China Steel Corp (中鋼) yesterday said it was planning to invest US$62.46 million to participate in a joint venture in Malaysia to secure access to ferromanganese — an additive used for manufacturing steel products — and to save costs.
Through the proposed investment, China Steel could acquire 19 percent of the shareholding in the joint venture, Sakura Ferroalloys Sdn Bhd, the nation’s only integrated steelmaker said in a statement.
It will also give China Steel access to 30,000 to 32,000 tonnes of ferromanganese a year, securing about one-third of its supply of the raw material, the company said.
Ferromanganese accounts for between 3 percent and 5 percent of China Steel’s raw material costs, which reached NT$220.45 billion (US$7.4 billion) last year, company vice president Steve Lee (李慶超) said by telephone yesterday.
The new venture is expected to become operational by 2016, the statement said.
Leading the joint venture is South Africa-based Assmang Ltd, which holds more than 50 percent of Sakura Ferroalloys’ shares, while a Japanese company owns about 25 percent to 30 percent, Lee said.
The new investment plan came on the same day that China Steel told its shareholders that the outlook for the industry would remain bleak in the second half of the year because of a persistent oversupply of steel and low product prices.
So far this year, the company has cut its domestic steel prices for this month and next month’s shipments by 2.08 percent and 4.66 percent per tonne respectively, due to high production levels in China and the weak economic momentum this year.
“It’s like we are walking in a tunnel without seeing any light ahead, but we will try to find a way out,” China Steel chairman Tsou Juo-chi (鄒若齊) said at the company’s annual general meeting yesterday.
From January through last month, the company posted revenues of NT$147.28 billion, down 8.91 percent from NT$161.69 billion a year ago, according to a company filing to the Taiwan Stock Exchange.
Despite the revenue decline, China Steel registered a pretax profit of NT$10.64 billion in the first five months of the year, which was up from NT$786.28 million a year ago, because of cost reductions, the company said.
Shareholders yesterday approved the company’s plan to distribute a cash dividend of NT$0.4 and a stock dividend of 1 percent, based on last year’s earnings of NT$5.81 billion, or NT$0.38 per share.
That represented a cash dividend yield of 1.66 percent based on the company’s closing price of NT$24.10 yesterday.