Global Cases

Supporting industry and everyday life with a borderless ferroalloy project

Malaysia

Manganese is an essential additive in steel production, contributing to increasing hardness and strength. Sumitomo Corporation started manganese business in the 1960s, by importing manganese ore to the Far East market. Since then, we have made an investment in a manganese ore mine in South Africa. Sumitomo Corporation has also invested in a manganese alloy smelter in Malaysia and these alloy products, which are made from manganese ore, are supplied worldwide. By ensuring stable supply of resources, we support industries and people’s livelihood, which contributes to the development of local communities and economies.

Manganese, an iron additive, used to strengthen iron and steel

Most iron used in common applications contains manganese. Manganese is a well-known additive used in iron and steel because the addition of only 10 kilograms of manganese to one ton of steel improves its strength and wear-resistance significantly. It has been said by some industry experts that the reason the Titanic broke apart so easily after hitting the iceberg was because the iron used for its hull did not contain manganese.

The amount of high-quality manganese ore in South Africa alone accounts for as much as 80% of the worlds known mineable reserves. Sumitomo Corporation started its business relationship with Assmang, a major manganese ore mine operating company, in the 1960s. Our relationship has continued to progress and in 1997, following the abolition of the apartheid regime, we jointly established an investment company for the production of ferroalloys in South Africa.

Stockyard to store coke, manganese ore and other materials

Launch of a new project under the partnership of three companies

China Steel Corporation, a Taiwanese steel manufacturer, has long been a business partner of the Metal Products Business Unit of Sumitomo Corporation. In 2008, a project was launched to establish a new business to manufacture manganese ferroalloys by partnering China Steel, which is engaged in steel manufacturing in Taiwan with no resources, with Assmang, a resource producer.

It was decided by the three companies to jointly establish a ferroalloy plant in the state of Sarawak in Malaysia, where our company's Metal Products Business Unit was already engaged in aluminum smelting. The reason Sarawak was selected was that, in addition to our familiarity with the region, it was expected that we would be able to use internationally competitive and clean electricity supplied by a newly constructed hydroelectric dam over a long period of time. Thus, in 2013, Sakura Ferroalloys Sdn. Bhd. was jointly established by Assmang (with a 54.36% share), Sumitomo Corporation (26.64%) and China Steel (19%), and construction of a plant was started.

Planting mango seedlings as part of the groundbreaking ceremony in 2014

Our capability, as an integrated trading company, to “connect regions and partners, and generate new value”

Manganese ore mined by Assmang is transported to Malaysia to be refined at the Sakura Ferroalloys plant, with the majority of the ferroalloys produced at the plant sold internationally by Assmang and Sumitomo Corporation and a portion consumed by China Steel.

Under this business model, Sumitomo Corporation serves as a facilitator, having connected regions, players and businesses in South Africa, Taiwan and Malaysia, among which there had been no connection, to create new value. Without the function of Sumitomo Corporation to connect these elements, it might have been less possible for Assmang and China Steel, two companies located far away from each other, to start a joint business, or to construct the manganese ferroalloy manufacturing plant in Malaysia. As the facilitator, we also made effective use of our expertise as an integrated trading company in negotiations with local administrative authorities and in other business transactions.

Steady supply of metallic raw materials

The furnaces 1 and 2 of Sakura Ferroalloys were completed in April and September 2016, respectively, and following their successful start-ups, both furnaces achieved full production in March 2017. The furnaces continue to operate at full production, producing 250,000 tons annually. Investments for improving their safety and environmental aspects are ongoing, and we will continue to maintain safe and environmentally friendly operations going forward.

As economic growth continues steadily in the Asian region, the demand for ferroalloys will also increase. Our one-stop approach to supplying ferroalloys, which covers everything from the securing of resources, the most upstream point in the value chain, to refinement and marketing, allows us to provide a stable supply of metallic raw materials so as to firmly support the development of industry and thus everyday life.