IBS, affordable housing offer boost to steel sector

As it is, 2018 is expected to be a good year for the local steel industry following production cuts in China


The industrialised building system (IBS) and affordable housing projects offer great opportunities for Malaysian steel manufacturers to grow and perform better this year.

Malaysian Iron and Steel Industry Federation (MISIF) president Datuk Soh Thian Lai (picture) said the two areas would be the main focus for the construction industry this year, which would augur well for steel industry players.

“Our local steel producers need to venture further into IBS and affordable housing. There is still a lot of opportunities for them to tap into the potentials as the property industry is moving towards those directions,” Soh told The Malaysian Reserve (TMR).

As it is, 2018 is expected to be a good year for the local steel industry following production cuts in China, as well as the booming infrastructure and property development projects that would further spur demands.

Soh said China has already reduced its global exports by 25% from 100 million metric tonnes to 75 million metric tonnes, which has also stabilised the price of steel.

The world’s largest steel exporter had been “dumping” its steel products — particularly in steel bars — across the globe, including Malaysia, in the past few years.

As a result, steel price went down and many players could not sustain their businesses competitively.

Malaysia is China’s top 10 steel exports destination apart from countries like South Korea, Vietnam and the Philippines.

Data from the Global Steel Trade Monitor report in December 2017 showed that China’s steel exports to Malaysia had decreased in volume by 48% last year compared to 2016.

Local steel supply and demand are expected to stabilise, while price would improve as a result of the capacity cut from China.

The projected improvement could be attributed to the government’s introduction of safeguard duties for both steel reinforcing bars and steel wire rods for a period of three years from April 2017.

Despite the optimism, Soh said players should also remain cautious, following the gas tariffs that had also increased the cost of doing business among local manufacturers.

“Increasing cost due to the upward revision in gas price would be the main challenge for local manufacturers.

“It has increased by 22.9% to RM32.54 per one million British thermal units (mmBtu) from RM26.46 mmBtu a year ago,” Soh said.

Meanwhile, TA Securities Holdings Bhd analyst Ooi Beng Hooi concurred with Soh, and believes that it is no longer practical to source steel from China as the price has increased.

“China has started cutting its capacity since two years ago. Currently, steel bar price in China is actually more expensive than those in Malaysia.

“It is now close to RM3,000 per tonne, compared to RM2,700-RM2,800 for locally-produced steels,” Ooi told TMR.

He added that the strengthening of the ringgit is also favourable to steel producers because input cost will be lower, as some of the raw materials like iron ore, scrap irons and coals are being imported in the US currency.