Leon Fuat able to weather volatile steel prices
KUCHING: Leon Fuat Bhd (Leon Fuat) is able to manage its operations in spite of the fluctuations in steel prices thanks to its predictions that there will be an impact from slowing global growth on the domestic economy.
According to its executive director Calvin Ooi, as the group ventured into steel pipe manufacturing in 2018, it was not reliant on just a handful of industries but also serve those in the manufacturing and construction sectors across the value chain as well as hardware wholesalers and retailers.
“We believe that steel prices are normalising, and this price normalisation trend has been accelerated by global economic uncertainties,” he said to The Borneo Post in an interview.
“From our business perspective, we are able to minimise the impact of price volatility due to our focus on downstream activities of trading and steel product processing, which are essential activities in the steel supply chain.
“We continue to monitor steel prices and related currencies and take proactive measures including negotiating forward contracts, where necessary, as well as prudent inventory management, to reduce any negative impact which may arise.”
When asked what is the outlook on margins given that steel price is coming off, Ooi said for Leon Fuat’s processing, the margin earned is manageable to a certain extent “as we process the steel for our customers and charges depend entirely on the value-added services that we offer.”
In order to cope with the steel raw material price fluctuations, Ooi said that the group has diversified its supply sources to have better control on price comparison and negotiation.
“To mitigate the impact of such fluctuations to the group’s operating costs and profitability, steel prices as well as inventory levels are closely monitored throughout the year in order to counter potential risks,” he affirmed.
As for the progress of Leon Fuat’s steel pipe manufacturing plant project, the project is being undertaken over three phases.
“We have begun Phase 2 whereby the production capacity is gradually increasing, and we expect this to be fully commissioned in the second-half of 2023.
“Phase 1 with two production lines is operational while another two production lines are soon to be operational.
“When the entire plant is fully operational, we estimate maximum capacity of 10,000 tonnes per month from the 5,000 tonnes capacity currently.”
On the matter of issues with foreign labour, Ooi said there was none so far as only around a quarter of Leon Fuat’s workforce comprise foreign migrant labour.
“We welcome government’s decision to re-open the application for foreign workers.
“We had submitted our application and as far as we are aware, there are no issue highlighted,” he concluded.