Ka Shui Holdings, a Shenzhen-based moulding company that sources said was moving towards an initial public offering, is to spend more than HK$100 million to double capacity and upgrade machines to use cheaper raw materials. The company, whose customers range from computer maker Lenovo Group to razor-blade manufacturer Schick, said it would increase capacity to at least 22,000 tonnes per year within two years by adding a new plant at Daya Bay, in Huizhou, Guangdong province. Ka Shui is expanding to take advantage of a domestic moulding market that it forecasts will grow at about 14 per cent annually until 2010, or six percentage points higher than the growth rate of the global moulding market. Only about 30 of the mainland's 3,000 moulding companies had annual production of more than 5,000 tonnes, chairman Lee Yuan-fat said. 'Our advantage is that we are able to mould all the zinc, magnesium and aluminium products in a one-stop service,' Mr Lee said. Machines would be upgraded to add capacity to mould products with magnesium and aluminium instead of zinc, helping customers to reduce cost. The increase coincides with the country's expanded output of magnesium. 'China has surpassed Norway as the biggest supplier of magnesium in the world,' Mr Lee said. 'Magnesium, which is only half the price of zinc, has less weight and higher strength, but its moulding process is more complicated so we need more investment in machinery.' The price of zinc rose 125 per cent last year to US$4,290 per tonne, a 320 per cent increase since 2004, according to the London Metal Exchange. That compares with only an 11.6 per cent gain in magnesium prices to US$2,123 per tonne in the past three years, while aluminium has risen 43.2 per cent to US$2,729 per tonne, according to China Shanghai Changjiang Metal Exchange. Magnesium can be used to make car parts or electronic products due to its high strength, while zinc and aluminium alloy are suitable for home appliances or products such as computers, communication tools and consumer electronics. A moulding machine for magnesium alloy products, which could provide an air-insulating environment for safety, might cost HK$3 million per unit, triple the price for an equivalent machine for zinc products, said the company, which started to mould magnesium products in 2000. Revenue from zinc products accounts for 70 per cent to 80 per cent of the company's total sales. The rest is from magnesium and aluminium products. Ka Shui has been partners with Schick, the United States-based razor maker, and Swedish home furniture maker Ikea for 10 years.