British steel plan under threat<\/p>\n
By Antony Barnett<\/p>\n
LONDON: Turmoil in Asian financial markets is threatening to
\nscupper a flagship US$800 million dollars investment plan by
\nBritish Steel.<\/p>\n
The company disclosed during the summer its intention to take
\na majority stake in an Indonesian project to build a large steel
\nmill to supply Southeast Asia. The investment was seen as central
\nto its efforts to reduce its dependence on UK production.<\/p>\n
But the economic crisis sweeping the region has forced the
\ncompany to rethink its long-harbored ambition to break into the
\nSoutheast Asian market.<\/p>\n
The move would have helped British Steel reduce its
\nsensitivity to movements of sterling on the foreign exchange
\nmarkets. The rise in the pound over the past year has wiped more
\nthan pounds 100m ($160 million) off its profits.<\/p>\n
According to sources close to British Steel, the board is
\n"rethinking the numbers to see if they can still get them to add
\nup".<\/p>\n
City analyst Terry Sinclair, of Salomon Brothers, who urged
\ninvestors to buy British Steel last week, welcomed the move.
\nHe said: "The long-term argument for buying in Asia is robust.
\nWith currency coming down, you are buying with strong money. But
\nBritish Steel was building on a greenfield site and would not
\nhave had that advantage. The market will be pleased if British
\nSteel now avoids the region."<\/p>\n
The steel-maker, which is reporting its half-year results in
\njust over two weeks time, would not officially comment. It
\nannounced this summer that it would take a majority stake in a
\nsteel mill to be developed in partnership with PT Bakrie &
\nBrothers, the Indonesian conglomerate.<\/p>\n
If the project went ahead it would add about 1 million tons of
\nsteel a year to the company's present output of 15 million tons.<\/p>\n
While the fall in the Indonesian currency affects the
\nfinancing of the new mill, British Steel's real concern is that
\nfinanciers will no longer back infrastructure and construction
\nprojects that would have produced orders for the plant's output.<\/p>\n
Last Friday, the International Monetary Fund announced a $23
\nbillion package of financial aid for Indonesia. But, as a
\ncondition of the rescue package, the Indonesian government must
\ncut back on investments in state-owned industries and curtail
\nprestigious public sector projects.<\/p>\n
The car market in the region, which depends on steel, has also
\ngone into free-fall. While the car industry in Southeast Asia
\ngrew by 20 percent a year between 1993 and 1995, this year sales
\nare forecast to fall by some 5 percent.<\/p>\n
The turmoil in Asia will also hit Shell, which this week
\nreports its third-quarter results. The oil company has
\nsignificant operations in the region and City analysts will be
\nlooking at how refining and marketing are performing in the Far
\nEast and Asian Pacific.<\/p>\n
One analyst said he expected the impact of Southeast Asian
\ncurrency devaluations to have hit Shell "quite hard".<\/p>\n
Apart from the obvious impact on Shell's foreign currency
\nholdings, devaluations of the currencies of many Pacific Rim
\ncountries will have put margins in the region -- which were
\nalready weak -- under further pressure.<\/p>\n
-- The Observer<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/british-steel-plan-under-threat-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }