Gradual recovery seen for prices of building materials


  • Construction
  • Tuesday, 14 Jul 2020

Besides that, it estimated cement prices in Peninsular Malaysia to hold steady at RM250 per tonne in the second half of this year due to the emergence of a price leader in the market following YTL Cement’s acquisition of Malayan Cement Bhd last year.

KUALA LUMPUR: The outlook for the building materials sector is turning more favourable on expectations that aluminium and steel prices are likely to inch up, while cement prices are expected to hold steady.

AmInvestment Bank Research, which has upgraded the sector to “neutral” from “underweight, ” sees a mild recovery in aluminium price to US$1,600 per tonne in the second half of this year compared to US$1,528 per tonne in the second quarter of 2020.

For the 2021 forecast, AmInvest Research has forecast aluminium prices to improve slightly to US$1,700 per tonne, assuming that rising demand from aluminium consuming industries would gradually run down the aluminium inventory build-up. 


Given that smelters globally have continued to produce throughout the pandemic as it is very costly to shut down and restart aluminium smelting plants, there is a build-up of aluminium inventory.

This has resulted in a huge inventory build-up, as reflected in a 23% increase in global aluminium stockpile to 13.3 million tonnes in end of first quarter this year (1Q20) from 10.6mil tonnes in the 4Q19, said the research house.

Similarly, it expects steel prices to recover in the second half of this year as construction activities in China pick up after the rainy seasons between April and July as well as exports that would ease steel supply pressure locally. “Domestic construction activities also recover as players get a better hang of how to operate under the new norms, particularly, with social distancing, ” AmResearch said.

Besides that, it estimated cement prices in Peninsular Malaysia to hold steady at RM250 per tonne in the second half of this year due to the emergence of a price leader in the market following YTL Cement’s acquisition of Malayan Cement Bhd last year.

It also said that cement prices were to hold steady because industry supply pressure has significantly eased after the recent shutdown of one clinker plant each by Malayan Cement and peer Cement Industries of Malaysia Bhd, with a total clinker capacity of two million tonnes per annum offline. Cement prices have been rising steadily to RM250 per tonne in the first half of this year compared to RM200 per tonne in the first of last year.

On the other hand, AmResearch also expects cement consumption in Peninsular Malaysia to decline by 30% to 10.5 million tonnes in 2020 forecast from 15 million tonnes estimated in 2019 due to low construction productivity, limited new infrastructure and expectations of building contracts in second half of this year.

Moving forward, the research house forecasts cement consumption to improve by 30% to 13.7mil tonnes in 2021 forecast, assuming construction players are able to bring their productivity up back to close to pre-pandemic levels. “Despite its significant pricing power, we believe the price leader will toe the line and only raise cement prices slightly to RM260 per tonne in 2021 in order not to invite backlash from cement consuming industries and intervention from the government, as what had happened in 2019, ” it said. 


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