Hello Everyone

It is nice to see everyone again. Welcome to Continental Steel’s 40th Anniversary dinner.

We are extremely delighted to have your presence tonight to celebrate this special milestone with us. A special thanks goes to our overseas guests, for journeying to Singapore – we are deeply appreciative.

It has been 2 1/2 years since the Covid19 pandemic began. What started as a welcome break from our busy work-life routines gradually became a painful long-drawn affair of starts and stops. I am sure we all can agree that we hope the worse is behind us and that hopefully life can continue as per normal.

40 years is a long time. I was there in 1982 when this Company was founded by my late father, Leonard Soh, Yip Seong Ching and my uncle, Anthony Hong Weng. 

The company grew from a small shophouse in Macpherson, a warehouse in 5 Tuas Avenue, to where we currently are today at 100 Gul Circle. It has survived 3 recessions, 2 pandemics and 1 succession. 

Here we are 40 years later. It truly is a unicorn.

Covid19 notwithstanding, the following events in the last 5 years have significantly affected the steel industry:

1. The oil crisis of 2014 that caused the collapse of the oil and gas industry in Singapore. Shipyards and oil rig manufacturers were vacant for years. The problem persists till today and is unlikely to be solved as the world pivots towards renewable energy.

2. The post global financial crisis, when China, through fiscal stimulus intended to save jobs and pump prime the economy, continued producing copious amounts of steel. This caused a natural price cap for steel. And since these are state driven decisions, changes to these decisions take longer than if they were typically market driven. We can’t fight the lumbering giant.

3. Also, low interest rates. The low interest rate environment experienced over the last few years has had a perverse effect on the economy. While it served to stimulate borrowing, such borrowings were mainly channeled into real estate and financial assets.

   However, in a low interest rate environment, actual business risk premiums collapsed as well. What was once a risk-free rate of 5% would push business owners to demand an additional 5% of risk premium, culminating in gross profits between the traditional 7 – 12% range.

   With a risk-free rate close to 0%, business owners are compelled to accept any orders that produce margins because all other competitors are able to borrow in such a loose credit environment to compete for the same transaction. 1 – 2% is still infinitely better than 0.

   Likewise for capital investment, machines that were once unaffordable suddenly became so. As a result, there was a sudden influx of machines, causing significant overproduction that resulted in diminished prices of finished goods.

   Persistent delays are another side-effect of low interest rates. Project owners are no longer incentivized for the time value of their projects. Likewise for contractors, extending their working capital for an additional year or two is not rewarded.

   We have even seen instances where lease contracts were converted to sale and lease-back contracts. This misrepresentation of time value, especially with Covid19, is devastating.

It was an era where it was easy to acquire assets, to grow big, but very difficult to generate meaningful return on assets. Without generating meaningful returns, companies cannot hire, pay higher wages, invest in productivity, innovation and all the other good things that come along with healthy growth.

I hope this era is now drawing to a close. We are currently experiencing a very different dynamic in the world.

Overly liberal socio-economic and political policies have led to a highly integrated world. While many have benefitted from such integration, just as many have seen their professions and lives belittled by simple substitution of labour and land. This has caused an enormous divergence of wealth and hence a polarization of thought in our world today.

While theories of competitive advantage, free trade of labour and goods make sense, its application should have been more measured in span and time. Not every country is in the same phase of development either economically, politically or culturally. Shipyard workers cannot be retrained as IT specialist or private bankers overnight. In fact, what is the purpose of positioning an economy towards a situation where my private banker has a private banker? That certainly cannot be sound policy. 

This polarization has cause political turmoil around the world and has caused increased barriers to trade. The end result is a sudden jolt of inflation which I believe is here to stay.

So, here we are in an inflationary environment, in a contest of wills between open and autocratic countries. And to top it off, we have got Covid19 and the Russia – Ukraine war. These are certainly chaotic times.

Against this backdrop, how does a small company survive in a small country?

We keep our heads down, we keep improving our core business. That is, stocking and distribution of structural steel. 

We need to explore or invent ways to create true intrinsic value. Value that is defined in terms of time, energy, labour and even carbon.

Many of you are aware that we are the exclusive distributor for Celsius Hot Formed Hollow sections from Tata Steel.              
                                                 
Recently, we have introduced Histar Jumbo steel columns to Singapore with our first successful project Changi Airport Jewel. We have also updated our distribution agreement with Arcelor Mittal.

We have also introduced steel-fibre reinforced concrete into Singapore.

This year, our focus is on sustainability.

We are happy to announce the availability of green steel in Singapore. Continental Steel has just executed the first large inventory purchase of Arcelor Mittal’s XCarb® structural steel in Asia.

XCarb® steel is recycled from scrap steel through the Electric Arc Furnace process. The energy used in conversion derives from sustainable sources only. That is, solar and wind energies.

We are happy to be the first to introduce this into Asia.

We believe these initiatives will help us generate real value for our customers. Where value is created independent of pricing and market forces. It is no longer a case of timing the market to be able to buy low and sell high. 

This is Continental Steel’s philosophy going forward. Hopefully this allows us to carry forward for the next generations.

These ideas are nothing revelatory. They have been explored in the past; however, the present situation allows for more open adoption.

With this in mind, I would now like to take the opportunity to thank my wonderful staff. The very core and soul of the company, without which these 40 years would have been impossible. 

Logistics and warehousing led by Phoy Choo Seng and Ah Tan.

Accounts by Lim Chwee Wah.

Administration by the popular Katherine Lim.

Sales by Simon Koh and Eric Sim.

Keeping this orchestra together is my dear friend Ronnie Lim.

Knowing that they are my team gives me swagger in my step.

Suppliers make more money selling through this team than direct.

Talent is within us, it already exists. We simply must recognize it, admit it and trust it.

Ladies and gentlemen thank you for your attention. And now, it gives me great pleasure to unveil our new corporate identity. Please enjoy the video and have a lovely enjoyable evening.