Volatility in construction materials

Volatility in construction materials

I have received several emails this morning confirming that construction materials are to be in a highly volatile state in terms of pricing it was announced that there will be a 12% increment for structural steel supply cost, 5% in concrete increment, 14% in reinforcement bars/mesh/aids, and average 7% in roofing product, 5-10% in civil and drainage products, etc. The list goes on.

To emphasise this point, there are unconfirmed reports today of a Japanese steel mill settling on a 65% increase for iron ore over last years rate. Refer the link below for full story.

http://www.miningnews.net/StoryView.asp?StoryID=170584

With that, and other factors such as rising electricity costs, increased logistics costs and massive coking coal increases, it is likely that we are once again going to be in a highly volatile state in terms of pricing. It was predicted that there will be a few more price increments cropping up and hit us before it become stabilised.

Miri steel price would be raise on the 1th March. around 20%-35%. i also heard that after election house price will be raise 5%-15%.

Why do I have a concussion just by reading this

everyone will concussion after these malaysia election. be prepare guys.

[size=150]Malaysia Raises Steel Prices [/size]
KUALA LUMPUR, Malaysia (AP) - Malaysia’s government announced Tuesday it has raised the ceiling price for steel bars and billets by 20 percent but analysts said the move isn’t expected to hurt builders and developers.

The price ceiling for steel bars was raised to 1,884 ringgit (US$496, euro413) a metric ton, from 1,570 ringgit (US$449, euro374), and for billets to 1,553 ringgit (US$444, euro370) a metric ton from 1,294 ringgit (US$370, euro308), Bernama said.

“We noticed a lot of shortage on the ground, and people have been buying from the black market,” Shafie was quoted as saying. An aide confirmed the comments but could not provide details.

The move followed calls by property developers and builders to abolish price controls on steel, which have been in place for over 36 years.

The Real Estate and Housing Developers’ Association Malaysia has warned of artificial inflation and higher risks of project delays, as steelmakers created artificial local shortages by exporting their wares.

With global steel prices now around 2,200 ringgit (US$628, euro524) a metric ton, analysts say the hike won’t go far in stemming the current steel shortage or in eliminating the black market created to bridge the supply gap.

The higher steel prices could lead to a 3 percent rise in total cost for construction and housing developers, resulting in a mild margin erosion, said MIMB Investment Bank’s research chief Pong Teng Siew.

But this “is unlikely to make or break a developer” as steel only makes about 10-15 percent of total construction costs, he said.

[size=150]Steel-related stocks surge on buying interest[/size]
PETALING JAYA: Strong buying interest, fanned by expectation of growing demand and higher selling prices, drove up steel-related stocks yesterday.

Steel is one of the favourite sectors recommended by investment analysts due to the rolling out of mega infrastructure projects, such as the double-tracking rail and second Penang bridge, under the Ninth Malaysian Plan.

Furthermore, Malaysia Hardware, Machinery and Building Materials Dealers Association executive adviser Tan Sri Pheng Yin Huah was quoted by Nanyang Siang Pau as saying that the Government had decided to revise steel product prices upwards.

It was possible for another hike this year in tandem with the escalating international prices, Pheng commented.

Construction companies, which had based their bids on lower steel prices and had been awarded the projects, would be the losers, he added.

The authorities had last raised the ceiling prices of steel bars and billets in April last year.

Long steel bars and billets, which are mainly used for construction, are price-controlled items.

Given the higher prices overseas and that there is no restriction on exports, it is more profitable for manufacturers to export such products than to sell them locally.

Consequently, that gave rise to the domestic shortage.

The last price hike had already lifted the steel-related companies earnings.

Ann Joo Resources Bhd posted over 70% rise in pre-tax profit to RM62.1mil for its third quarter ended Sept 30 on nearly 31% higher revenue of RM490.6mil.

Southern Steel Bhds third-quarter pre-tax profit also rose more than 70% to RM54.8mil compared with RM31.6mil in the previous corresponding period, while revenue improved by nearly 40% to RM885.1mil.

Kinsteel Bhds turnover surged 151% to RM582.4mil in the third quarter from RM231.4mil before.

Its pre-tax profit, however, dropped almost 82% to RM70.5mil due to a negative goodwill arising from the acquisition of subsidiaries in the preceding year.

Investment analysts expect the stellar financial performance in the industry to continue this year.

We hold a positive view on the steel sector. We believe the demand for steel products will be higher locally and abroad this year, said OSK Equity Research analyst Ng Sem Guan.

The export duties that were slammed on steel billets in China would benefit Malaysian steel makers, who were also serving the overseas markets, he added.

Yesterday on Bursa Malaysia, steel millers Southern Steel, Ann Joo, Kinsteel and Malaysia Steel Works (KL) Bhd were among the top gainers.

Southern Steel was the biggest gainer with its share price jumping nearly 23%, or 41 sen, to RM2.21. Ann Joo rose 27 sen to RM2.94, while Kinsteel added 24 sen to RM1.58.

[size=150]Steel stocks surge on higher China export tax [/size]

KUALA LUMPUR: Steel stocks rallied yesterday as sentiment was bolstered by Chinas move to raise the export duty on low value and semi-finished steel products by 5% to 15% effective on Tuesday.

Analysts said the higher export duty was expected to boost the Southeast Asian long steel products. Southern Steel Bhd gained 41 sen to RM2.21 and its loan stocks jumped 27 sen to RM2.04. Ann Joo Resources Bhd added 27 sen to RM2.94 and Kinsteel Bhd firmed 24 sen to RM1.58 while the warrants jumped 21 sen to RM1.36.

Lion Industries Bhd added 17 sen to RM2.33, Melewar Industries Bhd rose 14 sen to RM1.53 and Malaysia Steel Works Bhd 13 sen higher to RM1.81.

However, the broader market was weaker in line with Asian markets on their first trading day. The Kuala Lumpur Composite Index closed 0.61% or 9.35 points lower at 1,435.68. Turnover was 592.70 million shares worth RM1.08 billion. Losers beat gainers 456 to 285 with 246 counters remained unchanged.

Asian markets major indices posted losses of between 2.3% and 0.6%, on concerns the regional economic growth would slow down.

South Koreas Kospi closed 2.32% or 43.68 points lower to 1,853.45, Taiwans Weighted Index fell 2.15% or 183.23 points to 8,323.05 and Hong Kongs Hang Seng Index lost 0.91% or 252.13 points to 27,560.52. Singapores Straits Time Index gave up 0.61% or 21.08 points to 3,461.22. However, Shanghais A Share Index rose 0.21% to 5,522.25.

Analysts said the sentiment was affected by the triple-digit losses recorded by the Dow Jones Industrial Average on Monday, closing 0.76% or 101 points lower at 13,264.28.

Negative news affecting the markets were lower economic growth forecast in South Korea while Singapores economy shrank for the first time in 18 quarters.

As for Malaysia, analysts said most investors were still in the holiday mood, while some had decided to cash in on their gains. The KLCI rose 31% last year.

Heavyweights Sime Darby Bhd and IOI Corp Bhd fell 30 sen each to RM11.60 and RM7.45. The losses in the two counters shaved off 6.7 points of the KLCI. Bumiputra-Commerce Holdings Bhd lost 30 sen to RM10.70 and Public Bank Bhd fell 20 sen to RM10.80, accounting for 3.18-point decline in the KLCI.

Tenaga Nasional Bhd and Malayan Banking Bhd were unchanged at RM9.60 and RM11.50 each. Telekom Malaysia Bhd rose 20 sen to RM11.40.

Concrete Engineering Products Bhd led the losers list, down 56 sen to RM4.24 with only 7,600 shares traded. UMW Holdings Bhd, Dutch Lady Milk Industries Bhd and Boustead Heavy Industries Corporation Bhd fell 30 sen each to RM15.30, RM12.40 and RM7.15 respectively.

OSK Investment Research head Kenny Yee said many investors were still in a holiday mood and the market was taking a breather after last years strong performance. He said some investors had continued to lock in gains.

Insider Asia said the market would likely remain quiet in the next few days in the absence of fresh leads. Investors are expected to remain jittery on the outlook for equities in the near term, it said.

On the new stockbroking commission rate that came into effect yesterday, industry players said it was too early to gauge the impact on their businesses, adding it had a minimal effect to their operations.

Under the new structure, commission rates for Internet trading and cash upfront transactions are fully negotiable.

However, the commission rate for non-Internet and non-cash upfront transactions was unchanged but with a minimum brokerage charge of RM40 for these transactions. The minimum fee of RM40 was for transactions of RM6,670 and below.

The Association of Bumiputera Remisiers deputy president Zainal Arrifin said the new commission rate had a minimal effect on the members. Since most of our transactions were above RM10,000 most of our members were not affected, he said.

[size=150]Ceiling price of steel bars and billets up 12%[/size]

PETALING JAYA: The Government has raised the ceiling price of steel bars and billets, which are price-controlled items, by 12% across the board effective Dec 1.

The price hike, however, won’t be a windfall for steel millers, who have incurred higher raw material costs due to rising international scrap prices.

The Domestic Trade and Consumer Affairs Ministry announced the price revision in a Dec 28 circular to the Malaysian Iron & Steel Industry Federation.

Following the announcement, the various types of billets are now priced between RM1,907 and RM2,035 per tonne from between RM1,703 and RM1,817 previously.

Prices of mild steel round bars and high-tensile deformed bars are revised to between RM2,225 and RM2,419.

The latest price adjustment was the third last year following two revisions in April and June.

The price hike is not a windfall (for millers) but merely brings the ceiling price closer to the actual market equilibrium level, said Ann Joo Resources Bhd executive director Datuk Lim Hong Thye.

The increase would help narrow the gap between the local and international selling prices of long steel products, which are widely used in construction.

However, international prices are still higher than domestic prices.

For example, the export price to Singapore is still about RM120 a tonne higher than the equivalent ceiling price after taking into account the additional transport cost.

The export price to Singapore is US$730 (RM2,445) per tonne compared with RM2,278 per tonne in the peninsula.

The higher ceiling prices augur well for the steel milling industry. But steel millers’ raw material costs have also gone up substantially, Amsteel Mills Sdn Bhd marketing director Anthony Chin told StarBiz. We have already suffered (from rising raw material costs) for six months.

The benchmark HMS 80/20 scrap price has surged from about US$380 NCF (cost and freight) in early December last year to about US$430 cnf currently.

Steel millers sympathised with the contractors, who were vulnerable to the fluctuation in steel prices, said Chin. But, we (steel millers) cannot absorb the higher (raw material) costs.

Steel bars account for less than 5% of total construction costs for a housing project and about 20% for a mega infrastructure project.

Steel millers agree that there is sufficient capacity to cater to the additional domestic demand.

As long as the selling price is at the market equilibrium, there will not be any shortage of supply, Lim said.

The total industry capacity for billets is more than five million tonnes a year and about three million to 3.5 million tonnes a year for steel bars.

Kinsteel Bhd managing director Tan Sri Pheng Yin Huah noted that the rise in the ceiling price was a temporary solution. An automatic price mechanism (APM) should be in place to ensure pricing efficiency in the local market, he added.

Steel millers have been lobbying for APM for many years and are hopeful of Government approval as APM for cement was enforced from this year.

Given the growing demand for steel products, especially after the rise in the export duty in China, local steel millers are expecting international steel prices to continue to climb.

Consequently, the gap between the domestic and international prices would widen again.

Meanwhile, International Iron and Steel Institute forecasts world demand to expand 6.8% this year.Domestic demand is also expected to increase as more mega infrastructure projects are rolled out under the Ninth Malaysia Plan.