KUALA LUMPUR (April 28): Despite the recent recovery of steel bar and wire rod prices, the Malaysia Steel Association (MSA) said the overcapacity of China producers remained as a concern.
MSA said overcapacity remains in China with its domestic prices still only around historical lows.
"Cost of steel making has also risen, with prices of raw materials, such as iron ore, coke and scrap, having also increased," the association said in a statement today.
Having said that, MSA expects steel prices to increase moderately within the next few months, both domestically and internationally.
According to MSA, Malaysian steel importers have imported unprecedented amounts of steel bars and wire rods, mostly from China in the last three years, leading the utilisation rate of local steel mills to fall as low as 40%.
As a result, Malaysian long steel products chalked up a loss of up to RM2 billion from 2013 to 2015 for the precipitating widespread closures of steel mills and retrenchment of workers.
"This situation was in contrast to the sizeable profits generated by property and construction companies," MSA noted.
MSA highlighted that housing prices also does not correlate with the sharp decline in steel bar prices though consumers have enjoyed very low prices of steel domestically and internationally during this prevailing period.
"A typical 2-storey affordable terrace house only uses about 3 tonnes of steel bar," it said.
Nonetheless, the association said the current tight steel supply situation both domestically and internationally have been exacerbated by the recent cancellation of numerous steel supply contracts by the Chinese sellers.
With the over reliance of imports of steel products into Malaysia at artificially unsustainable low prices over the past few years, MSA said the move has undermined the viability of the Malaysian steel industry by decimating its strategic role to buffer against international steel shortages.
ANNJOO (6556) - Steel prices rebound but China concern remains
http://www.theedgemarkets.com/my/article/steel-prices-rebound-china-concern-remains
