Ye Chiu Metal

My Dearest CB,

Ye Chiu Metal Smelting Sdn Bhd is a scrap metal smelter. Some old news, 14/10/2003 , posted on The Edge.

• Ye Chiu is primarily involved in the manufacturing and trading of aluminium alloys which, in turn, is mainly supplied to producers in the automotive, home appliance and information technology industries. Its stock, which had once traded at a high of RM5.60 in 1996, now trades in the region of RM1.50 per share.
  
  Some time in 2000, Ye Chiu had planned to expand its manufacturing operations from its current factory premises in Pasir Gudang to Tanjung Langsat, Johor, where it had planned to purchase a 35-acre piece of land.
  
  The expansion was aimed at increasing its production capacity from 6,000 tonnes per month to 14,000 tonnes per month. However, the economic slowdown and the problem of labour shortages that followed forced the group to re-evaluate its plans. It eventually acquired a much smaller 15-acre piece of land in Tanjung Langsat. As China offered both an abundant labour force and the opportunity to tap into a vast market, Ye Chiu shifted its attention there and deferred its Tanjung Langsat plan.
  
  Its first venture into China was in 1999, when it acquired a 23 per cent stake in Jouder Precision Industry (Kunshan) Co Ltd, a precision metal parts manufacturer, for about RM2.1 million. While management does not plan to raise its investment here, Jouder was meant to provide a potential future avenue for more value-added products in the metal-related industry, RAM explains in an October 2002 rating rationale report.
  
  In April 2001, Ye Chiu established Ye Chiu Metal (Taicang) Co Ltd and Ye Chiu Recycling Resources (Taicang) Co Ltd in China. By 2002, it had started construction of its factory. It was expected to incur a total investment cost of RM26.6 million and have a total production capacity of 36,000 tonnes per annum, RAM says.

3/18/2004, from Recyling Today Magazine, the following article was posted: Asian Company Plans on Being Largest Scrap Smelter in World

• To date, Ye Chiu Metal has invested $10 million on its existing Shanghai plant, which was completed last June, with a production of 6,000 metric tons per month. Its plant in Johor also has a capacity of 6,000 metric tons a month.
  
  “After completion of our (new) plant in China by 2006, we will be the biggest scrap metal smelter in the world,” Huang told reporters after a ceremony to mark its transfer to the Main Board.
  
  The company’s Shanghai plant now has an operating rate of 33 percent with a production of about 2,000 metric tons a month, while the Johor plant has an operating rate of greater than 80 percent with a production of about 5,000 metric tons per month.
  
  Huang expects the price of aluminum alloy to increase by a further 30 percent this year from about $1,500 per metric ton due to the escalating copper price of $3,000 per metric ton from US$1,800 per metric ton last year.
  
  The smelting company sources 30 percent of its raw materials locally and 70 percent from the Asean region. It exports aluminum alloys to countries in the region, Japan and Taiwan. Its largest market is China, which accounts for about 50 percent of its sales.

So how has Ye Chiu fared?

Decent growth since 2003 but terrible margins!

See this old news. Ye Chiu keeps hopes high for aluminium ingot industry

It highlights the problems in the scrap metal business!

• Goh said hikes in fuel and scrap metal prices were among the main problems, adding they might affect the company’s operations.
  
  He said the company would work out some strategies to overcome the problems but declined to give details.
  
  Goh said the company was also facing a shortage of supply of scrap metal.
  
  “Demand for the raw material has increased, especially with the improvement in the electronics and electrical and automotive sectors,” he said.
  
  Goh said the company procured its supply from the United States, Europe and Asian countries such as Indonesia, Japan, the Philippines and Vietnam.
  
  To make matters worse, he said, the surge in demand for scrap metal from China had prompted many international suppliers to focus on that country.

As can be seen, it's a tough business and in a tough business, the balance sheets don't look too great!



Here is how Ye Chiu is faring in the market.