one word: Megasteel closure only benefits the Scrap Based HRC users directly & all of them in the supply chain downstream. Only Mycron is their Scrap Based HRC user to make Scrap based CRC. Scrap based CRC is mainly used in steel tube segment alone. Cscsteel does not consume Scrap based HRC.
Prestar consumes Scrap based CRC - the next stage user along the supply chain.
when i look at the Capacity available & the probable utilization rate historically based on their historical earnings....i can understand why Megasteel was a giant parasite that had sipped their blood dry...
It is only now the rain is coming after a prolonged drought..water is slowly reaching the desert (dry idle machines)...
Just like the water which will give life to the plants to grow back & flourish...megasteel death will soon revive these machines & put them back in operation gradually....
The shattered dream of the management who had invested on these machines :
Note: 1 ton = 1000 kg, current price ~ RM 3000. Their combined total capacity: 367,000 ton.
Even if you put just bloody RM 100 profit margin per ton of material processed (that is like 3% margin)...you will generate close to RM 40 Million profit per annum.
It can't be that their machines are that 'obsolete' already...
These are all either electrical or human labor using machines ma...their operating cost can't be that high relative to competitors - no rocket science technology can make them obsolete ma!
China's Tianjin Zhiyuan to inject RM1.8b into Perwaja - Business ... www.thestar.com.my › Business › Business News Jul 15, 2015 - KUALA LUMPUR: China's Tianjin Zhiyuan Investment Group Ltd will inject about ... Under the corporate exercise, Zhiyuan will subscribe for Perwaja's entire .... Help us improve Kuali.com by taking part in this quick survey.
The whole shit with the steel industry earlier is that they are all using (1)old technology and the (2) high power cost from TNB is not helping ...with the killing effect of (3) China steel price dumping.
None of these upstream fellows can survive except AnnJoo coz they have flexibility to use Iron Ore & Scrap and they use hybrid technology and has the advantage of Vale being place in Teluk Rubiah.
To protect them, government came up with all these Import duty. However with the heavy 'artificial - unfeasible' price dumping by China - all this company got killed lor!
As long China do not repeat it (dumping)...and the government unnecessarily come out with protections by heavy duty on upstream steel like HRC...all local steel players will gain lor...
Downstream players like Prestar are the least & last to be worried. If the local raw material price is high they can always import CRC from POSCO and export overseas the end products. Weak ringgit mean cheap labor cost & power cost relative to international competitors.
My Johor buddies think Perwaja is being used as a trojan horse to legalise steel dumping by China's surplus steel. They even shipped their machinery from China. As of now we don't know what they are up to.
Then Malaysia steel export will be imposed anti dumping duties by Euro , just like Vietnam, because of its strong connection with China steel makers. That will be disaster in making.
so target Asian market lor or even local market lor...Indonesia will have large Process plant investment development, Steel Tubes will be required almost everywhere
the great thing about Prestar is it only needs to add value of just RM100 over the material cost RM3000 to produce the tailored Automotive parts & Steel Tubes..
Posted by 明天会更好 > Dec 6, 2016 11:51 PM | Report Abuse
Then Malaysia steel export will be imposed anti dumping duties by Euro , just like Vietnam, because of its strong connection with China steel makers. That will be disaster in making.
Anti-dumping duties on stainless steel imports revised up Posted on 09 May 2016
Source: VietNamNet Bridge The Ministry of Industry and Trade has adjusted up anti-dumping duties on cold-rolled stainless steel products imported from China and Indonesia while cutting tariffs on similar products imported from Malaysia.
Probability, allow me to offer my opinion. Anti dumping duties are not set arbitrarily. It is set to bring up the price of goods to fair market value. If Posco is only slapped with a 3% tariff, it doesn't mean that it is extra cheap to import, it just means they weren't marking down their product as aggressively as Chinese exporters that are slapped with 20% tariff. So, if tariffs are designed well, a product from Posco with 3% tariff should sell for the same price as a Chinese product with 20% tariff. As such, I'm more inclined to believe that the weak results of mid-stream steel players is due to high inventory of cheap imported goods. Eventually, when these inventories are exhausted, prices will revert to international prices, plus tariff of course. I may be wrong, let's see.
Probability, allow me to offer my opinion. Anti dumping duties are not set arbitrarily. It is set to bring up the price of goods to fair market value. If Posco is only slapped with a 3% tariff, it doesn't mean that it is extra cheap to import, it just means they weren't marking down their product as aggressively as Chinese exporters that are slapped with 20% tariff.
Ans: agreed. we should also note that the tariff are not as fluid and does not get adjusted according to the fast changing market prices.
So, if tariffs are designed well, a product from Posco with 3% tariff should sell for the same price as a Chinese product with 20% tariff.
Ans: currently i believe those who source from Posco have a competitive advantage as mentioned above. Fixed % on increasing steel price has bigger impact on margins.
As such, I'm more inclined to believe that the weak results of mid-stream steel players is due to high inventory of cheap imported goods.
Feedback: The Midstream players like Mycron are currently facing difficulty to sell / raise their products pricing as i guess their clients are currently trying to reduce their inventory level (clearing) to a minimum in order to be not affected by sudden steel price change - collapse of price again. Low retention time is safer.
Eventually, when these inventories are exhausted, prices will revert to international prices, plus tariff of course. I may be wrong, let's see.
Feedback: agree. this applies to midstream and downstream too - all shall benefit eventually - simply because CHINA is not dumping. But i am not sure how fast they will adopt the Tariffs accordingly...
just remember they have huge capacity and these are not obsolete machines. as long the environment is conducive for fair competition.. and the local market is well placed to hinder penetration of China Steel into local market via artificial pricing - both midstream & downstream steel...(remember China supply captured a big chunk of the local market share 50% - so potential is there to recapture the market share)..
then these machines should be up & running full swing... that would be already super good scenario.
Since the current good EPS is even before a significant change on their gross margin, i.e NOT because of the selling price of products or buying price of raw material or the throughput changes (revenue)....and mainly due to their operating cost reductions...
WINDING UP / RECEIVER & MANAGER / RESTRAINING ORDER / SPECIAL ADMINISTRATOR PRESTAR RESOURCES BERHAD ("PRB" OR "THE COMPANY")- LIQUIDATION OF PT PRESTAR PRECISION TUBE, A 75% OWNED SUBSIDIARY OF PRB UNDER THE LAWS OF THE REPUBLIC OF INDONESIA
Prestar Precision Tube Sdn Bhd (PPT), is a stainless steel welded tube and precision mechanical tube manufacturer based in Malaysia.
Probably due to China dumping or some internal Indonesian policy, the Steel Tube section in Indonesia is not operating. They had also mentioned that they had not been getting any revenue from it earlier..so it has no material effects.
Note: Mycron's steel Tube is currently operating at RM500 Margin per ton of Tubes produced. And this is machined installed like 20 years ago.
Prestar's precision steel tube production machine was only installed in 2004.
The utilities + labor cost for operating these machines wont even come to RM50 per ton. Meaning even the world's most advanced technology with Artificial intelligence to operate the machine with free Solar Power can only reduce the cost by maximum RM50 per ton.
So, even if you reduced the Margin of Mycron by this RM50 or if you wish by RM 100, Prestar's Precision Steel Tube machine has the ability to add value by at least RM 400 per ton.
Hope people use some common sense when it comes this simple facts.
Mycron actively considering US, UK export markets TheEdgeFri, Dec 09, 2016
This article first appeared in The Edge Financial Daily, on December 9, 2016.
KUALA LUMPUR: Mycron Steel Bhd said it is currently assessing new markets to export its steel tube products, and is considering the UK, US and emerging countries as potential export destinations.
Group executive chairman Tunku Datuk Yaacob (pic) said exports currently make up a negligible portion of its sales, mainly due to Mycron previously having to acquire hot rolled coils (HRC) — the raw material for its cold rolled coil (CRC) products — from Lion Group’s Megasteel Sdn Bhd.
“In the previous days when Megasteel was still around, we had to buy all our raw materials from Megasteel. It was very expensive, making us uncompetitive when it comes to exporting.
“Since they have stopped operations, we can now begin to consider exporting pipes as we can purchase HRC at competitive prices and hence sell at competitive prices,” he said following Mycron and Melewar Industrial Group Bhd’s annual general meeting yesterday. Melewar is the holding company of Mycron. He said the company is also looking to export CRC.
The company previously hoped to benefit from the Trans-Pacific Partnership (TPP) agreement to export its products to the US. “We were hoping that with the TPP coming into force, we could sell our pipes and CRC to the US. But it looks like that is not going to happen,” he said.
However, he said, exporting to the US is still possible, considering the country’s reasonable import duty of 6.2%, which means the US market is still worth considering.
Besides the US, Mycron is looking at exporting steel pipes to the UK, and is eyeing to secure a contract for works related to the Malaysian-owned Battersea Power Station project.
“Right now, we only have very small revenue contributions from foreign markets, but that’s an opportunity for the company. We’re looking at the US, Europe and any other emerging countries that may have opportunities for exporting to, or even potentially setting up operations. We are actively studying different markets,” said Mycron chief operating officer Roshan Abdullah.
However, Roshan said the company will not be able to export in big quantities, as Mycron is operating at almost full capacity. However, he said the company will consider expanding its capacity if exports pick up. “If there is strong demand coming from foreign markets, definitely we would consider to expand. We will think about it when the time comes,” said Roshan.
He said the company is currently producing 205,000 tonnes of CRC per year, out of its total capacity of 250,000 tonnes per year. Its steel pipe production currently operates at 8,000 tonnes per month versus its total capacity of 18,000 tonnes.
Meanwhile, the company lauded the anti-dumping measures introduced by the government in May this year — when it imposed anti-dumping taxes ranging between 3.06% and 23.78% on certain CRC manufacturers from China, Vietnam and South Korea. Mycron said the move is beneficial to the local steel industry as it keeps speculators and low-quality raw materials away.
Noticed that Prestar's Inventory level had been rising significantly while its Revenue level had mildly improved for the last 3 qtrs....
Wondering if it is because they foresee a rising Selling Price of their products (due to rising steel price generally) and take advantage of the cheaply sourced raw material from POSCO?
or is it because they are foreseeing that they will be able to capture more local market share soon due to to the fact that the dumping is no longer taking place?
Important information: They are looking for Sales personnel for their Steel Pipes segment which had been "Dormant" for years (check their 2015 Annual Report).
Advertise less than a month ago, even on 7 Dec 2016:
I see Prestar has one of the highest Revenue and no. of Employees...the more the number of employees the higher the chances of Revenue to improve further - its a sign of definite - resilient value addition.
"You cant keep employees for nothing...but u can keep machines without generating income."
B2: Material changes in the profit before taxation for the quarter reported on as compared with the immediate preceding quarter. The Group achieved a Profit before taxation of RM 28.6 million for the quarter under review, this was substantially higher than RM 10.7 million of the immediate preceding quarter. The substantial increase in the quarter was due to the strong improvement in sales margin on higher sales volume as well as the positive results of operational efficiencies and costs control initiatives.
They have thin Margin, a small increase in Selling Price coupled with a careful selection of raw material supplier....will have significant impact on its bottom line like the above PBT of 28.6 Million. These are not Forex / one off gains.
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probability
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Posted by probability > 2016-12-06 11:46 | Report Abuse
after all that endless lecture i have said...still got such questions...sigh :(
Posted by KLCI King > Dec 6, 2016 11:34 AM | Report Abuse
probability very hard sell this counter, if this counter can do good, Mycron & CSC Steel should be the same, aren't they?