Business

Monday June 4, 2012

Spain's Acerinox fully committed to Bahru Stainless steel

By THEAN LEE CHENG
leecheng@thestar.com.my


PETALING JAYA: Spanish stainless steel producer Acerinox will continue with its investment in Bahru Stainless Sdn Bhd despite the financial crisis unravelling in the eurozone country.

Bahru Stainless is a subsidiary of stainless steel giant Acerinox Group from Spain, which has a 67% stake, while Japan's Nisshin Steel and Metail One owns 30% and 3% respectively. Bahru Stainless is Acerinox's fourth largest investment. It has altogether four plants located on four continents.

Bahru Stainless chief executive officer Lucien Matthews said in an email that the investment in the steel plant in Iskandar Malaysia, Johor is a “strategic investment that they are committed to” despite the Spanish financial woes at home.

“The financial crisis started in 2008. From the Acerinox press releases over the past four years, you will see that they have made it clear the project continues,” said Matthews. The project started in 2008, the same year the financial crisis affected world economy.

Matthews said the Spanish company has committed more than RM2bil for its first two phases. The first phase, which was announced late last year, commenced early this year which involves the installation of several lines and the setting up of a cold rolling mill and packing stations. Work on the second phase is expected to start in the second quarter of next year.

The plant's annual production capacity for phase one will be about 240,000 tonnes. This is expected to increase by more than 60% to 400,000 tonnes once phase two is completed.

The third and fourth phases are expected to continue until 2020. Work on phases three and four will involve the installation of a hot rolling mill and melting facilities.

Matthews said it was very likely that total investment would exceed RM5bil for the completion of all the four phases.

The investment amount for the third and fourth phases is expected to amount to several billion ringgit more, depending on equipment and construction costs over the next seven years. Construction cost, said Matthews, might also increase.

On what sort of returns are expected, Matthews said returns would depend on market conditions. It may change on a short-term basis based on raw material prices and the world market situation. .

“We will not try to forecast (what the returns will be) due to the variability of raw material cost,” he said.

Matthews said the price of nickel would be an important component and might “fluctuate substantially”.

Spanish Embassy commercial councillor Luis Lopez said other Spanish interests in Malaysia include sanitaryware maker Roca Corporacion who also came four years ago and Dunlopillo Holdings Sdn Bhd. Spanish rest-related product group Pikolin acquired 100% of the mattress company from Malaysian group Sime Darby late last year, while Roca purchased Johnson Suisse several years ago.

With talks of Greece exiting the monetary union and the impact of this on the eurozone and the global economy, concerns are now upon Spain, who may be the next casualty in the unravelling eurozone crisis.

The crux of Spanish woes today is getting support for its banking system, the most dire one being Bankia. But the European Central Bank's (ECB) rejection of the Spanish government's plan to recapitalise Bankia, its third-largest lender, by injecting government bonds directly into the bank, which would then be used as collateral in ECB financing operations, has thrown the country's politicians and economists into a state of flux.

The deadlock, coupled with the way the Spanish government is handling its affairs, is also fuelling Spanish fears, which has resulted in billions of euros leaving the country, it was revealed last week. About 100 billion euros, about a tenth of the country's gross domestic product, have left Spain last week in search of safe haven, The Financial Times reported.

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