This article first appeared in The Edge Financial Daily, on May 27, 2016.

KUALA LUMPUR: The recent increase in international steel prices has enabled Ann Joo Resources Bhd to clear up its inventory that has been piled up since last year due to the influx of cheap imports from China.

Its group managing director Datuk Lim Hong Thye expects the impact of the stronger steel prices to be reflected in Ann Joo’s earnings from the second quarter ending June 30, 2016 onwards.

“The upturn [in steel prices] is what we are waiting to clear our inventory,” Lim told the media after the group’s annual general meeting yesterday.

“But of course, being a domestic steel mill operator, Ann Joo’s performance will still depend on the China dumping factor, and whether the government would give its support to the [local steel] industry,” he added.

Ann Joo’s share price staged a strong rally in March, almost doubled from 62.5 sen in early March to RM1.24 — the highest closing since October 2014. It closed at RM1.01 yesterday.

Lim, however, noted that steel prices had normalised in May after the two-month rally, and Ann Joo’s operation would remain profitable.

“We do not foresee that steel prices would fall to a level like last year, but even if it drops by another 10%, we are still comfortable,” he said.

Lim explained that Ann Joo’s steel manufacturing involves a combination of electrified arc furnace and blast furnace, and that enabled the group to enjoy the flexibility in terms of sourcing raw material.

Lim believes that steel demand for the second half of FY16 would be higher due to the commencement of government infrastructure projects.

“Demand for quality premium steel bar is expected to increase. In fact, we are already seeing orders coming in for projects like TRX (Tun Razak Exchange),” he said.