Check on China: Gulf Resources, Inc.

China's red-hot economy may be cooling a bit, but the nation's industrialization efforts are still moving full steam ahead.

The toxic chemical element bromine is playing a key behind-the-scenes role in China's growth and infrastructure build-out.

Bromine and bromine-derived compounds have a wide range of uses. They're used as flame retardants, to purify water, in pesticides, oil-well drilling fluids and disinfectants. They're also used in the production of paper, inks, dyes, medications, films, hydraulic fluids, hair perm products, refrigeration and dehumidifying agents, and for a variety of industrial, manufacturing and agricultural applications.

By and large, as bromine goes, so goes China. China consumes 20% of the world's supply of bromine. And the soaring demand for bromine in China, stoked by the country's manufacturing machine, has left a supply gap, since domestic production can't keep pace with demand. Which brings us to Gulf Resources, Inc. (OTC: GFRE), the largest producer of bromine in China and the world's fourth largest supplier. The Shandong province-based company has two wholly owned subsidiaries: Shouguang City Hao Yuan Chemical Industry Co., Ltd. (SCHC), a manufacturer and distributor of bromine and crude salt, and Shouguang Yu Xin Chemical Industry Co., Ltd. (SYCI), which produces various bromine-based specialty chemical products.

Currently controlling over 15% domestic market share, Gulf Resources has a goal of attaining at least 20% market share by the end of 2008. If its recent accomplishments are any indication of things to come, the goal is well in reach. Gulf Resources is one of only six companies in China licensed to extract bromine. The government has been actively seeking out and shutting down unlicensed bromine operations, many of which Gulf Resources have subsequently acquired.

SCHC recently inked a deal to acquire the Wei Fang City Hanting area of a bromine producer for approximately $9.7 million. The agreement transferred assets including a complete production facility and a 50-year land lease (plus mineral rights) on a 2,641-acre property with a proven 200,000 to 210,000 metric tons of bromine reserves.

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