Strong global demand further drives up steel By Hanim Adnan
PETALING JAYA: Strong global demand for steel continues to drive the price of the commodity, which will in turn support the bottom line growth of local steel players this year. Most steel players expect steel prices to escalate further especially after the Chinese New Year (CNY) next month with the commencement of some construction and infrastructure projects under the Ninth Malaysia Plan (9MP). After a steep fall in mid-2005, steel prices escalated last August as demand from the US, China and other emerging economies picked up. The local steel price benchmark Megasteel Sdn Bhd's hot-rolled coil (HRC) is tagged at RM2,480 per tonne for February delivery compared with RM2,200 in January last year. China's persistent hunger for iron ore may "inadvertently" push steel prices higher by 5% to 10% this year, analysts said. For long steel products, overwhelming overseas demand saw prices rising by US$40-US$60 to US$460 per tonne over the past one month, Ann Joo Resources Bhd executive director Datuk Lim Hong Thye told StarBiz. Even the price of scrap metal rose to US$340 per tonne currently from US$300-US$305 last month. "From a steel miller's point of view, it is not wise to lock in our sale price given the potential for steel prices to move up further," Lim added. Kinsteel Bhd managing director Henry Pheng expects earnings for local steel players to remain good as some of the 9MP projects were expected to start after the CNY celebration. He said Kinsteel was pushing for more exports, given the strong demand from customers in South-East Asia and the Middle East. "Exports account for about 40% to 50% of the group's total production," he added. Mycron Steel Bhd chief executive officer Azlan Abdullah said the group was set for an earnings boost in 2008, driven by a RM120mil plant upgrade and expansion exercise to be completed by end-2007. Azlan said: "Currently, cold-rolled coil (CRC) prices are a bit flattish but CRC is selling at US$100 higher than HRC. We are able to pass the cost to end-users." OSK Securities analyst Ng Sem Guan said both long and flat steel producers were expected to benefit from the escalating steel prices. Ng is maintaining an "overweight" stance on the steel sector with "buy" calls on Hiap Teck Venture Bhd, Ornasteel Holdings Bhd, Tong Herr Resources Bhd, Choo Bee Metal Industries Bhd and Prestar Resources Bhd. On the international front, Tata Steel of India and CSN of Brazil are bidding to acquire Anglo-Dutch steel maker Corus. A merger will create the world's fifth biggest steel group, regardless of which firm wins. Last year, the Netherlands-based Mittal merged with Luxembourg-based Arcelor in a 25.8bil euro deal to create the world's largest steel-maker.
