KUALA LUMPUR: The ongoing decline in steel bar prices remains a positive development for construction players as they have been taking on higher price pressures over the past two years, said MIDF Research.
The firm said construction players had to face higher price pressures when steel bar prices had risen for 19 consecutive months to its peak of RM3,901.81 per tonne in June last year.
"On the flip side, we expect cement prices to remain elevated at current levels and we do not discount the possibility of further hikes, especially in the Peninsula due to elevated coal prices and the impact of higher electricity surcharge from January to June this year.
"In Sarawak, the sole cement manufacturer Cahya Mata Sarawak raised prices by an average of 10 per cent in February 2o22 for the first time in six years and has no plans for further increases, as the group seeks to focus on improving its plant efficiency, procurement and logistic arrangements to better manage its margins," said its analyst Royce Tan.
MIDF Research said prices of steel bars maintained its downward trend in December last year, marking its sixth consecutive month of decline.
Based on the Department of Statistics (DOSM) data released yesterday, the average prices of five types of mild steel bars and four types of high tensile deformed bars it tracked saw a reduction of 0.6 per cent month-on-month to RM3,602.94 per tonne.
On a year-on-year (YoY) basis, it was still an increase of 7.8 per cent YoY but at its slowest pace since March 2021. This was in line with the global decline in iron ore and steel prices.
"Average steel bar prices in the peninsula were down 0.5 per cent MoM lower to RM3,135.05 per tonne. The central region saw the highest decline by 1.2 per cent MoM to RM3,335.48 per tonne.
"In East Malaysia, average prices retreated 0.7 per cent MoM to RM3,836.88 per tonne, with the highest decline recorded in Tawau by 1.6 per cent to RM4,070.92," MIDF Research said.
As for cement prices, the binding substance averaged at RM21.04 per 50 kilogram bag in December, up 0.3 per cent from the previous month from RM20.98, its second straight month of increase.
The east of the peninsula posted the strongest increase by 3.6 per cent to RM19.92 while Sabah and Sarawak, average prices saw a marginal decline by 0.4 per cent to RM22.19.
Cement prices in Tawau, Kuching, Sibu and Miri remained unchanged.
MIDF Research maintained its "Positive" view on the construction sector as the current cost headwinds remain manageable.
"The issue of foreign labour shortage is also alleviating, which will go on to improve further as the government agreed to ease the conditions for the hiring of foreign workers and to shorten the process.
"Uncertainties for the sector remain with the potential reviews, delays or even termination of infrastructure projects but we still expect Mass Rapid Transit 3 to be the bright spot for the sector, albeit a delay in the rollout of its main packages, as it is a crucial final piece to complete the urban rail network in the Klang Valley," it said.
The firm's preferred names for the sector are still the larger players with strong balance sheets and considerable overseas presence namely Gamuda Bhd (Buy, TP: RM4.67), Sunway Construction (Buy, TP: RM1.87) and IJM Corp Bhd (Buy, TP: RM1.93).