KUCHING: Yung Kong Galvanising Industries Bhd will produce high-end steel products when its RM30mil continuous colour-coating plant in Selangor begins operations in October.
Newly appointed managing director and chief executive officer Datuk Soh Thian Lai said the new production line, equipped with the latest technology, would have an annual production capacity of 70,000 tonnes.
We will gradually ramp up production to 4,000 tonnes in January and then to 6,000 tonnes a month, he said after Yung Kongs AGM yesterday.
Soh said the plants output for niche market would include coated aluminium products and pre-painted products for cool rooms.
These products command higher profit margins compared with lower-to-medium range steel products. We plan to export some of the new products to Asean market, with Indonesia as our first target, he added.
Yung Kong, which has plants in Selangor and Sarawak, is one of the few companies that run full-fledged production facilities from pickling line to shearing and slitting lines in the downstream operations.
The groups main products are pickled and oiled coils, cold-rolled coils, galvanised iron coils and pre-painted galvanised iron coils.
Due to insufficient raw material of hot-rolled coils (HRC), Yung Kong recorded a 30% drop in overall production volume last year.
Chairman Datuk Dr Hii Wi Sing attributed the HRC shortage primarily to a petition filed by Megasteel Sdn Bhd, Malaysias sole HRC producer, to International Trade and Industry Ministry last May requesting for a safeguard investigation for HRC.
The ministry subsequently initiated an investigation into imposing a safeguard measure of 35% on imported HRC, and the probe took four months. The petition was rejected.
Hii said the action caused much anxiety to the industry as any importation of the raw materials during the period will have a direct impact of creating greater financial risks to the group.
Meanwhile, Soh said Yung Kong had stepped up its output since March and would return to normal production volume soon.
Currently, the group is running at 50% of its overall installed capacity. We will increase this to 75% after July. We try to produce 120,000 tonnes (of various flat steel products) this year and to achieve 150,000 tonnes in 2013, he added.
Soh said although the prices of flat steel products improved by 5% to10% from last years low, domestic demand was still weak.
He attributed the low demand to slower-than-anticipated roll-out of major infrastructure projects under the governments Economic Transformation Programme.
However, Soh is cautiously optimistic on the outlook for flat steel products, saying it was unlikely that prices would fall back to last years low.
He said Yung Kongs products were mainly supplied to small and medium industries for the construction of factories.
Despite the weakening global prices in steel raw materials, Soh said the group was trying to source raw materials at a more competive pricing. It now imports about 50% of raw materials from Japans Nippon Steel while the balance were sourced from domestic market.
He also said Yung Kong had completed its group management re-organisation by setting up three strategic business units to create operational synergy and transform the group from a loss-making entity into a profitable one.
Yung Kong registered a pre-tax loss of RM24.7mil in the financial year ended Dec 31, 2011, its first in 22-year history.