PETALING JAYA: The bearish view on the global steel market will likely be prolonged, as steel prices and demand are unlikely to see any favourable improvement, according to CSC Steel Holdings Bhd
.
In a filing with Bursa Malaysia, CSC Steel said Europe’s energy crisis was forcing the manufacturing industry across the continent, including steel mills, to close down.
“Also, the yuan is likely to continue depreciating, which stimulates exports and consequently affects local steel prices as the weaker yuan makes Chinese goods cheaper in the global market place,” CSC Steel noted.
The group’s main products include pickled and oiled, cold rolled, galvanised and pre-painted steel coils.
“Following the depreciation of Asian currencies and the sturdy coal prices in winter, steel mills appear to have no room for any price adjustment under the pressure of high raw material costs,” added CSC Steel.
The group pointed out that most of the Asian steel mills in the third quarter saw weak performances, as they were affected by significant sales decline and lower inventory prices.
“After experiencing a low order volume in the third quarter, Malaysia’s domestic sales volume and prices have shown a slight recovery at the beginning of the fourth quarter mainly due to the ringgit’s depreciation, the high import cost and the improvement in labour supply,’ said CSC Steel.
The group pointed out that in the fourth quarter, it is expected that the United States will continue to raise interest rates, and thus, the ringgit will continue to be weaker against the greenback, resulting in higher import costs.
“It is uncertain whether the downstream and steel market are able to absorb the higher costs,” said the group.
For its third quarter ended Sept 30, 2022 (3Q22), CSC Steel posted a RM14.2mil net loss versus a RM10mil net profit a year earlier despite revenue being 80% higher at RM363.2mil.
Loss per share in 3Q22 was 3.84 sen versus an earnings per share of 2.70 sen a year earlier.
The group said while the third quarter saw a significant increase in the sales volume and a slight increase in selling prices, it suffered losses due to higher raw material prices, the implementation of the higher minimum wage, high inflation as well as increase in inventory impairment.
For the nine months under review, net profit dropped 68.4% to RM14.94mil despite revenue rising 42% to RM1.338bil.
Earnings per share for the period was 4.05 sen versus 12.79 sen a year earlier.
