China Henan Special Steel Plans IPO

China Special Steel (CSS, Henan Province, China) announced it is planning an initial stock offering for late 2004 or early 2005. CSS manufactures bearings and springs, primarily for the domestic Chinese auto industry. The company said it expects to raise HK$300 to HK$500 million (USD $38.5 to $64.5 million) in the share sale. A shadow over CSS, however, is the dramatic recent slowdown in China's auto industry. Central government credit tightening, coupled with a glut of manufacturing capacity, produced not just an oversupply of vehicles in the market, but also a drop in demand. The pace of auto sales in China has fallen off dramatically. After doubling in 2003, sales should be up only 20% in 2004. Slower growth and oversupply have prompted GM and VW, among others, to become locked in price-cutting wars to keep sales and production up. Some GM and VW models have seen price cuts as much as 12% recently. Most auto industry analysts do not expect China's auto market to recover strength before the end of 2005.