BUILDERS, take note: Cement is expected to cost more in Malaysia by year-end, and the global softness in steel prices may not be felt by buyers either, according to research by UOB Kay Hian. That’s as demand for building materials bounces back on industry growth.
The construction industry is expected to pick up this quarter on infrastructure projects like the East Coast Rail Link, brokerage analyst Abdul Hadi Manaf noted. “As such, we believe that demand for cement and steel should also recover at a gradual pace.”
Cement costs could go up by 10 per cent to RM220 a tonne in the fourth quarter - and rise again to RM250 a tonne in 2020 - as the sector’s price war eases in the wake of infrastructure conglomerate YTL Corp’s take-over of rival cement producer Lafarge.
Meanwhile, the weakness in local steel prices - with bar prices slipping by 3.8 per cent month on month to RM2,103 a tonne in August - is “attributable to weak steel demand and compounded by higher supply from Alliance Steel”, Mr Hadi wrote.
While iron ore prices also fell on a supply recovery in Australia and Brazil mines, a lag of two to three months will funnel the lift towards steel companies’ profit margins, the report suggested.
Fitch Macro Solutions had earlier said in mid-August that the completion of key infrastructure projects will boost Malaysia’s construction sector in the long run.
Still, Fitch also trimmed its expectations for the residential, commercial and industrial building sectors, citing lower planned supply and short-term macroeconomic uncertainties. It now projects the overall construction sector to grow by 1.1 per cent in 2019 and 3.5 per cent in 2020.