PETALING JAYA: Malaysia Smelting Corp Bhd (MSC) could see better earnings this year contributed by its new smelting plant in Pulau Indah and higher global tin prices.

       According to UOB Kay Hian Research, MSC’s smelting plant in Pulau Indah is fully operational based on its ground check.

       “MSC is on track for a more meaningful recovery growth in 2022 supported by improved production output and better cost savings from the full utilisation of its new eco-friendly plant,” it said in a report yesterday.

       It said that the full utilisation of the new plant and the lifting of its force majeure came at a good time for MSC as London Metal Exchange (LME) and Shanghai Futures Exchange tin prices continue to surge a whopping 100% year-on-year to all-time high of about US$44,000 (RM184,320) per tonne and US$52,000 (RM217,830) per tonne on Jan 22.

       “Continued supply disruptions from key producing countries like China and Indonesia continue to lend strength to the tin prices amid the growing structural demand globally.

       “While prices may ease gradually entering into 2022, we believe prices will remain firm in the long run, albeit not at the current high, as the structural supply issue may persist,” UOB said.

       On the plant, the research house expected the new plant to have a lower production cost by 20% compared to the company’s old plant in Penang, thanks to the state-of-the-art technology.

       The plant has a 50% higher capacity of 60,000 tonnes and required less than 40% manpower compared to the previous plant.

       “This helps to reduce MSC’s carbon footprint via the use of natural gas, solar panels and waste heat recovery.

       “In addition, MSC’s smelter is strategically located close to its Port Klang and LME warehouses, allowing vessels to have easy access to shipping routes,” UOB said.

       It has raised its 2022 and 2023 net profit forecast on MSC by 21% on the back of higher tin price assumptions at US$34,000 (RM142,452) and US$30,000 (RM125,688) per tonne, from US$32,000 (RM134,067) and US$28,000 (RM117,309) previously, to reflect the prolonged rally in tin prices.

       Based on its sensitivity analysis, for every US$2,000 (RM8,379) per tonne rise in its tin price would boost MSC’s earnings by about 12% a year.

       UOB pointed out that MSC could also benefit from higher demand for “environmentally-friendly commodities”.

       It said that MSC is doubling its efforts to integrate environmental, social and governance (ESG) practices across its business.

       For instance, MSC’s new smelting plant uses 1.26MWp solar PV panels and a waste heat recovery function that will harness thermal energy from the furnace’s flue gas to generate power.

       “The use of natural gas and the new furnace help to raise efficiency and reduce carbon emissions by at least 1,000 tonne per year, which means MSC’s smelter has one of the lowest carbon footprints globally.

       “These practices could result in MSC becoming the preferred ESG investing target,” UOB said.