KEMAMAN: Hiap Teck Venture Bhd’s 55% owned Eastern Steel Sdn Bhd has been granted a licence by the Terengganu government to mine iron ore on a 243ha site near Bukit Besi.
Mentri Besar Datuk Seri Ahmad Said said after the symbolic ground-breaking ceremony that the mining concession will allow Eastern Steel to mine the area, which has estimated reserves of 40 million to 50 million tonnes of iron ore, until the end of its mining life.
He said Eastern Steel has received the second of four licences that have been made available so far. “This is an incentive the state government is giving to encourage Eastern Steel to invest in the steel milling business here, in addition to building the infrastructure to improve accessibility and logistics.”
Perwaja Holdings Bhd, which also has a steel operation in the state, was the first company to be given mining rights.
Low Choong Sing, executive director of Hiap Teck, said the mining concession will help Eastern Steel secure the supply of iron ore, the main raw material, for the integrated steel complex it is building in Kemaman to produce steel slab.
He added that this would reduce Eastern Steel’s input costs as it would have to import fewer raw materials from abroad.
Hiap Teck is investing about RM415 million in Phase 1, Stage 1 of the integrated steel complex project, that is estimated to cost up to RM3.8 billion upon full completion. Stage 2 of Phase 1 will involve an investment of RM1.05 billion.
Datuk David Law, the company’s deputy executive chairman, said Hiap Teck’s investment in Eastern Steel is a step for the steel pipe maker into upstream activities.
Law, a major shareholder in Hiap Teck, said about half of its earnings will be derived from Eastern Steel starting from FY14 once the integrated steel complex commences operations in mid-2013.
“Hiap Teck expects 50% of its profit to come from Eastern Steel in 2014. The remaining 50% will be generated by pipe manufacturing and the trading of steel products,” said Law. He declined to reveal the earnings forecasts for the upstream project.
At present, pipe manufacturing and trading of steel products are the key contributors to Hiap Teck. For FY11 ended July 31, the company posted sharply lower net profit of RM25.5 million compared with RM50.5 million a year ago. Revenue dropped marginally to RM1 billion from RM1.06 billion.
Eastern Steel is a partnership between Hiap Teck and Beijing-based China Shougang International Trade and Engineering Corp. State-owned Shougang International holds a 40% stake in Eastern Steel while Chinaco Investment Pte Ltd owns the remaining 5%.
Eastern Steel’s steel complex, which will cover 486ha, will have a maximum annual capacity of 3.5 million tonnes. The project is divided into two phases. The first phase consists of Stage 1, that is to build an initial capacity of 700,000 tonnes in 18 months, and Stage 2 to add 800,000 tonnes.
Eastern Steel is Shougang International’s first overseas investment in a steel complex. Shougang International chairman and president Hu Bin said political stability is the key factor that lead to Malaysia’s selection as Shougang’s base in Asean.
Hu believes Eastern Steel’s timing is good despite the economic headwinds. By investing now, Eastern Steel will be able to ride the recovery when the global economy turns around.
This article appeared in The Edge Financial Daily, December 6, 2011.
Mentri Besar Datuk Seri Ahmad Said said after the symbolic ground-breaking ceremony that the mining concession will allow Eastern Steel to mine the area, which has estimated reserves of 40 million to 50 million tonnes of iron ore, until the end of its mining life.
He said Eastern Steel has received the second of four licences that have been made available so far. “This is an incentive the state government is giving to encourage Eastern Steel to invest in the steel milling business here, in addition to building the infrastructure to improve accessibility and logistics.”
Perwaja Holdings Bhd, which also has a steel operation in the state, was the first company to be given mining rights.
Low Choong Sing, executive director of Hiap Teck, said the mining concession will help Eastern Steel secure the supply of iron ore, the main raw material, for the integrated steel complex it is building in Kemaman to produce steel slab.
He added that this would reduce Eastern Steel’s input costs as it would have to import fewer raw materials from abroad.
Hiap Teck is investing about RM415 million in Phase 1, Stage 1 of the integrated steel complex project, that is estimated to cost up to RM3.8 billion upon full completion. Stage 2 of Phase 1 will involve an investment of RM1.05 billion.
Datuk David Law, the company’s deputy executive chairman, said Hiap Teck’s investment in Eastern Steel is a step for the steel pipe maker into upstream activities.
Law, a major shareholder in Hiap Teck, said about half of its earnings will be derived from Eastern Steel starting from FY14 once the integrated steel complex commences operations in mid-2013.
“Hiap Teck expects 50% of its profit to come from Eastern Steel in 2014. The remaining 50% will be generated by pipe manufacturing and the trading of steel products,” said Law. He declined to reveal the earnings forecasts for the upstream project.
At present, pipe manufacturing and trading of steel products are the key contributors to Hiap Teck. For FY11 ended July 31, the company posted sharply lower net profit of RM25.5 million compared with RM50.5 million a year ago. Revenue dropped marginally to RM1 billion from RM1.06 billion.
Eastern Steel is a partnership between Hiap Teck and Beijing-based China Shougang International Trade and Engineering Corp. State-owned Shougang International holds a 40% stake in Eastern Steel while Chinaco Investment Pte Ltd owns the remaining 5%.
Eastern Steel’s steel complex, which will cover 486ha, will have a maximum annual capacity of 3.5 million tonnes. The project is divided into two phases. The first phase consists of Stage 1, that is to build an initial capacity of 700,000 tonnes in 18 months, and Stage 2 to add 800,000 tonnes.
Eastern Steel is Shougang International’s first overseas investment in a steel complex. Shougang International chairman and president Hu Bin said political stability is the key factor that lead to Malaysia’s selection as Shougang’s base in Asean.
Hu believes Eastern Steel’s timing is good despite the economic headwinds. By investing now, Eastern Steel will be able to ride the recovery when the global economy turns around.
This article appeared in The Edge Financial Daily, December 6, 2011.
