A massive, multi-year industrial project pushes the construction sector forward in Sarawak

 

Far and away the largest driver of investment and construction for both the public and private sectors in Sarawak is an industrial project called the Sarawak Renewable Energy Corridor (SCORE). Covering a vast area of over 70,000 sq km, the site is one of five economic development corridors established nationwide and is largely responsible for elevating the state to become Malaysia’s highest recipient of foreign direct investment (FDI). In 2013 foreign companies approved more than $2bn in investments in Sarawak, much of this going to heavy industrial manufacturing projects. This wave of private investments is further supported by ongoing infrastructure spending being carried out by the state and federal governments, which themselves have launched a raft of large-scale construction projects, including a fleet of hydroelectric dams, two new industrial seaports, water supply and treatment plants, and hundreds of kilometres of new roads.

BIG BUSINESS: In the last two years or so, the bulk of privately funded construction projects in Sarawak have been bankrolled by foreign companies. In 2013, FDI accounted for $2.08bn, or 83%, of the country’s $2.52bn in proposed state-approved investments, according to the Malaysian Investment Development Authority (MIDA). This trend continued into 2014: Sarawak’s FDI figures through September easily eclipsed the 2013 annual total, with $2.67bn in approved investments out of the state’s $3.06bn total inflow, making it the highest recipient of FDI in the country.

Most of the big-ticket items are located in the Samalaju Industrial Park (SIP), which attracted 21 companies with total approved investments of RM34.5bn ($10.5m) by the end of 2013, according to MIDA. The largest of these projects, most of which are centred around production of basic metals, is the massive Press Metal Bintulu factory, which produces up to 320,000 tonnes per annum (tpa) of aluminium ingots and billets for export. After completing the first two stages of development and firing up operations in 2013, the firm announced in January 2015 that it was allocating another RM2bn ($608.4m) to the facility, bringing the total investment to RM5.5bn ($1.7bn). The initial stage of construction for the plant’s third developmental phase is set for completion by the fourth quarter of 2015, and stage two by the first quarter of 2018. When the expansion is finished, Press Metal will have raised its smelting capacity from 440,000 tpa to 766,000 tpa, making it the largest smelter in South-east Asia.

The second major construction project completed in the heavy industry node is the first two stages Tokuyama Malaysia’s new polycrystalline silicone (polysilicon) plant, which started operations in September 2013. The initial RM2.98bn ($906.5m) construction stages were carried out on an engineering, procurement and construction (EPC) contract signed in October 2010 with Japanese construction firm Chiyoda Corporation, yielding a capacity of 6000 tpa. Chiyoda then won a second, RM3.72bn ($1.13bn) EPC contract in February 2012 to build another plant with a capacity of 13,800 tpa, to be completed in 2015.

WORK IN PROGRESS: Following close on the heels of Press Metal Bintulu and Tokuyama are Samalaju’s two other pioneer investors, OM Materials and Pertama Ferroalloys, both of which are well into the construction stages of their own projects. Site clearing and other early construction work was also moving forward for a number of other large project metal and silicone manufacturing plants as of late 2014.

Construction on OM Materials’ massive new $400m manganese and ferrosilicon alloy smelter was initiated in 2013 to build a new plant with a projected annual production capacity of 575,000 tonnes of ferro alloy, consisting of 265,000 tpa of manganese ferro alloys and 310,000 tpa of ferrosilicon alloys. The company signed Sinohydro Corporation on to a turnkey EPC contract in February 2013, along with Sinosteel Jilin Electro-Mechanical Equipment, which was hired as a subcontractor for the plant’s construction and commissioning. The contract covers the design, civil works, procurement, manufacturing and transport, as well as installation, commissioning and testing of all equipment, facilities and associated infrastructure. As of September 2014, construction of the initial phases had been completed, with full commercial production expected to begin by the second quarter of 2015.

Hong Kong-based Pertama Ferroalloys, for its part, has invested RM490m ($149m) over the course of 2013 to construct a manganese ferroalloy smelting plant, on which it broke ground in 2012. Local contractor KBB Engineering secured a RM171m ($52m) contract from Pertama for the initial stage of construction, with commercial operations set to commence by the third quarter of 2015. The second phase of construction is scheduled to begin in the first quarter of 2016, at which point the $300m plant will have an annual production capacity of 120,000 tonnes of silicomanganese; 54,000 tonnes of medium- and low-carbon ferromanganese; 60,000 tonnes of ferrosilicon; and 200,000 tonnes of manganese ore sinter.

A second ferroalloy plant is also under way at the SIP, with construction work on the $328m Sakura Ferroalloys facility set to finish by October 2015, according to statements made by the project’s general manager, Chris Rowe, to the local press in February 2015. A tripartite joint venture between South Africa’s Assmang, Japanese global miner Sumitomo and Taiwan’s integrated steel manufacturer China Steel Corporation, the plant is expected to have an initial production run of about 169,000 tonnes of manganese alloy per year upon start-up. Smelter engineering firm Metix, a subsidiary of Germany’s SMS Group, signed an EPC to carry out the construction, which includes building two 81-MVA ferromanganese and silico-manganese closed submerged arc furnaces, gas cleaning, raw material handling, product handling, infrastructure and associated services. As of February 2015, the plant had reached 65% completion and expected to reach full commercial production by mid-2016.

Other projects at various stages of construction include Asia Advanced Materials’ RM720m ($219m) metallic silicon plant, Cosmos Chemicals’ 25,000-tonnes-per-year polysilicon facility, and a RM32.1m ($9.8m) electrode paste plant being built by Norway’s Elkem Carbon. Iwatani-SIG Industrial Gases also broke ground on a RM13m ($4m) air separation unit in 2014, having already finished a RM18m ($5.5m) plant to supply industrial gases such as liquid oxygen, argon, carbon dioxide and nitrogen to customers within the SIP.

Taken as a whole, these ongoing projects place Sarawak squarely in the centre of the country’s growing basic metal products sector, which was Malaysia’s third-largest recipient of investment from January-September 2014, with $2.91bn of total proposed capital investments, according to MIDA data.

PORT: Bintulu Port Holdings is also building the new RM1.8bn ($547.6m) Samalaju Port to cater to the new traffic brought on by manufacturers. Initial contracts for the interim and first development phases were tendered in 2012 and construction began in 2013. A RM194m ($59m) contract to build interim port facilities, including two barge berths and a roll-on/roll-off ramp, was also awarded to TRC Synergy in June 2012 and completed in 2013. Tenders awarded since include: a RM437m ($132.9m) deal for dredging and reclamation awarded to Integrated Marine Works in 2012; a RM300m ($91.3m) deal to build the breakwater, won by China Harbour Engineering Company in July 2013; and two others in September 2014: a RM157m ($47.8m) contract to design and build a conveyor system, awarded to Muhibbah Engineering, and a RM40.4m ($12.3m) contract won by Samado to build an administrative building, wharf, electrical works and navigation systems. Another RM70m ($21.3m) package is expected to be awarded in 2015 for supplying the wharf’s last unloading components, including a pneumatic suction loader and three units of level luffing cranes.

SPREADING THE WEALTH: While the majority of large private construction builds and supporting infrastructure have so far been centred around SIP, other growth nodes such as Tanjung Manis and Mukah are likely to see increasing activity in the coming years. The heart of the former is the Tanjung Manis Halal Hub, which is already hosting Taiwanese seafood processor Sea Party International (SPI). The company finished construction of the initial RM318m ($96.7m) phase of its RM2bn ($608.4m) factory and support infrastructure in 2013, including 18 tilapia breeding ponds, 24 nursery ponds and supporting infrastructure. The second phase moves into the production of gelatine from tilapia scales, bones and skin, organic prawn farming and vendor development programmes. In all, SPI has committed investments through six subsidiaries: Sea Party Microbes, Sea Party Aquaculture, Sea Party Technology, Sea Party Industry, Sea Party Biotech Industry and Sea Party Technology Research & Development Centre.

To support future growth, other infrastructure projects were awarded, including an upgrade to the Tanjung Manis deepwater port in 2010 and a water supply project that began in October 2013 when local construction firm Hock Seng Lee won an RM87m ($26.5m) contract to build a water pumping station.

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The Report: Sarawak 2015

Construction & Real Estate chapter from The Report: Sarawak 2015

The Report: Sarawak 2015

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