The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q.

Certain statements in this Report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words "may," "will," "should," "anticipate," "estimate," "plan," "potential," "project," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend," or the negative of these words or other variations on these words or comparable terminology. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" in our 2011 Annual Report on Form 10-K and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Except as otherwise indicated or as the context otherwise requires, "Fushi," "the Company," "we," "our" and "us" refer to Fushi Copperweld, Inc. (formerly Fushi International, Inc.), a Nevada corporation and its subsidiaries, (i) Fushi Holdings, Inc. (formerly Diversified Product Inspections, Inc.) ("Fushi Holdings"), (ii) Fushi International (Dalian) Bimetallic Cable Co., Ltd.
(formerly Dalian Diversified Product Inspections Bimetallic Cable, Co., Ltd.)
("Fushi International (Dalian)"), (iii) Dalian Fushi Bimetallic Manufacturing, Co., Ltd. ("Dalian Fushi"), (iv) Copperweld Bimetallics, LLC ("Copperweld"), (v) Copperweld Bimetallics UK, LLC ("Copperweld UK"), (vi) Dalian Jinchuan Power Cable Co. ("Jinchuan"), (vii) Shanghai Hongtai Industrial Co., Ltd ("Hongtai"),
(viii) Fushi International (JiangSu)) Bimetallic Cable Co., Ltd. ("Fushi International (JiangSu)"), (ix) Fushi Copperweld Europe SARL ("Fushi Europe"),
(x) Copperweld Tubing Europe SPRL ("Copperweld Tubing"), and (xi) Copperweld Bimetallic Europe SPRL ("Copperweld Europe"). In this Quarterly Report, all references to the "PRC" refer to the People's Republic of China. In accordance with industry practice, "MT" refers to a metric ton, a unit of weight equivalent to 1,000 kilograms. "Copperweld" is a registered trademark that we own, and "Fushi" is an additional trademark we use in our business.

Overview

We believe we are one of the world's largest producers, based on manufacturing capacity, and a leading innovator of bimetallic wire products, principally copper-clad aluminum, or CCA, and copper-clad steel, or CCS, products. CCA and CCS conductors are generally used as a substitute for solid copper conductors in applications for which either cost savings or specific electrical or physical attributes are necessary. Relative to solid copper wire, our customized, engineered bimetallic wire products significantly reduce the amount of copper metal required to manufacture a conductor, and because copper is expensive relative to aluminum and steel, our products significantly reduce conductor cost per unit length. In the first quarter of 2012, our products were sold to 222 customers in 27 countries. We market our products under the trademarked names of "CopperweldŽ" and "Fushi TM ," and sell primarily to cable manufacturers and to a lesser extent through distributors or sales agents to cable manufacturers.

Although we are engaged in one line of business, as a result of different markets primarily served by each of our manufacturing facilities and significant differences in the operating results among each of our facilities, we manage our worldwide operations based on two geographic segments: 1) "PRC" which consists of our facilities located in the People's Republic of China (PRC) and 2) "US" which consists of our Fayetteville, Tennessee, (US), Telford, England, (UK) and Liege, Belgium (EU) facilities. We have combined our US, UK and EU operations as one segment since the UK and EU operating results are consolidated into the US operating company for our chief decision maker to review. Furthermore, the nature of our products, services and production processes at our US, UK and EU facilities, along with the customer base, methods to distribute products and services are nearly identical.

We believe we have a strong market position in all markets in which we compete due to the quality of our products, geographic and customer diversity and our ability to deliver superior products while operating as a low cost provider. As a result, we believe we are now one of the leading producers of bimetallic wire products in the world and are one of the market leaders in North America, Europe, North Africa, the Middle East and the PRC. We continue to expand within current and developing markets and create shareholder value by:

ˇ Investing in organic growth in both infrastructure-based and fast-growing markets;

ˇ Focusing on margin enhancement through investment in new machinery and research and development that will improve the performance and capabilities of our bimetallic products and allow us to enter new markets;

ˇ Optimizing capacity and utilization rates throughout the Company by focusing on key performance indicators and operational excellence;

ˇ Protecting and enhancing the Fushi Copperweld brand;

ˇ Strategically hiring and developing talent, to improve the effectiveness of our performance management process, and

ˇ Pursuing acquisitions that expand our strategic capabilities, our access to customers and our product lines as well as downstream in our value chain.

To accomplish these goals, we are focused on continuously improving operational efficiency in areas we view to be vital: quality, delivery, cost and innovation. We also take an opportunistic approach to achieving our goals, and thus, we seek acquisitions of businesses which facilitate overall growth and cash flows of the Company.

We manufacture, market and distribute bimetallic conductors (two-metal conductors). These bimetallic conductors are primarily CCA and CCS. These conductors have either aluminum or steel cores, surrounded by an outer layer of pure copper, resulting in a composite bimetallic conductor. The copper sheath, through our processing methods, is metallurgically "bonded" to the core metal. The amount of copper-metal used in cladding the core-metal varies widely, and is based on customers' needs. However, bimetallic conductorscan reduce the amount of copper used by as much as 90% by volume, or 73% by weight which is a considerable cost savings to the company and our customers. For many applications, bimetallic conductors offer significant advantages over copper wire. End-user manufacturers in the industry have increasingly pursued and considered alternative technologies such as bimetallics due to performance and economic considerations. Relative to traditional copper conductors, bimetallic conductors offer greater value to a variety of customers. Because of the benefits of bimetallic conductors, we believe there are substantial opportunities to capture increased market share in applications that have historically been dominated by solid copper wire.

We believe our engineered bimetallic conductor products offer end-users greater value-performance than "solid" copper conductors. Our bimetallic conductors combine the efficiency of copper with the lightweight qualities of aluminum (CCA), or the ruggedness and strength of steel (CCS). Bimetallic conductors offer favorable cost characteristics, weight savings (CCA), increased flexibility and end-product ease-of-handling (CCA), increased tensile strength (CCS), improved corrosion characteristics and decreased theft risk. Conductivity can be customized, by changing the percentage of copper, to fit many applications. The physical and electrical attributes of our bimetallic products provide our customers cost savings beyond their intrinsic pricing advantages.

We believe our proprietary manufacturing technology allows us to produce superior products compared to other manufacturers and creates a significant barrier to entry. Manufacturing copper-clad products involves bonding copper tape to an aluminum or steel core rod, drawing the clad product to a finished diameter and heat treating (annealing) as necessary depending on customer specifications. Our proprietary cladding process differentiates us in terms of manufacturing capabilities, offering superior product quality. Our developmental capabilities support the ongoing evolution of our current products. We are continuously working toward new technologies and products that we expect to improve the performance and capabilities of our bimetallic products thereby allowing us to enter new markets.

While the pricing volatility of our raw materials, especially copper, is a primary cause of cost variations in our products, changes in raw material costs do not materially affect our dollar earnings on a per pound basis. Although an increase in the price of raw materials may reduce our gross margins as a percentage of revenues, likewise, a decline in raw material prices may increase our gross margin as a percentage of revenues. We generally pass the cost of price changes in our raw materials to our customers. We establish prices for our products based on market factors and our cost to produce our products. Typically, we set a base price for our products for our customers with an understanding that as prices of raw materials change, primarily for copper but also for aluminum and steel, we will pass the change to our customers. Therefore, when prices of raw material increase, our prices to our customers increase and the amount of our total revenues increases while the dollar amount of our gross margin on a per pound basis remains relatively stable. As a result, the impact on earnings per share from volatile raw material prices is minimal, although there are timing delays of varying lengths depending upon volatility of metals prices, the type of product, competitive conditions and particular customer arrangements.

Factors driving and affecting operating results include raw material prices, product and price competition, economic conditions in various geographic regions, foreign currency exchange rates, interest rates, changes in technology, fluctuations in customer demand, variations in the mix of products, production capacity and utilization, working capital sufficiency, availability of credit and general market liquidity, patent and intellectual property issues, litigation results and legal and regulatory developments, and our ability to accurately forecast sales demand and calibrate manufacturing to such demand, manage volatile raw material costs, develop, manufacture and successfully market new and enhanced products and product lines, control operating costs, and attract, motivate and retain key personnel to manage our operational, financial and management information systems.

Highlights for the three months ended March 31, 2012 include:

ˇ Revenues were $62.1 million compared to $65.9 million in the first quarter of 2011;

ˇ Gross profit was $16.4 million, or 26.3% of revenues, compared to $17.1 million, or 26.0% of revenues, in the first quarter of 2011;

ˇ Income from operations was $8.1 million, or 13.0% of revenues, compared to $10.5 million, or 15.9% of revenues, in the first quarter of 2011;

ˇ Net income was $4.9 million, or $0.13 per diluted share, compared to net income of $6.8 million, or $0.18 per diluted share, in the first quarter of 2011;

ˇ Cash position of $205.4 million at March 31, 2012, compared to $200.5 million at December 31, 2011.

Current Business Environment and Outlook for the remainder of 2012

The bimetallic conductor industry is a subset of the broader wire and cable industry, which consumed approximately 14,767,000 MT of metallic center conductor in 2010 according to estimates by CRU International Limited, a leading publisher of industry market research. The global bimetallic wire industry, as well as the wire and cable industry, is fast-growing and increasingly competitive. This is especially true in the PRC where there is considerable fragmentation of manufacturers. We continue to see strong demand for our products and believe significant growth opportunities exist to capture a larger proportion of the metallic center conductor market relative to solid copper wire.

Furthermore, we think the following macro-level trends will positively impact our business and offer us opportunities to capture new business and preserve profitability despite global economic conditions:

ˇ Continued investment in telecommunication projects in emerging economies;

ˇ Government initiatives focused on infrastructure: high-speed railways, transmission and distribution and power grid build out;

ˇ Continued strength of grounding wire market;

ˇ Worldwide underlying long-term growth trends in electric utility and infrastructure markets; and

ˇ Continuing demand for cost effective, energy saving alternatives.

In addition to these macro-level trends, the Company is presented with tremendous opportunities brought by the addition of CCS cladding capacity at our Dalian facility. We believe this equipment is the first large-scale, high quality CCS cladding capacity in Asia. We continue to educate the PRC and other Asian markets on the benefits of CCS for the telecommunication, utilities, and transportation market in anticipation of large-scale production of 8,200 MT of annual CCS capacity at our Dalian facility in fiscal year 2012. Initially, we intend to focus our CCS efforts on capturing market share in the CATV drop cable market. According to the 12th Five-year Program Outline by the Optical and Electrical Cable Association of China, approximately 8,000,000 kilometers of CATV drop cable was manufactured in the PRC in 2009. This amount of CATV cable represents the equivalent of approximately 50,000 MT of CCS center conductor, and to-date has been primarily supplied by local Copper-plated Steel (CPS) manufacturers. We believe CPS to be an inferior product compared to CCS, and the absence of local, affordably priced CCS manufacturers in the PRC results in CATV manufacturers choosing CPS in their production process. As we introduce CCS production, we expect those market dynamics to shift to be more in-line with those of developed markets, where CCS is the preferred center conductor of choice for CATV drop cable.

In addition, we are seeking to continue to develop the high potential utility and transportation markets, to enhance productivity and to expand our sales of higher margin products. We view the market for CCA and CCS wires and cables within the utilities market to be worldwide. In order to capture the growth opportunities, we will focus on driving profitability by streamlining our organizational structure and business procedures, increasing operational efficiency and optimizing operating processes, while managing production costs and operating expenses.

Meanwhile, we are also working to strengthen our business development, sales, marketing and customer relations. We will seek approval for our products from product safety testing and certification organizations and inclusion in national and industry product standards throughout the world. We view efforts in certification and standardization as vital aspects of our efforts to realize large-scale conversion to bimetallic wire from solid copper wire. In addition, as part of our ongoing efforts to reduce total operating costs, we continuously improve our ability to efficiently utilize existing and new manufacturing capacity to manage expansion and growth. We believe that effectively utilized manufacturing assets and generating economies of scale will help offset high raw material prices and dilute overhead over time, thus improving profitability.

We actively seek to identify and promptly respond to key economic and industry trends in order to capitalize on expanding niche markets for our products, and possibly entering into new markets both down and up stream, in order to achieve better returns. We have the resources, technology, working capital and capacity to meet growing market demands. Over the long-term, we believe that we are well positioned to benefit from the growth opportunities presented by infrastructure projects throughout the world.

Results of Operations



The following table sets forth, for the periods indicated, statement of
operations data in millions of US dollars:



                                                   Three Months Ended
                                               March 31,        March 31,      Change
                                                  2012             2011           %

Revenues                                             62.1             65.9        -5.8 %
Gross profit                                         16.4             17.1        -4.6 %
Selling, general and administrative expenses          8.3              6.7        24.2 %
Income from operations                                8.1             10.5       -22.9 %
Income before income taxes                            8.0             10.3       -21.9 %
Income tax expense                                   (3.1 )           (3.4 )      -8.5 %
Net income                                            4.9              6.8       -28.7 %

Three Months Ended March 31, 2012 compared to three months ended March 31, 2011:

Revenues from external customers by segment

The following tables set forth revenues from external customers in millions of US dollars and metric tons (MT) of copper-clad products sold by segment:

(in millions, except                    Revenues
percentage)                   Three Months Ended March 31,
                              2012                    2011
                                                                        Change in       Change in
                       Amount         %        Amount         %          amount             %
PRC                    $  47.8        77.0 %   $  51.3        77.8 %   $      (3.5 )          -6.8 %
US                        14.3        23.0 %      14.6        22.2 %          (0.3 )          -2.1 %
Total revenues         $  62.1       100.0 %   $  65.9       100.0 %   $      (3.8 )          -5.8 %




(in MTs, except                   Metric Tons Sold
percentage                  Three Months Ended March 31,
                            2012                    2011
                                                                      Change in      Change in
                       MT           %          MT           %            MT               %
PRC *                  6,080        73.0 %     6,732        74.8 %          (652 )          -9.7 %
US                     2,248        27.0 %     2,265        25.2 %           (17 )          -0.8 %
Total sales volume     8,328       100.0 %     8,997       100.0 %          (669 )          -7.4 %

* Does not include sales volume contributed by Jinchuan. The sales volume of power cables in Jinchuan is measured in meters.

Revenues for the first quarter of 2012 were $62.1 million, a decrease of 5.8% from $65.9 million in the prior year's quarter. The decrease was primarily due to a pressured spending environment which is a result of ongoing macroeconomic uncertainty and hesitation, resulting in a 7.4% decline in volumes from the first quarter of 2011.

The PRC segment experienced a decrease of 6.8% in revenues in the first quarter of 2012, which is primarily due to a 9.7% decrease in quantities sold. The lower volume shipped in PRC segment in the first quarter of 2012 was mainly a result of weaker telecom demand in China.

The US segment experienced a decrease of 2.1% in revenues in the first quarter of 2012 compared to the same period of 2011. The decrease is primarily due to a 1.6% decrease in average selling price of copper-clad product as a result of lower copper costs and a 0.8% decrease in quantities sold, which reflected the continued macroeconomic uncertainty on customer order patterns.

Revenues by industry

The following table presents the breakdown of revenues in millions of US dollars by industry:

                                        Revenues
(in millions, except          Three Months Ended March 31,
percentage)                   2012                    2011
                                                                        Change in       Change in
                       Amount         %        Amount         %          amount             %
Telecommunication      $  18.2        29.3 %   $  24.3        36.9 %   $      (6.1 )         -25.1 %
Utility                   39.6        63.7 %      38.6        58.5 %           1.0             2.6 %
Transportation             1.2         2.0 %       1.1         1.7 %           0.1             9.1 %
Other                      3.1         5.0 %       1.9         2.9 %           1.2            63.2 %
Total revenues         $  62.1       100.0 %   $  65.9       100.0 %   $      (3.8 )          -5.8 %

The following table presents the breakdown of metric tons (MT) of copper-clad products sold to customers by industry:

                                  Metric Tons Sold
(in MTs, except             Three Months Ended March 31,
percentage                  2012                    2011
                                                                      Change in       Change in
                       MT           %          MT           %            MT               %
Telecommunication      3,161        38.0 %     3,717        41.3 %          (556 )         -15.0 %
Utility *              4,661        56.0 %     4,720        52.5 %           (59 )          -1.3 %
Transportation           171         2.1 %       136         1.5 %            35            25.7 %
Other                    335         3.9 %       424         4.7 %           (89 )         -21.0 %
Total sales volume     8,328       100.0 %     8,997       100.0 %          (669 )          -7.4 %

* Does not include sales volume contributed by Jinchuan. The sales volume of power cables in Jinchuan is measured in meters.

In the first quarter of 2012, our sales to the telecommunication markets decreased by 556 metric tons, or 15.0%, compared to the same period of 2011, which was primarily due to a slowdown in the 3G build out in the PRC.

Our sales to utility markets decreased by 59 metric tons, or 1.3%, in the first quarter of 2012 compared to the first quarter of 2011. We expect modest growth in utilities-related sales in 2012 as a result of our business development efforts as well as ongoing adoption trends elsewhere in Europe and Asia.

Capacity and Output



The following table summarizes installed cladding capacities and metric ton sold
by products in the first quarter of 2012:



             Three Months Ended March 31, 2012
                 PRC                     US
                       Total                  Total
         Capacity      Volume   Capacity      Volume
           (MT)         (MT)      (MT)         (MT)
CCA         40,000      5,983      12,400        783
CCS          8,200         21      16,300      1,390
Total       48,200      6,004      28,700      2,173

Product Mix



The following table summarizes the breakdown of metric tons (MT) of copper-clad
products sold to customers by product mix:



(in MTs, except                     Metric Tons Sold
percentage                    Three Months Ended March 31,
                              2012                    2011
                                                                        Change in       Change in
                         MT           %          MT           %            MT              MT
CCA                      6,766        81.3 %     7,371        81.9 %          (605 )          -8.2 %
CCS                      1,411        16.9 %     1,477        16.4 %           (66 )          -4.5 %
Others                     151         1.8 %       149         1.7 %             2             1.3 %
Total sales volume *     8,328       100.0 %     8,997       100.0 %          (669 )          -7.4 %

* Does not include sales volume contributed by Jinchuan. The sales volume of power cables in Jinchuan is measured in meters.

Sales volume of CCA in our PRC segment decreased by 9.2%, or 605 metric tons in the first quarter of 2012 compared to the same period of 2011 due to the slowdown of the PRC's 3G build out. Sales volume of CCA in our US segment kept stable at 783 metric tons in the first quarter of 2012 compared to the same period of 2011.

Sales volume of CCS in our US segment decreased by 3.9%, or 56 metric tons in the first quarter of 2012 compared to the same period of 2011. The uncertain macroeconomic environment remains challenging at Fayetteville, however, we continue to see growing interest in our applications driven by the investments we have been making in our sales and marketing efforts. We have begun to see traction in diverse markets including India, the Philippines, Indonesia, Malaysia, and Singapore, particularly for our grounding wire applications. We experienced greater activity in Europe as well, and saw an increase in quote activity during the first quarter in this market.

Gross Profit and Gross Margin



                                       Three Months Ended March 31,                Change
(in millions, except percentage)        2012                   2011          Amount        %
Gross Profit                       $         16.4         $         17.1     $  (0.7 )     -4.1 %
Gross Margin                                 26.3 %                 26.0 %                  0.3 %

Gross profit decreased 4.1% to $16.4 million from $17.1 million in the first quarter of 2011. As a percentage of revenues, gross margin increased to 26.3% in the first quarter of 2012 from 26.0% in the same period in 2011. The increase in gross margin was primarily the result of lower raw material prices.

Selling Expenses



                                              Three Months Ended March 31,                 Change
(in millions, except percentage)               2012                  2011           Amount          %
Selling Expenses                           $         1.6         $         1.1     $     0.5         45.5 %
as a percentage of revenues                          2.6 %                 1.7 %                      0.9 %

Selling expenses were $1.6 million in the quarter ended March 31, 2012, an increase by 45.5%, or $0.5 million compared to the same period in 2011. As a percentage of revenues, selling expenses increased from 1.7% in the first quarter of 2011 to 2.6% in the first quarter of 2012. The increase in selling . . .