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) Fushi International (JiangSu) Bimetallic Cable Co., Ltd. ("Fushi International (JiangSu)"), (viii) Fushi Copperweld Europe SARL ("Fushi Europe"), (ix) Copperweld Tubing Europe SPRL ("Copperweld Tubing"), and
(x) 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 third quarter of 2012, our products were sold to 217 customers in 43 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 conductors can 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 wire and cable 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.

On June 28, 2012, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement"), with Green Dynasty Holdings Limited, a Cayman Islands exempted company ("Holdco"), Green Dynasty Limited, a Cayman Islands exempted company wholly owned by Holdco ("Parent") and Green Dynasty Acquisition, Inc., a Nevada corporation wholly owned by Parent ("Merger Sub"). Holdco is an entity controlled by Mr. Fu, Chairman and Co-CEO of the Company.

Pursuant to the Merger Agreement, at the effective time of the merger, Merger Sub will be merged with and into the Company, and as a result, the Company will continue as the surviving corporation and a wholly owned subsidiary of Parent (the "merger"). Each share of the Company's common stock issued and outstanding immediately prior to the effective time of the merger (the "Shares") will be converted into the right to receive $9.50 in cash without interest. Shares held in the treasury of the Company or owned, directly or indirectly, by Parent, Merger Sub, or any wholly owned subsidiary of the Company immediately prior to the effective time of the merger will be cancelled without consideration. Shares of our common stock beneficially owned by Mr. Fu and his affiliates and affiliates of Abax Capital Partners (Hong Kong) Limited ("Abax"), will be cancelled for no consideration, because these parties are contributing their shares to Parent in exchange for ownership interests in Holdco. Each then-outstanding option to purchase shares of the Company's common stock granted under any equity plan of the Company, whether or not vested or exercisable, will become fully vested and exercisable, contingent upon the occurrence of the merger, and will be converted into the right to receive an amount in cash equal to the product of (i) the excess, if any, of the merger consideration of $9.50 per share over the applicable exercise price per share of such stock option and
(ii) the number of shares of the Company's common stock such holder could have purchased had such holder exercised such stock option in full immediately prior to the effective time of the merger. Each then-outstanding nonvested share of the Company's common stock granted under any equity plan of the Company, will vest in full, contingent upon the occurrence of the merger (and all restrictions thereon will immediately lapse), and be converted at the effective time into the right to receive an amount in cash equal to $9.50.

The Company's Board of Directors, acting upon the unanimous recommendation of the Special Committee approved the Merger Agreement and has recommended that the Company's stockholders vote to approve the Merger Agreement. The Merger is scheduled to be subject to the stockholders' vote on December 11, 2012.

The Merger Agreement must be approved by the holders of (i) at least a majority of the combined voting power of the outstanding shares of our common stock, and
(ii) at least 60% of the combined voting power of the outstanding shares of the Company's common stock not beneficially owned by the buyer group, which is comprised of Parent, Merger Sub, Holdco, Mr. Fu and his affiliates, and Abax and its affiliates, and any affiliate of any buyer group member.

Highlights for the three months ended September 30, 2012 include:

ˇ Product shipped was 10,167 MT compared to 9,300 MT in the third quarter of 2011;
ˇ Revenues were $72.6 million compared to $74.3 million in the third quarter of 2011;
ˇ Gross profit was $18.9 million, or 26.1% of revenues, compared to $19.9 million, or 26.8% of revenues, in the third quarter of 2011;
ˇ Income from operations was $11.3 million, or 15.5% of revenues, compared to $13.7 million, or 18.5% of revenues, in the third quarter of 2011;
ˇ Net income was $7.7 million, or $0.20 per diluted share, compared to net income of $8.9 million, or $0.23 per diluted share, in the third quarter of 2011;
ˇ Cash position of $217.7 million at September 30, 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 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 markets in anticipation of expected 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 believe 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                                        Nine Months Ended
                         September 30,         September 30,        Change         September 30,       September 30,        Change
                             2012                  2011                %               2012                2011                %
Revenues                $          72.6       $          74.3            -2.3 %   $         212.1     $         219.2            -3.2 %
Gross profit                       18.9                  19.9            -5.0 %              55.1                58.1            -5.2 %
Selling, general and
administrative
expenses                            7.7                   6.2            24.2 %              24.7                18.5            33.5 %
Income from
operations                         11.2                  13.7           -18.2 %              30.4                39.6           -23.2 %
Income before income
taxes                              11.5                  13.1           -12.2 %              30.9                38.2           -19.1 %
Income tax expense                  3.8                   4.2            -9.5 %              11.0                11.8            -6.8 %
Net income              $           7.7       $           8.9           -13.5 %   $          19.9     $          26.4           -24.6 %

Three Months Ended September 30, 2012 compared to three months ended September 30, 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 September 30,
                                2012                     2011              Change in       Change in
                        Amount           %        Amount         %          amount             %
PRC                    $   56.2          77.4 %   $  61.3        82.5 %   $      (5.1 )          -8.3 %
US                         16.4          22.6 %      13.0        17.5 %           3.4            26.2 %
Total revenues         $   72.6         100.0 %   $  74.3       100.0 %   $      (1.7 )          -2.3 %




(in MTs, except                    Metric Tons Sold
percentage                 Three Months Ended September 30,
                             2012                     2011              Change in       Change in
                        MT            %          MT           %            MT               %
PRC *                    7,710        75.8       7,227        77.7 %           483             6.7 %
US                       2,457        24.2       2,073        22.3 %           384            18.5 %
Total sales volume      10,167       100.0       9,300       100.0 %           867             9.3 %

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

Revenues for the third quarter of 2012 were $72.6 million, a decrease of 2.3% from $74.3 million in same quarter of the prior year. The decrease was primarily due to lower unit selling prices as a result of decrease of raw material price in the third quarter of 2012 compared to that of 2011.

The PRC segment experienced a decrease of 8.3% in revenues in the third quarter of 2012, which is primarily due to lower unit selling prices as a result of decrease of unit price of raw materials, particularly copper. The volume sold in terms of MT in our PRC segment increased 483 MT, or 6.7% in the third quarter of 2012 compared to the same quarter of 2011. The higher volume shipped in the PRC segment in the third quarter of 2012 was mainly the result of stronger sales to our utility customers. The appreciation of the average exchange rate of RMB against USD in the third quarter of 2012 compared with the same period of 2011 has also attributed to a 1.0% or $0.6 million increase in revenue as a result of translating PRC entities' revenue denominated in RMB to USD.

The US segment experienced an increase of 26.2% in revenues in the third quarter of 2012 compared to the same period of 2011. The increase is primarily due to an 18.5% increase in quantities sold which is partially contributed by operations in Liege, Belgium.

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 September 30,
percentage)                     2012                     2011              Change in       Change in
                        Amount           %        Amount         %          amount             %
Telecommunication      $   20.8          28.7 %   $  24.1        32.4 %   $      (3.3 )         -13.7 %
Utility                    45.8          63.1 %      47.1        63.4 %          (1.3 )          -2.8 %
Transportation              1.0           1.4 %       1.2         1.7 %          (0.2 )         -16.7 %
Other                       5.0           6.8 %       1.9         2.5 %           3.1           163.2 %
Total revenues         $   72.6         100.0 %   $  74.3       100.0 %   $      (1.7 )          -2.3 %

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 September 30,
percentage)                  2012                     2011              Change in       Change in
                        MT            %          MT           %            MT               %
Telecommunication        3,586        35.3       3,707        39.9 %          (121 )          -3.3 %
Utility *                5,636        55.4       4,948        53.2 %           688            13.9 %
Transportation             136         1.3         152         1.6 %           (16 )         -10.5 %
Other                      809         8.0         493         5.3 %           316            64.1 %
Total sales volume      10,167       100.0       9,300       100.0 %           867             9.3 %

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

In the third quarter of 2012, our sales to the telecommunication markets decreased by 121 metric tons, or 3.3%, compared to the same period of 2011, which was primarily the result of the continued slowdown in telecommunication infrastructure build out in the PRC and US.

Our sales to utility markets increased by 688 metric tons, or 13.9%, in the third quarter of 2012 compared to the third quarter of 2011 as we continued to shift our sales to utility customers. In our PRC segment, sales to utility market increased by 374 MT, or 11.8%, 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 per annum and metric ton sold by products in the third quarter of 2012:

. . .