| In the 21st century, the worldwide economy has been globalized more rapidly, and this produces much more uncertainty of the market. The classical investment theory, such as NPV (net present value) is becoming more and more unfitted to the needs of investment decision . In this paper, we firstly give an introduction to the theory of Real Options and its development, then use this theory to analyze the "CSP" investment program of Handan Steel & Iorn Co. Limited. In this way, the new investment theory of Real Options, which is valid under uncertainty conditions, is introduced to domestic steel industry.In the first part of this paper, we use "Two-Step Investment Rule" and " Black-Schoes Formula" in the theory of Real Options to solve the value of "CSP", and then compare the value with the result obtained by NPV. In the second part, we consider the possible ranges of the parameters,the investment cost "I", the initial price "P0", and the possibility of price chang "q", analyzing the influence of these parameters to the investment decision, then determine the optimal investment scale.The theory of Real Options has been being studied and applied in USA since the 1990's. This paper, however, is the first attempt to apply this theory to domestic steel & inor industry. With the globalization of the world economy, the uncertainty of the market will increase. The grasp of this theory will be of great help to control the risk of uncertainty investment in the steel & iorn industry.
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