STEEL products trader Van Shung Chong Holdings expects the construction boom in Shanghai to continue despite China's macroeconomic controls. Managing director Andrew Yao Cho-fai said the control measures had slowed construction development but the potential still was huge in the long term. 'Developers such as Henderson Land Development Co and Wharf (Holdings) will continue their development plans in major cities in China,' he said. He believed the group's Shanghai joint venture, Shanghai Bao Shun Chang International Trading Co, would obtain new business from Henderson and Wharf when they began construction work. The group acquired a steel processing factory, Dongguan Van Shung Chong Steel Products Co, in Dongguan, Guangdong province, in June. Acquisition of the factory, which mainly produces steel products for manufacturing, is in line with the group's objective of diversifying its businesses into high-profit margin products. However, Mr Yao said the contribution of the factory to the group's turnover in the coming year would not be more than 10 per cent. He said the first phase of production had begun last month and a review of the factory's performance would be done at the end of the year. He said the group would consider the second-phase development if the returns reached double digits, a level that the group was confident the factory could meet. Van Shung Chong acquired a 35 per cent interest in a pier in Shekou for an undisclosed sum at the beginning of the year to enhance the group's distribution system in Guangdong. Mr Yao expected the pier would break even within two years. He said the group would be able to maintain a profit margin in the range of three to five per cent through its steel business. The group, which has more than 100,000 tonnes of storage capacity, buys steel when prices are low and stockpiles it as a buffer against price fluctuations. 'One hundred thousand tonnes is nearly 10 per cent of the total steel demand in Hong Kong,' Mr Yao said. He said, for example, the group had ordered more steel from Mexico when the Mexican peso depreciated. The group's main sourcing countries are Turkey, Mexico and Saudi Arabia. Van Shung Chong, whose market share is more than 30 per cent in Hong Kong, has outstanding contracts valued at $700 million. 'About $200 million to $300 million is contributed by contracts that relate to airport and other associated projects,' Mr Yao said. Since the construction of such contracts would be completed between 1997 and 1998, the group was confident that these projects would make a contribution to its turnover from the coming year to 1997, he said.