Construction Material Cost On A Decline, Boon For Sector

Average steel bar prices in Malaysia declined – 2.1%mom to RM3,721.80 per tonne in Sept-22 (Aug-22: -2%mom to RM3,802.79), marking its third consecutive month of a downtrend, in line with slowing steel prices globally that is being caused by lower demand, depreciation of regional currencies and high energy costs.

On a year-on-year basis, it was still an increase of +15.4%, but at its slowest pace since Jun-21. Cement prices also recorded a decline, by -0.6%mom to RM20.92 per 50kg bag.

Based on the Department of Statistics (DOSM) data released, the prices of five types of mild steel bars and four types of high tensile deformed bars it tracked were generally lower across the board. Average steel bar prices in the Peninsular retreated -2.3%mom to RM3,322.60 per tonne. The northern region saw the highest decline of -3.8%mom to RM3,082.28 per tonne. In East Malaysia, average prices were -2%mom lower to RM3,921.40 per tonne, with the highest decline recorded in Kota Kinabalu at -3.4%mom to RM3,520.40 per tonne. MIDF believes that steel bar prices peaked in Jun-22 at RM3,901.81 per tonne and prices are now starting to soften after 19 consecutive months of increase since Dec-20, though we understand that industry players still remain cautious as prices still remain elevated.

Cement prices have also averaged out at RM20.92 per 50kg bag in Sept-22. The Peninsular recorded a decline of -1.8%mom to RM18.29. The northern region saw the highest reduction of -4.3%mom reduction to RM17.17. In Sabah and Sarawak, average cement prices declined only by -0.04% to RM22.23 per 50kg bag. Prices mostly remained unchanged in the regions tracked except for a -0.2% decline in Kuching to RM22.56.

MIDF is on the view that it is not overly concerned about the building materials price headwinds being a huge risk to the companies under its coverage as they are still able to mitigate the impacts, on top of margin protection measures such as Gamuda Bhd maintaining with its record high order book of RM14b. Sunway Construction Group Bhd with its improving construction margins from a full resumption of operations.

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