Major Infrastructure Projects To Drive Malaysia's Steel Demand - Kenanga IB

KUALA LUMPUR, Jan 10 (Bernama) -- Malaysia’s demand for ferrous metals and their value-added products will be well driven by the roll-out of major local infrastructure projects, according to Kenanga Investment Bank Bhd (Kenanga IB).

The investment bank said the demand for steel should improve along with the roll-out of mega public infrastructure projects such as Penang’s Mutiara Line Light Rail Transit (LRT), the Kuching Autonomuous Rapid Transit (ART) and the Mass Rapid Transit 3 (MRT3).

“The good news is that stable steel prices translate to stable steel product prices, reducing earnings volatility of steep product producers such as Engtex Group Bhd (Engtex) and United U-Li Corp Bhd,” it said in a note.

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Kenanga IB also anticipates China's steel demand to grow modestly in 2025 after four years of stagnation, driven by a stabilising property market, additional stimulus supporting other sectors, and improving consumer sentiment.

“Steelmakers may face pressure in 2025 and beyond due to rising anti-dumping investigations with a more pronounced impact likely in 2026. The industry's poor profitability has already led to production cuts and is paving the way for consolidation as many steelmakers face the risk of bankruptcy. If capacity limits are enforced, utilisation rates could improve, potentially boosting Chinese steel prices in 2025,” it noted.

Meanwhile, the bank also projected a higher average aluminium price of US$2,450 per tonne (US$1= RM4.50) in 2025 from US$2,420 per tonne in 2024.

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“Aluminium prices have fluctuated between US$2,400 and US$2,600 per tonne over the past two months, despite expectations of firmness driven by unexpectedly strong consumption in China earlier in the year. Strong consumption in China during the year’s initial months provided an early boost, while demand outside China has been supported by the expansion of renewable energy projects and increased electric vehicle (EV) production,” it added.

Therefore, Kenanga IB has maintained an “overweight” rating on the building materials sector, with its top picks being Press Metal Aluminium Holdings Bhd (PMetal) and Engtex. 

-- BERNAMA