Shares of China's General Steel Holdings soar 15 percent

The stock jumped $1.10, or 15.3 percent, to $8.30 in afternoon trading. Over the past year, it has ranged between a low of $2.76 and a peak of $19.43, which it hit in October.

"GSI's selling price for their rebar, which is their primary product, has continued to move higher and that is a very strong indication of gross margin in the June quarter," said Merriman Curhan Ford analyst David A. Duley. "Demand for their product is very strong."

The company also has made no secret of its interest in buying other Chinese steel companies.

In March, when reporting its fourth-quarter 2007 results, Chief Executive Henry Yu said in a statement, "Our proven strategy to grow through aggressive mergers, joint ventures and acquisitions brings us closer to our vision of becoming one of the largest non-government owned steel companies in China."

The company's 2007 results led Dutton Associates analyst Stanley Ng on Friday to upgrade the shares to "Strong Speculative Buy" from "Speculative Buy."

"In our view, the solid financial results in 2007 clearly indicated that management's strategy of expanding steel production capacity through the acquisition and implementation of western management to improve operating efficiency has been successful.

"Management is still in ongoing negotiation to acquire a steel company with multiple targets on hand, which could add 2 million tons of annual production capacity to its current annual production capacity of 3 million tons, and which could significantly drive growth in 2008 and 2009. They are buying other large steel companies in China and they can do that at a very low multiple."

Duley also said that investors may be playing "catch-up" with GSI shares. Earlier this month Roth Capital Partners LLC analyst Kun Tao said the shares were trading at ten times his estimated 2008 earnings per share compared with 12.4 times other companies in General Steel's peer group.

"Future acquisitions may provide upside to our estimates," Tao wrote in a client note.