News Room - Steel Industry

Posted on 18 Feb 2010

Steel prices likely to rise further

Steel prices are expected to jump a further 15% to 20% after the Chinese New Year as governments in East Asia restart spending on major infrastructure-related projects and restocking activities increase, said Malaysia Steel Works (KL) Bhd (Masteel) managing director Datuk Seri Tai Hean Leng.

 

The current steel bar price in the domestic market is about RM2,000 (US$585) per tonne while the international market price is about US$565.

 

He said the steel industry was heading for a recovery with an average capacity utilisation of about 70% to 75% due to an improvement in steel demand from East Asia.

 

The higher cost of raw materials like iron ore and scrap metal, given the extreme cold winter, could also result in steel prices rising in the coming months.

 

“Many industry players are expecting an increase in restocking activities as consumers (steel buyers) prepare for strong construction demand by end-February,” Tai told StarBiz.

 

Malaysia, Indonesia, the Philippines, Singapore and Thailand are expected to spend a total of about RM102bil on infrastructure projects, financed by their economic stimulus packages.

 

He also expects locally-made steel billets to command higher prices in the regional markets as the local products were of a higher grade compared with those from China.

 

“The Middle East, Australia, Pakistan and Bangladesh will also be favourable export markets for local billets, should these economies continue to improve,” he said.

 

According to Tai, Masteel was looking forward to boosting the sale of its premium steel products which conform to the Australian and New Zealand standards.

 

The company recently secured a two-year contract worth RM120mil to export steel bars to major cities in Australia. It has been exporting to New Zealand since October last year.

 

Tai said Masteel was targeting to produce 500,000 tonnes of steel billets and 280,000 tonnes of steel bars by the year-end. Currently it produces about 450,000 tonnes of billets and about 230,000 tonnes of steel bars.

 

“Works are in progress to further boost our billets and steel bars capacity to 550,000 tonnes and 300,000 tonnes by the middle of next year,” he said, adding that this was to cater to the expected higher demand arising from projects earmarked by the government stimulus packages.

 

The infrastructure expenditure in Malaysia include the Light Rail Transit extension, Gemas-Johor Baru electrified double-tracking, the low-cost carrier terminal, the upgrading of roads, bridges and community halls in rural areas, the upgrading of schools and hospitals as well as the urban transport system.

 

It is reported that over the past two years, local steel mills had been exporting about one million tonnes of steel products.

 

Malaysia’s exports of steel products increased after China imposed a 25% tax on exports of billets which created a shortfall of about five million tonnes of billets in the South-East Asia (SEA) market. Previously, China supplied about 75% of the total SEA billets requirement.

 

Meanwhile, analysts expect feedstock iron-ore prices to increase by 20% to 40% from 2010 onwards due to the emergence of highly monopolised supply from the impending merger between iron-ore giants BHP Billiton Ltd and Rio Tinto Group.

 

Metal Bulletin said in a recent report that iron-ore prices would likely trade at US$110 to US$110 per tonne from US$70 to US$75 per tonne currently.

 

BHP is currently in talks with China to set the annual iron-ore prices. Together with Vale SA, the world’s biggest producer, the move could signal contracts doubling the spot market prices this year.