Government liberalises steel industry

Saturday May 10, 2008 THE STAR
Government liberalises steel industry
By YEOW POOI LING

PETALING JAYA: The long-awaited liberalisation of the domestic steel industry has finally become a reality.

In a statement yesterday, Prime Minister Datuk Seri Abdullah Badawi said the Government had decided to remove the domestic ceiling price for steel bars and billets and allow importers to be exempted from import licensing and paying import duty. Additionally, local steel makers will be able to export their steel bars and billets. The abolishment will take effect on Monday.

“The liberalisation is in line with the Government's intention to provide smooth development as well as ensure the steel industry continues to operate more efficiently,” Abdullah said.

Industry players contacted by StarBiz welcomed the news. Kinsteel Bhd managing director Tan Sri Pheng Yin Huah said that it was fair to sell at market prices since raw materials were imported and priced at international rates. Also, it would now be “a fair game” for contractors bidding for projects, as price volatility in the past had hindered some of them from tendering competitively. Pheng expected little impact on Kinsteel as its products were already reasonably priced.

Ann Joo Resources Bhd executive director Datuk Lim Hong Thye said domestic steel prices would now better reflect the global trend. “Steel millers will eventually have to face competition and, in this sense, Ann Joo is ready for it,” he said. “If international prices were to continue surging, which we expect for the next two quarters, it would benefit us.”

The news would also bode well for local contractors, especially those involved in government projects, as they would be able to re-negotiate the pricing to consider the impact of steel prices. “We're glad that the Government recognised the issue and the move will help spur domestic demand further,” Lim added.

Master Builders Association Malaysia president Patrick Wong said the supply of steel bars and billets was anticipated to improve, hence addressing the plight of the construction sector.
“The contract price adjustments will alleviate costs and provide better margins for contractors,” he said.

Meanwhile, OSK Investment Bank analyst Ng Sem Guan said steel millers would have to be more competitive in pricing, given that buyers could now import the materials. “It will also address the issue for stockists who complained of insufficient supply,” he said. Domestic steel makers, meanwhile, would be able to reap the export market as global demand was anticipated to remain firm while supply could be tight following the stricter ruling by China to restrict exports of steel products, Ng said. “New capacity is unlikely to come in the next two to three years,” he added.

An analyst with a bank-backed brokerage said the liberalisation would remove the pricing uncertainty faced by smaller contractors. “There is less ambiguity now in how prices are fixed. Contractors can be more confident in bidding for projects,” he said.