By Bloomberg News
June 22 (Bloomberg) -- China Metal Recycling (Holdings) Ltd., the country’s largest recycler of scrap metal by sales, jumped in Hong Kong trading as a revival in prices benefited producers.
The Guangzhou-based company rose 25 percent to HK$6.48 at 10:50 a.m. local time. The company sold 300 million new shares at HK$5.18 each to raise HK$1.55 billion ($200 million) in Hong Kong’s second-biggest initial public offering this year.
Steel and industrial metal prices have rallied this year as China spends 4 trillion yuan ($585 billion) to revive economic growth. Steel prices in the world’s biggest consumer have gained 31 percent since November as the country bolstered spending on houses, roads and railways.
“China Metal mainly focuses on steel recycling,” Heng Kun, an analyst at Essence Securities Co., said by phone today. “So long as prices stabilize, the industry will be in good shape because its profit margin is quite stable.”
The company produced 1.6 million metric tons of recycled products in 2008, and plans to almost double capacity by the end of this year by building new facilities in Tianjin, Zhejiang and Jiangsu. It had sales of HK$6.5 billion last year, according to its prospectus.
“Recyclers with large-scale capacity enjoy lower operating costs and with low-interest rates, they can easily get financing,” Heng said. “The industry also enjoys favorable tax policies, so they have good prospects.”
China Metal buys scrap steel, copper and other metals from overseas and domestic suppliers and produces recycled products used in buildings, autos, ships, home appliances and aircraft. UBS AG managed the share sale.
China Zhongwang Holdings Ltd. the country’s biggest producer of extruded aluminum products, was the largest initial public offering in Hong Kong earlier this year.
--Xiao Yu. Editors: Tan Hwee Ann, Andrew Hobbs.
To contact the Bloomberg News staff on this story: Xiao Yu in Beijing on yxiao@bloomberg.net
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