Steel prices hike: Government must take action now!

KUALA LUMPUR March 16 – The Ukraine-Russia war has pushed up the prices of various commodities. They span from oil, palm oil, wheat, fertiliser and corn.

And now it looks like steel is also rising due to the war in Eastern Europe.

Last week, nickel prices shot up to a historical high of US$10,000 a tonne due to the escalating war.

The London Metal Exchange had to halt trading of the rare mineral to prevent it from overheating.

"Yes, steel prices may rise just like any other commodities but it's already been three weeks into the war. So the increase might not be that significant," Bursa Malaysia trader Nur Hamidy Yusoff told DagangNews.com.

He added due to the possible steel price hike, some of the top beneficiaries include Prestar Resources, Kinsteel and Leon Fuat Berhad.

Bloomberg reported that steelmakers across Europe are cutting back their operations as power prices surge to record levels in response to Russia's invasion of Ukraine.

Producers of the metal from Spain to Germany are beginning to slow down or stop entirely their output as the higher costs make production unsustainable even with steel trading at record levels.

Master Builders Association Malaysia had numerous times said that local steel millers have no control of steel prices as they are subjected to global demand.

But what is certain is that escalating steel prices will lead to higher building materials prices which in turn will jack up house prices.

Asteel Group managing director Datuk Seri Victor Hii Lu Thian said domestic steel millers are also factoring in risks associated with the potential increase in domestic and imported inflation, increase in oil and energy prices and potential disruption in the global supply chain.

"Domestic steel mills are adjusting prices due to the potential increase in commodity prices, European long steel prices are expected to rise sharply in the coming weeks.

Speaking to the New Straits Times, Hii said domestic steel bar manufacturers have no control over the rising steel prices.

"The rising energy prices in Malaysia has also exacerbated the situation," said Hii.

In 2021, there was a 64 per cent increase in natural gas tariff, coupled with a hike in global freight costs.

Local steel millers depend on gas to heat up the furnaces.

Meanwhile, the Malaysian Iron and Steel Industry Federation (MISIF) and the Malaysia Steel Association (MSA) said steel bar prices rose in the first half of 2021.

This is primarily due to strong demand resulting from global economic recovery and hike in raw material prices, particularly scrap, iron ore and coking coal, due to supply tightness and global supply chain disruption.

The two trade bodies said that coupled with the Chinese government’s tight control over steel production and the removal of export rebates, the increasing raw material costs are reflected in rising steel prices.

The trajectory of domestic steel prices tracks the international price trend, particularly China steel prices, as China accounts for more than half of global crude steel production.

Thus, it is a bleak outlook for contractors and the government should intervene to alleviate the matter.

Meanwhile, due to the rising nickel prices, a source from Panasonic Malaysia said it is too early to say on whether battery prices will increase.

"For now, battery manufacturers have enough nickel stockpile to make batteries.

But if the situation persists in the future, battery makers have no choice but to increase retail prices." – DagangNews.com