Millcon invests in $12m Myanmar plant

28 November 2016

SET-listed Millcon Steel Plc (MILL) has partnered with local companies to invest in a UScopy2 million plant to produce construction steel to meet rising demand in Myanmar, where construction business and investment in infrastructures are booming.

Chief executive Sittichai Leeswadtrakul said Millcon owns a 45% stake in the joint venture, while General Engineering Co Ltd holds 45% and 10% is held by Thiha Group.

The new company is called Millcon Thiha Co Ltd and is located in Myanmar's Thilawa special economic zone with a privilege to lease land for up to 75 years as well as import and export tariff exemptions.

The company has production capacity of 4,000-5,000 tonnes of construction steel per month, with most expected to be sold initially domestically in Myanmar. Export locations include Cambodia, Laos and Vietnam, he said.

After three years, the goal is for 25% of production to be sold in Myanmar, with exports to the region making up the remainder, Mr Sittichai said.

He said the company expects the venture to generate 1 billion baht in revenue its first year of operation, with the company breaking even in four to five years.

Aye Thiha, chief executive of Thiha Group, said demand for construction steel in Myanmar grew about 10% per year over the past decade as economic growth surged.

"After the election, construction of several mega-infrastructure projects were quite slow compared to the junta period, but we believe these project will be accelerated from now, boosting demand for construction steel and materials," Aye Thiha said.The company will diversify to produce other construction materials soon, he said.

For its Thai business, Millcon is likely to be picked as a major supplier of special-grade steel for the construction of the Red Line electric train project because the company adjusted its focus recently to produce high-quality steel, aiming to compete in the high-end market, which has fewer competitors and a higher profit margin.

As a result, Millcon is the only domestic steelmaker that can produce the high-tensile steel needed for the construction of the Red Line (from Bang Sue to Rangsit).

The move should help reduce imports of high-grade steel and encourage Thai steelmakers to switch to producing the higher-quality metal, said Mr Sittichai.

MILL shares closed Friday on the Stock Exchange of Thailand at 1.25 baht, unchanged, in trade worth 6.1 million baht.