Steady increase in steel prices projects. Building materials industry look pretty

The restructuring and cut-off of domestic and foreign companies has prompted steel prices to remain strong and stable. Coupled with the steady growth of major domestic projects, the overall outlook for the construction materials industry is good. The performance in the third and fourth quarters of this year is expected to be delivered to good news. 

According to data from the Department of Trade and Industry, local steel prices decreased by 7.2% in October to MYR2,452 / tonne, which was lower than the record high of MYR2,642 recorded in September. Futher prices also dropped 4.4% to 2258t./mt Ringgit.

However, steel bars and steel billets soared 32.5% and 44.5% respectively over the previous year.

In contrast, the prices of Chinese steel bars and HRC coil dropped by 2.4% and 1% respectively in October due to a decrease in demand for winter construction, with RMB4,182 and RMB4,134 for each metric tonne reported.

Iron and steel industry restructuring at home and abroad to 
promote steel prices

UOB Kay Hian studies believe that although the steel price slightly callback, but still at a high level, thanks to continued restructuring of the steel industry at home and abroad.

"After a six-month period of steady increase in steel output in China, the number of steel mills dropped by 3.7% YoY to 71.8m tonnes in September, the Chinese government said at the Ninth Congress that it will reach the target of 50m tonnes of steel output to be reduced in the full year by August."

In addition, starting October 12, the Malaysian government will impose a 7.3 to 111.6% import tax on cold-rolled stainless steel in China, South Korea, Taiwan and Thailand, which is also good news for domestic steel companies.

As the price of steel dropped, the prices of raw materials and fuels also plunged last month, helping steel companies reduce costs. On a monthly basis, scrap fell 9.2% to US $ 330 / mt. Iron ore slipped 6% to US $ 71.5 / unit. Coal also dropped 11.3% to US $ 181.60 / mt.

UOB Kay Hian said that given the average selling price of steel products rose 16.4% quarter-to-quarter to RM2,417 / tonne, the performance of the steel mills in the third quarter is expected to be marked as green. As the demand rises, the performance of the steel mills in the fourth quarter is even more exciting .

The bank continued to be optimistic about the outlook for the construction materials industry and maintained its "overweight" rating. The bank advises investors to pay attention to the steelmakers actively promoting their capital management activities and think the valuation of these companies may increase.

Preferred stocks: 
Anyu resources poly steel plant

The bank's preferred building materials stocks include Anju Resources (ANNJOO, 6556, Mainboard Industrial Products Group) and Polymetal Steel Works (CHOOBEE, 5797, Mainboard Industrial Products Group).

CSC Steel (CSCSTEL, 5094, Mainboard Industrial Products Group) outperformed the broad band of building materials stocks after declining 3.3% in July, compared with an average increase of 16% for the building materials stocks tracked by the bank over the same period.

Closed today, CSC Steel and Poly Steel fell 2 sen and 1 cents respectively to settle at RM1.72 and RM2 at 39 sen. An Yu Resources added 3 sen to RM3 at 91 sen.

Source: http://www.klsescreener.com/