KUALA LUMPUR : A possible liberalisation of the Malaysian steel sector does not necessarily mean cheaper supplies for local builders and property developers should they decide to import the material, albeit in a more transparent and competitive pricing system.
Builders, and real estate players said they would still be subject to global market forces, which dictate the prices of steel, although buyers with more financial muscle would be able to negotiate for lower rates.
“At least, we know we are paying the actual market value. How can steel users in Malaysia, which is a steel exporter, pay more than countries like Singapore?” Real Estate and Housing Developers’ Association president Ng Seing Liong told The Edge Financial Daily last Friday (April 11). The association represents about 1,000 property firms in Peninsular Malaysia.
International Trade and Industry Minister Tan Sri Muhyiddin Yassin recently said the government was studying the feasibility of gradually liberalising the local steel and cement industries, a move which could allow builders and property developers in Peninsular Malaysia to import long steel products.
The authorities’ decision to review its policies on steel and cement was aimed at boosting competitiveness in both sectors, following the government’s move to allow imports of both materials into Sabah and Sarawak last February.
The easing of steel and cement import restrictions in Sabah and Sarawak has fuelled hopes that similar policies may be implemented in the Peninsular to ensure supply consistency at competitive rates.
“If a builder pays cash, it will have better bargaining power to negotiate for lower steel prices which depends on international rates,” said a construction and property player who requested anonymity.
In a note, OSK Investment Bank Bhd analyst Ng Sem Guan said the absence of ceiling prices for steel products here would result in greater transparency for the sector, hence, increasing chances of a re-rating for the industry.
Although home competition will increase should the government allow the imports of steel in Peninsular Malaysia, local millers’ excess capacity will still enable them to capitalise on the shortage of the material in the Asean region following China’s move to curb its steel exports.
At the same time, Ng said Malaysian policymakers should scrutinise the quality of foreign steel offerings to ensure the materials were fit for the construction of infrastructures.
“It offers another non-tariff barrier to import,” said Ng who rates the local steel sector an “overweight”
In a joint statement on March 8 last year, Rehda and the Master Builders Association Malaysia had attributed the shortage of steel products in the country to local steel millers preferring to export their products to capitalise on higher prices overseas.
Both associations contended that many contractors had to buy steel bars from the grey market to keep up with construction schedules, at prices higher than the controlled rates set by the government.
According to OSK, international prices for a tonne of billets and steel bars are about RM800 higher than the Malaysian ceiling rates of RM1,907 and RM2,278, respectively.