Posted on 21 November 2007

 

Source: The Star, November 21, 2007

Steel pipe maker Hiap Teck Venture Bhd group has obtained certification from the American Petroleum Institute (API), which allows the company to sell its pipes to the oil and gas (O&G) industry.

 

The award of the certification was stated on the website of the US-based institute on Monday.

 

API provides a list of the companies that it certifies, and the list shows that Hiap Teck's wholly owned subsidiary, Alpine Pipe Manufacturing Sdn Bhd, has earned endorsement of its product.

 

The institute is a national trade association representing all segments of the O&G industry in the United States. It sets the standards for equipment used in the industry, and issues certification to companies whose products meet those standards.

 

Up till now, Hiap Teck had been selling its pipes to various industries, principally the building and water sectors, but could not sell its products to the O&G industry until it received API certification.

 

"Hiap Teck started marketing its pipes to the O&G industry last week in anticipation of getting the certification," an analyst said.

 

Currently, the older of the company's two plants was operating at full capacity and its new plant is running at about 60% capacity. It would be producing API-certified pipes from the new plant, the analyst said.

 

He said the company would use all the spare capacity at the new plant for O&G pipes because these yielded higher profit margins than pipes for the water sector.

 

The analyst expects Hiap Teck to be able to obtain a gross profit margin of about 20% for pipes for the O&G sector, which is double the 10% margin for products sold to the water segment.

 

Companies that make pipes for the O&G sector could fetch gross profit margins of 25% to 30% but being a new player, Hiap Teck would be targeting a lower margin of about 20%, he said.

 

The company would be targeting markets in the Middle East and Asean for its API-certified pipes, the analyst added.

 

Hiap Teck has a good track record of exports since much of its existing output of pipes is exported to several markets, including developed countries like Australia.

 

European countries generally follow the standards set by Consultants Europe, which assesses the hazards and carries out tests for its CE marks. Hiap Teck has also applied for CE certification, which it expects to secure soon.

 

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