'Nimble' steel maker sees uptick in business

One of AnnAik's waste-water treatment plants in Zhejiang province in eastern China. It switched to this area of business 10 years ago.
One of AnnAik's waste-water treatment plants in Zhejiang province in eastern China. It switched to this area of business 10 years ago.PHOTO: ANNAIK

Singapore-listed AnnAik, a steel products maker and engineering service provider, says its business in China has picked up despite the slowdown. The uptick is thanks to a structural shift it made several years ago.

For 20 years - from 1993 to 2013 - it had factories in the mainland making steel products. But surging labour costs - among other operating costs that kept rising every year - made it non-viable to keep its factories there.

"China is suffering from an overproduction in the steel industry - it's cut-throat competition in the sector. They like to say: 'You're better off selling vegetables than selling steel these days'," says executive chairman and chief executive James Ow.

So, two years ago, Mr Ow moved his manufacturing operations to Malaysia, where labour costs were less than half of those in China, and electricity costs 30 per cent cheaper.

AnnAik's business in China now is in the area of waste-water treatment. It started this 10 years ago when treating industrial waste water was a relatively new concept in China. "From there, we moved into waste-water treatment for the rural villages, where it is a huge untapped market," says Mr Ow in Mandarin.

AnnAik now has 25 related companies operating treatment plants in various parts of China. The plan is to expand to 100 companies within this year, to every province in the mainland. "We are using it to subsidise our steel hardware business," Mr Ow quips.

To him, the weakening yuan is not that big an issue.

"Most importantly, we must have a viable business that brings in the revenue. If you don't make money, there's no point in talking about exchange rate losses. We keep the money in China and use it for investment and expansion so we don't suffer."

Chong Koh Ping

A version of this article appeared in the print edition of The Sunday Times on January 17, 2016, with the headline ''Nimble' steel maker sees uptick in business'. Print Edition | Subscribe