30 October 2008

Local steel millers cutting prices.

My dad's take on the importing of steel. Scroll down to the bottom to read his comments.

It’s to ensure competitiveness of products

PETALING JAYA: Local steel millers have been slashing prices to ensure that their products remain attractive to domestic construction firms. Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long said local steel millers had been lowering their prices on a weekly basis since August and had reduced about RM900 per tonne since then.

“It is not practical to adjust every other day when there is a sharp movement in international prices. Before the liberalisation (of steel prices) on May 12, local steel cost about RM300 to RM400 per tonne lower than the international price and local steel prices have been increasing to close the gap.

“Currently, the domestic steel bar prices (RM2,850 to RM3,000 per tonne) are about RM200 per tonne higher than the international, but after taking into consideration the holding cost, inland and distribution charges and traders’ profit, the domestic and international steel prices will be about the same,” he told StarBiz yesterday.

He was responding to the StarBiz report yesterday that construction players are close to ironing out hitches on the steel import process with the Government.

Chow said that the minimum tonnages to import steel from Asean countries and non-Asean countries are about 1,000-2,000 tonnes and 5,000-10,000 tonnes respectively, which are considered high volumes for most contractors. Thus many small contractors cannot afford to import steel directly.

“Nevertheless, steel imports started to increase two months ago but there are concerns that some imported steel bars are substandard and do not comply with Malaysia’s standard MS146:2006, especially steel from smaller mills abroad,” he said.

Since July, the domestic steel demand has plunged more than 70% to 50,000 tonnes per month in September from 180,000 tonnes in July. It is expected to further decline by 10% in this month. Chow attributed the slow steel demand to deferred launches of new construction projects, downsizing and cancellation of projects, local political uncertainties and the global financial crisis.

On the industry’s outlook, he said the construction market was expected to recover by the first quarter of next year or after the Umno election. “We expect the Government to review the Ninth Malaysia Plan projects but hope that it will continue spending to ease the market,” he added.

Meanwhile, Crest Builder Holdings Bhd managing director Yong Soon Chow said he would consider importing steel but need more details on the steel liberalisation procedures. He said the company had been cautious on tendering for new jobs earlier this year when steel prices were high but had secured more contracts lately and would need a lot of steel in the next two to three years.

An analyst projected that steel industry would improve in the next six months after all the inventory of steel bars held by traders or contractors had been used up. “The completion of the full steel liberalisation will not significant impact the local millers as most of the imports are in bulk volumes.

“However, we foresee that imported steel may be RM50 to RM80 per tonne cheaper than domestic steel even after including all the import charges,” he said. He said it was very common for a country’s domestic steel prices to be higher than the international prices.


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