KUALA LUMPUR – Malaysia Smelting Corp Bhd (MSC), the world’s third-largest tin producer, has immediately suspended all its contractual obligations effective yesterday, citing the movement control order (MCO) 3.0, a letter seen by The Vibes showed.
Smelting group chief operating officer Raveentiran Krishnan said the decision to invoke force majeure came after MSC was deemed non-essential and asked to shut down its smelting operations until MCO 3.0 ends on June 14.
“lnitially, MSC’s tin smelting activities were thought to fall within ‘essential services’. However, after a reclassification of economic activities, MSC was deemed to be non-essential and was asked to shut down its tin smelting operations until June 14, 2021.
“lt is not known if further restrictions on MSC’s activities may be imposed in future phases of the lockdown.”
Raveenthiran said the group has appealed to the relevant government agencies to be allowed to operate during the lockdown.
But, “to date, we have not succeeded in getting any positive response from them. As such, we have no choice but to issue this notice of force majeure.
“Further, due to the uncertainties, the success and extent of the success of our appeal cannot be ascertained at this juncture. With the pandemic showing no sign of abatement here in Malaysia, we are not sure how long it will take for things to return to normal.”
MSC’s operations have been affected by pandemic-induced restrictions, including previous movement control orders.
Raveenthiran said the group had “tried its very best” to mitigate the restrictions’ effects “and maximise tin production at the expense of pushing our workforce, machinery and furnaces to a breaking point, which has caused even further delays in tin production.
“However, notwithstanding the difficulties faced in our operations, we had tried to produce as much tin as possible in order to minimise the disruption to the global supply.”
MSC added it would provide a notice to all stakeholders on the cessation of the force majeure “as soon as we are able to resume the level of smelting operations that will enable us to meet our contractual obligations”.
MSC makes up 7% of the global supply of tin, with an estimated 330,000 tonnes produced last year. International Tin Association data showed the group produced 224,000 tonnes last year.
According to MSC’s website, just one of its plants in Port Klang has the capacity to produce up to 60,000 tonnes of tin a year, and it processes its own mined raw materials and concentrates from countries such as Nigeria and the Democratic Republic of Congo.
The group was expected to benefit from the spike in tin prices, which had been hovering at the US$30,000 (RM123,600) per tonne bracket.
The upswing in prices of one of the world’s oldest trade commodities helped MSC turn around its financials in the first quarter ended March 31, 2021, as the group recorded a net profit of RM22.12 million compared with a loss of RM13.19 million a year ago.
This came amid higher average tin prices and tin production quantity in the mining segment, and a reversal of inventories written down in its smelting segment. Revenue for the quarter jumped 34% year-on-year to RM275.91 million.
MSC closed 1.4% lower at RM2.11 per share today, valuing the group at RM844 million. – The Vibes, June 8, 2021
