Steelmakers' earnings may take a hit, say analysts

Malaysian steel millers’ earnings could take a hit in the coming quarters as they contend with inventory writedowns following a plunge in selling prices of the material, prompting analysts to downgrade valuations on the companies.

This is in anticipation of waning demand for steel as the crippling financial liquidity crisis in the US and Europe puts the brake on the world economy. It is compounded by China’s move to scrap export taxes on its steel products with effect from Dec 1, increasing competition for Malaysian steel millers.

“Some of the local steel mills may record a loss in the fourth quarter of calendar year 2008 on sluggish demand and weak selling prices, but steel mills that practise effective procurement policy and skip purchases during the peak of scrap prices may still see earnings in positive territory.