Wednesday, December 7

East M’sia ports, smelters to gain from Nusantara devt

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Sabah and Sarawak are well positioned to benefit from trade diversion (away from China) given their locations along the intra-Asia shipping path.

KUCHING (Aug 11): Sabah and Sarawak are expected to gain from the development of Nusantara as analysts gather that local companies have received plenty of enquiries from potential new clients or partners in Indonesia.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Sabah and Sarawak are well positioned to benefit from trade diversion (away from China) given their locations along the intra-Asia shipping path.

“In addition, they have also been earmarked as part of China’s Belt-and-Road Initiative,” Kenanga Research said following its Sarawak and Sabah field trip.

“Seaports in Sabah, especially Tawau Port adjacent to Nusantara of Suria Capital Holdings Bhd, are poised to benefit from the massive development of Nusantara in the neighbouring East Kalimantan as they will handle the import of building materials for the construction of the new capital city of Indonesia.

“We understand local companies in Sabah and Sarawak, have already received a deluge of enquiries from their potential new clients or partners in Indonesia.

“We gathered that the US$32.5 billion Nusantara project will kick start this month and will last another 15 to 20 years.”

On another note, Kenanga Research gathered that smelters here are in a good position to capitalise on cheap and clean hydro power.

“Many global smelters are cutting their production as their operations have become barely profitable amidst elevated energy costs.

“Press Metal Aluminium Holdings Bhd (Press Metal) and OM Holdings Ltd (OM Holdings) are spared given the stable cost of their energy source, namely hydro power.

“In fact, prior to the recent surge in fossil fuel cost, by virtue of them using the cheaper hydro power, they already enjoyed significant cost advantage over their international competitors.

“With reduced production from fossil fuel-powered smelters in the world, the supply of end-products will remain tight, keeping their prices firm over the short term.”

The research arm gathered that Press Metal will see the first full-year impact in financial year 2022 (FY22) from its Phase 3 expansion commissioned back in October 2022, boasting an additional aluminium smelting capacity of 320,000 MT per annum, while OMH is currently converting its four existing ferrosilicon (FeSi) furnaces into two manganese alloys (Mn Alloys) furnaces and two metallic silicon (MetSi) furnaces (of which end-products command better margins).

“In addition, OMH has plans to add two more new Mn Alloys furnaces, increasing its total plant output to 610,000 to 640,000 MT per annum (from 470,000 MT per annum prior to the pandemic).”

The research arm also noted that Samalaju Industrial Port of Bintulu Port Holdings Bhd is poised to benefit from higher throughput backed by a higher aggregate output from the expanded production capacity of key players in Samalaju Industrial Park.