Friday, August 26, 2011

Pmetal ... Aug11

Come 2012, Press Metal Bhd will be the largest aluminium smelter in terms of capacity in Southeast Asia.

Its first aluminium smelting plant in Mukah is already operational and its second facility in Samalaju Industrial Park, Similajau — both in Sarawak — is slated for commissioning by end-2012. The new plant in Samalaju will triple Press Metal’s smelting capacity to 360,000 tonnes from the current 120,000 tonnes produced at its Mukah plant.

This will put the group in a strong position to benefit from a re-acceleration of aluminium demand within Southeast Asia and contribute to the group’s earnings.

Malaysia could become the regional hub for the production of aluminium products. China, the biggest producer of aluminium products at present, is opposed to exporting and is selling its aluminium products domestically. Furthermore, the power cost in China is expensive; around US$75 [RM223.50] to US$85 per MWh, which is not competitive for smelting companies to set up their plants there. Even the [Chinese] government is not encouraging the industry to grow.

In April 2011, Press Metal was one of four companies which signed power purchase agreement (PPA) term sheets with the state utility Sarawak Energy Bhd (SEB) for the delivery of 1,300MW of power. With the Bakun dam, which commenced electricity production of 300MW in Aug 2011, smelters can enjoy relatively lower power cost in Sarawak than in China or anywhere else.

Press Metal enjoys an “early bird” advantage with its PPA with SEB. It is believed the company’s starting rates for its power supply are about 50% cheaper than that the average power cost of Chinese smelters; at between 11 sen to 12 sen per kWh with an annual escalation of 1.5%.

Most importantly, the PPA paves the way for Press Metal to lock in its long-term power requirements at an attractive rate — and undoubtedly elevate its competitive positioning as an integrated aluminium producer.

Press Metal has an advantage, having made the first move over its rivals as the first smelter operating within Sarawak. Other notable aluminium smelter proposals in the state include Smelter Asia Sdn Bhd’s 700,000 tonne per year smelter and Sarawak Aluminium Co Sdn Bhd’s 1.5 million tonne smelter, both in Similajau.

Apart from Press Metal, there has only been some tangible news flow on an MoU between Gulf International Investment Group Holdings Sdn Bhd (GIIG) and Aluminium Corp of China (Chalco) — which have proposed to set up a US$1.5 billion aluminium smelter in Samalaju which is slated to have an initial capacity of 370,000 tonnes per annum. This project is generally referred to as the Smelter Asia project.

Any new aluminium plant set up to rival Press Metal would probably only be ready in two to three years’ time. Plus, Press Metal would have enjoyed a cost advantage via the long-term electricity supply accord signed with SEB as mentioned earlier.

For 1QFY11 ended March, Press Metal posted a net profit of RM21.49 million on the back of RM471.59 million in revenue. The company’s earnings per share for the three months in review was 4.98 sen. In contrast to a year ago, Press Metals net profit for 1Q slipped by a third despite revenue gaining about 20%.

1 comment:

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