Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long maintained that there was no steel shortage in the country as steel millers had continuously increased their capacity over the past few years.
Misif represents 150 members, including five of the largest local steel millers – Lion Group, Kinsteel-Perwaja, Ann Joo Resources Bhd, Southern Steel Bhd and Malaysia Steel Works (KL) Bhd (Masteel).
Chow told StarBiz that Misif did not foresee any problems in supplying steel bars based on the Construction Industry Development Board’s (CIDB) forecast 2.1 million tonnes in 2008.
In the first half, steel millers had confirmed the supply of 1.2 million tonnes.
According to Chow, many previous claims of steel shortage had never been independently verified.
Over the last few weeks, orders received by steel millers were 30% below normal and “we even need verification whether this downtrend is likely to continue,” Chow said.
This was despite the move by the Master Builders Association of Malaysia (MBAM) and Real Estate and Housing Developers Association (Rehda) calling on the Government to impose a 15% export duty on billets and steel bars, or even banning the export of the latter, implying a shortage in steel supply.
Chow had suggested an independent study to confirm the shortage or oversupply of steel.
In addition, the Government could appoint Misif and CIDB as mediation agencies to help contractors negotiate with the variation orders (VO) with the developers, while steel mills could facilitate the VO computation by publishing its monthly prices to serve as a benchmark.
The lifting of the local steel ceiling price on May 12 has seen the commodity soaring by 55% to RM4,000 per tonne currently, moving in tandem with the international price of about US$1,200 to US$1,300 per tonne.
The impact of soaring prices has resulted in housing developers and construction players putting pressure on MBAM and Rehda to look for amicable solutions pertaining to the escalating raw materials, claims on artificial steel shortage and steel millers opting for exports due to the higher international selling price.
In the past one month, MBAM and Rehda had put forward a series of proposals to the Government, including a temporary ban on exports of local steel, allowing steel imports, tax-free import of steel that meets Malaysia’s standard MS146 or equivalent to BS4449 standard, establishment of a steel stockpile and export quota on steel millers.
The latest is a request for a six-month lead-time announcement on price increase to enable contractors to make provisions to mitigate the rising costs.
On Tuesday, two separate closed-door meetings were held among the International Trade and Industry Ministry, officials from MBAM and Misif.
Another was held between the Housing and Local Development Ministry and MBAM representatives.
An industry source told StarBiz that ministry officials had cautioned MBAM to be “guarded” with its stand and various proposals to the Government, which could affect investors’ confidence in Malaysia’s credibility.
“They must understand that the Government cannot keep on changing its policies overnight. All must be taken into consideration to ensure parties involved are well taken care of,” she said.
Meanwhile, Masteel managing director and chief executive officer Tai Hean Leng concurred that there was no steel shortage.
“Contractors are trying to pressure steel mills to reduce prices by using claims of shortage and high prices to get the Government to impose export tax.
“A quick check on the delivery lead time of mills will show that they have high stocks and make deliveries within a week of receiving orders. Steel millers are exporting because there is not enough demand from local contractors,” he added.
After the liberalisation, Tai said steel bars were being imported as verified by most local customers.
For flat steel products, an industry player said there had been some operational disruptions in terms of delivery and production since late 2007, which led to price increase for hot- and cold-rolled coil in the past six months.
However, the problems had been resolved and supply was back to normal, he said. The major producer is expected to upgrade its plant by end-August, which may tighten supply.
As for long steel products, he said: “The slowdown within the construction and building materials sectors has led to weaker demand, and this caused local prices to continue to trade below world prices.”
Under such circumstances, he said, steel millers would find it more attractive to export.
An analyst with a local brokerage said local millers would rather sell locally to avoid freight charges.
“There is no acute shortage of supply as demand is slowing due to contractors re-drawing orders. Many projects are either delayed or put on hold.
“The smaller contractors are facing cash flow issues, as millers prefer cash transactions to avoid credit risk,” he said.
He said millers had their own business risks and it would be unfair to clip their wings by imposing a ban on exports or reversing to the ceiling price mechanism.
“It must be a free market. If the contractors feel the local prices are too high, they can source elsewhere,” he added.
Another analyst asked: “If there is a shortage locally, where is the demand?”
There is always a delivery lag of eight to 10 weeks even for international suppliers.
There is a shortage worldwide because demand is growing at 6% to 7% per annum while new capacity is only coming in in two to three years.
“Prices will continue to remain high and a reprieve is unlikely unless there is a global slowdown,” he said.
The millers also face high freight charges and long delivery time as they source more than 70% of scrap from abroad.
He pointed out that liberalisation was the best option as players could have a free hand in choosing where to source their materials.
By The Star - StarBiz - (by Hanim Adnan & Yeow Pooi Ling)
Posts
No comments:
Post a Comment