Press Metal mitigated by insurance, Samalaju ramp-up

Despite Press Metal Bhd’s (Press Metal) Mukah smelting plant being out of commission due to the blackout last week, analysts believe this will not leave much impact for the group in the long term period, partly mitigated by the ramping up of its Samalaju smelter.

On Monday, Press Metal announced on Bursa Malaysia that its subsidiary, Press Metal Sarawak Sdn Bhd (Press Metal Ssarawak) suffered a sudden shutdown of its primary aluminium production lines at its Mukah smelting plant due to a major power outage that occured at approximately 5.40pm on June 27, 2013 in Sarawak.

The power outage lasted for almost six hours, leading to a significant drop in temperature of the production pots.

“Although power has been restored, Press Metal Sarawak was unable to resume metal production as solidification had taken place in the reduction cells of its potline despite its management and staff working tirelessly around the clock to salvage the pot,” the statement highlighted.

At the time of this announcement, Press Metal noted that none of the pots could be salvaged while its management was unable to estimate the full impact and consequences of the incident but will be closing the smelting plant to facilitate major reconstruction works.

It is noted that Press Metal Sarawak has in place adequate insurance coverage and has initiated engagement with its insurers to ascertain the damage and the cost of the reconstruction works. Consequently, the subsidiary has issued a notice to its affected customers that a force majeure event had occured at its Mukah smelting plant, thereby impacting the supply of aluminium products to such customers.

RHB Research Institute Sdn Bhd analyst Ng Sem Guan in a note on the group noted that in addition to adequate insurance coverage, the ramping up of its Samalaju smelter – which is 2.66 times larger and way more efficient than its Mukah operation – will also partly mitigate any immediate losses.