Perwaja stock sure will hit high since the news will rock the stock !!
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KUALA LUMPUR, Aug 2 (Bernama) -- Perwaja Holdings Bhd's decision to build its own RM400 million iron ore concentration and pelletising plant in Kemaman, Terengganu is set to rejuvenate the local steel industry, says an industry analyst.
One benefit for the industry would be the reduced dependency on imported iron ore pellets, said a senior analyst with MIDF Research, Syed Muhammad Kifni Syed Kamaruddin.
Perwaja could also gain in terms of cost, he said, adding that however no change could be expected in terms of steel pricing as the metal's pricing would follow international prices.
Another way the local industry could benefit will be the stability in terms steel supply in the local market, he told Bernama today.
This, however, could be achieved only if the right amount of steel is produced without disrupting prices.
Ranked among the country's largest integrated producer of primary steel products such as billets, blooms and beam blanks, Perwaja supplies its products directly to downstream producers both in the local and overseas markets including the Middle East.
Perwaja also recently announced that it had put in an application to the state government to mine for iron ore, the basic material used to make primary steel, in Bukit Besi, which is about 80km from its proposed plant in Terengganu.
The proposal is still under consideration from the Terengganu state government.
Bukit Besi has an estimated 50 million tonnes of raw iron ore deposits, and this could be translated into at least 12 years of supply based on Perwaja's full capacity requirement of four million tonnes of raw iron ore annually for its plant.
OSK Research in its report that if Perwaja obtains the mining license, it could save itself a cost of more than US$100 for per tonne of raw iron ore.
The calculation was based on the current price of imported raw iron ore of US$160 per tonne against local cost for mining which would amount to less than US$50 per tonne, it said.
Therefore, obtaining the mining concession would mean a lucrative income to the steel manufacturing company after considering the amount of cost reduction that they would gain from operating their own iron ore mine and processing, it said.
Perwaja's Chairman Tan Sri Abu Sahid Mohamed meanwhile on Saturday had said that the company's new plant would need two million tonnes of raw iron ore per year to operate at a maximum capacity to produce 1.2 million tonnes of iron ore pellets when the first phase is completed next year.
Its requirement would increase to four million tonnes of raw iron ore per year to produce 2.4 million tonnes of pellets when the second phase is completed in 2013.
Adding up, the company could garner, based on its requirement at full operation, savings of up to RM840 million a year, including up to 20 per cent or RM600 million in raw material cost.
It would also reduce the company's exposure to the volatile prices of imported iron ore pellets.
Abu Sahid said it will also provide stability in the supply and price of iron ore pellets in the local market which has been dominated by three major international players.
Source: Bernama
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