Written by Joseph Chin of theedgemalaysia.com Wednesday, 09 February 2011 11:17
KUALA LUMPUR: Lembaga Tabung Haji disposed of one million shares of Malaysia Steel Works (KL) Bhd on Jan 31 and Feb 2, reducing its stake to 14.026 million shares or 6.66%.
A filing with Bursa Malaysia showed the pilgrimage fund had disposed of 500,000 shares on Jan 31 and another 500,000 shares on Feb 2.
The share price closed at RM1.28 on Jan 31 and RM1.30 on Feb 2.
Masteel shares had attracted attention after the company and KUB MALAYSIA BHD [] (KUB) proposed to build and operate a 100km inter-city rail transit system in Iskandar Malaysia, which will connect to the MRT line from Singapore.
To recap, the companies said on Jan 19, 2011, the project could cost over RM1 billion, and consists of up to 25 commuter stations in major towns in the Iskandar Malaysia region in the initial stage.
"The operation of the inter-city rail transit shall be based on a 25-year concession," they said in the statement after the signing of the head of joint venture agreement to undertake the project.
Masteel and KUB would hold 60% and 40% equity stakes respectively in the JV company, Metropolitan Commuter Network Sdn Bhd. The project would be undertaken in three phases and completed within 24 months from project commencement.
The building of the rail transit infrastructure would also be funded by project financing under the Public-Private Partnership scheme (PPP).
Showing posts with label Steel Maker. Show all posts
Showing posts with label Steel Maker. Show all posts
Wednesday, February 9, 2011
Friday, January 14, 2011
Coal shortage not affecting locCoal shortage not affecting local steel millsal steel mills
By RISEN JAYASEELAN and YVONNE TAN starbiz@thestar.com.my
PETALING JAYA: The reduced supply of coking coal, a key raw material used by steel mills, is not likely to affect local steel makers which mostly use scrap metal in their operations.
Australia, which supplies more than half of the world's coal exports, has been hit with massive floods that have hurt the production of the commodity, which is mostly sold to Asia's steel companies.
However, Malaysian steel makers will still have to contend with slightly higher scrap metal prices.
According to some estimates, scrap metal prices have risen following the uptrend in coking coal prices to about US$500 per tonne now from around US$400 per tonne in December.
A file picture shows a man working at a steel mill in Penang. Steel product prices are expected to soften slightly in the coming weeks. But Kinsteel Bhd chief executive officer Datuk Henry Pheng reckons that the problem in Australia will create a shortage of steel products.
“With the slowdown in the supply of coking coal, we are expecting a shortage of steel. This bodes well for local producers who don't rely on coking coal as their raw material,” he said.
Kinsteel uses scrap metal as its main raw material. Pheng declined to comment on how this development would impact Kinsteel's margins.
Analysts said the outlook for local steel makers depended on whether they could pass on the slight increase in scrap metal prices to their end customers.
“The good news is that steel prices are on an uptrend. That bodes well for steel makers, despite their higher raw material costs. If steel prices keep going up, local steel companies could see a positive impact on their margins, notwithstanding the rise in raw materials,” said an analyst.
However, OSK Research steel analyst Ng Sem Guan said in a recent report that steel product prices were expected to “soften slightly” in the coming weeks largely due to a slowdown in construction activities in view of the upcoming Lunar year celebrations.
“Thus this (higher-priced products) may not significantly benefit local mills for now,” he said, without giving estimations.
As a result, he is keeping a “neutral” stance on the sector.
Meanwhile, another analyst said local steel companies were poised to benefit in the long term from the implementation of mega construction projects under the Economic Transformation Programme (ETP).
“The construction sector will be in a better position to absorb any additional cost as construction players themselves will be able to factor in the higher cost when bidding for the projects under the ETP,” said an analyst.
The ETP aims to transform the nation into a high-income nation. Some of the projects to be carried out include the RM36bil mass rapid transit network and Shell Malaysia's RM5.1bil investment to upgrade or build facilities in upstream, midstream and downstream activities.
PETALING JAYA: The reduced supply of coking coal, a key raw material used by steel mills, is not likely to affect local steel makers which mostly use scrap metal in their operations.
Australia, which supplies more than half of the world's coal exports, has been hit with massive floods that have hurt the production of the commodity, which is mostly sold to Asia's steel companies.
However, Malaysian steel makers will still have to contend with slightly higher scrap metal prices.
According to some estimates, scrap metal prices have risen following the uptrend in coking coal prices to about US$500 per tonne now from around US$400 per tonne in December.
A file picture shows a man working at a steel mill in Penang. Steel product prices are expected to soften slightly in the coming weeks.“With the slowdown in the supply of coking coal, we are expecting a shortage of steel. This bodes well for local producers who don't rely on coking coal as their raw material,” he said.
Kinsteel uses scrap metal as its main raw material. Pheng declined to comment on how this development would impact Kinsteel's margins.
Analysts said the outlook for local steel makers depended on whether they could pass on the slight increase in scrap metal prices to their end customers.
“The good news is that steel prices are on an uptrend. That bodes well for steel makers, despite their higher raw material costs. If steel prices keep going up, local steel companies could see a positive impact on their margins, notwithstanding the rise in raw materials,” said an analyst.
However, OSK Research steel analyst Ng Sem Guan said in a recent report that steel product prices were expected to “soften slightly” in the coming weeks largely due to a slowdown in construction activities in view of the upcoming Lunar year celebrations.
“Thus this (higher-priced products) may not significantly benefit local mills for now,” he said, without giving estimations.
As a result, he is keeping a “neutral” stance on the sector.
Meanwhile, another analyst said local steel companies were poised to benefit in the long term from the implementation of mega construction projects under the Economic Transformation Programme (ETP).
“The construction sector will be in a better position to absorb any additional cost as construction players themselves will be able to factor in the higher cost when bidding for the projects under the ETP,” said an analyst.
The ETP aims to transform the nation into a high-income nation. Some of the projects to be carried out include the RM36bil mass rapid transit network and Shell Malaysia's RM5.1bil investment to upgrade or build facilities in upstream, midstream and downstream activities.
Tuesday, January 11, 2011
Asian steelmakers face input cost rise, eye price hikes
Written by Reuters Tuesday, 11 January 2011 17:02
MUMBAI: Japanese and Korean steelmakers are seen posting weak December quarter profits as tepid demand and rising raw material costs hurt margins, but mills in China and India could outperform, helped by stronger domestic growth, according to a Reuters report on Tuesday, Jan 11.
A reduction in stockpiles in China and rise in global steel prices in recent months have helped lift prices in Asia, and companies are expected to push through further price hikes during the first half of the year to cover rising input costs.
Steel mills in Asia are staring at cost increases following floods at Australian coal mines, forcing them to scour for new suppliers, and coking coal prices are expected to rise a fifth to $300 a tonne, the highest in nearly two years.
South Korea's POSCO , the world's No.3 steelmaker, will be the first major Asian producer to report quarterly earnings on January 13 and is likely to report among the biggest declines in earnings. POSCO is forecast to post a 40 percent drop in operating profit to 956 billion won, according to the consensus forecast of 13 analysts polled by Thomson Reuters I/B/E/S. However, earnings could miss those forecasts after POSCO cut its outlook in October. Starmine SmartEstimates, which gives greater weight to recent forecasts from top-ranked analysts, points to a 17 percent downside surprise and an operating profit of around 793 billion won.
Analysts believe POSCO's profit may have bottomed out in the fourth quarter, and would recover in the first quarter, helped by higher steel prices globally and consumption of cheaper raw materials purchased in the preceding quarter.
"I do not expect POSCO earnings to rebound sharply, but they would post gradual recovery in the first half," said Kim Mi-hyun, an analyst at NH Investment & Securities in Seoul.
"The key is raw materials prices. Unless they rise sharply, it would not be difficult for POSCO to pass along raw materials costs on to customers in the second quarter, when there is high seasonal demand," she said.
Japanese steel mills, which supply to some of the world's top car makers, are also expected to report profit declines, hurt by the yen's ascent, a slide in domestic car sales and weakness in export prices in Asia, their main export region.
"The yen's strength was a pain, although buoyant exports of specialty steel to the U.S. on the back of strong car sales there may have helped raise output at Nippon Steel and Kobe Steel," said Kazuhiro Harada, analyst at Nikko Cordial. Profits at Nippon Steel Corp are seen down 8 percent in the December quarter according to the average of two analysts' forecasts, while JFE Holdings earnings could slip 41 percent in the period, based on the average of three analysts. Most Japanese analysts do not forecast quarterly profits.
Sumitomo Metal Industries Ltd , Japan's third-biggest steelmaker, could also slash pretax profit estimate for the year to March 2011 after trouble at a blast furnace cut output and affiliate Sumco posted large losses.
PROFITS UP IN CHINA, INDIA China's Baosteel , the world's No.2 steelmaker, is forecast to post a modest 7 percent rise in quarterly net profit, according to the average of 21 analysts polled by Thomson Reuters I/B/E/S, far less spectacular than a 12-fold increase in profit in the first six months of the year. The figures are derived from subtracting nine month profits from full-year forecasts.
"In the fourth quarter it is clear that costs have grown faster than steel prices," said Helen Lau, steel analyst with UOB Kay Hian in Hong Kong.
With Beijing tightening monetary policy and iron ore prices at high levels, analysts are pessimistic about the year ahead for the country's steelmakers.
"I don't see things improving given there will be no fundamental improvement in steel demand, with CONSTRUCTION [] of low-cost housing unable to offset overall decline in the property market. Raw materials prices will continue to increase as demand recovers over the rest of the world," Lau said.
Preliminary figures showed its net profit in 2010 reached 12.81 billion yuan up 120 percent, Baosteel said on Monday. [ID:nTOE709062]
The company said it will raise its key product prices for the second straight month in February, driven more by rising costs than a pickup in demand. [ID:nTOE70A01E]
Indian steel firms are seen posting higher volumes during the quarter, helped by continuing demand from construction and auto sectors, but rising input costs may hurt profitability, analysts said.
Tata Steel , the world's No. 7 steelmaker, is forecast to more than double profit from a year earlier, when it had posted its first profit after the global demand slump.
However, margins at European unit Corus, which accounts for two-thirds of its global capacity, are likely to be squeezed due to lower steel prices in Europe and higher raw material costs.
Oct-Dec Yr ago Reporting date Baosteel (yuan) 2.26 bln 2.11 bln end-March POSCO (won) 0.96 trln 1.59 trln Jan 13 Nippon Steel(yen) 39.95 bln 43.32 bln Jan 28 JFE (yen) 30.90 bln 53.10 bln Jan 28 Tata Steel(rupees) 11.09 bln 4.32 bln mid-Feb
Notes: For Baosteel and Tata Steel, estimates are net profit; for POSCO, estimates are operating profit; for Nippon Steel and JFE, estimates are pretax recurring profit. ($1=1125 Won=6.62 Yuan=45.4 rupees) - Reuters
MUMBAI: Japanese and Korean steelmakers are seen posting weak December quarter profits as tepid demand and rising raw material costs hurt margins, but mills in China and India could outperform, helped by stronger domestic growth, according to a Reuters report on Tuesday, Jan 11.
A reduction in stockpiles in China and rise in global steel prices in recent months have helped lift prices in Asia, and companies are expected to push through further price hikes during the first half of the year to cover rising input costs.
Steel mills in Asia are staring at cost increases following floods at Australian coal mines, forcing them to scour for new suppliers, and coking coal prices are expected to rise a fifth to $300 a tonne, the highest in nearly two years.
South Korea's POSCO , the world's No.3 steelmaker, will be the first major Asian producer to report quarterly earnings on January 13 and is likely to report among the biggest declines in earnings. POSCO is forecast to post a 40 percent drop in operating profit to 956 billion won, according to the consensus forecast of 13 analysts polled by Thomson Reuters I/B/E/S. However, earnings could miss those forecasts after POSCO cut its outlook in October. Starmine SmartEstimates, which gives greater weight to recent forecasts from top-ranked analysts, points to a 17 percent downside surprise and an operating profit of around 793 billion won.
Analysts believe POSCO's profit may have bottomed out in the fourth quarter, and would recover in the first quarter, helped by higher steel prices globally and consumption of cheaper raw materials purchased in the preceding quarter.
"I do not expect POSCO earnings to rebound sharply, but they would post gradual recovery in the first half," said Kim Mi-hyun, an analyst at NH Investment & Securities in Seoul.
"The key is raw materials prices. Unless they rise sharply, it would not be difficult for POSCO to pass along raw materials costs on to customers in the second quarter, when there is high seasonal demand," she said.
Japanese steel mills, which supply to some of the world's top car makers, are also expected to report profit declines, hurt by the yen's ascent, a slide in domestic car sales and weakness in export prices in Asia, their main export region.
"The yen's strength was a pain, although buoyant exports of specialty steel to the U.S. on the back of strong car sales there may have helped raise output at Nippon Steel and Kobe Steel," said Kazuhiro Harada, analyst at Nikko Cordial. Profits at Nippon Steel Corp are seen down 8 percent in the December quarter according to the average of two analysts' forecasts, while JFE Holdings earnings could slip 41 percent in the period, based on the average of three analysts. Most Japanese analysts do not forecast quarterly profits.
Sumitomo Metal Industries Ltd , Japan's third-biggest steelmaker, could also slash pretax profit estimate for the year to March 2011 after trouble at a blast furnace cut output and affiliate Sumco posted large losses.
PROFITS UP IN CHINA, INDIA China's Baosteel , the world's No.2 steelmaker, is forecast to post a modest 7 percent rise in quarterly net profit, according to the average of 21 analysts polled by Thomson Reuters I/B/E/S, far less spectacular than a 12-fold increase in profit in the first six months of the year. The figures are derived from subtracting nine month profits from full-year forecasts.
"In the fourth quarter it is clear that costs have grown faster than steel prices," said Helen Lau, steel analyst with UOB Kay Hian in Hong Kong.
With Beijing tightening monetary policy and iron ore prices at high levels, analysts are pessimistic about the year ahead for the country's steelmakers.
"I don't see things improving given there will be no fundamental improvement in steel demand, with CONSTRUCTION [] of low-cost housing unable to offset overall decline in the property market. Raw materials prices will continue to increase as demand recovers over the rest of the world," Lau said.
Preliminary figures showed its net profit in 2010 reached 12.81 billion yuan up 120 percent, Baosteel said on Monday. [ID:nTOE709062]
The company said it will raise its key product prices for the second straight month in February, driven more by rising costs than a pickup in demand. [ID:nTOE70A01E]
Indian steel firms are seen posting higher volumes during the quarter, helped by continuing demand from construction and auto sectors, but rising input costs may hurt profitability, analysts said.
Tata Steel , the world's No. 7 steelmaker, is forecast to more than double profit from a year earlier, when it had posted its first profit after the global demand slump.
However, margins at European unit Corus, which accounts for two-thirds of its global capacity, are likely to be squeezed due to lower steel prices in Europe and higher raw material costs.
Oct-Dec Yr ago Reporting date Baosteel (yuan) 2.26 bln 2.11 bln end-March POSCO (won) 0.96 trln 1.59 trln Jan 13 Nippon Steel(yen) 39.95 bln 43.32 bln Jan 28 JFE (yen) 30.90 bln 53.10 bln Jan 28 Tata Steel(rupees) 11.09 bln 4.32 bln mid-Feb
Notes: For Baosteel and Tata Steel, estimates are net profit; for POSCO, estimates are operating profit; for Nippon Steel and JFE, estimates are pretax recurring profit. ($1=1125 Won=6.62 Yuan=45.4 rupees) - Reuters
Tuesday, January 4, 2011
Power price hike may erode steel millers' profit
In view of the burgeoning fuel costs, RHB Research says Malaysia's steel millers' profit margin is at risk of being eroded.
The temporary coking coal supply disruption from Australian floods is unlikely to have a big impact on steel millers in Malaysia but analysts say the impending price hike in electricity and natural gas tariff will erode their profits.
RHB Research Institute analyst Toh Woo Kim said most steel millers in Malaysia use electric arc furnaces except for Ann Joo Resources Bhd.
"But then, Ann Joo had already secured their coke supply. So, this temporary coking coal supply disruption from Australia is unlikely to have a big impact," Toh added.
He is maintaining a "market perform" call on Ann Joo's shares and values the stock at RM3.14.
Yesterday, Ann Joo's shares rose 1 sen to close at RM2.92.
Toh said he is not too bullish on the steel sector as steel prices are closely tracked and no millers can really charge a premium.
"World prices of crude oil, natural gas and coal are already on the rise. So, it is really up to the government how they want to implement the reduction in subsidies," Toh said.
He added that steel millers had appealed to the government to consider their competitiveness against rival neighbouring countries when deciding on electricity and natural gas tariff hikes.
Toh said they had appealed to extend off-peak electricity pricing to the weekends and not just limit it to night time.
In view of the burgeoning fuel costs, Toh said Malaysia's steel millers' profit margin is at risk of being eroded.
OSK (Asia) Securities analyst Ng Sem Guan has a "neutral" take on the local steel sector.
"Demand for steel is still sluggish as the implementation of mega projects has yet to be seen. Also, raw material prices have been inching up," he said.
Ng gave an example of steel scrap, which is usually priced higher in the winter as it costs more to collect and ship out the scrap in the cold.
On Ann Joo, Ng said he is maintaining a "neutral" call and values the stock at RM2.76.
He said Ann Joo has yet to operate its blast furnace and is still using electric arc furnace to make steel.
"Even when Ann Joo starts up their blast furnace, they'll be sourcing coke, which is actually a finished product of coking coal. They'll source the coke from China and Japan. Australia does not export coke."
Australia, the world's second biggest exporter of thermal coal, has been hit by devastating floods over an area the size of France and Germany combined.
Thermal coal is used to fuel power plants while coking coal is used by steel mills to fuel their furnaces. Australia is also the world's biggest exporter of coking coal.
Coal prices for delivery in March have already risen to some US$130 (RM398) a tonne, according to Bloomberg data. It was around US$100 (RM306) a tonne at the start of December last year.
TNB (5347) purchases about 17 per cent of its coal from Australia. The bulk of its coal comes from Indonesia.
Currently, about 40 per cent of Malaysia's generation capacity comes from coal-fired plants.
"Thermal coal prices have been steadily increasing over the past few weeks due to the overall demand and supply disruptions, which has resulted with the tightness in the market.
"The massive flood situation in Australia is the latest supply disruption for seaborne coal trade and it is expected that thermal coal prices will be affected by the situation," TNB said in reply to questions from Business Times.
On December 10, TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the group was still able to absorb the increase in fuel prices but should they continue to rise, the power company's bottom line will definitely be hurt.
"There is no way we are able to sustain and absorb these additional costs," he had said then, noting that a revision request will be made to the government.
But analysts don't think the government would agree to a tariff hike as it could be preparing for an early general election, as widely expected.
"I'm sure that TNB will continue to make their case but I think they will only get it after the election," said OSK Research's head of research Chris Eng.
http://www.btimes.com.my/Current_News/BTIMES/articles/xtahan/Article/index_html
RHB Research Institute analyst Toh Woo Kim said most steel millers in Malaysia use electric arc furnaces except for Ann Joo Resources Bhd.
"But then, Ann Joo had already secured their coke supply. So, this temporary coking coal supply disruption from Australia is unlikely to have a big impact," Toh added.
He is maintaining a "market perform" call on Ann Joo's shares and values the stock at RM3.14.
Toh said he is not too bullish on the steel sector as steel prices are closely tracked and no millers can really charge a premium.
"World prices of crude oil, natural gas and coal are already on the rise. So, it is really up to the government how they want to implement the reduction in subsidies," Toh said.
He added that steel millers had appealed to the government to consider their competitiveness against rival neighbouring countries when deciding on electricity and natural gas tariff hikes.
Toh said they had appealed to extend off-peak electricity pricing to the weekends and not just limit it to night time.
In view of the burgeoning fuel costs, Toh said Malaysia's steel millers' profit margin is at risk of being eroded.
OSK (Asia) Securities analyst Ng Sem Guan has a "neutral" take on the local steel sector.
"Demand for steel is still sluggish as the implementation of mega projects has yet to be seen. Also, raw material prices have been inching up," he said.
Ng gave an example of steel scrap, which is usually priced higher in the winter as it costs more to collect and ship out the scrap in the cold.
On Ann Joo, Ng said he is maintaining a "neutral" call and values the stock at RM2.76.
He said Ann Joo has yet to operate its blast furnace and is still using electric arc furnace to make steel.
"Even when Ann Joo starts up their blast furnace, they'll be sourcing coke, which is actually a finished product of coking coal. They'll source the coke from China and Japan. Australia does not export coke."
Aussie coal supply woes may affect power tariffs
Tenaga Nasional Bhd (TNB) is likely to be affected by higher coal prices following massive floods in Australia and this may strengthen its case for higher power prices.| |
 |
Thermal coal is used to fuel power plants while coking coal is used by steel mills to fuel their furnaces. Australia is also the world's biggest exporter of coking coal.
Coal prices for delivery in March have already risen to some US$130 (RM398) a tonne, according to Bloomberg data. It was around US$100 (RM306) a tonne at the start of December last year.
TNB (5347) purchases about 17 per cent of its coal from Australia. The bulk of its coal comes from Indonesia.
Currently, about 40 per cent of Malaysia's generation capacity comes from coal-fired plants.
"Thermal coal prices have been steadily increasing over the past few weeks due to the overall demand and supply disruptions, which has resulted with the tightness in the market.
"The massive flood situation in Australia is the latest supply disruption for seaborne coal trade and it is expected that thermal coal prices will be affected by the situation," TNB said in reply to questions from Business Times.
On December 10, TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the group was still able to absorb the increase in fuel prices but should they continue to rise, the power company's bottom line will definitely be hurt.
"There is no way we are able to sustain and absorb these additional costs," he had said then, noting that a revision request will be made to the government.
But analysts don't think the government would agree to a tariff hike as it could be preparing for an early general election, as widely expected.
"I'm sure that TNB will continue to make their case but I think they will only get it after the election," said OSK Research's head of research Chris Eng.
http://www.btimes.com.my/Current_News/BTIMES/articles/xtahan/Article/index_html
Saturday, January 1, 2011
Local steel companies face tough outlook
By HANIM ADNAN
mailto:nem@thestar.com.my
PETALING JAYA: Local steel players will continue to face tough market conditions in 2011, with increasing competition from regional and China-based steel players.
The implementation of the Asean Free Trade Area (FTA) and Asean-China FTA, which started in January last year, had these other steel players ramping up their capacities to take advantage of the new markets.
The Asean-China FTA is to date the world’s largest FTA, set to liberalise billions of dollars in goods and investments covering a market of 1.7 billion consumers.
Chow Chong Long ... ‘The focus will be on the trading of spot iron ore price this year.’
Furthermore, prices of major raw materials like iron ore, coking coal and scrap metal are expected to rise this year, in view of the continued oligopoly by top global iron ore producers - Vale SA of Brazil, BHP Billiton and Rio Tinto Group – as well as the short supply of coking coal and scrap.
“The three mining companies hold considerable bargaining clout, controlling two-thirds of the US$88bil global seaborne iron ore trade,” said Malaysian Iron and Steel Industry Federation (MISIF) president Chow Chong Long.
Between now and the middle of this year, iron ore price is expected to trade at between US$170 to US$180 per tonne free-on-board (FOB) compared with last year’s average of about US$144 per tonne FOB.
“The focus will be on the trading of spot iron ore price this year. It will be on an uptrend but prices are not likely to escalate by 50%-80%, like what was experienced in 2008,” he added.
Chow told StarBizWeek that local steel players should continue to explore new markets like the Middle East, Vietnam and Indonesia rather than focusing on traditional markets like Europe or the US which were still grappling with their economic recovery.
“The Middle East economy is picking up especially with the rise in crude oil prices while Vietnam and Indonesia are expected to have good sustainable growth in steel consumption,” he added.
He noted that recent global developments such as the quarterly price increases in iron ore, deepening euro sovereign debt crisis, potential slowdown in China as well as rising costs from the removal of subsidies in Malaysia, had severely affected local steel companies.
Exacerbating the problem is the fact that these steel companies have become increasingly export-driven.
Malaysia exports about 2.5 million tonnes of steel products, especially long-steel products, annually to Asean countries.
Of the long-steel products exports, billet is the largest item, representing 603,890 tonnes in 2009.
According to Chow, Asean steel players including those from Malaysia are fast losing their indigenous identities due to the implementation of the Asean FTA, Asean-China FTA and other FTAs in the pipeline.
“Asean steel producers are already facing a difficult situation with the flooding of steel products from China into the Asean markets. “China’s ability to export steel products at much lower prices compared with their Asean peers had lately brought not only complaints but also threats of trade and other dumping actions,” he said.
However, on the local front, Chow expects domestic steel consumption to improve by the second half of this year.
“Most of the projects under the Government’s Economic Transformation Plan are expected to be rolled out in the second half, including the proposed RM36bil Klang Valley mass rapid transit (MRT),” he added.
In its latest sector report, AmResearch said: “The Federal Government’s renewed push on infrastructure spending and urban renewal spur domestic steel consumption.
“Maiden contracts for the Klang Valley light rail transit extension works could be dished out by year-end, with the larger MRT works poised to kick off beginning 2011.
“Also on the cards are the construction of six new highways, in addition to several mega developments in the pipeline such as the RM26bil KL International Financial District,’’ it said.
mailto:nem@thestar.com.my
PETALING JAYA: Local steel players will continue to face tough market conditions in 2011, with increasing competition from regional and China-based steel players.
The implementation of the Asean Free Trade Area (FTA) and Asean-China FTA, which started in January last year, had these other steel players ramping up their capacities to take advantage of the new markets.
The Asean-China FTA is to date the world’s largest FTA, set to liberalise billions of dollars in goods and investments covering a market of 1.7 billion consumers.
Chow Chong Long ... ‘The focus will be on the trading of spot iron ore price this year.’ Furthermore, prices of major raw materials like iron ore, coking coal and scrap metal are expected to rise this year, in view of the continued oligopoly by top global iron ore producers - Vale SA of Brazil, BHP Billiton and Rio Tinto Group – as well as the short supply of coking coal and scrap.
“The three mining companies hold considerable bargaining clout, controlling two-thirds of the US$88bil global seaborne iron ore trade,” said Malaysian Iron and Steel Industry Federation (MISIF) president Chow Chong Long.
Between now and the middle of this year, iron ore price is expected to trade at between US$170 to US$180 per tonne free-on-board (FOB) compared with last year’s average of about US$144 per tonne FOB.
“The focus will be on the trading of spot iron ore price this year. It will be on an uptrend but prices are not likely to escalate by 50%-80%, like what was experienced in 2008,” he added.
Chow told StarBizWeek that local steel players should continue to explore new markets like the Middle East, Vietnam and Indonesia rather than focusing on traditional markets like Europe or the US which were still grappling with their economic recovery.
“The Middle East economy is picking up especially with the rise in crude oil prices while Vietnam and Indonesia are expected to have good sustainable growth in steel consumption,” he added.
He noted that recent global developments such as the quarterly price increases in iron ore, deepening euro sovereign debt crisis, potential slowdown in China as well as rising costs from the removal of subsidies in Malaysia, had severely affected local steel companies.
Exacerbating the problem is the fact that these steel companies have become increasingly export-driven.
Malaysia exports about 2.5 million tonnes of steel products, especially long-steel products, annually to Asean countries.
Of the long-steel products exports, billet is the largest item, representing 603,890 tonnes in 2009.
According to Chow, Asean steel players including those from Malaysia are fast losing their indigenous identities due to the implementation of the Asean FTA, Asean-China FTA and other FTAs in the pipeline.
“Asean steel producers are already facing a difficult situation with the flooding of steel products from China into the Asean markets. “China’s ability to export steel products at much lower prices compared with their Asean peers had lately brought not only complaints but also threats of trade and other dumping actions,” he said.
However, on the local front, Chow expects domestic steel consumption to improve by the second half of this year.
“Most of the projects under the Government’s Economic Transformation Plan are expected to be rolled out in the second half, including the proposed RM36bil Klang Valley mass rapid transit (MRT),” he added.
In its latest sector report, AmResearch said: “The Federal Government’s renewed push on infrastructure spending and urban renewal spur domestic steel consumption.
“Maiden contracts for the Klang Valley light rail transit extension works could be dished out by year-end, with the larger MRT works poised to kick off beginning 2011.
“Also on the cards are the construction of six new highways, in addition to several mega developments in the pipeline such as the RM26bil KL International Financial District,’’ it said.
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