Posted on 15 Sep 2016
The recovery in the price of steel bars and wire rods has failed to sustain the bullish sentiment on the producers.
Although steel prices are up by over 10% year-to-date, the recovery in the stock prices of steel producers was shortlived after two days of increases.
The steel counters succumbed to profit-taking despite the positive outlook in global steel prices yesterday.
Major steel miller Ann Joo Resources Bhd eased one sen to RM1.88, Perwaja Holdings Bhd lost two sen to 10.5 sen while Kinsteel Bhd and Malaysia Steel Works (KL) Bhd dropped 0.5 sen each to five sen and 78.5 sen, respectively.
Southern Steel Bhd, meanwhile, firmed up by rising six sen to RM1.12 while Melewar Industrial Group Bhd added three sen to 57 sen.
Melewar’s 71.51%-unit, hot-rolled coil (HRC) producer Mycron Steel Bhd, which had been actively traded since last week, lost 2.5 sen to 88 sen.
According to industry observers, a sustained recovery in the global steel prices led by China supported the improved margins for domestic players, who had in the last two years been hit by a global price slump and competition from cheaper imports.
Renewed demand from China – the world’s major steel consumer and producer – had sent international steel prices together with iron ore and coking coal prices skyrocketing, particularly in March and April this year.
China is said to be focusing on supplying its domestic consumption after facing a shortage brought about by the recent winding-up and mills closure by the Chinese authorities to curtail excess steel production capacity.
For Malaysia, the higher steel prices, particularly from China, had increased the landed cost of steel imports.
“This will indirectly help our domestic steel pricing, previously hit by steel imports from China selling below the cost of production of local millers,” Malaysian Iron and Steel Industry Federation president Datuk Soh Thian Lai told StarBiz.
“The situation has since improved, with the recovery in the domestic prices of steel bars and wire rods which had gone up by over 10% year-to-date,” he added.
Steel bars are trading at RM1,800 to RM1,900 per tonne currently, while wire rods have firmed up to about RM1,900 per tonne.
“The global steel price slump and cheaper steel imports from China saw local players raking up losses of up to RM2bil between 2013 and 2015.
“In 2015, Malaysia’s top-five steel makers of long products had also incurred about RM1.3bil in pre-tax losses,” added Soh.
With the recovery in domestic steel prices, Soh said local long-product steel millers were hopeful that their petition to obtain anti-dumping/safeguard measures on steel bars and wire rods would be approved by the Government soon.
“We expect the International Trade and Industry Ministry (Miti) to announce its decision by the end of next month.
“Should our petition be approved, the local steel industry will get similar protection already imposed in Thailand and Indonesia to prevent anti-dumping of imported steel goods,” added Soh.
The aggressive dumping of China steel products at below-cost price in the global market in recent years had affected the survival of steel millers in Asean.
In Malaysia, the unprecendented import of steel bars and wire rods – mostly from China – had led to the low utilisation capacity of local steel mills to 40% between 2013 and 2015.
This had resulted in the closure of smaller steel mills and the retrenchment of workers nationwide, added Soh.
One of the major casualties was Megasteel Sdn Bhd which is a producer of flat steel under the Lion Group. Megasteel ceased operations in the first quarter of this year.
In a statement yesterday, Lion Corp Bhd said the temporary suspension of Megasteel was due to losses caused by the excessive dumping of steel products by foreign millers in the past few years.
It also said the decision by Miti in January this year to stop investigations on imported HRC had further affected Megasteel’s operations.
Lion Corp, which owns 79% of Megasteel, said the Banting plant had suffered losses in the past few years and it had been operating intermittently.
Meanwhile, Melewar in a reply to Bursa Malaysia’s query yesterday said the unusual market activity (UMA) on its share price could be due to its revaluation exercise and a turnaround in its financial performance.
It is also looking into various fund-raising options, but so far, none of the options has progressed to a stage that would require a public announcement.
Melewar also said the board of directors and major shareholders had confirmed that there were no corporate developments which had not been previously announced that might account for the UMA.
As for its unit Mycron Steel, Melewar said it was also unaware of any reason for the UMA except for its Aug 30 announcement about a revalution of its land, plant and machinery.
Melewar added that the revaluation surplus had been approved by the board to be reflected in the fourth-quarter unaudited results for the financial year ended June 30, 2016 (FY16), which was announced on Aug 30.
It also said that in the fourth quarter of FY16, it had reported earnings of RM8.12mil compared with a net loss of RM29.55mil a year ago.
