The rating on Shandong-based aluminum producer China Hongqiao Group Ltd. reflects the company's high concentration risk and its short operating track record. In addition, Hongqiao faces significant negative free operating cash flow in the next couple of years as the company continues to seek capacity expansion and industry risk increases. These weaknesses are partly offset by the company's low cost position, proximity to its customer base, and the relatively good demand prospects for aluminum products in China. We view Hongqiao's business risk profile as "fair" and its financial risk profile as "significant". We view Hongqiao's concentration risk as high because its customer base, product range, supply source, and diversification are limited. In 2011, more than 71% of the company's revenue
