BRC Asia has announced that its replacement of a steel-supply contract with a cheaper deal amid sliding steel prices has enabled it to save at least S$25 per tonne – even after taking into account the S$2.1 million it had to pay to compensate the first supplier.

In its regulatory filing in response to queries from the Singapore Exchange (SGX) on Monday (Dec 4), the mainboard-listed steel reinforcement solutions provider described the settlement sum to Shanghai Emetal Hong Energy as “commercially justifiable”.

BRC also stated that the move did not prejudice the interests of the company and its minority shareholders.

Shanghai Emetal Hong Energy is an associate of BRC’s controlling shareholder.

The price per tonne for the steel deformed bars in the purchase contract with Shanghai Emetal Hong Energy was based on the prevailing market price, but the price of steel bars fell substantially in the six months before the scheduled delivery by October.

BRC said: “Such market conditions presented the company with an opportunity to negotiate more advantageous terms with another supplier.”

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The S$2.1 million compensation was “outweighed” by the cost savings of at least S$25 per tonne eventually achieved by the company as a result, without compromising the reliability of its supply chain, added BRC.

The aggregate value of all transactions entered into with Shanghai Emetal Hong Energy in FY2023 (including the settlement amount) totalled approximately S$2.1 million, representing less than 3 per cent of the group’s audited net tangible assets for FY2022, BRC stated.

Thus, it did not require shareholder approval based on listing rules.

The counter closed down S$0.01 or 0.6 per cent at S$1.73 on Monday, before this response to SGX’s queries was published.