Posted by probability > 2016-11-01 19:29 | Report Abuse

Anyone who wants to understand why the spread, i.e CRC-HRC is increasing...look at like this:

View it like its a piece of 'flexible rubber hose' that connects a tow truck to the car...the faster the tow truck pulls (higher the demand) the longer the flexible rubber will stretch..

The higher the weight of the car (lesser the supply)...the longer the rubber will stretch too.

The inverse is true for a lighter car and a slower truck.

The CRC manufacturers are obviously behaving like a heavy weight car now...

So lets benefit from this "stretching rubber"...

Posted by moneySIFU > 2016-11-01 19:40 | Report Abuse

Very good example given by probability, thumbs up!

Posted by probability > 2016-11-01 19:43 | Report Abuse

on top of the above phenomenon...some are "beginning" to benefit from the freedom of sourcing HRC externally compared to being forced to buy locally (from Megasteel earlier), who sold at a premium - more than RM 450 per ton relative to the imported HRC...

how much safer can it get.

I am saying the word "beginning"...because the need to order the HRC 3 months ahead in bulk...and wait for its arrival at factory....and then process it to produce the CRC..

The "full impact" of the benefit is yet to be reflected..

Posted by probability > 2016-11-01 20:18 | Report Abuse

Why i am saying 3 months...

Refer section 1.2 - CRC section : extract in bracket below

http://www.melewar-mig.com/investorsinfo_cmmsg.html

"Mycron orders its HRC raw material from the international market, based on US Dollars, and on a back-to-back basis, pre-sells its CRC output, to Malaysian customers, denominated in Ringgit. HRC deliveries are received between one to three months from the order date, at which point settlement in US Dollars are made. Any decline in the Ringgit during that period will cause a foreign exchange loss; whilst any appreciation of the currency will generate a profit."


This means Forex fluctuations only effects on their planned Margin. Say, the planned Margin at the time of booking was 12% and by the Invoice is realised, the RM had weakened by 5%, their margin will only be reduced to 11.4 %.

Note that it means for the CRC segment they had been importing at least some portion of the HRC (Iron Ore based) since 2015....this is where the Spread effects will have the impact soon!

Only for the Steel Tube Segment, the RM450 difference is being partially realized on the last quarter results in 2016...where they had started sourcing the Scrap based HRC too externally.....this is the reason their Steel Tube segment Margins is rising rapidly...

Posted by probability > 2016-11-01 21:08 | Report Abuse

Of course if they managed to receive in 1 months time like they said is better...their results would better reflect the recent rise in spread...he he...

but in any case, i am interested to see the full impact due to Scrap Based HRC on the Steel Tube segment on the coming quarter results......

Posted by ronnietan > 2016-11-01 21:33 | Report Abuse

YKGI has very high borrowings. Much higher than Mycron's and pales in comparison with CSC Steel's huge cash hoard. For some reason, YKGI doesn't generate cash - weak management?

Posted by djibaok > 2016-11-01 22:27 | Report Abuse

ykgi will never go up. stay at 0.36 or lower

Posted by Ven Felix > 2016-11-02 02:20 | Report Abuse

Pick the Most benefited Combination ; Mycron & Melewar for Steel Commodity recovering.

Posted by moneySIFU > 2016-11-02 02:41 | Report Abuse

Very fruitful discussion, thank you all!
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Posted by probability > Nov 1, 2016 08:18 PM | Report Abuse
Why i am saying 3 months...

Refer section 1.2 - CRC section : extract in bracket below

http://www.melewar-mig.com/investorsinfo_cmmsg.html

"Mycron orders its HRC raw material from the international market, based on US Dollars, and on a back-to-back basis, pre-sells its CRC output, to Malaysian customers, denominated in Ringgit. HRC deliveries are received between one to three months from the order date, at which point settlement in US Dollars are made. Any decline in the Ringgit during that period will cause a foreign exchange loss; whilst any appreciation of the currency will generate a profit."

Posted by moneySIFU > 2016-11-02 02:44 | Report Abuse

After reading all the figures & conversations from many great people for CRC & HRC industries, I can now apply for a job in CRC company :)

Posted by faytdestiny > 2016-11-02 11:54 | Report Abuse

@Smartrader2020 can I have your email address ?
All sifu mycron still the best option