PETALING JAYA: Elevated ferroalloy prices, higher production output and expanded capacity are expected to buoy OM Holdings Ltd
’s (OMH) earnings in the quarters ahead despite volatile market sentiment in the macroeconomic space.
UOB Kay Hian (UOBKH) Research said OMH’s production volumes of ferrosilicon (fesi) have eased to 29,707 tonnes in the first quarter of 2023 (1Q23), representing a 13.5% decline quarter-on-quarter (q-o-q) while that of manganese alloy improved to 52,151 tonnes or a 25.7% increase q-o-q.
The temporary suspension of the fesi furnace for scheduled maintenance works during the quarter was the main reason behind the drop in fesi production.
“On the other hand, manganese alloy production has improved due to two furnaces resuming operations earlier this year after the completion of maintenance works last quarter.
“The 1Q23 production forms 22% to 25% of our full-year forecasts, which we deem in line with our expectations as production is expected to improve going forward now that the maintenance works have been completed,” the research house said in a report.
Sales volume for fesi and manganese alloy have also lowered by 31.9% year-on-year (y-o-y) and 14.6% y-o-y respectively in 1Q23.
This was due to shipments that were delayed into 2Q23. UOBKH expects sales to improve in the following quarter.
“As of end-March, 11 of its 16 furnaces were in operation (five fesi and six manganese alloy).
“Of the remaining five furnaces, three are undergoing scheduled major maintenance while the other two are still undergoing reviews to rectify issues regarding the production of silicon metal (metsi).
“Four furnaces have completed maintenance so far while the other eight furnaces (two manganese alloy and six fesi) will undergo maintenance in phases throughout 2023 to minimise disruptions to production,” said the research outfit.
In January 2023, the integrated manganese player converted one of its fesi furnaces to produce metsi and the furnace entered the hot commissioning and performance testing phase.
“OMH aims to commission the furnaces within the next 12 months. Once completed, it will be ramped up to its capacity of 10,500 to 12,250 tonnes per year,” the research house said.
It also noted that given the slow recovery of the steel market, fesi and manganese alloy prices were in the range of US$1,500 (RM6,679) to US$1,600 (RM7,124) per tonne and US$1,000 (RM4,453) to US$1,100 (RM4,898) per tonne respectively in 1Q23.“Prices were mainly pressured by the fear of recession, soft demand from steel mills, as well as elevated global power costs and weak sentiment in the current rising rates environment,” it added.
