Analysts sanguine on OMH’s furnace conversion, metallic silicon a key growth driver
KUCHING (Jan 17): OM Holdings Ltd’s (OMH) furnace conversion of its ferrosilicon (FeSi) furnaces to produce metallic silicon has been viewed positively as metallic silicon is able to command better margins for the group against other ferroalloys, analysts observed.
In a note to investors on Bursa Malaysia, OMH announced that OM Materials (Sarawak) Sdn Bhd (OM Sarawak) has modified and converted one of its ferrosilicon (FeSi) furnaces to produce silicon metal.
The silicon metal furnace has entered the hot commissioning and performance testing phase, prior to ramping up to its design capacity of 10,500 to 12,250 tonnes per annum.
It noted that the FeSiSilicon Metal Conversion Project will enable diversification of the company’s end customer base away from the steel-making industry, and into sectors such as aluminium, chemicals, and ultimately into the renewable solar energy industry via polysilicon production.
The aim is to produce the highest grade possible as margins are better for higher purity silicon metal.
The plant now encompasses 16 units of 25.5MVA furnaces, of which six units are allocated for the
production of FeSi, eight units for manganese alloys, and two units for silicon metal.
“We are sanguine over the conversion of furnaces into the production metallic silicon. OMH is now able to tap into the green energy sector alongside with the rising adoption of green energy products such as solar photovoltaic panels and electric vehicle batteries,” Malacca Securities Sdn Bhd’s (MSSB) research team said in a report.
It also gathered that metallic silicon is able to command better margins against other ferroalloys.
Meanwhile, MSSB noted that although FeSi prices has come off sharply from the peak in September 2021, prices have since staged a mild recovery from approximately US$1,200 per metric tonne in October 2021 to US$1,630 metric tonne in early January 2023.
“Moving forward, we expect prices to see trade at current levels as the elevated power cost may deter European players to ramp up production and certain Chinese smelters to shut down production to comply with the strict environmental requirements enforced by the government.
“However, this may also be offset by the prospect of weaker demand in tandem with the expected slowdown in economic growth,” it noted.
“While material prices have turned softer, we also gather that freight rates appears to have normalised and is lingering at levels back in September 2021,” it added.
It expected global freight rates to see further normalisation, on the back of the easing of tightness in freight capacity and weaker freight volumes as global economic recovery moderates.
“This bodes well for OMH, given that majority of their sales are exported particular to the Asia region,” it opined.
All in, MSSB maintained its ‘buy’ recommendation on the stock.
It also noted that given that the operations progress is well on track, it made no changes to its earnings forecast pending the release of FY22 financial figures, tentatively by end of the month. -Source: The Borneo Post