Ann: 31 December 2023 Quarterly Market Update, page-26

OMH projects more than 85% plant utilisation

By JACK WONG Monday, 05 Feb 2024


KUCHING: OM Holdings Ltd’s (OMH) ferroalloy smelting plant in Samalaju Industrial Park, Bintulu, is expected to raise its production output with the stablisation of capacity utilisation from this year onwards.
The smelting plant is operated by its wholly-owned subsidiary, OM Materials (Sarawak) Sdn Bhd (OM Sarawak).

OMH projects the plant’s utilisation rate to be more than 85% this year and to achieve an estimated combined production volume of ferrosilicon (FeSi), manganese alloys and metallic silicon of between 430,000 and 470,000 tonnes.
Based on OMH’s 2024 guidance contained in the company’s investor presentation update on Jan 31, 2024, the company expects all the eight manganese alloy furnaces to be in operation with annual production volume of 280,000 to 308,000 tonnes.

Meanwhile, six to eight FeSi furnaces will produce 130,000 to 140,000 tonnes of FeSi this year.
The company expects to commission two metal silicon (MetSi) furnaces that will be ramped up in operations, with estimated annual output of 26,000 to 29,000 tonnes.
“Fabrication works are on-going for the MetSi furnaces with expected completion by the end of February 2024. They are expected to restart in early 2024,” said OMH.

In the interim, both MetSi furnaces are producing FeSi to maximise furnace utilisation and increase productivity.
According to OMH, the company is the lowest cost quartile ferroalloy smelter.
It is backed by low-cost environmentally friendly hydro power from a 20-year power purchase agreement with Sarawak Energy Bhd and enjoys a 10-year tax holiday.
OM Sarawak is the largest producer in the region, with growth and diversification plans.
The company prioritises diversification to silicon metal targeting renewable energy and plans to add another 150,000 tonnes per annum of manganese alloy production capacity in the future.
As at Dec 31, 2023, 14 out of the plant’s 16 furnaces had completed major maintenance and the remaining two FeSi furnaces will undergo major maintenance works in 2025.
In 2023, the plant recorded production volume of 433,961 tonnes, comprising 294,432 tonnes of manganese alloys (including silicon manganese and high carbon ferro manganese) and 139,529 tonnes of FeSi.
Also produced last year was 154,273 tonnes of manganese sinter ore.
In 2023, OM Sarawak sold 290,770 tonnes of manganese alloys and 135,545 tonnes of FeSi, bringing total sales to 426,315 tonnes.
In the fourth quarter of 2023 (4Q23), OMH said FeSi price fell to US$1,285 from US$1,360 per tonne CIF (cost, insurance and freight) in 3Q23, while silicon manganese price dropped to US$900 from US$945 per tonne CIF during the same period.
“The decrease was mainly attributed to reduced global demand towards the year-end period and higher production rates from FeSi smelters in China.
“Freight rates increased in the current quarter (4Q23) as compared to the preceding quarter, with Fastmarkets MB reporting an implied freight of US$0.82 per dry tonne unit (dtu) from South Africa to China for 37% manganese ore as compared to US$0.80 per dtu at the end of September 2023,” added the company.
OMH recalled that the Covid-19 pandemic and China’s coal and power crisis in 3Q21 had led to a FeSI price surge to historical highs.
The post-Covid market was supported by structurally higher Chinese power prices with floating industrial power costs.
China and Russia are the top two global exporters of FeSi, with Russian markets shrinking post invasion of Ukraine.
On the outlook for the FeSi market, OMH anticipates continued weak market sentiment, but one that is well poised for cyclical recovery.
OMH said manganese alloy prices have retraced to Covid levels despite power price increases in key production regions.
Strong margins were recorded post the Covid super-cycle and price shocks post Russia’s invasion of Ukraine, the world’s second largest exporter of manganese alloys.
This has resulted in a subsequent decline, with Ukraine’s output fully displaced by exports from India.
Commenting on the outlook for the manganese alloys market, OMH said prolonged weakness is necessary to shed inventory overhang, adding that the current reduction in global production is preparing for cyclical recovery.
World crude steel production during the October to November 2023 period was 303.1 million tonnes, up 2.4% from a year ago.
OMH, which is dual listed on the Australian Securities Exchange and on Bursa Malaysia, placed out 27,633,464 fully paid ordinary shares (representing about 3.75% of the company’s total issued shares, excluding treasury shares) at an issue price of A$0.472 each to JFE Shoji Corp for about A$13.04mil in December 2023.
JFE, which has an established business relationship with OMH for over two decades, is a Japanese international trading company with business operations mainly in the marketing and distribution of steel products, as well as raw materials for steel and machinery.