Japan's Nippon Steel buys Thai steelmakers in $763 mln deal

https://www.reuters.com/world/asia-pacific/nippon-steel-buy-thai-steelmakers-300-mln-2022-01-21/

Nippon Steel will pay $419 million to buy a 49.99 stake in Thai steelmaker G Steel PCL (GSTEEL.BK) and a 40.45% stake in G J Steel PCL (GJS.BK), including debt, from a fund managed by Ares SSG.

The Japanese company will then launch a tender offer to buy the remaining stake, which will cost up to $344 million, bringing the total acquisition cost to up to $763 million.

By buying the two steelmakers, which have production capacity of 3 million tonnes, Nippon Steel's global capacity will rise to 69 million tonnes.

........

We can see on below detail pdf the capacity and Operating profit information of these companies. This companies generates operating profit of RM 714 million (170 USD to RM exch 4.2) .

https://www.nipponsteel.com/en/ir/library/pdf/20220121_300.pdf

Nippon is buying them at RM 3204 million (USD 763m to RM exch 4.2).
PE = 3204 / 714 = 4.5

PE of Hiapteck = 3.1

Future of CHINA steel manufacturers is 100% EAF.
Ann Joo has an ocean size market to leverage its margins.

Using average electricity tariff of RM 0.26 per kwh for 500 kwh per metric ton steel would be :

= RM 0.26 x 500 kwh
= RM 130 per ton of steel

If say 60% hot metal is used (max 70%), savings on electricity by 66% ( 1 - 1.3 factor) per metric ton of steel:

= RM 130 x 0.66
= RM 86 per ton steel

For 200,000 ton steel per qtr, savings compared to pure EAF players :

= RM 86 x 200,000 per qtr
= RM 17 million (savings on cost advantage in electricity alone)

The off-gas produced by the BF is more than sufficient to replace a substantial amount of total natural gas usage of the 2 rolling mills in Prai. As a rule of thumb, c.2mmbtu of natural gas is required to produce 1MT of steel.

...

Last qtr, average cost of Natural Gas is 5.5 USD per mmbtu, i.e RM23 per mmbtu. From above, for every ton of steel 2 mmbtu is saved, i.e savings of RM46 per metric ton of steel.

In a quarter, it produces approximately 200,000 ton of steel. Cost savings compared to EAF producers from natural gas alone:

= RM46 per ton x 200,000 ton per qtr
= RM9 million (savings from cost advantage from natural gas alone)

Ann Joo has a unique cost structure whereby it is able to save at various points of the production chain, from the upstream production of the BF to the downstream production of the rolling mills. Its procurement strategy includes sourcing local raw materials, especially scrap metal and iron, alongside 100% own-produced billets as opposed to imported billets.

The BF-EAF allows for flexibility in choosing between hot metal and scrap metal to produce liquid steel as opposed to the industry practice of relying purely on scrap metal.

The proportion of hot metal and scrap metal deviates over time from a ratio of 40:60 up to 70:30, allowing Ann Joo to take advantage of pricing differentials of input materials.

By charging hot metal into the EAF, electricity usage is reduced as less heating is required (1% hot metal saves at least 1% to 1.3% of electricity consumption); As a rule of thumb, c.500khw of electricity is required to produce 1MT of steel. A majority of the hot metal produced from the BF will be used to produce liquid steel while the remaining will casted into pig iron for sale and own consumption.

The by-products of the Ann Joo’s BF have different uses. The reduced-pressured BF gas is directed to the rolling mills, sinter plant and hot blast stove as a fuel substitute for natural gas while the off-gas produced will be transferred to the Top Gas Pressure Recovery Turbine to generate electricity for the plant. The off-gas produced by the BF is more than sufficient to replace a substantial amount of total natural gas usage of the 2 rolling mills in Prai. As a rule of thumb, c.2mmbtu of natural gas is required to produce 1MT of steel. Another by-product of the BF is molten slag which is then granulated and sold as raw material to the cement industry.

hng33, you are spot on

this is a long term game changer for AJ and eastern steel

BOOST IN DEMAND FOR PIG IRON FROM ANNJOO (EXPORT MARKET)

11 Jan 2022

https://www.spglobal.com/platts/en/market-insights/latest-news/energy-transition/011122-analysis-chinas-eaf-steelmaking-capacity-on-rise-amid-decarbonization-goals

China has started implementing stringent capacity swap rules since 2021, pushing the commissioning of new EAFs that gained construction approvals during the year. This would lead to a net decrease in China's pig iron and crude steel capacity from late 2022 and onwards.

In 2021, China approved the construction of 43 new EAFs, with a total crude steel capacity of 29.33 million mt/year, S&P Global Platts calculations based on announcements by local governments showed.

Hebei province saw the most EAFs approvals, with a total capacity of 7.4 million mt/year. It was followed by Jiangsu province, with 4.4 million mt/year of new EAFs.

These new EAFs in China will be commissioned from late 2022 to 2025, predicated on closures of 34.24 million mt/year of old crude steelmaking facilities that still run on the traditional route.

These capacity swaps will lead to a net decrease of 4.91 million mt/year in China's total crude steel capacity, Platts calculations showed.

Of the replaced 34.24 million mt/year of crude steel capacity, 16.21 million mt/year of capacity comes from converters.

Together with some of the replaced converters, blast furnaces with pig iron making capacity totaling 5.9 million mt/year will be closed as well.

@yaujing, you are right and i am actually totally aware of it

Reason i had to use BOF is to show the other extreme end of their flexibility if they decide to reduce reliance on scrap.

The mass balance on the usage of the raw material at Annjoo will still be as it is shown for BOF if they decide to maximize iron ore usage. Above model is purely to show the implication of Iron Ore and Coal price changes on their cost of production if they decide to minimize reliance on scrap.

Annjoo named their system BF-EAF instead of BF-BOF (as per conventional steel players) purely to show their ability to maximize scrap usage just like pure EAF player if they want.

Basically they have the ability to change their process between BF-BOF and EAF, the two extremes on raw material usage.

As you had enlighten on their flexibility, Anjoo would have likely purchased more of scrap when Iron Ore price shot up in the mid of 2021.

It all shows their competitive advantage against other players.

Vietnam's steel exports likely to rise sharply to 12 mn t in CY'21. Will the momentum continue?

20 Dec 2021

https://www.steelmint.com/insights/vietnams-steel-exports-likely-to-rise-sharply-to-12-mn-t-in-cy21-will-the-momentum-continue-264856


Sharp rise in shipments to EU, USA

On the other hand, Vietnam's steel shipments to the EU and USA are expected to increase by roughly over 500% and 400%, respectively, y-o-y. While exports to the EU are about to rise to 2.2 mn t compared 350,000 t last year, shipments to the USA are slated to increase to 1.02 mn t from just 190,000 t in 2020.

During the early months of the 2020 shutdowns, many steel mills in the USA and Europe shut off production in fear that we were headed into a deep recession. But that drop-off in demand didn't last long. Pent-up demand from the manufacturing, appliances, oil and gas, and construction sectors far outpaced supply. And the stiff duty structure in place restricted steel imports in large volumes.

@Blessed investor,

Firstly, the main message missed by many readers here is that there are two types of steel making plants, Blast Furnace and Electric Arc Furnace. The former uses iron ore while the latter uses scrap steel. The former produce pollution and the latter does not. For environment reasons, China is specifically shutting down the Blast Furnace makers.

As such those Blast Furnace steel player in Malaysia Annjoo & Hiaptek which rely on iron ore will stand significant competitive advantage. (Less demand for iron ore while demand shoots up for Billets).

Keyword - competitive advantage, exactly what Annjoo mentioned on its presentation link above.

This scenario is actually the opposite of gloves margin erotion. China is actually helping to inflate margin of Annjoo. Annjoo does NOT need very high margin to produce excellent earnings unlike gloves.


Secondly, as OTB mentioned above (pasted below), even general steel makers in Malaysia has protective double layer to raise their margins as per below:


"China is no longer exporting steel products to Malaysia since 2020. Moreover, there is an export tax of 15% imposed by China government on any steel product exported. Malaysian government also imposed an import tax of 15% to 20% on steel products."

Refer Page 4:

http://www.annjoo.com.my/wp-content/uploads/2018/05/AGM_Slide_2017_MSWG_Reply_2017_05_25_final.pdf

2) What is the Board’s strategy and plan with regard to the export market in Southeast Asia? How is the Group going to compete with the other players?

Answer:

The Group intends to leverage on its cost competitiveness, especially via the hybrid Blast FurnaceElectric Arc Furnace technology, to compete with peers in the region. China’s ongoing closure of induction furnace significantly affects the supply of billets and steel bars from China into the region. The Group’s strategy is to capitalise on its ability to offer prompt shipments to regional markets amidst an expected robust regional demand from railways, roads and other infrastructure projects.

@BlessedInvestor, i can't comment much on macroeconomics. Difficult to predict. Here is a news which came out 2 days back:

https://www.spglobal.com/platts/en/market-insights/latest-news/metals/121621-chinas-steel-output-may-rise-further-on-healthy-margins-stimulus-policies

Some sources said the key problem behind the slowdown in construction in both the property and infrastructure sectors was lack of financing or funding. China tightened liquidity for the two sectors for most of 2021 in a bid to address debt risks. However, in order to ensure steady economic growth for 2022, China in December started loosening its monetary policy, eased financing restrictions in the property sector and accelerated fiscal spending.

More of such proactive policies are expected to be introduced in 2022, aimed at cushioning the slowdown in property investment, while at the same time, boosting infrastructure investment to stabilize economic growth, market participants said.

Although all these stimulus policies can only reach the property and infrastructure sectors by the end of Q1 or even Q2 2022, some sources said the steel market outlook has improved due to anticipation of further monetary policy easing next year.

@OTB and mrbusiness, thank you

This article is not really meant to predict supply and demand stretch for elevating the margin, but rather to highlight the "competitive advantage" - the sweet spot the blast furnace steel makers have by relying on iron ore as raw material, which does seem for the long term due to environmental policy of china.

we have only two such steel makers listed in Bursa.

@Mrbusiness, does Hiaptek source its iron ore externally?

Curious because I see profit margin of Annjoo much better than Hiaptek as it delivered equivalent margin of Hiaptek on last qtr itself (1 month behind) despite MCO and reduced shipment at half the sales volume.

@nakata, much appreciated. I try to provide information as objectively as possible.

Not expecting market to give PE like tech stocks, just a reasonable PE would do based on dividend yield expectation and considering all risk of product and raw material price volatility.

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

Go through the article - no doubt its a little intensive, but all your queries will be cleared. Feel free to ask any specific question.

This becomes obvious when you see Annjoo's last quarter results where it only sold about half of its usual steel output and yet the PAT margin was 17% (EPS almost 13 cents)

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

ANNJOO - Truth to be told

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

https://klse.i3investor.com/blogs/informationtech/2021-12-17-story-h1595657474-ANNJOO_Truth_to_be_told.jsp

Ann Joo at 12% margin generating 15 cents EPS per QTR

Many people dont realize the above

Just another 10% margin expansion, easily 30 cents per qtr and that is with only operation of 2 months in that quarter.

Both product ASP rise and raw material ASP reduction, each of them independently, has higher magnitude than 10% change...

Dalian iron ore, steel prices benefit from China power cuts

https://www.fxstreet.com/news/dalian-iron-ore-steel-prices-benefit-from-china-power-cuts-202109270444

Prices of steel rebar, hot-rolled coils rise as climate crackdown joins power cuts in China.

China’s recently aggressive push for climate controls measures by the industrial players has already favored the metal buyers. Adding to that were the later power cuts in the dragon nation.

Production curbs were used to tame the power usage by the industries. “Prices for steel rebar and hot-rolled coils on the Shanghai Futures Exchange also increased due to production curbs as major steel producing regions are restricting power usages,” said Reuters.

https://fortune.com/2021/07/08/steel-prices-2021-going-up-bubble/

"I don't think we've hit the peak for steel prices. Most people in the market see strength through the third quarter, and some don't see it getting better on the buying side until 2022 sometime," Schier says. "It is just that supply is that tight. People are scrambling for material."

Another factor: Consolidation. Two major acquisitions last year by steelmaking titan Cleveland-Cliffs—AK Steel for $1.1 billion and U.S. steel mills from ArcelorMittal for $1.4 billion—has essentially made the steel industry a duopoly. That firm grip by Cleveland-Cliffs and United States Steel Corporation on the market, Schier says, leaves them with little incentive to increase production. After all, creating more supply would only mean their prices would fall.

The other wildcard at play are global supply chains issues. In particular, the chip shortage which is hampering new car production. Once the chip shortage is resolved, the automotive industry is expected to ramp-up. More cars rolling off production lines, means more steel demand.

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

“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.”

QES's Quest For Growth

https://klse.i3investor.com/blogs/bfm_podcast/2021-08-09-story-h1569652878-QES_s_Quest_For_Growth.jsp

raw material cost had spiked more than 20% while ASP dip by 10%

where are you going to get the margin?

common sense

Posted by information > Jun 26, 2021 9:53 PM | Report Abuse X

last quarter PAT margin of 18% will be easily wiped out by rising raw material price naphtha along with oil price

products are flooded in the market with rising production from china and depressing avg selling price

it will be difficult for LC Titan going forward with such high oil price (unlikely to come down)

Posted by information > Jun 26, 2021 4:36 PM | Report Abuse X

asp drop 16% and naptha price had risen 15%, difficult to make profit

http://www.sunsirs.com/uk/prodetail-334.html

https://markets.businessinsider.com/commodities/naphthapreis

further, mandatory turnaround coming for 35 days:

https://www.argusmedia.com/en/news/2220041-se-asia-braces-for-heavy-3q-petchem-turnaround-season

Lotte Titan Pasir Gudang, Malaysia No.1 cracker 285 145 5 July, 35 days

totally agreed

Posted by VincentTang > Jul 28, 2021 2:33 PM | Report Abuse

Please check polymer-naphtha spread now.... It have slump since June to below cost for ethylene and propylene, the two major polymer product of lctitan. Lctitan only able. To record profit in April and May, but will record loss from June onward. CAUTION

calvin, you should at least reply if you are asking the same query to management or not

the longer you delay, the more people will loose confident on this stock

one good news can boost this stock price by 20% in an instant

dont aim short term for such growth stock, buy and keep it like you put in FD

ViTrox posts record 2Q profit of over RM50m on semiconductor boom

https://www.theedgemarkets.com/article/vitrox-posts-record-2q-profit-over-rm50m-semiconductor-boom

https://www.theedgemarkets.com/article/qes-group-aims-be-bigname-equipment-player

“People often ask me whether QES can be as big as ViTrox, Pentamaster, Greatech and MI Technovation. I don’t discount such possibilities. That’s our plan actually. It is where we want to be one day. To me, it is all about hitting the volume and scale,” he tells The Edge in a virtual interview.

yes calvintaneng should ask these question if he has access to the management as claimed

his diversion from these query though trivial reflects badly on his integrity and assertions on kpower

@PSAi3alert, It would be good if calvintaneng can seek kpower with the same query of yours and i am confident we will received good explanation on this

Trust your concerns are only limited to Laos powerplant (which appears more of a clarification than authenticity of such awards), and that the rest of the international contracts has no such concerns

@Jessie, PSAi3alert query is answered here:

https://www.ohpgroup.co/hydro-power-plants

Click on Laos and you will see that Serba owns 49% equity interest on the project.

Talk so much..

Did kpmg respond to SD as per their guidance ? KPMG visiting wrong office shows how much communication took place between SD & KPMG at stage 2 & 3 below

It does not look like kpmg made a smart opinion that replies from SD was not satisfactory looking at 5th May presentation

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


C1) In the very high ranking meeting with Serba, KPMG raised queries over the subject matters

C2) Serba responded & replied with their version of findings & explanation, if not on the spot, later.

C3) KPMG opined that the replies from Serba were NOT satisfactorily justified & thus requested independent 3rd party to review the validity of the replies & evidences produced by Serba. By getting internationally recognized audit firm to be the independent reviewer to review over the evidences, the outcome of the review will be able to assist KPMG to conclude the audit.

C4) But Serba refused such suggestion from KPMG and labelled that request WAS UNNECESSARY. (Go read yourself on the statement of claim point 58 by Serba over the law suit to KPMG)

now it all makes sense what had happened to KPMG

if you come to UAE and suspect LIWA group's existence because you cant find street name matching with google address, they will start contemplating to place you in a mental institution

now every tom dick & harry become FBI already

you must be at the peak of paranoia to suspect LIWA GROUP who's office in the same building with same address

http://www.groupliwa.com/contact.html

http://focusmalaysia.my/serba-dinamik-uncle-tan-do-you-really-know-what-a-ponzi-scheme-is/

http://focusmalaysia.my/serba-dinamik-uncle-tan-do-you-really-know-what-a-ponzi-scheme-is/

he does not know bernie sander is a senator

Posted by Dante5566 > Jun 27, 2021 7:43 PM | Report Abuse

Actually its best to let police investigate, lets see if wat uncle tan said is truth or not.