Posted on 04 Jan 2008
The Government has raised the ceiling price of steel bars and billets, which are price-controlled items, by 12% across the board effective Dec 1.
The price hike, however, won't be a windfall for steel millers, who have incurred higher raw material costs due to rising international scrap prices.
The Domestic Trade and Consumer Affairs Ministry announced the price revision in a Dec 28 circular to the Malaysian Iron & Steel Industry Federation.
Following the announcement, the various types of billets are now priced between RM1,907 and RM2,035 per tonne from between RM1,703 and RM1,817 previously.
Prices of mild steel round bars and high-tensile deformed bars are revised to between RM2,225 and RM2,419.
The latest price adjustment was the third last year following two revisions in April and June.
"The price hike is not a windfall (for millers) but merely brings the ceiling price closer to the actual market equilibrium level," said Ann Joo Resources Bhd executive director Datuk Lim Hong Thye.
The increase would help narrow the gap between the local and international selling prices of long steel products, which are widely used in construction.
However, international prices are still higher than domestic prices.
For example, the export price to
The export price to
"The higher ceiling prices augur well for the steel milling industry. But steel millers' raw material costs have also gone up substantially," Amsteel Mills Sdn Bhd marketing director Anthony Chin told StarBiz. "We have already suffered (from rising raw material costs) for six months."
The benchmark HMS 80/20 scrap price has surged from about US$380 NCF (cost and freight) in early December last year to about US$430 cnf currently.
Steel millers sympathised with the contractors, who were vulnerable to the fluctuation in steel prices, said Chin. "But, we (steel millers) cannot absorb the higher (raw material) costs."
Steel bars account for less than 5% of total construction costs for a housing project and about 20% for a mega infrastructure project.
Steel millers agree that there is sufficient capacity to cater to the additional domestic demand.
"As long as the selling price is at the market equilibrium, there will not be any shortage of supply," Lim said.
The total industry capacity for billets is more than five million tonnes a year and about three million to 3.5 million tonnes a year for steel bars.
Kinsteel Bhd managing director Tan Sri Pheng Yin Huah noted that the rise in the ceiling price was a temporary solution. An automatic price mechanism (APM) should be in place to ensure pricing efficiency in the local market, he added.
Steel millers have been lobbying for APM for many years and are hopeful of Government approval as APM for cement was enforced from this year.
Given the growing demand for steel products, especially after the rise in the export duty in
Consequently, the gap between the domestic and international prices would widen again.
Meanwhile, International Iron and Steel Institute forecasts world demand to expand 6.8% this year.Domestic demand is also expected to increase as more mega infrastructure projects are rolled out under the Ninth Malaysia Plan.
