Ann Joo sees bearish outlook for steel industry

• China’s fast-rising steel production combined with poor end-user demand recovery, continues to pressure steel prices and industry profit margins.

KUALA LUMPUR (May 29): Ann Joo Resources Bhd sees bearish sentiment in the steel market outlook given global recession fears and China strains after posting its third straight net loss of RM21.08 million in the first quarter ended March 31, 2023 (1QFY2023). This comes on the back of lower selling price coupled with a higher cost of sales attributable to higher inventory cost.

“The outlook of the global steel market is clouded by bearish sentiment, as global recession fears and supply demand imbalance in China are expected to stymie demand recovery momentum, Ann Joo said in a filing with Bursa Malaysia.

It also said the steel demand growth is further restrained by the uncertain recovery of China’s steel market, which has been affected by shrinking orders for manufactured goods from overseas, lacklustre domestic consumption and a further slowdown in property investment.

China’s fast-rising steel production combined with poor end-user demand recovery, continues to pressure steel prices and industry profit margins.

“Despite the rebound in steel prices following China’s reopening in 1Q2023, steel market remains highly volatile and uncertain in the wake of sudden price corrections since April 2023, it observed.  

On the domestic market front, Ann Joo said the domestic steel market is not immune to volatility, with global economic uncertainty influencing steel pricing and demand, lacklustre rollout of mega infrastructure projects continues to weigh on demand for construction steel.

“The industry’s profitability is also negatively impacted by higher operational costs brought on by rising interest rates and electricity costs,” it added.

Compared to a year ago, the steelmaker delivered a net profit of RM32.93 million in 1QFY2022.

Its loss per share was at 3.75 sen, compared to earnings per share of 1.25 sen previously.  

Quarterly revenue also inched down 0.37% to RM670.73 million, from RM673.21 million, lower export tonnage despite higher selling prices of various steel products.

Given the challenging market dynamics, the group said it continues to place strong emphasis on balance sheet and cash flow management, in order to stay vigilant and navigate through this volatile and challenging period