Sahaviriya Iron and Steel Co (SIS), the operator of a 500-billion-baht smelting plant, expects to start construction by the fourth quarter of this year once it receives the green light on environmental assessment, financing and investment privileges, says acting president Win Viriyaprapaikit.
The subsidiary of the Sahaviriya Group is now waiting for the approval of its environmental impact assessment (EIA) report and plans to submit an application for investment privileges to the Board of Investment (BoI) soon.
''I hope we will wrap up all legal documents within the third quarter. Once we get all the papers done, the construction will begin immediately,'' said Mr Win, also the president of SET-listed Sahaviriya Steel Industry Plc, the country's largest hot-rolled steel coil manufacturer.
The smelting project has been delayed by two years due to strong opposition by activists and local communities who fear the project's impact on their neighbourhoods.
While appeasing local communities and stakeholders, SIS has made a big stride by securing an equipment and procurement contract (EPC) for the project with Sino-International Heavy Industry Technology (Sino-HIT), which leads a consortium of Chinese equipment and technology suppliers.
The contract was signed on July 1 in a ceremony attended by Prime Minister Samak Sundaravej during his Beijing visit, which was viewed by the company as a gesture of full government support.
The contract, valued at 10 billion renminbi, covers the project's first phase with a total production capacity of five million tonnes per year.
The contract also allows the same Chinese suppliers to work on the remaining phases.
The five-phase project aims to produce 33 million tonnes of steel and is scheduled to be fully completed in 15 years. The strong baht, however, might help lower the cost of the project from the original 500 billion baht.
The Chinese consortium is responsible for providing turnkey services, from plant construction and equipment procurement to production preparation. The entire process is expected to be completed within 24 months.
SIS's contract with the Chinese has helped improve its chances of securing more loans from Chinese state and private financial institutions.
''We expect to gain a syndicated loan covering the total cost of 10 billion renminbi and a seven-year repayment term,'' Mr Win said.
For its part, SIS has spent several billion baht over the last three years on engineering and ground work at the site in Bang Saphan, Prachuap Khiri Khan.
SIS hopes to soon conclude financing deals, along with purchasing contracts for ore with world exporters. World ore prices have risen by 65-80% over the past year on average in line with oil and other commodity goods.
For its initial production capacity of five million tonnes, SIS would need around eight million tonnes of ore.
Due to the high costs of raw materials, steel prices doubled in the first half of 2008. SSI expects to record sales of nearly 50 billion baht this year, up from 30 billion baht a year earlier, on the back of higher prices.
Its sales rise would also come from a higher utilisation rate, which increased slightly to half of its full capacity of four million tonnes from below two million last year.
Mr Win, however, declined to discuss margins but said he planned to run at full capacity when the smelter started operation. The smelter would help reduce SSI's costs by 35% as it would no longer need to import materials such as slab, scrap and billet.
Source: Bangkok Post
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