By John Gilbert
KUALA LUMPUR: Malaysia Steel Works Bhd (Masteel) sees a continued uptrend with growing demand of high-tensile steel bars for this year, on the back of the rollout of infrastructure projects under the Economic Transformation Programme (ETP) and various other projects.
“We are generally optimistic about the outlook of the domestic steel sector in 2013 and much of this will be due to the more than RM150 billion in ETP projects which are expected to be rolled out this year.
“This will definitely require huge amounts of high-tensile steel bars which is a core component of the construction and property industries,” Masteel managing director/(CEO) Tai Hean Leng told The Malaysian Reserve.
He said projects that would push up the demand for steel include the Klang Valley mass rapid transit (MRT) project, the RM26 billion Tun Razak Exchange, the proposed RM25 billion-RM30 billion high-speed rail service between Kuala Lumpur and Singapore, the RM7 billion light rail transit (LRT) extension and the RM8 billion Gemas-Johor Baru double tracking project.
Additionally, he said the the 1Malaysia Housing Programme, which will see affordable housing being built for the middle-income group under a public-private initiative in various major cities around the country, will also lead to a demand for steel bars.
OSK Research Sdn Bhd said local steel millers were in high anticipation for the roll-out of projects under the government’s ETP which was expected to spur steel demand.
However, the focus may have shifted to the upcoming polls rather than the actual implementation of the proposed ETP projects which pose some risks in the actual rolling out of such projects.
“With the market likely to disappoint again, we now see the momentum of construction works picking up only post-general election,” it said in a recent research note.
Some of the local steel players include the country’s sole hot-rolled coil producer Megasteel Sdn Bhd, cold-rolled coil producer Mycron Steel Bhd and Hong Leong Group controlled Southern Steel Bhd.
On its strategies for 2013, Tai said Masteel was investing an estimated RM230 million to increase its meltshop capacity to 600,000 metric tonnes (MT) and planned to maximise it to 650,000MT by 2013/2014.
“We have also planned to build a second rolling mill to boost its total annual steel bar capacity to 550,000MT and our continuous technology upgrades over the years have also allowed us to boost plant efficiencies and lower costs.
“Such strategies will allow the company the flexibility to meet the growing domestic demand for steel bars, fuelled by the ETP projects and the local property market as well as tap into existing and new export destinations for our steel products,” he said.
Tai said at the moment, the company exports to Australia, Indonesia, Sri Lanka, Singapore, New Zealand, Fiji, Vietnam, the Philippines, Thailand, Bangladesh and Myanmar.
“Additionally, having a larger capacity in steel bars also allows us to benefit from this product’s higher margins compared to that of steel billets and this will provide a boost to our bottomline going forward.
“Should there be a need for additional steel bar capacity expansion, we are more than capable of doing so given our strong fundamentals and relatively low gearing levels,” he said.
Masteel is also in the midst of an organic expansion plan, with an estimated capital expenditure of RM230 million to expand the capacity of its meltshop in Bukit Raja, Selangor, to 600,000MT by 2013 as well as the setup of a new 200,000MT rolling steel mill next door by 2014.
This new facility will augment the company’s existing rolling steel mill’s annual capacity of 350,000MT.
Last year, the company won a RM6.7 million supply contract for Grade 500 high tensile steel bars for the RM50 billion MRT project and also supplied steel bars for the new Istana Negara and the low-cost carrier Terminal 2 projects.
Regionally, Masteel also benefitted from the growing regional demand for steel bars, signing a three-year RM500 million deal with Trafigura Pte Ltd that will see the latter take up more than 200,000MT of steel bars and steel billets for sale to its regional customers.