Tycoon Group Enterprise Co (聚亨企業), which makes fasteners and steel wire rods, yesterday said that it would expand the capacity of its electric arc furnace in Thailand to 700,000 tonnes of iron ore a year from 500,000 tonnes a year by the end of next quarter, allowing the company to reduce its iron ore inventory.
“With the new capacity we can use more iron scraps [for production], as the prices of iron ore are more volatile than those of iron scraps,” Ho Ying-tien (侯英典), special assistant to the company chairman, told reporters on Thursday. “Sometimes we are not able to buy the necessary amount of iron ore when the demand is high.”
In addition, as Thailand imports 5 million tonnes of iron ore a year, the company can also sell iron ore in the market, company chairman Kenny Huang (黃文松) said.
Until the capacity expansion has been completed, the company has to keep an inventory of 150,000 to 160,000 tonnes of iron ore, making it vulnerable to declining prices of iron ore, Huang said.
The company registered losses of NT$259.46 million (US$8.8 million) during the January-to-September period, up from NT$59.17 million a year ago, according to the company’s filing to the Taiwan Stock Exchange.
In addition to falling prices of the iron ore in its inventory, market sentiment for steel wire rods was low this year, as the government aims to open up the local market to imports of steel wire rods containing boron from China next year, Huang said.
“Many downstream firms reduced their inventory as they waited for the prices to drop,” Huang said.
Commenting on the government’s decision to relax restrictions on Chinese imports, Huang said the government should learn from other governments in Southeast Asia to impose taxes on such imports, as the Chinese government offers subsidies on boron-containing steel wire rods manufactured in China.
Sales of steel wire rods account for 70 percent of Tycoon Group’s revenue, the company said.
From January through last month, the company posted revenue of NT$8.76 billion, down 1.35 percent from NT$8.88 billion a year ago, the filing showed.
While it is unlikely that the company would swing back into the black this year, the outlook for next year is more positive, as the Thai government plans to spend 2 trillion baht (US$63 billion) on infrastructure construction, Huang said.
Tycoon Group’s shares rose 0.18 percent to NT$5.52 yesterday, underperforming the TAIEX, which was up 0.52 percent.