Summary of GENERAL STEEL HOLDINGS INC

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains forward-looking statements. General Steel Holdings, Inc. is referred to herein as "we" or "our." The words or phrases "would be," "will allow," "expect to", "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," or similar expressions are intended to identify forward-looking statements. Such statements include those concerning our expected financial performance, our corporate strategy and operational plans. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations; and (d) whether we are able to successfully fulfill our primary requirements for cash which are explained below under "Liquidity and Capital Resources. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Recent Developments

Continued Record Growth:

We have experienced continued record growth in revenue, shipment volume and income from operations.

For the three month period ended September 30, 2009 revenue was $484.75 million; shipment volume was 1.04 million metric tons and income from operations was $29.25 million. This is the highest revenue, shipment volume and operating profit in one quarter ever recorded by us.

Operating results for the three months and nine months ending September 30, 2009 are shown below:

                           Three months ended                              Nine months ended
                              September 30,                                  September 30,
                        unaudited      unaudited                       unaudited       unaudited
In thousands               2009           2008         Increase          2009            2008          Increase
SHIPMENT VOLUME
(metric tons)                1,036            619           67.4 %          2,710           1,733           56.4 %
TOTAL REVENUES          $  484,752     $  411,521           17.8 %    $ 1,216,493     $ 1,090,116           11.6 %
GROSS PROFIT                39,735         -6,347          726.0 %         75,155          29,503          154.7 %
GROSS PROFIT MARGIN           8.20 %        -1.54 %        632.5 %           6.18 %          2.71 %        128.0 %
INCOME FROM
OPERATIONS              $   29,248     $  -18,675          256.6 %    $    45,936     $     1,139         3933.0 %

Our shipment volume for the nine months ended September 30, 2009, increased by 56.4% as compared to the same nine month period in 2008. For the nine month period ended September 30, 2009 our gross profit increased 154.7%, our gross margin increased from 2.7% to 6.2% and our income from operations increased 3933.0% compared with the same period last year.

Our Shaanxi Longmen Iron and Steel Co., Ltd. ("Longmen Joint Venture"), located in the developing region of Shaanxi province, comprises 94% of our total revenue. Shaanxi province, where we hold dominant market share for construction steel, has seen steady demand resulting from the central government's "Go West" economic development initiative and economic stimulus package focused on infrastructure construction.

Our positive operating results during a period of global economic slowdown demonstrate the following strengths:

· Our two-pronged growth strategy of upgrading our existing operations and growth through merger and acquisition activities has proven successful;

· We are a direct beneficiary of the China economic stimulus infrastructure spending program; and

· The developing regions of China are growing and have not been significantly impacted by the global economic slowdown.

Company Overview

Through our headquarters in Beijing, China, we operate a diverse portfolio of Chinese steel companies. Our companies serve various industries and produce a variety of steel products including: rebar, hot-rolled sheets, spiral-weld pipes and high-speed wire. Our aggregate production capacity of steel products is 6.3 million metric tons per year, of which the majority is rebar. Individual industry segments have unique demand drivers, such as rural income, infrastructure construction and energy consumption. Domestic economic conditions are an overall driver for all our products.

We aim to become one of the largest and most profitable non-government owned steel companies in China through the acquisition of Chinese steel companies. We intend to increase the profitability and efficiencies of the steel companies we acquire through the infusion of applied western management practices, advanced production technologies and capital resources.

Our strategy is to grow through aggressive mergers, joint ventures and acquisitions targeting state-owned enterprise steel companies and selected entities with outstanding growth potential. We have executed this strategy by acquiring controlling interest positions in three joint ventures. We are actively pursuing a plan to acquire additional assets.

We presently own controlling interests in four steel-related subsidiaries:

· Tianjin Daqiuzhuang Metal Sheet Co., Ltd.;

· Baotou Steel - General Steel Special Steel Pipe Joint Venture Co., Ltd.;

· Shaanxi Longmen Iron and Steel Co., Ltd.; and

· Maoming Hengda Steel Group Limited.

Steel Operating Companies

• Tianjin Daqiuzhuang Metal Sheet Co., Ltd.

Tianjin Daqiuzhuang Metal Sheet Co., Ltd. ("Daqiuzhuang Metal"), started operations in 1988. Daqiuzhuang Metal's core business is manufacturing high quality hot-rolled carbon and silicon steel sheets mainly used in the production of small agricultural vehicles and other specialty markets.

Daqiuzhuang Metal has ten steel sheet production lines capable of processing approximately 400,000 metric tons of 0.75mm to 2.0mm hot-rolled steel sheets per year. Products are sold through a nation-wide network of 35 distributors and three regional sales offices.

Daqiuzhuang Metal uses a traditional rolling mill production sequence, including heating, rolling, cutting, annealing, and flattening to process and cut coil segments into steel sheets. Sheets produced at the facility have a length of approximately 2,000mm; a width of approximately 1,000mm, and a thickness ranging from 0.75mm to 2.0mm. Limited size adjustments can be made to meet order requirements. Products sell under the registered "Qiu Steel" brand name.

On May 14, 2009, Daqiuzhuang Metal changed its official name from "Tianjin Daqiuzhuang Metal Sheet Co. Ltd." to "General Steel (China) Co., Ltd." to better reflect its role as a merger and acquisition platform for steel company investments in China.

• Baotou Steel - General Steel Special Steel Pipe Joint Venture Co., Ltd.

On April 27, 2007 Daqiuzhuang Metal and Baotou Iron and Steel Group Co., Ltd. ("Baotou Steel") entered into an Amended and Restated Joint Venture Agreement (the "Baotou Steel Joint Venture Agreement"), amending the Joint Venture Agreement entered into by the parties on September 28, 2005. The Baotou Steel Joint Venture Agreement increased Daqiuzhuang Metal's ownership interest in the Baotou Steel - General Steel Special Steel Pipe Joint Venture Co., Ltd. ("Baotou Steel Pipe Joint Venture") to 80%.

Baotou Steel Joint Venture has four production lines capable of producing 100,000 metric tons of double spiral-weld pipes used mainly in the energy sector primarily to transport oil and steam. These pipes have a diameter ranging from 219mm to 1240mm, a wall thickness ranging from 6mm to 13mm, and a length ranging from 6m to12m. Presently, Baotou Steel Pipe Joint Venture sells its products using an internal sales force to customers in the Inner Mongolia Autonomous Region and the northwest region of China.

• Shaanxi Longmen Iron and Steel Co., Ltd.

Effective June 1, 2007 through two subsidiaries, Daqiuzhuang Metal and Tianjin Qiu Steel Investment Co., Ltd., we entered into a joint venture agreement with Shaanxi Longmen Iron & Steel Group Co., Ltd. ("Long Steel Group") to form Shaanxi Longmen Iron and Steel Co., Ltd. ("Longmen Joint Venture"). Through Daqiuzhuang Metal and Tianjin Qiu Steel Investment Co., Ltd., we invested approximately $39 million in cash and collectively hold approximately 60% of the Longmen Joint Venture.

Long Steel Group, located in Hancheng city, Shaanxi province, in China's central region, was founded in 1958 and incorporated in 2002. Long Steel Group operates as a fully-integrated steel production facility. Less than 10% of steel companies in China have fully-integrated steel production capacity. Our Longmen Joint Venture, assumed existing operating units of the Long Steel Group. The Long Steel Group contributed most of its working assets to the Longmen Joint Venture.

Currently, the Longmen Joint Venture has four branch offices, seven subsidiaries under direct control and eight entities in which it has a non-controlling interest. It employs approximately 6,250 full-time workers. In addition to steel production, the Longmen Joint Venture operates transportation services through its Changlong Branch, located at Hancheng city, Shaanxi province. Changlong Branch owns 153 vehicles and provides transportation services exclusively to the Longmen Joint Venture.

Coke Operation: Longmen Joint Venture owns 22.76% of Hancheng Tongxing Metallurgy Co., Ltd. ("Tongxing"). Located in Hancheng city, Shaanxi province, Tongxing produces second grade coke used as part the fuel for our blast furnaces. Its annualized coke production capacity is 150,000 metric tons. Tongxing sells all of its output to Longmen Joint Venture.

Longmen Joint Venture does not own iron pelletizing facilities.

Longmen Joint Venture's products are categorized within the steel industry as "longs" (referencing their shape). Rebar is generally considered a regional product because its weight and dimension make it ill-suited for cost-effective long-haul ground transportation. By our estimates, the provincial market demand for rebar is six to eight million metric tons per year. Slightly more than half of this demand radiates from Xi'an, the capital of Shaanxi province, located 180km from the Longmen Joint Venture's main steel production site. We estimate we have approximately 72% share of the Xi'an market for rebar according to Xi'an Steel Market Statistics dated April 7, 2009

An established regional network of 40 agents and eight sales offices sell the Longmen Joint Venture's products. All products sell under the registered brand name of "Yulong" which enjoys strong regional recognition and awareness. Rebar and billet products carry ISO 9001 and 9002 certification and many other products have won national quality awards. Products produced at the facility have been used in the construction of the Yangtze River Three Gorges Dam, Xi'an International Airport, the Xi Han, Xi Tong and Xi Da provincial expressways, and are currently being used in the construction of the Xi'an city subway system.

On September 24, 2007 Longmen Joint Venture acquired controlling interest in two subsidiaries of Long Steel Group: Longmen Iron and Steel Group Co., Ltd. Environmental Protection Industry Development Co., Ltd. ("Longmen EPID") and Longmen Iron and Steel Group Co., Ltd. Hualong Fire Retardant Materials Co., Ltd. ("Hualong").

The Longmen Joint Venture entered into an equity transfer agreement with Long Steel Group to acquire its 74.92% ownership interest in Longmen EPID. The Longmen Joint Venture paid $2.4 million (RMB18 million) in exchange for the ownership interest. The facility utilizes solid waste generated from the steel making process to produce landscape blocks, tiles, curb tops and ornamental tiles.

At the same time, the Longmen Joint Venture also entered into a second equity agreement with the Long Steel Group to acquire its 36% ownership interest in its subsidiary, Hualong. The Longmen Joint Venture paid $430 thousand (RMB3.3 million) in exchange for the ownership interest and is the largest shareholder in Hualong. The facility produces fire-retardant materials used in various processes in making steel.

On January 11, 2008, the Longmen Joint Venture completed its acquisition of a controlling interest in Hancheng Tongxing Metallurgy Co., Ltd. ("Tongxing"). The Longmen Joint Venture contributed its land use right of 21.45 hectares (approximately 53 acres) with an appraised value of approximately $4.1 million (RMB30 million). Pursuant to the agreement, the land was converted into shares valued at approximately $3.1 million (RMB22.7 million), providing the Longmen Joint Venture a 22.76% ownership stake in Tongxing and making it Tongxing's largest and controlling shareholder. Tongxing has two operating areas: coking coal production and rebar processing. Its coking coal operations have an annual production capacity of 150,000 metric tons. Its rebar processing facility has an annualized rolling capacity of 300,000 metric tons.

• Maoming Hengda Steel Group Limited

On June 25, 2008 through our subsidiary Tianjin Qiu Steel Investment, we acquired 99% of Maoming Hengda Steel Group, Limited ("Maoming") for $7.3 million (approximately RMB 50 million). Maoming's core business is the production of high-speed wire and rebar, products used in the construction industry. Located on 140 hectares (approximately 346 acres) in Maoming city, Guangdong province, the facility has two production lines capable of producing 1.8 million metric tons of 5.5mm to 16mm diameter high-speed wire and 12mm to 38mm diameter rebar annually. The products are sold through nine distributors targeting customers in Guangxi province and the western region of Guangdong province. Previously, the Maoming facility had been operating at approximately 10% of its capacity due to, we believe, the previous owners corporate focus on matters unrelated to the Maoming facility.

To take advantage of stronger market demand, in the second quarter of 2009, we relocated the 800,000 metric ton capacity rebar production line from the Maoming facility to the Longmen Joint Venture.

Operating Information Summary by Subsidiaries

                         Daqiuzhuang    Baotou Steel Pipe   Longmen Joint
                            Metal         Joint Venture        Venture          Maoming
Annual Production          400,000           100,000         4.8 million       1 million
Capacity (metric tons)
Main Products             Hot-rolled    Spiral-weld pipe        Rebar          High-speed
                            sheet                                                 wire
                            Light                           Infrastructure   Infrastructure
Main Application         agricultural   Energy transport         and              and
                           vehicles                          construction     construction

Stock listing

Our stock trades on the NYSE under the ticker symbol "GSI".

Factors affecting our operating results

Demand for our products:

Overall, domestic economic growth is an important demand driver for our products. Currently, China is experiencing an economic downturn after eight years of record growth. Nevertheless, according to estimates issued by Hong Kong and Shanghai Banking Cooperation Ltd., HSBC on November 1, 2009, it estimates that China's economy will still grow by approximately 8.1% in 2009, well above many western developed economies. Industry demand drivers for our products include construction and infrastructure growth, rural income growth and energy demand.

At Longmen Joint Venture, growth in regional construction and infrastructure projects drives demand for our products. According to the 11th Five-Year National Economic and Social Development Plan (the "NESDP")(2006-2010), development of China's western region is one of the top-five national economic priorities. Shaanxi, the province where Longmen Joint Venture is located, has been designated as a bridgehead for development into the western region, and Xi'an, the provincial capital, has been designated as a focal point for this development. Our Longmen Joint Venture is 180km from Xi'an and does not have another major competitor within a 250km radius. According to Shaanxi Provincial Development and Reform Commission, total fix assets investment was approximately RMB113billion for the first nine months of 2009, a 71% increase over the same period last year. Major projects include thirty-four new highways, expressways and railways, one new airport, the expansion of the Xi'an airport, two new ring subway systems and seven irrigation reservoirs. We see strong demand for our products driven by these and many other construction and infrastructure projects. We believe that there will be sustained regional demand for several years ahead as the government continues to strengthen its western region development efforts.

At Daqiuzhuang Metal, demand for our hot-rolled sheets previously had been tied to their use in light agricultural vehicles. However, due to over capacity in the market of cold-rolled sheets and a resulting decline of cold-rolled sheet prices, many producers of light agricultural vehicles have replaced our hot-rolled steel sheets with cold-rolled sheets. Demand for our product now comes mainly from smaller manufacturers of metal security doors and wiring cabinets used in housing projects.

At Baotou Steel Pipe Joint Venture, energy sector growth which spurs the need to transport oil and steam drives demand for spiral-weld steel pipe. Presently, demand is fueled by smaller pipeline projects and municipal energy infrastructure projects within the region.

At Maoming, infrastructure growth and business development drive demand for our construction steel products. Guangdong province serves as an export hub to Southeast Asia and abroad for many products produced in China, and is one of China's most economically advanced provinces.

Supply of raw materials:

Iron ore

The primary raw materials we use for steel production are iron ore, coke, hot-rolled steel coil and steel billets. Daqiuzhuang Metal and Baotou Steel Pipe Joint Venture use hot-rolled steel coil as their main raw material. Longmen Joint Venture uses iron ore and coke as its main raw materials. Maoming uses steel billets as its main raw material. Iron ore is the main raw material used to produce hot-rolled steel coil and steel billets. As a result, the prices of iron ore and coke are the primary raw material cost drivers for our products.

Longmen Joint Venture represents 4.8 million metric tons of our aggregate 6.3 million metric ton annual production capacity. At Longmen Joint Venture, approximately 90% of the production costs are attributable to the purchase of raw materials, with iron ore being the largest component of the purchase.

According to the China Iron and Steel Association, approximately 60% of the domestic steel industry's demand for iron ore must be filled by imports. At our Longmen Joint Venture, we purchase iron ore from four primary sources: the Mulonggou mine (owned by the Longmen Joint Venture), the Daxigou mine (owned by Long Steel Group, our joint venture partner), domestic sources and from foreign sources. The Daxigou mine has 300 million metric tons of iron ore reserves. According to the terms of our joint venture agreement with our strategic partner, the Long Steel Group, we have first rights of refusal for sales and development from this mine.

Coke

Coke, produced from metallurgical coal (also known as coking coal), is our second most consumed raw material, after iron ore. It requires approximately 550kg to 600kg of coke to make one metric ton of pig-iron.

Our Longmen Joint Venture facility is located in the center of China's coal belt. We source all coke used at Longmen Joint Venture from the town in which Longmen Joint Venture is located. This ensures dependable supply and minimum transportation costs.

The sources and/or major suppliers of our raw materials are as follows (1):

Longmen Joint Venture

Major Suppliers

        Name of the Supplier           Raw Material   % of Total Raw   Relationship with GSI
                                        Purchased        Material
                                                        Purchased
Shaanxi Longmen Iron & Steel Group       Iron Ore         11.2%        Affiliated company
Co., Ltd.
Shaanxi Haiyan Coal Chemical               Coke            9.6%        Related party
Industry Co., Ltd.
Shaanxi Huanghe Material Co., Ltd.         Coke            7.4%        Others
Shaanxi Jinhu Industrial and             Iron Ore          2.6%        Others
Commercial Co., Ltd.
Yunnan Jingliyuan Industrial Co.,         Alloy            2.5%        Others
Ltd.
                                          Total           33.3%

Daqiuzhuang Metal

Major Suppliers

Name of the Supplier Raw Material % of Total Raw Relationship with GSI
Purchased Material
Purchased
Tianjin Hengying Trade Co., Ltd. Hot-roll coil 56.1% Related party
Tianjin Dazhan Industrial Co., Ltd. Hot-roll coil 16.7% Related party
General Tongyong Qiu Steel Pipe Co., Ltd. Hot-roll coil 16.2% Others
Shenghua Xinyuan Hot-roll coil 6.9% Others
Tianjin Zhaoliang Trading Co., Ltd. Hot-roll coil 1.3% Others
Total 97.2%

Baotou Steel Pipe Joint Venture

Major Suppliers

Name of the Supplier Raw Material % of Total Raw Relationship with GSI
Purchased Material
Purchased
Shaanxi Xinbang Trading Co., Ltd Steel coil 46.2% Others
Tianjin Jinchang I&E Co., Ltd. Steel coil 12.7% Others
Tianjin Zhaoliang Trade Co., Ltd. Steel coil 12.3% Others
Tianjin Fulida Pipe Co., Ltd. Steel coil 10.2% Others
Baotou Xinzhongyuan Trade Co., Ltd. Steel coil 6.3% Others
Total 87.7%

Maoming

Major Suppliers

Name of the Supplier Raw Material % of Total Raw Relationship with GSI
Purchased Material
Purchased
Maoming Shengze Trading Co., Ltd. Billet 46.6% Related party
China Railway Material Commercial Billet 21.8% Others
Corporation Tianjin Office
Guangxi Shenglong Metallurgy Co., Heavy oil 9.7% Others
Ltd.
Maoming Zhengmao Develop Co., Ltd. Billet 1.0% Others
Maoming Dazhongmao Petrochemical Heavy oil 0.9% Others
Co., Ltd.
Total 80.0%

(1) For purposes of the above tables, the term (i) "Affiliated company" refers to our joint venture partners, (ii) "Related party" refers to a company over whose operating policies we can exercise control or significant influence and
(iii) "Others" refers to entities that are not related to us and are not an Affiliated party or Related party.

Industry consolidation

It is the central government's long-stated goal to consolidate 50% of domestic steel production among the top ten producers by 2010 and 70% by 2020. In September of this year the central government published an industry target to eliminate 80 million metric tons of inefficient capacity from the steel industry by the end of 2011. Along with this target, the government added new steel making operational and environmental restrictions and tasked ten government agencies with enforcing these measures. In the fourth quarter of 2009, the government plans to issue revised steel industry guidelines which are expected to further strengthen measures to minimize old and inefficient capacity. We believe the government's action this year demonstrates increased resolve to bring about industry consolidation. We see the pace of industry consolidation quickening in the coming years.

Results of Operations

The following table sets forth, for the periods indicated, statement of
operations data.

                                      Three months ended                           Nine months ended
In thousands                             September 30,              %                September 30,               %
                                      2009           2008         Change         2009            2008          Change
                                   Unaudited      Unaudited                    Unaudited       Unaudited
TOTAL REVENUES                     $  484,752     $  411,521         17.8 %   $ 1,216,493     $ 1,090,116         11.6 %
GROSS PROFIT                           39,735         -6,347        726.0 %        75,155          29,503        154.7 %
GROSS PROFIT MARGIN                       8.2 %         -1.5 %      632.5 %           6.2 %           2.7 %      128.3 %
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                10,487         12,328        -14.9 %        29,219          28,364          3.0 %
INCOME (LOSS) FROM OPERATIONS          29,248        -18,675        256.6 %        45,936           1,139       3933.0 %
Total other income (expense),
net                                    -5,986         31,726       -118.9 %       -31,488          -3,188        887.7 %
INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTEREST            23,262         13,051         78.2 %        14,448          -2,049        805.1 %
NET INCOME                             19,470         15,135         28.6 %         7,262          -1,502        583.5 %
NET INCOME ATTRIBUTABLE TO
GENERAL STEEL                          10,382         20,464        -49.3 %       -14,159          -1,618        775.1 %
. . .