Malaysian mills need further increase to cover production costs
As previously reported by SteelOrbis, Malaysian Government approved a Malaysian Ringgits 90/mt increase of
billet and steel rod ceiling prices, carrying the ceiling price of billets from RM 880/mt to RM 970/mt and of steel rods from RM 1'229/mt to RM 1'319/mt.
As mentioned by the Malaysian Iron and Steel Industry Federation, the
production costs of the steel mills have risen almost 75%, a situation which requires even further sales price increases as it becomes difficult for the mills to bear these rising
production costs.
Most Malaysian mills are currently operating at low capacity with ample stock and supply, selling their material to the building material dealers. Therefore, recent reports of steel bar purchases from building material dealers are commented to be due to the credit-worthiness of the contractors or other end users, resulting in dealers having to charge risk premiums over actual prices.
It is noteworthy that this comment received strong protest from the Building Materials Distributors Association of
Malaysia. The Association defends that it is inevitable to charge the financing if credit is requested by the contractors and emphasizes that steel mills are charging very strict cash terms to distributors, reducing the margins.
The delivery periods that have lately become six to ten weeks, compared to the previously period of one week also contributes to the difficulties experienced, according to the Association.