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Tuesday, May 13, 2008

Steel stocks surge on move to free prices

SHARE prices of major steel millers jumped yesterday after the government abolished ceiling prices for steel bars and waived import duties.

On the stock exchange, Penang-based Southern Steel Bhd jumped 14 sen to RM3.20, its highest level since November 1997. Lion Industries Corp Bhd leapt 18 sen to RM2.70 while Kinsteel Bhd added four sen to RM1.59. Ann Joo Resources Bhd rose six sen to RM3.88.

OSK Investment Bank analyst Ng Sem Guan has an "ultra bullish" view on Malaysia's steel bar and billet sector.

Malaysia Steel Works (KL) Bhd managing director Tai Hean Leng said billet and steel bar prices are now 35 per cent higher.

He said billets are now being sold at RM2,900 per tonne. Steel bars ranging from 16mm to 32mm are priced between RM3,219 and RM3,078 per tonne.

Last week, when government-controlled ceiling prices were still intact, billets were sold at RM1,928. Steel bars were priced between RM2,419 and RM2,278 per tonne.

Contractors had complained that steel products were sold above the ceiling prices. They bid for projects by basing the cost of steel at the ceiling price.

However, steel producers said that they kept to the ceiling prices but the extra charges were for other costs like transportation and handling fees.

This created an artificial shortage where steel was available but contractors could not afford them.

Since many could not afford the higher price, government projects were delayed.

To prevent further delays, the government liberalised the market and set up Mavtrac Sdn Bhd to bulk-buy building materials for government jobs.

"There's unlikely to be any supply shortage now as contractors will be able to price in the real price of steel bars when tendering for government jobs," said Mavtrac Sdn Bhd chief executive officer Mohd Azman Sulaiman.

"Mavtrac is helping local contractors, especially small ones, secure supplies of building materials at fair pricing," he told Business Times in Kuala Lumpur yesterday.

By New Straits Times (by Ooi Tee Ching)

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