One of the principal activities of the Group is the manufacturing of steel cords. Jiaxing Eastern Steel Cord Co., Ltd. ("JESC") and Tengzhou Eastern Steel Cord Co., Ltd. ("TESC"), are the Group's two large production bases in the manufacturing and selling of steel cord specifically used in radial tyres.

Steel cord is the essential material of radial tyres. Downstream products include car tyres, light truck tyres, heavy truck tyres, construction machinery vehicle tyres and aviation tyres. Tyre sales can be divided into the original equipment market (“OE”) and the replacement market. The OE refers to new automobile tyres produced by auto makers, while the replacement market refers to replacement tyres used by existing autos and tyre distributors who replace original spare tyres for customers. The steel cord market has grown steadily in the past few years under rapid development of the domestic expressway and automobile industries. Its scale has grown to RMB 26.5bn in 2019.

The outbreak of the COVID-19 epidemic has had an adverse impact on China's tyre manufacturing industry in the first quarter 2020. However, since April 2020, China’s tyre manufacturing industry has gradually recovered. with the mitigation of COVID-19 pandemic, global demand for logistics will witness a substantial increase, boosting the demand for large vehicles’ tyres. Leveraging the Chinese government’s domestic circulation policy, coupled with the solid demand on tyres, the prospects of the Group’s business operation is promising as the sales of steel cords is expected to bloom. Moreover, taking into consideration the Chinese government’s regulations on energy conservation and emission reduction, the constant increase in output of electric cars drives demand for their accessorial tyres, which will in turn expedite the market expansion of steel cords for radial tyres and bring a more ample room for development to steel cord industry in the long term.

Located in Zhejiang Province and Shandong Province, the Group’s two large production bases, namely JESC and TESC, produce approximately 200,000 tonnes of steel cords in total every year. To cope with the increasing demand for tyres in China and abroad fuels a robust market demand for steel cords, the Group expanded its production capacity through further optimizing its plant construction. In 2019, the Group kicked off an expansion plan in its Tengzhou factory and invested in new brass wire production facilities to add an additional 100,000 tonnes of steel cord production capacity. Spurred by the solid construction progress, the Group continues to make great strides towards its goal to manufacture over 300,000 tonnes of high-quality steel cords annually.