First of its kind in Malaysia and Southeast Asia Spur economics spin-offs of supporting industries such as transportation, property, engineering and service sectors Unlock values in national scarce resources and keep the values within the country Jobs creation for the locals Reduces Malaysia’s dependency on imported iron ore pellets Loan facility arranged by three banks – RHB Bank, Standard Chartered Bank and OCBC Bank
Terengganu, 30 July 2011 – Leading producer of primary steel products, Perwaja Steel Sdn Bhd (“Perwaja Steel or the “Company”), a wholly owned subsidiary of Perwaja Holdings Berhad (“Perwaja” or the “Group”) aims to move further upstream and add values to the local iron ore mining sector with the construction of the first of its kind in Malaysia and Southeast Asia, a concentration and pelletizing plant.
The concentration and pelletizing process ensures that raw iron ore sourced directly from local mines is processed into high quality iron ore pellets suitable to be used as feedstock for Perwaja’s steel production. It involves crushing iron ore into iron ore fines for easy removal of impurities, resulting in increased concentration levels of iron. Thereafter, the iron ore fines will be combined with other materials to produce iron ore pellets, the main raw material used in manufacturing steel.
Currently, the local iron ore is exported raw only to be reimported as iron ore pellets. Now that, the concentration and pelletizing process can be done locally, the cost savings to the country will be quite significant. In addition, there will also be stability in the supply and price of iron ore pellets.
When the plant is fully operational, Perwaja expects to save in the region of 10-20% in raw material costs. It is also expected to create employment for approximately 3,000 skilled and unskilled workers.
Executive Chairman of Perwaja, Yang Berbahagia Tan Sri Abu Sahid Bin Mohamed said, “Bringing the pelletization process in-house is a significant move for the Group. It will give us better control over our cost and value chain, and will also reduce our absolute dependence on foreign players. More importantly, the introduction of this higher value activity would generate economic benefits in the form of value creation and generate more higher-income jobs.”
“Malaysia is rich in natural resources, which should be safeguarded and kept for usage locally to benefit the local establishments and community, which in turn creates multiplier effect in economics potential for the nation. In order to facilitate our preparation and mobilization of our capital resources, we look forward to the State Government’s continuous cooperation and support so that the values unlocked could be enjoyed sooner by all”, Abu Sahid added.
Being one of the earliest heavy industry in the State of Terengganu, Perwaja views the expansion into iron ore mining as a natural progression of its growth. This is more so given the close proximity of its steel making plant to the iron ore reserves. Bukit Besi, one of the iron ore mines in Terengganu is approximately 80km away from Perwaja Steel in Kemaman and findings have indicated that the reserves in Bukit Besi are sufficient to meet Perwaja’s needs for iron ore.
Managing Director, Yang Berbahagia Tan Sri Dato’ Sri Pheng Yin Huah said, “Perwaja has ventured into iron ore mining and we are grateful to the Terengganu Government for their support so far to achieve this objective. And we look forward to even more support as the potential in iron ore mining is very bright. A fully integrated steel industry will have tremendous economic multiplier effect to the nation and Terengganu could be the centre. Downstream players will also benefit from more stable supply and considerably reduce impact from any adverse external developments”.
The concentration and pelletizing plant is located on Perwaja Steel’s existing 400-acre land in Kemaman, Terengganu. Upon commencement, the plant will contribute to improving the Company’s operational efficiency, and reduce dependency on foreign imports of iron ore pellets. Currently, Perwaja Steel imports its iron ore pellets from countries such as Brazil, Chile, Bahrain and Mexico.
Perwaja is investing RM400 million into the concentration and pelletizing project. The construction of the plant will be carried out in two phases. Phase 1 will have an initial annual production capacity of 1.2 million metric tonne (“mt”) and will be fully operational by first half of 2012. Upon completion of Phase 2 which is expected in 2013, the plant will have a combined total annual production capacity of 2.4 million mt.
To commemorate this historical milestone and mark the commencement of the construction of the concentration and pelletizing plant, Perwaja held a ground breaking ceremony today, which was graced by the Menteri Besar of Terengganu, Yang Amat Berhormat Dato’ Seri Haji Ahmad bin Said.
This concentration and pelletizing project will be financed by a combination of internally generated funds and bank borrowings. The principal bankers which have lent their support to Perwaja are RHB Bank, OCBC Bank and Standard Chartered Bank.
Yang Berbahagia Dato’ Mohamed Khadar Merican, Independent Non-Executive Chairman, RHB Investment Bank Berhad said, “The steel industry is increasingly global and is subjected to a wide range of competitive pressures. We applaud Perwaja’s initiative in embracing this technical revolution to ensure long-term sustainability and profitability. We hope the government will support upstream steel millers like Perwaja to keep the raw materials in the country for the benefits of the local economy”.
Mr. Osman Morad, Managing Director and Chief Executive Officer of Standard Chartered Bank Malaysia Berhad said, “Having the first concentration and pelletizing plant in South East Asia gives Perwaja a competitive advantage over other players in the region and we are pleased to play a part in arranging the loan facility. With the growing consumption of steel in the country and the region, the creation of this plant will contribute to the enhancement of the industry and in turn the country’s economic development.”
Mr. Jeffrey Chew Sun Teong, Director and Chief Executive Officer of OCBC Bank (Malaysia) Berhad said, “We are proud to play a supportive role in this venture which will contribute significantly to the development of the local steel industry and Malaysian economy as a whole.”
Perwaja has appointed world-renowned steel engineering and machinery advisory companies based in China, Sinosteel Corporation and Beijing Tieforce Engineering Co. Ltd for the design, supply, installation, construction and commission of the concentration and pelletizing plant.
About Perwaja Holdings Berhad
Perwaja Holdings Berhad is an investment holding company. Perwaja Steel Sdn Bhd, a wholly-owned subsidiary of Kinsteel Berhad, is a leading steel manufacturer of upstream products in Malaysia. Its range of products includes DRI, beam blanks, blooms and billets. Perwaja’s products are used in the manufacturing, construction and infrastructure industries. Today, the Group has a DRI production capacity of 1.8 million metric tonnes and a billet, beam-blanks and blooms production capacity of 1.3 million metric tonnes.
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