OSK Research has reiterated its neutral call on Malaysia Steel Works Bhd due to weaker steel prices and not so rosy outlook as the steel producer and seller may have been caught with some high cost scrap metal when prices surged to USD 500 a tonne in May.

OSK in a research note said that in contrast, the company's average scrap metal cost is likely to be USD 400 a tonne.

The research house sees limited room for steel prices to pick up further despite the recovery at end July caused possibly by the build up for high inventory by steel mills, suggesting possible dumping on any price escalation. As a result, the buyers are likely to hold back on procurement.

It said that "The weakening steel price plus the lack of a demand push factor prompt us to cut our financial year 2010 projection by 16.3% although we retain our financial year 2011 figures adding that it remains cautious on the second half outlook.”
(Sourced from BERNAMA)