in China and also the world’s largest single plant seamless pipe manufacturer. With scrap steel and scrap copper being the major raw materials for its manufacturing, Tianjin Pipe Group is one of the largest consumers of scrap metals in northern China. Its annual demand of scrap steel and scrap copper are 2,500,000 tons and 200,000 tons respectively. The 11 suppliers of the joint venture are all reputable metal recyclers in Northern China with extensive collection network, the region under coverage with an annual scrap steel consumption amounts to approximately 14 million tons in 2009.

Mr Chun concluded, “The joint venture fits in with the objectives of China’s 12th Five-Year Plan – setting ‘energy conservation and environmental protection’ as a more important and pressing need than ‘new energy development’.

The Plan also requires expediting the establishment of a scrap commodities collection system with technological support. Northern China is the region producing the largest volume of metal and has the highest demand for both natural resources and scrap metals. Riding on the huge demand for scrap metals of Tianjin Pipe, CMR’s relevant management experience in large scale operation, nationwide logistics network, strong sales and financing platform, our industry reputation and advanced management system, in addition to the regional collection network covering annual scrap steel consumption of 14 million tons of the suppliers, the joint venture will set up a scrap metal processing base in Northern China with an annual processing capacity of 5,000,000 tons, satisfying 36% of demands from the Northern China region and dominating the Tianjin market, in turn becoming the largest recycling platform in the region. Going forward, we will increase investments in the PRC market, continue to consolidate the regional market and strengthen the Group’s leading position in the market, so as to capture the enormous market opportunities in the PRC. The joint venture is the largest merger and acquisition of the Group since its listing in 2009.”