The Associated Press (7/25) reported: "China's Ministry of Industry and Information Technology has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars. The affected industries include steel, cement, copper and glass." The Dow Jones Business News reported: "The Ministry also ordered 650,400 tons of outdated copper capacity and 260,000 tons of outdated galvanized aluminum capacity shut by end of September."
I think the key word in the above sentence is "outdated". Clearly, LIWA is a new facility making some cutting edge products. If anything, the reduction of copper production by other companies ought to be in LIWA's favor and help sustain the price of their products. Any thoughts, anybody?
That article is talking about the effect of government subsidy and the over expansion of certain group of industry that they ignore the demand. The following is CEO response on demand of copper anode of LIWA:
Also in Q1, we begin construction on our fourth dedicated copper anode smelter, which is expected to be complete by the end of Q2 and come online shortly thereafter. The addition of this fourth copper anode smelter will increase our total anode production capacity to 100,000 to 120,000 tons per annum, with total annual scrap copper refinery capacity reaching between 150,000 and 170,000 metric tons per year.
We are currently supplying to three copper anode customers, but remain capacity constraint, and believe that the addition of the fourth copper anode smelter will help Lihua better address reflect greater demand for high quality anode product.
Lihua provides a cheap alternative to copper in an uninterrupted basis to their clients that generates the demand, not excess funding and subsidy, and because of fast turnover rate, their price are always competitive, and with their location advantage Lihua is dominating its regional copper anode market base on price, quality & quick turnover of its product to earn their revenue. That is based on response from their client, not forecast.
LIWA remains in a vicious cycle of Chinese stock trashing, unhappy institutional shareholders, unhealthy non-existent investment banking relationship and P.R. Couple with an image problem of excessive CASH build up without a coherent plan and a clear picture of the future market response on its new project - CCA wire which supposed to start running in a few months from now.
Does LIWA have REAL cash of $180MM in their bank account? When and how will they use it if they exist? Why no insiders' buying (CEO, COO, CFO, directors) after management stopping the stock buyback and dividend distribution? Did LIWA pass the industrial specification standard qualification?
Current stock price of LIWA has nothing to do with any macro news from China or anything else. Many Chinese stocks that are running have a lot to do with investment bank activities. After XIN raise fund through bond sale and VIPS cut a deal to sell stocks from management to their related investment banks, the stock price shoot up within 3 months. LIWA are not willing to create investment banking relationship which results as an abandon orphan drifting up and down. Wall Street runs by a group of professional money managers and without their backing, you have already seen through LIWA in the past 2 years.
This stock needs serious news to attract attention, if institutions will pick up a couple million shares of LIWA, you will see the effects just like second half of 2010.
I'm going to strongly disagree with you elpaso. This is a major event in China and, in my opinion, will have significant implications for a number of industries there. The central government ordering of companies to reduce production and / or close is clearly a function of their unique economic control system.
Has LIWA been ordered to shut down smelters and reduce production? We need to hear from LIWA management asap about their status. The "current stock price" of LIWA may take a severe hit if they are on the Ministry's cut list. I very much doubt that they are, but any reassurance would be helpful. Very needed, and very helpful to all shareholders.