July 13, 2006 — Wire Rope Corp. of America, Inc., St. Joseph, Mo., announced this week it has formed a joint venture with Wuhan Iron and Steel Corp., China's third-largest steel producer and the 18th largest in the world. The joint venture, WISCO WRCA Co. Ltd., is 51% owned by WRCA and 48% owned by WISCO. Total investment in the new venture will be approximately $100 million.
According to WRCA, plans call for building a 1-million-square-foot modern wire rope production facility in Wuhan, China, west of Shanghai on the Yangtze River. WISCO is located within close proximity of the new wire rope mill and will be the primary supplier of rod to the joint venture. Manufacturing will focus on the more sophisticated parts of WRCA's product line, such as oil, gas, mining, and lifting products. A number of WRCA's customers currently have overseas manufacturing operations, and these customers are expected to benefit from the joint venture by having an efficient local supply source. Products manufactured by WISCO WRCA Co. Ltd. are exclusively for the Chinese and Asian markets and not for export into North America.
Out of the new facility, WISCO WRCA will be able to produce 50,000 metric tons of wire rope products when all the manufacturing equipment is installed. Designed with optimum logistics flow and expansion capabilities, the facility's total output will be more than 100,000 tons at the site by 2010. New plant construction is expected to start in August and will be completed in 2007 with some specialty installations continuing into 2008. WRCA anticipates more than 400 people will be employed at the new facility.
According to Ira Glazer, chief executive officer of WRCA, the new joint venture is a good business opportunity for WRCA. “While the total wire rope market in China is 2.5 times the size of the U.S. market, and there are numerous wire rope manufacturers there, the majority of the product is of relatively low quality,” he said.
Additionally, a significant amount of wire rope is being imported into China and is expected only to increase in the future. “The joint venture will benefit from the lower costs of operation in China and the high-quality rod supply from WISCO,” Glazer said. “We will add our technical expertise to the favorable cost environment to produce a very competitive product for the local Chinese and broader Asian markets. We believe there is a great demand for a higher-quality product to enable us to sell our capacity and eventually expand.”
WISCO WRCA will be led by a five-person board of directors, which will appoint a general manager to run the new production facility in Wuhan. The Balloch Group, a financial advisory and investment banking firm based in Beijing, was engaged by WRCA to help explore the possibilities of a strategic business initiative for WRCA in China.
