The above is jackpot news for Blast furnace (BF) steel producers - for those who understand

What does China’s power policy shift mean for metal makers, other energy hogs?

Wednesday, 13 Oct 2021

https://www.malaymail.com/news/money/2021/10/13/what-does-chinas-power-policy-shift-mean-for-metal-makers-other-energy-hogs/2013129

Going forward, as generators pass on some rising costs to consumers and raise power supplies, power-hungry industries such as steel, aluminium, cement and chemical producers are expected to face higher and more volatile power costs as previous fixed-cost arrangements are replaced by market-based pricing.

How will output of key metals be affected by this?

Analysts say China’s world-leading steel industry may be forced to cut output from electric arc furnaces (EAF), which account for roughly 15 per cent of China’s total steelmaking capacity.

Electric furnaces run on electricity and so emit fewer emissions than traditional blast furnaces, but have high power needs.

“The broad story is that there will be an increase in steelmaking costs, more so for EAF. This could amount to around 4.5 per cent of current rebar prices, which are currently at (5,860 yuan per tonne),” according to Li Wang, senior steel analyst at consulting firm CRU.

China is also restricting traditional steel output through mid-March next year to reduce smog, which may further underpin steel prices.

What does China’s power policy shift mean for metal makers, other energy hogs?

Wednesday, 13 Oct 2021

https://www.malaymail.com/news/money/2021/10/13/what-does-chinas-power-policy-shift-mean-for-metal-makers-other-energy-hogs/2013129

Going forward, as generators pass on some rising costs to consumers and raise power supplies, power-hungry industries such as steel, aluminium, cement and chemical producers are expected to face higher and more volatile power costs as previous fixed-cost arrangements are replaced by market-based pricing.

How will output of key metals be affected by this?

Analysts say China’s world-leading steel industry may be forced to cut output from electric arc furnaces (EAF), which account for roughly 15 per cent of China’s total steelmaking capacity.

Electric furnaces run on electricity and so emit fewer emissions than traditional blast furnaces, but have high power needs.

“The broad story is that there will be an increase in steelmaking costs, more so for EAF. This could amount to around 4.5 per cent of current rebar prices, which are currently at (5,860 yuan per tonne),” according to Li Wang, senior steel analyst at consulting firm CRU.

China is also restricting traditional steel output through mid-March next year to reduce smog, which may further underpin steel prices.

rebar price shoot up again last week...

http://www.sunsirs.com/uk/prodetail-927.html

even Genting can go up before movement restrictions are removed...why not Dayang which will be profitable for certain & almost net cash??

if you are very concern on whether money can come out like Jaks situation due to chinaman involvement, suggest to go for Annjoo

at such lucrative oil price, it would be prudent for Petronas to intensify its maintenance activity to keep its equipment in tip top condition...

@ular, i rather say 'reverting to mean' than 'uptrend due to momentary supply - demand gap'....just that our steel industry never had the chance to revert to mean all this while due to big bully China

hope the bully is gone for good

Sifu ular, you calculate the margin at the estimated level and see

in the long run, i expect the Blast Furnace (BF) players margin to come down minimum to a level of 24%....

its simple because they are protected by the high scrap steel price EAF players need to use while they can enjoy cheap iron ore...

its not easy to build a BF plant just like gloves plants were made by competitors and China can be ruled out as they wont invest on such plants anymore due to regulatory requirements

as such supply side there is protective barriers unlike for gloves

on the steel demand side, it can only rise as the world economy opens after the pandemic... unlike gloves demand which was only temporarily boosted by the pandemic phase....

at 24% margin, earnings is simply fantastic (for Annjoo and Hiaptek)...anything more is a bonus especially if given dividend...


Posted by UlarSawa > Oct 9, 2021 10:49 AM | Report Abuse

Thank you Mr Businessman sharing your business sense on steel business. Ular appreciate your sharing very much. Let Ular digest what your sharing. HiapTek income mainly from EasternSteel kah. Potentially earning rm455mil 28sen next year alone is alot leh. After next year berapa can earn any estimation given. Same earning as you predicted. As you know lah. Analists very good one nowaday predict 3 to 4 yrs in advance one like Gloves companies leh. Is your calculation meant for 2022 only and 2023 dunno yet right. That mean HiapTek is for short term 1 year play only kah. By hook or by crook need to run in 2022 kah. Correct?

Ular ada question about the Chinaman own 3/5 of EasternSteel. HiapTek only 1/3 right. EasternSteel still Chinaman Company right. Do you think investors skeptical about Chinaman run company. You know what ular talking about right. A lot of ppl talking about Chinaman run company in bursa with investors got 9 out 10 got bad experienced one. Thats why the price so cheap based on what your sharing on future steel potential is so great but still cannot go up. Possible is bcos Eastern Steel is Chinaman Company. Correct?

dragonslayer is UlarSawa? Its nice to have him in the forum...he asks reasonable question le...

DAYANG ENTERPRISE HOLDINGS BHD 14TH ANNUAL GENERAL MEETING – 22 JUNE 2020

http://dayang.listedcompany.com/misc/Annexure_A_(14th_AGM).pdf

(d) When does the Company plan to start this venture and what is the expected CAPEX?

Dayang is currently evaluating potential partners who have expertise and solid track record in Decommissioning and Modular Structural works. These ventures are targeted to begin in Q1 of 2021 with estimated CAPEX requirement of RM30 million.

..................

Decommissioning will intensify in the future for Petronas...

@Mrbusiness, thanks for the truly valuable information shared

yeah coal prices also already signs of decline, if my intuition is right, it will continue declining rapidly soon

fat margins await upstream players with Blast furnace

WOW 70% utilisation rate?

From below extract of Qtr 4 end Dec 31 - 2019, and the PAT reported for 2019, we can see that 70% utilisation can easily deliver about 60 m PAT per qtr

B3. Prospects
...........

Financial year 2019 has indeed turned out to be a great success as we achieved the best ever annual profits in the long history of Dayang. In spite of the external uncertainties and multiple headwinds from all directions, we have grown from strength to strength to hit the significant milestone, registering a massive 44% growth for our 2019 profits after a stellar performance in 2018. The strong growth momentum has been envisaged as we maintained and carefully executed our business plan throughout the year.

This remarkable achievement comes on the back of the robust work orders for the Maintenance, Construction and Modifications Contract (MCM) and Topside Maintenance Services works under the Pan Hook-up and Commissioning Contract (Pan HUC). Consequently, vessel utilisation also came in stronger at 70% for 2019, as compared to 64% in 2018.

https://klse.i3investor.com/blogs/PublicInvest/2021-09-27-story-h1571736538-Dayang_Enterprise_Holdings_Better_Year_Ahead.jsp

Caution on further impairment. Recent results saw an impairment loss amounting to RM27.9m (RM29m owing to Perdana). Given the current operating climate and uncertainty in project execution, management cautions on further impairments in the coming quarters though with potential write-backs at the end of the reporting period. The Group has adopted value-in-use estimations which entail discounting the estimated future cash flows of assets, taking into account the current vessels’ utilisation and charter rates. Based on orders in hand, management guided that utilisation rates for 3Q and 4Q will be c. 70% on average.


Better year ahead. We understand that Dayang has achieved 100% vaccination rate for its workers. Hence, the on-going discussion involving Petronas, Health Ministry, and state government of Sarawak with regards to the movement restrictions (relaxation on quarantine period) is expected to bear positive outcomes in the near term. Therefore, FY22F earnings are anticipated to be robust, supported by healthy orderbook of RM2.3bn and improved profit margins. The increase in the availability of work orders will continue with higher capex spending by oil majors. We note that Petronas’ 2QFY21 capex was disappointing mainly due to project delays caused by movement restriction.

......................

WOW!...

"Based on orders in hand, management guided that utilisation rates for 3Q and 4Q will be c. 70% on average."

suggest u all dispose lctitan before results and buy annjoo

both at same price now

lets see what both these stocks price are at the end of month

https://www.klsescreener.com/v2/news/view/891655

https://www.klsescreener.com/v2/news/view/891655

at such high oil price LC Titan will be making loss....can't see any justification for the price rise

Only justifications for such mismatch in valuation is:

i) either Dialog consistently able to have 10 x times higher margin than Dayang or,

ii) Dialog's stable revenue generation business can grow 10 times the rate of Dayang business growth...


i doubt any of the above justifications is valid

Only justifications for such mismatch in valuation is:

i) either Dialog consistently able to have 10 x times higher margin than Dayang or,

ii) Dialog's stable revenue generation business can grow 10 times the rate of Dayang business growth...


i doubt any of the above justifications is valid

in other words Dayang can contribute 10 times revenue of Dialog for the same price you pay for both....

For every 1% PAT of Dayang , Dialog has to obtain 10% PAT margin for same valuation (PE valuation)....further Dayang is almost net cash now

DAYANG next qtr earnings definitely better than DIALOG... it will be consistently beating dialog from then on..

Dialog's price to revenue per share is 10 times higher than Dayang (at 70% utilization)...

there is every reason for EPS of Dayang to beat Dialog consistently

in other words Dayang can contribute 10 times revenue of Dialog for the same price you pay for both....

For every 1% PAT of Dayang , Dialog has to obtain 10% PAT margin for same valuation (PE valuation)....further Dayang is almost net cash now

DAYANG next qtr earnings definitely better than DIALOG... it will be consistently beating dialog from then on..

Dialog's price to revenue per share is 10 times higher than Dayang (at 70% utilization)...

there is every reason for EPS of Dayang to beat Dialog consistently

i can only imagine pent up maintenance demand when all petronas operation restarts...

further its about time for decommissioning of rigs

future is bright for dayang services

without impairment loss, it has already breakeven on last qtr at 50% utilization rate...

even air asia can run up to 1.19 from 0.90...

this jewel price is truly misplaced

sifu, you forgot to mention who are the upstream, downstream players...and who benefits most from the permanent effect of Iron Ore price decline due to China pollution control..

ok thanks

guys how u derive 8%?

Posted by rohank71 > Oct 3, 2021 10:42 PM | Report Abuse

court documents already submitted so in 2.5 to 3 months payout. thats 8% or more..

Mrbusiness sharing of the below, shows even the premium of steel billet over scrap steel is ~ RM 1000. Any steel makers including EAF routes (which Annjoo is flexible to utilize) should be able to make plenty of margins...

https://malaysiasteelinstitute.com/

@keep going, good question there..

coal usage is half the tonnage of Iron Ore used to produce via Blast Furnace method. The reduction on Iron Ore cost far outweighs the rise in Coal cost presently.

The coal price rose steeply only in mid of sept while iron ore dipped on end of July. This means at any point in time, the cost of production is lesser than quarter ending July 21'.

Good thing is MCO forced them not to operate in July and wait to take advantage of steeply cheaper Iron ore cost in August.


Iron ore price decline is much permanent (its a permanent pollution control which wipes out its demand, supply is always there) than the temporary coal price rise due to shortage of coal - Australia has plenty and just waiting for China to let go their ego and buy....

Till 2015 (for many years), China was a pain in the ass for local steel players due to price dumping on their exports...then we had things improving (lesser dumping by China) and megaprojects planned locally by 2017....then we had so much political twist and then covid.

CHINA was the biggest equation....

I believe with China actively importing, it should be clear blue sky for local upstream steel players from now on..at least for another 2 years as Annjoo Lim put it on his interview above.

Local steel price are truly in line with China (being the major consumer of our steel now):

http://www.sunsirs.com/uk/prodetail-927.html

Malaysia is exporting 60% of their steel products to China (as per Annjoo's Lim info in May 21)'. I believe with the force cut down on steel output from China now, they will be importing even more.

China's present power constrain issue & Evergrande issue on the steel consumption is purely a sentiment issue on demand, and its a temporary blip.

The price decline on iron ore due to pollution control is permanent & long term advantage to BF steel producers.

Extremely informative video: May 2021 by Annjoo

https://www.youtube.com/watch?v=eMdmVZcE1r8

Essential Minutes:

0.29 - 0.34 (5 min) - to understand type process
1.06 - 1.13 (7 min)
1.38 = 1.50 (12 min)

@Kevin asp of steel products would not be able to adjust as much as the decline on raw material Iron Ore as all of local players except Annjoo & Eastern Steel use EAF method (100% relying on scrap steel) unable use Iron Ore as their raw material.

This phenomenon is the same in China (BF method where uses Iron Ore) has been disabled from operation due to pollution concern permanently.

Its this China's inability to use iron ore as raw material for steel making is the real reason why iron ore price had declined.

Extremely informative video: May 2021 by Annjoo

https://www.youtube.com/watch?v=eMdmVZcE1r8

Essential Minutes:
0.29 - 0.34 (5 min)
1.06 - 1.13 (7 min)
1.38 = 1.50 (12 min)

asp of local billet and rebar had been uptrend from june till end of sept and now from MITI publishing

it also shows iron ore rapid price decline from july..

Kenanga bullshit a lot - nothing said on Iron Ore price decline. Inventory of Annjoo at the end of June maintains the same as end of March. Its pure lie saying inventory usage.

Truth will reveal itself..

Mr. Koon, buy Annjoo too since it owns 100% of it businesses and has a dividend payout policy of 60%.

Hiap Teck, though may be able to make explosive profits from Eastern Steel with its rising throughput, at 35% stakes it may not be able to dictate the payout (like in JAKS situation, placed in a sea of money but unable to drink).

Mr. Koon, buy Annjoo too since it owns 100% of it businesses and has a dividend payout policy of 60%.

Hiap Teck, though may be able to make explosive profits from Eastern Steel with its rising throughput, at 35% stakes it may not be able to dictate the payout (like in JAKS situation, placed in a sea of money but unable to drink).

“We expect China’s crude steel production will fall over the long term,” says Steve Xi, a senior consultant at research firm Wood Mackenzie. “As a heavy-polluting industry, the steel industry will remain a key sector in China’s environmental protection work in the next few years.”

Why are steel prices so high when iron ore prices have crashed? Because: China

https://qz.com/2060156/chinas-cuts-have-made-steel-prices-soar-and-iron-ore-prices-crash/

China’s squeeze of the world’s supply of steel suggests that shortages of many products will continue until the post-pandemic demand and supply stabilize.

Car companies, for instance, are already trying to cope with a crunch in the supply of semiconductor chips; a Ford executive told CNBC that steel, too, is now part of a “new crisis” of raw materials.

In 2019, the US made 87.8 million tons of steel, according to the World Steel Association—less than a tenth of China’s 995.4 million tons of output. So while American steelmakers are now making more steel than they have since the 2008 financial crisis, it’ll be a while before they can fill the shortfall that China’s cutbacks will create.

Why are steel prices so high when iron ore prices have crashed? Because: China

https://qz.com/2060156/chinas-cuts-have-made-steel-prices-soar-and-iron-ore-prices-crash/

60m - 66/3 (excluding write back of impairment) = 38m PAT for the current qtr

Its still superb...

its one third of the 66m i guess that is contributing to Hiap Teck