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Armco in scrap supply deal with Midland Resources


Asia: Chinese recycler and iron ore distributor Armco Metals has entered into a steel scrap supply agreement with Midland Resources Co. The deal will see Armco Metals become a sourcing agent for the Hong Kong-based business to import ferrous scrap into China.

Under the agreement, Midland Resources will use its import licences and financing capabilities to import steel scrap for direct processing by Armco Metals. This method is expected to 'substantially improve' Armco Metals' cash flow and represent a 'significant first step' towards becoming a processing base for both Midland Resources and Shagang Steel.

'Steel scrap is the only raw material in short supply in the steel industry,' comments Kexuan Yao, chairman and ceo of Armco Metals. At a time when declining steel prices have placed a 'huge burden' on the whole industry supply chain, this new strategic plan will 'help stabilise margins and achieve sustained profitability'.

Yao notes that Armco is seeking environmental regulatory approval to extend its import licence from 5000 tonnes to 20 000 tonnes; the company expects to get the go-ahead later this year. 'We see this as an important move for future expansion when steel markets cyclically recover and our cash flow improves,' Yao adds.

Midland Resources is a joint venture with Shagang Steel Group, one of China's major importers of ferrous scrap. It is said to have sold more than 400 000 tonnes of steel products for Shagang Steel throughout Hong Kong last year.

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