Summary

• Chin Well Holdings Bhd’s operations were affected by the implementation of Movement Control Order (MCO) since March 2020. Since then, the group has received approval from MITI to resume their operations in mid-April 2020 (Fastener segment) and early-May 2020 (Wire segment) respectively. The temporary shutdown has resulted in deliveries being postponed, particularly for orders in Malaysia and to Europe. For now, Chin Well will be kept busy, playing catch-up with the backlog orders.

• On a brighter note, the Vietnam operations were largely unaffected which may see the production of the reinforcement bar in Vietnam to US which may see shipment rising to approximately 600 tonnes by end-2020 from approximately 200 tonnes in 1Q2020. We see the improvement capitalizing from the US move to impose the anti dumping taxes on threaded rods on countries like Thailand, Taiwan, India and China. This in turn shifts the demand to Vietnam which has been growing into a manufacturing powerhouse country in the South East Asia region over the years.

• The expansion in the production of new product lines such as welded fencing, gabion and poultry mesh which had commenced production in 3Q2019 is expected to see higher shipments to the US market. At the same time, Chin Well will ramp up output on the fastener products segment production by additional 5,000 tones to 110,000 tonnes as the group prepares to take on the rising demand.

• Elsewhere, the bottoming out of wire rod prices to an average of US$3,929.66 per tonne in June 2020 vs. US$3,860.37 per tonne in May 2020 and US$3,775.74 per tonne in April 2020 (see figure 1) implies improved demand of wire rod products against the previous period. The recovery, however, will be feeble as the global economy pace of recovery has yet to be accelerated which suggest prices may not rise back towards pre-covid19 levels that peaked near US$4,400 per tonne

Source: Mplus Research - 7 Jul 2020