Copper bottomed

Taking first place in a government-backed poll of the Top 100 private enterprises in Guangdong – one of China’s most industrious provinces and home to some of its most successful exporters – is something to celebrate.

For years Huawei has enjoyed first place in the ranking, although the latest holder of the title is Amer International Group (better known as Zhengwei locally).

Headquartered in Shenzhen and described as a new materials producer, Amer earns the award as the best-selling private company in Guangdong (as opposed to state-owned enterprises), reporting revenues of just under Rmb723 billion ($99 billion) last year.

Local media outlets picked up on the achievement, perhaps under encouragement to showcase the progress of private firms like Amer at a time when foreign media have portrayed President Xi Jinping’s administration as steering key parts of the economy back under the direction of the state. But the changes at the summit also tell another story: how a firm focused on industrial metals has powered past better-known tech-focused brands like Tencent and Huawei, both of which have slipped from their previous peaks commercially.

Huawei is struggling to weather Washington’s block on the supply of key components and it also waved goodbye to a huge chunk of the revenues that contribute to the Top 100 ranking when it handed control of its Honor smartphone brand to a consortium led by the Shenzhen government’s investment firm in late 2020.

Tencent’s problems have come more directly from its home market, where a slap down of the internet sector has hammered its share price, while Country Garden, the country’s biggest property developer by sales dropped out of contention for the Guangdong corporate crown because of the debilitating slump in the real estate industry.

As the Chinese media tells it, Amer has cultivated a much lower profile than each of these peers – so much so that Shenzhen’s mayor is said to have been shocked that he had never heard of the firm when it first made an appearance in similar rankings a decade ago.

Information is still in relatively short supply today, although the firm’s founder Wang Wenyin crops up every now and again in stories about a corporate headquarters stuffed with mahogany and jade and a management style that demands that senior staff write reviews of the books that he favours (see WiC226 for a profile of Wang).

No doubt Amer’s absence from the headlines is partly because its focus on the industrial economy is unglamorous. Yet what’s known of Wang’s story is still compelling in outlining the transformation of a maker of copper wiring into a much fuller force in non-ferrous metals, following heavy investment in mining and processing.

Much of this was achieved through the development of industrial parks across the country in places like Ganzhou in Jiangxi and Tongling in Anhui, where copper is mined and processed into industrial applications, as well as Huizhou in Guangdong, where Amer has commissioned higher-end production of semiconductor wiring.

On its website the company says all the right things about the journey into value-added industries, including computer chips and polyimide production, and makes sure to highlight its tie-ups with prestigious institutions in science and technology.

Yet there is a trading mentality at the core of its success, where step-changes in its fortunes have coincided with downturns in the wider economy.

Jiemian reports that Wang made his first major breakthrough during the Asian financial crisis in 1997, when he bought new equipment on preferential terms from desperate suppliers. As other factories went to the wall financially, Wang’s operations survived, allowing him to emerge as one of Guangdong’s leading copper wire manufacturers as the crisis subsided.

There was another masterful decision in 2003 to buy several copper and tungsten mines at discount prices, when SARS was ravaging the Chinese economy, reports Deep Blue Finance, a local zimeiti. After the bet paid off in subsequent profits, Wang consolidated his factories into a bigger operation and he was back in the market buying the dips again in 2008, including a selection of international assets, as the copper price plunged to historical lows during the global financial crisis.

“In his own words: ‘We were all over the world picking up bargains and acquiring dozens of mines,’” Deep Blue Finance recalls.

The spotlight on Amer’s sales isn’t matched with the same visibility on the privately held firm’s profits, however, with little clarity on the company’s bottom-line.

The few figures that merit mention in the local media suggest a fraction of the returns of companies like Huawei and Tencent, while in the single instance in which Amer does have control of a listed company – Jiangsu Amer New Material, which is principally engaged in glass fibre processing – the profit margins have been negligible.

Wang’s critics say this is probably why he hasn’t tried harder to list the parent company, although he makes the case that he can do without the interference of other shareholders and that he hasn’t needed to raise capital from the public markets.

Deep Blue Finance is intrigued by how Amer has funded its growth on relatively subdued profits, however, especially during periods in which the copper price has been flagging.

One of the likely sources of financial support is from local governments in the locations where it builds its industrial parks (typically in third and fourth-tier cities), while another tactic in previous fundraisings was trust products backed by commercial activity in the same districts.

Citing local media sources, Deep Blue Finance says that Amer presented its story of a fast-growing conglomerate cleverly “using its reputation as ‘a world top 500 company’ and [its knowledge of] the local government’s psychology, to develop projects, investing everywhere, encircling a piece of land, and then quickly building”.

SOEs such as Jiangxi Copper, used to spearhead the quest to satisfy China’s thirst for commodities but led by the mercurial Wang – known locally as ‘the copper king’ – Amer has joined a list of fast-growing private sector firms in the commodity market, including nickel producer Tsingshan, cobalt miner Huayou and lithium firm Tianqi.

Amer’s sales have also benefited from trading conditions in the copper market, Jiemian reckons, helped by prices that reached new highs for the red metal last year.

Prices have been retreating from another peak this year for months, however, which could see a slowdown in sales for Amer over the same period.

Yet copper’s champions say that a supply crunch in the commodity is imminent because of massive new demand from the net-zero economy, suggesting that Wang might be well positioned to profit from the cycle once again.

That said, in spite of being Guangdong’s top company by sales, Amer remains not as well understood as a company of its scale ought to be…

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