OM Holdings jumps over 15% on surge in ferrosilicon prices

OM Holdings jumps over 15% on surge in ferrosilicon prices
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KUALA LUMPUR (Oct 4): Shares in mining firm OM Holdings Ltd (OMH) jumped as much as 15.36% or 45 sen to RM3.38 on Monday, its highest in more than three months, amid a surge in global ferrosilicon (FeSi) prices.

The counter had since slipped one sen to close at RM3.37, still up 44 sen or 15.02% from last Friday’s close, with 2.58 million shares done. It was among the top gainers of the day on the local bourse.

The counter had risen 80 sen or 31.13% from its initial public offering (IPO) price of RM2.57 since it was listed on the Main Market of Bursa Malaysia on June 22. At its current price, it has a market capitalisation of RM2.49 billion.

In a bourse filing on Monday, in which it updated on the recent unprecedented increase in international prices of FeSi, the group said the ferroalloy is produced by its 75%-owned smelter plant in Sarawak.

Citing S&P Global Platts, OMH said the price of FeSi shipped on cost, insurance and freight (CIF) terms to Japan in the first half of 2021 (1H21) was US$1,582 (about RM6,600) per tonne, and it closed at US$1,920 per tonne at the end of June.

S&P Global Platts subsequently reported a significant increase in the price of FeSi, which closed at US$4,150 per tonne (+116%) on CIF Japan as at Sept 29, 2021, according to OMH. FeSi is used to deoxidise molten steel and has a particular application in electrical steels.

“It is important to note that the financial impact on OMH of recent price changes will continue to be modulated by the forward delivery nature of ferroalloy sales, where newly contracted prices will be reflected in OMH’s financial results with a lag of several months, subject to previously committed sales,” it said, adding that it sells the ferroalloy produced using a blend of formula that is index-based and fixed price contracts.

OMH further said the recent surge in global prices was due in part to government policies in China relating to the ongoing power shortage, with power rationing being imposed on energy-intensive industries, thus limiting ferroalloy production and causing Chinese ferroalloy futures to surge to historical highs.

These factors, in conjunction with record-high ocean freight rates and uncertainty in global ferroalloy production, substantially supported prices of FeSi for the better part of 2021, it said.

OMH’s Sarawak smelter plant was operating 12 furnaces out of 16 furnaces as at Sept 30, 2021, comprising six FeSi and six silicomanganese furnaces in operation.

“As previously announced, it should be emphasised that production plans for the Sarawak smelter plant in 4Q21 (the fourth quarter of 2021) will be subject to changes given anticipated pressures and constraints on existing labour force brought about by the Covid-19 pandemic and the resultant restrictions inhibiting cross-border movements,” it added.

Kang Siew Li & Tan Choe Choe