Malaysia Raises Steel Prices

Domestic Trade and Consumer Affairs Minister Mohamad Shafie Apdal was quoted by national news agency Bernama as saying that prices had been adjusted Monday to keep up with rising raw material cost and address a shortage of supply.

The price ceiling for steel bars was raised to 1,884 ringgit (US$496, euro413) a metric ton, from 1,570 ringgit (US$449, euro374), and for billets to 1,553 ringgit (US$444, euro370) a metric ton from 1,294 ringgit (US$370, euro308), Bernama said.

"We noticed a lot of shortage on the ground, and people have been buying from the black market," Shafie was quoted as saying. An aide confirmed the comments but could not provide details.

The move followed calls by property developers and builders to abolish price controls on steel, which have been in place for over 36 years.

The Real Estate and Housing Developers' Association Malaysia has warned of artificial inflation and higher risks of project delays, as steelmakers created artificial local shortages by exporting their wares.

With global steel prices now around 2,200 ringgit (US$628, euro524) a metric ton, analysts say the hike won't go far in stemming the current steel shortage or in eliminating the black market created to bridge the supply gap.

The higher steel prices could lead to a 3 percent rise in total cost for construction and housing developers, resulting in a mild margin erosion, said MIMB Investment Bank's research chief Pong Teng Siew.

But this "is unlikely to make or break a developer" as steel only makes about 10-15 percent of total construction costs, he said.