Golden Dragon's New Production Facility in Alabama will help Bolster State
15 Apr 2012
In about five years, Henan-based Golden Dragon Precise Copper Tube Group Inc went from seeking an investment opportunity in the United States to helping a flagging employment rate in Alabama by building a production facility.
The decision to have a site in the US was also spurred by the government's decision to levy anti-dumping tariffs after complaints from US copper tube makers.
Golden Dragon is a supplier of precision copper products, mainly to air conditioner makers around the world. The company sells its products domestically as well as to other countries such as the US, Japan, South Korea, Thailand and Malaysia, as well as the Middle East and Europe. Golden Dragon's overseas markets make up a significant portion of its revenue.
According to the Shanghai Securities News, the company produced about 400,000 tons of copper tube in 2010, generating revenue of 23.55 billion yuan ($3.73 billion, 2.86 billion euros) and a net profit of 213 million yuan.
In October 2010, the US International Trade Commission ruled that imports of copper pipe and tube from China and Mexico would face anti-dumping duties.
It was the first time the US government slapped anti-dumping duties on these products. The ruling affected Golden Dragon's 10 manufacturing operations in China and one in Mexico.
The company opened a plant in Mexico in 2009 to manufacture products for its North American customers.
A report by China's 21st Century Business Herald said that Golden Dragon and other relevant exporters in China and Mexico face anti-dumping duties of 11.25 percent to 60.85 percent and 24.89 percent to 31.43 percent respectively.
"If you have a local production, you don't have to worry about the exchange rate, freight cost, exporting policy, etc. You just need to focus on establishing your market share and to cater to your customers' needs," Golden Dragon's president of North America Jason Yin tells China Daily.
"It's good to get your products to customers as quick as possible. The cost of shipping is also going up. The yuan keeps appreciating. These are costs that we can't control. There are also some trade issues between the US and China."
When Chinese enterprises establish their production bases in the US, it creates a "win-win situation" for both countries, says George Landegger, chairman of Alabama-China Partnership (ACP).
The ACP recently organized a two-day symposium in Monroeville, Alabama, to help Chinese companies learn about investment opportunities in the southern state.
Alabama Governor Robert Bentley says Golden Dragon's investment is "welcome news for a part of the state that has long been in need of new jobs."
When Bentley was elected in November 2010, he vowed to "put Alabamians back to work". He gained voters' confidence when he said he would not accept a salary until the state reaches full employment.
In July, Alabama became the first state to pass a tariff subsidy bill to help foreign investors hedge against the federal government's anti-dumping duties.
Bentley told 21st Century Business Herald that the bill, which offers a tax cut or exemption to foreign companies if they invest more than $100 million and create more than 100 jobs, was initially drafted to attract Golden Dragon's investment.
Three days after Bentley became governor, he invited Golden Dragon to Birmingham after learning the company was looking for a site in the US.
Yin says Alabama was chosen over other states because "the governor and its people responded very quickly to our requests and are very helpful in general."
The other two sites considered were Dallas and Little Rock, Arkansas.
It helps that Golden Dragon already had established some business relationships in the area. It works closely with Alabama-based Wolverine Tube Inc, a supplier of finned tubing, fabricated assemblies and components. Its major customer Goodman Group, a producer of air conditioners and heaters, has plants in nearby states - Texas and Tennessee.
In February, Golden Dragon announced that it plans to build a $100 million manufacturing facility in Pine Hill in Wilcox County, Alabama, although it previously announced Thomasville in Clark County, Alabama, was the chosen site.
Late last year, Golden Dragon officials said they needed an area three times as big as the 50-acre (20 hectares) site in Thomasville in line with their future expansion plans.
Thomasville Mayor Sheldon Day then proposed the 280-acre site in Pine Hill located just a few miles outside Thomasville's boundaries.
"The plant will be closer to Thomasville, although it's technically situated in Pine Hill. Because Pine Hill is a small area, we still need the access of utilities like water supply from Thomasville," Yin says.
The new plant is said to be capable of producing more than 100 million pounds of copper tubes per year for American customers in the refrigeration and cooling industry.
Currently, Golden Dragon has seven employees in Alabama, but it plans to hire about 300 workers when the plant is completed in about 18 months. It will consider adding an additional 200 employees in the future.
The new facility will be a significant employment boost to southwestern Alabama. Pine Hill has a population of less than 1,000. As of 2010, the population of Wilcox County stood at 11,670.
Golden Dragon will work with the Alabama Industrial Development Training Office to teach its new employees.
George Alford, manager of the Wilcox County Industrial Development Authority, says the project is one of the largest economic development events in the county's history.
"Recently, we were named the 15th-poorest county in the US," Alford says. "We believe this project is the first major step in reducing our high unemployment and poverty rates."
In February, Wilcox County reported the highest employment rate in the state - 16.9 percent - and is way above the state average of 7.6 percent.