Western Pallet Magazine April 2016 - Page 16

14 Pallets West

16 WESTERN PALLET

Composite pallet provider RM2 has entered into a strategic cost-saving manufacturing agreement with Zhenshi Holding Group Company Limited of China ("Zhenshi"). Zhenshi is a major shareholder of China Jushi Co. Ltd. ("Jushi"), one of the largest manufacturers of fiberglass in the world, producing over 1.1 million tons of glass fiber annually. Fiberglass is one of the key raw materials used in the manufacture of RM2's BLOCKpal pallet.

The agreement will allow for the mass production of the RM2 BLOCKpal pallet in Tongxiang, at a facility owned by Zhenshi Group Huamei New Materials Co., Ltd, adjacent to the principal Jushi glass fibre manufacturing plant. Initial production is expected to be deployed in Q1 2017 and will target circa 1.5 million pallets per annum, with projected growth to at least 5 million pallets per annum in the medium term. Pallets produced at the facility will initially be deployed with RM2's customers in North America and Europe.

RM2 and Zhenshi believe that there is a significant strategic opportunity for BLOCKpal deployment in the domestic Chinese and other Asian markets as Chinese logistics develop and as China palletizes its vast supply chain. The two companies will also develop additional areas where their resources and expertise are complementary, particularly in the area of logistics.

RM2 believes that the agreement will address the volume demands of its clients while significantly reducing Cost Per Unit (CPU). Some of RM2's manufacturing assets will be transferred to China and, as a consequence of reduced production in Canada, RM2 will fall well short of its 2016 production target. Management analysis has demonstrated that the CPU benefits support this decision. The Company continues to seek to improve and optimise its manufacturing processes and remains committed to volume production in North America.

"We believe that large parts of the Chinese logistics chain will become palletized over the coming years.," commented President Zhang, Chairman of Zhenshi and President of Jushi. "We are convinced, after our own extensive research, that the

RM2 Establishes Chinese Alliance, Will Move Some Equipment from Ontario