East Malaysian ports and smelters to benefit from Nusantara development

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Sabah and Sarawak stand to benefit from Nusantara’s development, as analysts believe local companies have received many inquiries from potential new customers or partners in Indonesia.

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

“Additionally, they were also affected under China’s Belt-and-Road Initiative,” Kenanga Research said following its field visit to Sarawak and Sabah.

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

“We understand that local businesses in Sabah and Sarawak have already received a deluge of inquiries from their potential new customers or partners in Indonesia.

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

On another note, Kenanga Research has concluded that smelters here are in a good position to capitalize on cheap, clean hydroelectric power.

“Many global foundries are cutting production as their operations have become barely profitable amid high energy costs.

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

“In fact, before the recent spike in fossil fuel costs, because they were using cheaper hydroelectric power, they already had a significant cost advantage over their international competitors.

“As production from fossil fuel-powered smelters around the world is reduced, the supply of finished products will remain tight, keeping their prices firm in the near term.”

The research arm understood that Press Metal would see the first full-year impact in fiscal year 2022 (FY22) from its Phase 3 expansion commissioned in October 2022, benefiting from a smelting capacity of additional aluminum by 320,000 MT per year, while OMH is currently converting its four existing Ferrosilicon (FeSi) furnaces to two Manganese Alloy (Mn Alloys) and two Metallic Silicon (MetSi) furnaces (including end products offer better margins).

“In addition, OMH plans to add two additional new furnaces for manganese alloys, increasing its plant’s total production from 610,000 to 640,000 MT per year (compared to 470,000 MT per year before the pandemic).”

The research arm also noted that Bintulu Port Holdings Bhd’s Samalaju Industrial Port is poised to benefit from higher throughput supported by higher overall production thanks to the increased production capacity of major players in the industrial park. from Samalaju.
Source: Borneo Post

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