China’s Environ Policy May Fuel Steel Price Rise: Masteel

By Ooi Tee Ching

STEEL prices could rise even higher after soaring 55 per cent in the last two months, due to China’s strict environmental protection policy during the Olympics.

“The Chinese government, in ensuring clean air and blue skies for Olympic athletes and visitors, are requiring 43 steel mills in3 Tianjin City and Hebei to halt or slash production during the session of the Games,” Malaysia Steel Works (KL) Bhd (Masteel) managing director Tai Hean Leng told Business Times.

“Beijing is waging war against pollution on nearby steel mills that is causing grey skies. When the supply of steel into the global market comes down, prices will go up.”

Hebei is a major steel-making province in China, accounting for 20 per cent of the country’s 489 million tonnes of crude steel output last year.

Another factor in the rising steel prices is that China is reducing freight movement around Beijing.

“When exports of heavy metal is being diverted to ports in the south like Lianyungang, logistics costs will go up, thereby adding to steel bar prices,” Tai said.

In April, steel bars sold locally cost between RM2,278 per tonne and RM2,419 per tonne. Following the liberalisation of the market on May 12, prices have increased to between RM3,550 per tonne and RM3,750 per tonne.

Meanwhile, Tai declined to disclose revenue and net profit forecasts for 2008.

“We have invested RM90 million in capacity expansion in the last two years. We are now leveraging on economies of scale because of better global demand and rising prices,” he said.

Masteel has capacity to produce 450,000 tonnes of billets and 350,000 tonnes of steel bars per year. Seventy-five per cent of its steel products are for the domestic market and the rest for exports.

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