SHANGHAI — China Precision Steel, Inc. (Nasdaq: CPSL) (“China Precision Steel” or the “Company”), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal 2010 second quarter results for the period ended December 31, 2009.

    Second Quarter Highlights
    -- Revenue increased 53.7% year-over-year to $27.0 million
    -- Gross profit was $3.6 million with 13.5% gross margin
    -- Net income was $2.6 million, versus a net loss of $2.0 million in
       second quarter 2009
    -- Fully diluted earnings per share were $0.06

“We are very pleased with our results for the second quarter. During the quarter, we experienced a significant increase in demand from our current customers along with a ramp up of orders from new customers. Specifically, our sales volumes benefited from an increase in the domestic demand for home appliances and automobile components as a result of China’s economic stimulus programs which drove orders for both our low and high carbon precision steel products,” commented Dr. Wo Hing Li, China Precision Steel’s Chairman and CEO. “Additionally, we are experiencing a rebound in international sales as our customers’ businesses appear to be recovering from the impact of the economic crisis.”

Revenue for the second quarter of fiscal 2010 was $27.0 million, up 53.7% from revenue in the second quarter of fiscal 2009 of $17.6 million. The increase in revenue was mainly attributed to the increase in sales volume which offset a decline in average selling price. Total sales volume in the second quarter was 35,588 tons, up 139.5% from total sales volume of 14,862 in the second quarter of 2009. Sales volume increased 59.6% from 22,293 tons in the first quarter of fiscal 2010. Average selling price per ton was $759, down 35.8% from $1,182 in the second quarter of fiscal 2009. The decline in average selling price parallels the overall decline in global steel prices. High carbon and low carbon sales accounted for 32.0% and 54.9% of total sales, respectively, compared to 6.1% and 87.3%, respectively, in the second quarter of fiscal 2009. Exports represented 13.0% of total sales for the quarter.

Gross profit in the second quarter was $3.6 million, up 5.3% from gross profit in the same period a year ago of $3.5 million. Gross margin was 13.5% compared to 19.6% in the second quarter of fiscal 2009. The decline in gross margin was mainly due to decrease in average selling prices, which was partially offset by decrease in average cost per unit sold period-on-period.

Selling expenses for the second quarter of fiscal 2010 were $70,605, or 0.3% of revenue, compared to $1.1 million, or 6.4% of revenue, in the second fiscal quarter of fiscal 2009. The decline in selling expenses was primarily attributable to higher commission costs associated with export products in the second quarter of fiscal 2009. Administrative expenses were $654,041, or 2.4% of revenue, compared to $578,105, or 3.3% of revenue in second quarter of fiscal 2009. The increase in administrative expenses is due to an increase in salaries as a result of an increase in the average number of staff as well as an increase in stock and listing fees and travel expenses period-on-period. China Precision Steel also recognized an allowance for bad and doubtful debts in the amount of $101,067 during the quarter in accordance with its policy for allowance for bad and doubtful debts, as compared to $3.8 million for the same period a year ago.

Operating income for the quarter was $2.8 million, compared to operating loss of $2.1 million in the second quarter of fiscal 2009.

Net income for the second quarter of fiscal 2010 was $2.6 million, compared to net loss of $2.0 million for the second quarter of fiscal 2009. Fully diluted earnings per share were $0.06 compared to fully diluted loss per share of $0.04 in the same period a year ago.

Six Months Financial Results

Revenue for the first six months of fiscal 2010 was $44.0 million, up 2.6% from $42.9 million in the same period a year ago. Gross profit was $4.3 million, down 41.4% from gross profit of $7.4 million for the six months of fiscal 2009. Gross margin was 9.8% compared to 17.2% for the comparable period a year ago. Operating income was $2.7 million, up 137.1% from $1.1 million in the first six months of fiscal 2009. Net income was $2.3 million, up 156.9% from $0.9 million in the same period a year ago. Fully diluted earnings per share were $0.05 compared to $0.02 in the first six months of fiscal 2009.

Financial Condition

As of December 31, 2009, China Precision Steel had $12.8 million in cash and cash equivalents, no long-term debt, total liabilities of $42.8 million and working capital of $42.5 million. Net cash provided by operating activities for the first six months of fiscal 2010 was $0.6 million. Stockholders’ equity stood at $123.0 million compared to $120.6 million as of June 30, 2009.

Subsequent Events

On January 29, 2010, China Precision Steel’s subsidiary, Shanghai Blessford, entered into a Senior Loan Agreement with DEG-Deutsche Investitions-Und Entwicklungsgesellschaft Mbh (“DEG”) for a loan amount up to $18,000,000 at an annual interest rate of 4.5% above the six-month USD LIBOR rate. The loan is to be repaid semi-annually over five years starting on December 15, 2011 and is secured on a mortgage of the new cold rolling line and annealing furnaces at Shanghai Blessford’s facilities.

Business Outlook

China Precision Steel began initial production runs at its new mill in January 2010, and is currently in the process of ramping up production capacity. The mill is expected to reach its full design capacity of 100,000 tons in approximately four years; increasing the Company’s total production design capacity by 33%. China Precision Steel expects to incur an additional $900,000 in capital expenditure for the completion of the new mill and annealing furnaces.

“We are optimistic that market activity will improve throughout the first half of 2010 because our business has been gradually stabilizing and our visibility on customer orders has improved considerably. As of December 31, 2009, we had a backlog of $23.9 million in orders that are to be delivered over the next three to four months and we anticipate our monthly production will be approximately 10,000 tons,” Dr. Li commented. “Moreover, we have liquidated our higher cost inventory and strengthened our balance sheet which gives us flexibility to rapidly respond to changing market conditions.”

About China Precision Steel, Inc.

China Precision Steel, Inc. is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel’s high precision, ultra-thin, high strength (7.5 mm to 0.05 mm) cold- rolled steel products are mainly used in the production of automotive components, food packaging materials, saw blades and textile needles. The Company primarily sells to manufacturers in the People’s Republic of China and overseas markets such as Nigeria, Thailand, Indonesia and the Philippines. China Precision Steel was incorporated in 2002 and is headquartered in Sheung Wan, Hong Kong. Additional information can be found at the Company’s website http://chinaprecisionsteelinc.com .

Conference Call

China Precision Steel will host a conference call on Tuesday, February 16, 2010 at 9:00 a.m. Eastern Time to discuss fiscal 2010 second quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 888-339-2688. International callers should dial 617-847-3007. When prompted by the operator, mention conference passcode 493 644 31.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, February 16, 2010 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 20808534. International callers should dial 617-801-6888 and enter the same passcode.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.chinaprecisionsteelinc.com . Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Precision Steel on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding China Precision Steel’s ability to prepare the Company for growth, the Company’s planned manufacturing capacity expansion, predictions about improvements in the global economy and predictions and guidance relating to the Company’s future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, such as business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

                         - Financial Tables Follow -

         China Precision Steel, Inc.
              and Subsidiaries
         Consolidated Balance Sheets
                                           (Unaudited)
                                           December 31,            June 30,
                                               2009                  2009
                     Assets
    Current assets
      Cash and cash equivalents           $12,752,288            $13,649,587
      Accounts receivable
        Trade, net of allowances of
         $1,006,973 and $830,127
         at December 31 and June 30,
         2009, respectively                23,524,856             25,140,834
        Bills receivable                      317,391              6,131,143
        Other                                 920,274                881,153
      Inventories                          25,149,536             16,275,070
      Prepaid expenses                        161,427                 75,917
      Advances to suppliers, net of
       allowance of $1,632,442 and
       $1,631,557 at December 31 and
       June 30, 2009, respectively         22,491,830             21,878,047
    Total current assets                   85,317,602             84,031,751
    Property, plant and equipment
      Property, plant and equipment,
       net                                 72,880,841             46,812,484
      Deposits for building, plant
       and machinery                               --              8,348,496
      Construction-in-progress              5,656,934             22,245,173
                                           78,537,775             77,406,153
    Intangible assets, net                  1,852,015              1,871,211
    Goodwill                                   99,999                 99,999
    Total assets                         $165,807,391           $163,409,114

        Liabilities and Stockholders'
         Equity
    Current liabilities
      Short-term loans                    $25,791,988            $22,489,031
      Accounts payable and accrued
       liabilities                          6,346,626              7,144,242
      Advances from customers               2,786,380              1,742,944
      Other taxes payables                  2,921,706              6,650,668
      Current income taxes payable          4,978,877              4,778,767
    Total current liabilities              42,825,577             42,805,652
    Stockholders' equity:
      Preferred stock: $0.001 per
       value, 8,000,000 shares
       authorized, no shares
       outstanding at December 31
       and June 30, 2009, respectively             --                     --
      Common stock: $0.001 par value,
       62,000,000 shares
       authorized, 46,562,955 and
       46,562,955 issued and
       outstanding December 31 and
       June 30, 2009, respectively             46,563                 46,563
      Additional paid-in capital           75,642,383             75,642,383
      Accumulated other comprehensive
       income                               9,795,611              9,731,505
      Retained earnings                    37,497,257             35,183,011
    Total stockholders' equity            122,981,814            120,603,462
    Total liabilities and
     stockholders' equity                $165,807,391           $163,409,114

                  China Precision Steel, Inc. and Subsidiaries
                      Consolidated Statements of Operations
          For the Three and Six Months Ended December 31, 2009 and 2008
                                   (Unaudited)

                             Three Months Ended          Six Months Ended
                            December    December      December       December
                                31,        31,           31,            31,
                               2009       2008          2009           2008

    Revenues
      Sales revenues     $27,013,838   $17,573,959   $44,055,827   $42,924,378
      Cost of goods
       sold               23,377,883    14,122,622    39,716,513    35,520,383
      Gross profit         3,635,955     3,451,337     4,339,314     7,403,995

    Operating expenses
      Selling expenses        70,605     1,122,532      102,414      1,333,830
      Administrative
       expenses              654,041       578,105    1,232,739      1,040,205
      Allowance for bad
       and doubtful
       debts                 101,067     3,829,462      218,184      3,829,462
      Depreciation and
       amortization
       expense                36,755        33,318       80,493         59,521
      Total operating
       expenses              862,468     5,563,417    1,633,830      6,263,018

    Income/(loss) from
     operations            2,773,487    (2,112,080)   2,705,484      1,140,977

    Other
     income/(expense)
      Other revenues          91,041       138,998      110,963        259,701
      Interest and
       finance costs        (275,091)     (320,777)    (503,434)      (648,182)

     Total other
     (expense)              (184,050)     (181,779)    (392,471)      (388,481)

    Net income/(loss)
     from operations
     before income
      tax                  2,589,437    (2,293,859)   2,313,013        752,496

    Provision
     for/(benefit
     from) income tax
      Current                     --      (318,878)      (1,233)      (148,257)
      Deferred                    --            --           --             --
      Total income tax
       (benefit)                  --      (318,878)      (1,233)      (148,257)

    Net income/(loss)     $2,589,437   ($1,974,981)  $2,314,246       $900,753

    Basic
     earnings/(loss)
     per share                 $0.06        ($0.04)       $0.05          $0.02
    Basic weighted
     average shares
     outstanding          46,562,955    46,562,955   46,562,955     46,559,531
    Diluted
     earnings/(loss)
     per share                 $0.06        ($0.04)       $0.05          $0.02
    Diluted weighted
     average shares
     outstanding          46,562,955    46,562,955   46,562,955     46,566,423

                   China Precision Steel, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
               For the Six Months Ended December 31, 2009 and 2008
                                   (Unaudited)
                                                       2009             2008
    Cash flows from operating activities
      Net income                                  2,314,246          900,753
      Adjustments to reconcile net income to
       net cash provided by operating
       activities
        Depreciation and amortization             2,181,380        1,825,544
        Allowance for bad and doubtful debts        218,184        3,829,462
        Inventory impairment                         42,534               --
      Net changes in assets and liabilities:
        Accounts receivable, net                  7,189,783        3,801,518
        Inventories                              (8,908,192)        (461,094)
        Prepaid expenses                            (85,504)         (50,382)
        Advances to suppliers                      (601,926)       2,890,245
        Accounts payable and accrued expenses      (801,406)        (147,831)
        Advances from customers                   1,042,492       (3,006,670)
        Other taxes payable                      (2,236,478)        (426,823)
        Current income taxes                        197,520         (491,584)
    Net cash provided by operating activities       552,633        8,663,138

    Cash flows from investing activities
      Purchase of property, plant and
       equipment including construction in
       progress                                  (4,746,139)     (12,954,497)

    Net cash (used in) investing activities      (4,746,139)     (12,954,497)

    Cash flows from financing activities
      Exercise of common stock warrants                  --          269,985
      Short-term loan proceeds                    3,735,169               --
      Repayments of short-term loans               (444,400)         (87,690)
    Net cash provided by financing activities     3,290,769          182,295

    Effect of exchange rate                           5,438          303,887
    Net (decrease) in cash                         (897,299)      (3,805,177)
    Cash and cash equivalents, beginning of
     period                                      13,649,587       18,568,842
    Cash and cash equivalents, end of period     12,752,288       14,763,665