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Alloy Steel International (OTC BB: AYSI.OB) filed this 8-K today:
Quantum Leap for New Super Alloy
High demand for new Super Alloy Arcoplate products has prompted Alloy Steel International to expand their operations into Indonesia by the appointment of a company to carry out functions on its behalf and under its direction.
The first overseas engineering office, based in Jakarta, will house both marketing staff and engineering professionals.
The Indonesian capital was chosen as the hub of operations due to its proximity to the expanding South-east Asian market, the lower manufacturing costs and the availability of highly qualified technical staff.
Possible sites for the manufacturing facility are undergoing analysis regarding capital costs of construction and fit out.
The Arcoplate Super Alloy, released in July this year, can be manufactured thinner thus lighter and more durable than older white iron type products. A one inch Arcoplate Super Alloy plate can replace white iron products up to six inches thick. Successful laboratory tests and field trials have shown cost and energy savings by reducing friction, greater ease of handling, and less production shutdown time for plate replacements.
Mining clientele have indicated they will specify Arcoplate in their plant expansions, upgrades and in new mining and mineral processing applications worldwide. The new thicker sizes are in heavy demand worldwide.
The new Indonesian branch of Alloy Steel International will cater for clients extending their mining operations into Indonesia and will allow for further expansion into the Chinese, Indian and Mongolian markets.
Alloy Steel International Chairman, Mr Gene Kostecki, estimates that once the company has the facility to service the Indonesian market from a local base, demand for Arcoplate in Indonesia could exceed $10 million per annum.
There was some question on Alloy Steel's i-Hub message board about whether this is a licensing deal or not. I suspect it isn't, but I sent an e-mail to the CEO asking if he could clarify. If I hear back from him, I'll update this post accordingly.
Update: Alloy Steel International's CEO Gene Kostecki responded via e-mail saying that this was not a licensing deal. He said the company was avoiding those out of concerns about protecting its intellectual property, which he said was the company's highest priority. He said that this expansion would enable AYSI to take advantage of Indonesia's lower labor costs and proximity to markets in China and India. If I get his permission to do so, I will quote his e-mail verbatim here, but those were the key points.
Second Update: I have his permission, so here's his e-mail:
We are all very excited with our expansion program into South East Asia as it will give the company a great stepping stone into the entire ASEAN Market which is one of the fastest growing economies in the world.
The new government in Indonesia is fast tracking all economic development and investment in Indonesia. With Indonesia’s low labour costs and proximity to China and India it will place the company in a very competitive position to capitalize on Asian markets in this part of the world without sacrificing quality and margins, yet still being price competitive against low end products that portray themselves as wear plate.
David, we do not see the need to enter into any licensing agreements with any third party as this could potentially compromise our position in protecting our intellectual property rights in this part of the world. Protecting our intellectual property rights is the company's top priority.