News Room - Steel Industry

Posted on 20 Jan 2009

Lion halts mill ops on gas price but Perwaja undecided

Major steel player Perwaja Holdings Bhd is still uncertain whether to stop production at its direct reduced iron (DRI) plant, while Lion Group has temporarily stopped operations at its hot briquetted iron (HBI) and DRI steel mills given the high cost of gas.

 

Lion’s Antara Steel Mills Sdn Bhd’s HBI plant in Labuan and the Lion DRI Sdn Bhd plant in Banting, which use gas as feedstock in their production process, have stopped production since October and November 2008 respectively.

 

Perwaja managing director Tan Sri Pheng Yin Huah, when contacted by StarBiz, declined to comment on whether the group might be forced to close its DRI plant in Kemaman soon.

 

However, he said, the plant was currently still running at 50% of its installed capacity of 1.5 million tonnes a year.

 

“We want to see the Government bring down the gas tariff as soon as possible to reflect the current world gas prices.

 

“It is difficult for many players, including Perwaja, to cope with the high cost and want the Government to revert to the previous gas prices before the hike in June 2008,” Pheng said.

 

Meanwhile, a Lion Group spokesman said its HBI and DRI plants could no longer bear the high cost of gas, which had doubled to RM22.58 per mmbtu (million British thermal units) since June 2008.

 

“Given such high cost, we are unable to compete with overseas producers whose gas prices are much lower than ours,” he said.

 

Before the stoppage, the group’s HBI plant was operating at full capacity of 900,000 tonnes a year.

 

Its DRI plant, which has an installed capacity of 1.54 million tonnes, started operations in June and was ramping up capacity before it stopped production in November due to the high cost of gas.

 

The HBI and DRI plants currently employ a total of about 430 workers.

 

“Since we stopped production, they are currently doing maintenance work.

 

“We will try to re-deploy them to other operations and not retrench anyone unless all the other operations are also affected by the increasingly difficult operating environment of high cost and weak demand,” the spokesman said.

 

The high electricity tariffs effective July 1 have also affected the group’s steel-making plants as well as other steel mills in Malaysia which use huge amounts of electricity in their electric arc furnaces to produce molten steel.

 

“Many steel mills, including our Megasteel Sdn Bhd and Amsteel Sdn Bhd, are now running at about 30% to 40% capacity,” the spokesman said.

 

The situation is rather critical and may lead to the mills’ closure and retrenchment of staff if immediate action is not taken.