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Armco Metals Holdings, Inc.(NYSE MKT:AMCO), a distributor of imported metal ores and a steel recycler in China, today announced that its Armco Metals (Shanghai) Holding, Ltd. subsidiary is establishing an OTO (Online to Offline) platform for steel scrap business with business partners.
The new operations will be conducted through, Shanghai Meng Yi Network Technology Co., Ltd., which has been in the process of registration and will serve as the operating entity to establish and operate the ecommerce trading platform for steel scrap products. This is a new strategic development for Armco Metals to expand and enlarge the steel scrap business from traditional trading model to OTO platform model with additional value-added services.
The new company is in the process of registration with registered capital of CNY 10 million (“approximately $1.6 million”) and is being organized by four shareholders, including Armco Metals Shanghai, which will be the largest shareholder holding 34.3% ownership of the new company by contributing CNY 1.4 million (“approximately $0.23 million) and business know-how. The other three shareholders will own 21.9% interest each by contributing CNY2.85 million (“approximately $0.46 million”).
The other shareholders include two Chinese business entities and one Chinese individual. One of shareholders, Shanghai Pianzhou Assets Management Co, Ltd., was Armco Metal’s customer and the other two shareholders had no previous relationships with Armco Metals. Meng Yi will be operated from and based in Shanghai once registered and Mr. Kexuan Yao, Chairman of Armco Metals, will serve as executive director of the new company at no additional compensation. Meng Yi will create an OTO platform connecting decentralized steel scrap suppliers from upstream with downstream steel mills via internet and provide the services for facilitating steel mill’s purchase from and payment to suppliers.
“As ecommerce has been developing quickly in China and China government is encouraging and promoting the application of internet technology in traditional business, management has been considering and studying the application and implementation of ecommerce strategy in our business. Currently and in the short term, it provides a match and complements our business; for the long term Creating the OTO platform is an important strategic development which could lead the business transition for the Company from solely selling steel scrap products in traditional methods to providing both services and products in the steel scrap business through the online platform.”
Commenting on the announcement, Kexuan Yao, Chairman and CEO of Armco Metals Holdings, stated, “Once the platform grows to certain scale, we believe the greater sales revenue and profit for our steel scrap business could be expected.”
