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S'pore steel prices hit $900 - and seen rising

Vince Chong - Febuary 13, 2004
The Business Times

[SINGAPORE] Steel prices in Singapore have surged to at least a 10-year high of more than $900 a tonne, fuelled by a burgeoning China market that is forecast to consume about 30 per cent of global output this year.

Prices are expected to keep rising in the first half of this year before levelling off, players say.

Since the start of last year, prices of steel reinforcement bars – or rebars, a common measure of steel products - have almost doubled from below $500 per tonne.

At its annual Construction and Property Prospects seminar yesterday, the Building and Construction Authority said the sharpest month-on-month hike of 18 per cent occurred between November and December 2003, when export prices of billet - small bars of iron - from Turkey and Commonwealth of Independent States countries rose about 14 per cent.

BCA director of business development Low Chin Min said: 'The latest market feedback has it that the alarming trend in prices has reached $900-plus per tonne... and prices look set to continue rising for H1 at least.'

With rising freight costs also, construction firms will be hoping the steel price boom will run itself out before they apply for tenders.

Hor Kew managing director Aw Leng Hwee told BT: 'We can't do anything about the price because steel is a core material in construction and there are no alternatives.

'But while the price of a building project won't be severely influenced by expensive steel - affecting probably below 5 per cent of the construction cost - some builders may run into problems if they tender for a project now and then realise that steel prices are rising dangerously above their tender estimates.'

Demand for steel rebars slipped 3 per cent last year to 0.88 million tonnes, BCA said, with imports from Turkey down substantially to 37 per cent, from 70 per cent in 2002, as Turkish exporters focused on the more lucrative markets of China, the US, the Middle East and Europe.

Demand is expected to dip again this year to 0.7 million tonnes.

'In anticipation of more volatile international prices in the coming year, import trends for steel are likely to respond more sensitively to international price movements than to local demand,' BCA said.

Market insiders say the steep hike in steel costs began in the second half of last year as demand in the US and Middle Eastern countries grew.

HG Metal chief executive Wee Piew said demand from the US accelerated after President George W Bush dropped tariffs on steel imports 16 months ahead of schedule.

'There was a slight correction in steel prices after the Iraq war, but that has quickly gone in the wake of strong demand from China, a net importer of steel and a vacuum sucking up consumption with its many infrastructure works,' Mr Wee told BT, adding that steel prices should keep rising now before stabilising in the second half of the year.