After coal, ..... Now, TIN is also rising ... :) Kalau sebelumnya sekitar US$ 4500/Tonne sekarang menjadi sekitar US$ 7000/Ton ... dan masih cenderung meningkat .... :)
RDP === MSC rides on rising tin prices BY C.S. TAN BUTTERWORTH-BASED Malaysia Smelting Corp Bhd (MSC) is poised to achieve record profits this year as tin prices continue to rise sharply. MSC's principal business has been that of tin smelting for many years. It made a timely upstream diversification in the last two years with acquisitions of tin mines in Indonesia and Australia. The group owns 75% of PT Koba Tin, a large tin mining and smelting company in Indonesia, and 30% of the smaller Marlborough Resources NL, a listed tin mining company in Australia. Koba Tin was acquired in 2002 and Marlborough joined the group in April last year. These acquisitions are now paying off. Tin prices moved up from around US$4,500 a tonne early last year to hit US$6,000 at the end of the year. Within two-and-a-half months this year, prices have crossed US$7,000, and are still heading north. Watching this trend, commodity analysts said tin prices would climb towards US$8,000 this year. The price of tin, like that of copper, nickel, steel and aluminium, has surged due to rapidly rising demand for commodities in China. There may be precious few tin mines left in this country, but through its cross-border acquisitions, MSC has become the world's fourth largest miner of tin. The group made a record pre-tax profit of almost RM52mil, and earnings per share of 37 sen for the year ended Dec 31, 2003. Earnings will surely improve further this year as the demand/supply equation points to higher tin prices. MSC chief executive Datuk Mohd Ajib Anuar said demand for tin exceeded production last year. "There was a deficit of 20,000 tonnes." The shortfall was met by stocks. As a result, stocks registered at the London Metal Exchange (LME) have dwindled to 12,200 tonnes from 35,000 at the start of 2002. In spite of the price increases, there was no noticeable increase in the production of tin last year, Ajib told StarBiz in MSC's marketing office in Kuala Lumpur. Consumption rose almost 8% last year, reaching more than 300,000 tonnes for the first time. Global consumption continues to increase this year. "Stocks are going down fast. I cannot see where new supplies are going to come from," he said. It follows that demand will again outstrip production this year. The demand for tin has long been associated with tin cans. These days, the biggest user of tin is the electronics industry. Tin, alloyed with other metals, is used for soldering in electronics. Tin shines as this year is shaping up to be another Year of Commodities. In hedging operations for its tin output, MSC had sold forward substantially last year. The group was careful to lock in profits in case prices fell back. It was due to the forward sales that MSC did not fully benefit from the run-up of tin prices last year. The group obtained an average price of about US$4,900 a tonne for tin last year. With prices at US$7,000 currently, profit margins are bound to fatten in MSC's mining division. With such high prices, there is no fear that prices will drop close to break-even levels. Hence, forward sales are reduced. MSC will hedge a maximum of 25% of its output this year. This will enable it to catch prices that are expected to rise even higher. In years past, the US defence stockpile had been the bane of fair tin prices. These days, however, there is an understanding that the US releases only 12,000 tonnes a year into the market. Even the US stockpile has shrunk. Its stock of tin had fallen to just 40,000 tonnes from 200,000 tonnes in the past, said MSC's group commercial manager Jamaludin Ali. Inventories are valuable stuff these days, and MSC has heaps of this. The group's inventories rose to almost RM210mil worth at the end of last year from RM132mil in 2002. I have a minimum (profit) margin of US$1,000 (a tonne) on the stocks, said Ajib. Tin is cash, he added. Tin ingots are sold on the LME on a cash-before-release basis. There are, therefore, no worries over bad debts. Besides higher prices and releases from stocks, MSC will produce more tin this year. Ajib expects Koba Tin to raise its output by 1,000 tonnes to 20,000 tonnes this year. The group is carrying exploration work on parts of Koba Tin's 100,000-acre Contract of Work area on Bangka Island. In addition, MSC has teamed up with an Indonesian party to explore for tin in another area in Indonesia. These efforts may bring up more tin from the ground in a few years. It is a pity that Malaysia seems to have exhausted its large deposits of tin. There are pockets of mining operations though. Rahman Hydraulic Tin Bhd, for example, operates a tin mine in Perak. MSC has proposed to acquire a 25% stake in ZR Network Sdn Bhd that has an agreement to purchase all of Rahman's mining assets. Rahman's mine is in production. The mining profits flow into the coffers of Danaharta until the authorities approve the sale of the mine to ZR. MSC's entry into mining has helped to preserve Malaysia's century-old expertise in tin mining. When the group made its entry in 2002, Malaysia Mining Corp Bhd (MMC) was just getting out of mining. Ajib took the opportunity to hire many of MMC's staffers who are experts in geology, dredging technology, gravel pump mining and mineral processing. These experts are ensuring that MSC's mines are operating with high yields and low costs. MSC itself has transferred some of its expertise to Koba Tin. "The Koba Tin smelter increased its production by 17% last year, all through efficiency. We applied in Koba Tin the same standards applied in our plant in Butterworth," he said. The MSC group earned a pre-tax profit of RM22.1mil in Malaysia last year ? that would be from smelting and trading ? while RM46.3mil came from Indonesia. Ajib expects smelting profit margins to remain stable this year. They will not widen like mining profits. MSC's share price has moved up smartly over the last 12 months. It may not, however, fully reflect the company's potential, as the stock is not followed by analysts. There is no interest from analysts because the stock is thinly traded. The reason for the illiquid nature in the stock is that MMC and Straits Trading Company Ltd each own 37.4% of MSC. That means 74.8% of the shares are tightly held by these two shareholders. Even so, a corporate exercise may be undertaken to loosen up liquidity, as companies in such situations will try to do, observers said. There will then be more interest in this singularly remarkable company.
