BEIJING, Dec. 5, 2012 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced that its Longmen Joint Venture ("Longmen JV") has signed a one-year supply agreement with Tianjin Product and Energy Resources Development Co., Ltd. ("Tianwu"), through which Tianwu will provide Longmen JV with a minimum of 3 million metric tons of iron ore at market prices, with favorable credit terms.
"This agreement with Tianwu is another example of our successful efforts to enhance our raw materials procurement capabilities by establishing relationships with key suppliers, including prominent state-owned enterprises and their subsidiaries. We have worked closely with Tianwu and its parent Company, Tianjin Materials and Equipment Group Corporation ("Tewoo Group"), for several years and are extremely pleased to expand the scope of our cooperation through this agreement," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "The current pricing pressure facing the construction steel market reinforces the importance of access to high quality raw materials and maximizing production efficiency. The minimum quantities guaranteed under this agreement coupled with the favorable purchasing terms will give us the resources needed to utilize more of our available production capacity. This increased access to iron ore and the recent efficiency improvements we have made at Longmen JV will allow us to better meet the growing demand for our products in Western China."
Tianwu has provided Longmen JV with credit of up to RMB1 billion for the purchase of iron ore under this agreement at an interest rate of 10% above the benchmark lending rate of the People's Bank of China. These financing terms provide the Company with an attractive alternative to bank debt, while freeing up cash to support working capital needs.
Tianwu is a leading Chinese trading company specializing in the procurement, sale and financing of raw materials including iron, steel and mineral resources. It operates through affiliates in key Chinese cities including
Hong Kong, and international markets such as
India. Tianwu is one of
China's largest iron ore trading companies, having sourced and sold over 16 million metric tons in 2011. It is a subsidiary of Tewoo Group, a state-owned commodity trading enterprise with nearly
RMB2.5 billion in registered assets. Tewoo Group is one of the top-100 enterprises in
China and one of the Fortune Global 500 companies for 2012. In 2010, General Steel and Tewoo Group partnered to form Tianwu General Steel Material Trading Co., Ltd. ("Tianwu JV"), a joint venture 60% owned by General Steel.