Tuesday, November 24

Mixed reaction towards S’wak’s projects progress

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KUCHING: The team at Kenanga Investment Bank Bhd (Kenanga Research) was mixed on its outlook of several key Sarawakian projects following its recent trip here for updates on Sarawakian players under its purview.

One of particular highlight was the Samalaju Industrial Park whereby it observed that  development is progressing well but the construction progress of the Pan Borneo Highway was slightly behind schedule with potential shortage of material supply in the near future.

Since its official opening in June 2017, several major industries are already operating at the Samalaju Industrial Park, with aluminium, ferroalloy and polycrystalline silicon players operating on site.

In particular, Press Metal Aluminium Holdings Bhd (Press Metal) who has an aluminium smelting plant at SIP seems to leading the way in development as the group is already boasting that two phases of its plant already in operations.

Following that is OM Materials (Sarawak) Sdn Bhd (OM Sarawak) who specialises in producing ferroalloys such as ferrosilicon with capacity of 192.5 metric tonne (MT) per annum and ferromanganese with a capacity of 250,000 MT per annum.

However, these ratios are set to change in 2018 as the group plans to convert some of its ferrosilicon producing facilities into ferromanganese production facilities.

This was decided after a strategic review taking into consideration the marketing strategy and price environment of various ferroalloys, guided the research arm.

Remaining major players at SIP are Sakura Ferroalloys Sdn Bhd and Pertama Ferroalloys Sdn Bhd who both have their respective ferroalloy smelting plants, and South Korean owned OCI Co Ltd who will soon be taking over an existing polycrystalline silicon plant.

“In the near future, the Malaysian Phosphates Additives (MPA) plant would commence its operations in circa 1Q19 as it is still under construction at its earthworks stage,” added the research arm.

In contrast, the Pan Borneo Highway project was dragging slightly behind schedule as Kenanga Research saw that construction progress of various companies involved are ranging from circa 2 to 15 per cent.

While the team did not name any of these companies, they did highlightt Hock Seng Lee Bhd (HSL) being on track with the progress of their Pan Borneo Highway package – completing circa 10 per cent of it so far.

The RM1.71 billion package was awarded back in March, 2016 to a consortium of companies led by HSL who held a 70 per cent equity stake in it.

The progress is deemed on track but has yet to provide any meaningful contribution to HSL’s bottomline as the project is only expected to pick up from the second half of 2018 (2H18).

Meanwhile, in construction materials of the Pan Borneo Highway project, Kenanga Research believed that the local stone aggregate supply will not be sufficient to cater to both the needs of Pan Borneo and the needs of local road maintenance.

“We understand that the construction of the entire line of Pan Borneo will require 22 to 23 million tonnes of stones in the next 4 to 5 years.

“Meanwhile, the real demand for stone aggregates for maintenance and new roads in Sarawak is circa 17 million tonnes per annum while production capacity from all quarries in Sarawak is around 20m tonnes per annum.

“Given that there would only be an excess stone capacity of circa 3 tonnes per annum, we believe there could be a shortage in stone aggregate supply in the next few years to cater for the needs of Pan Borneo.”