Vol. XXII, No. 114 [ BusinessWorld Online ]
Monday, January 12, 2009 | MANILA, PHILIPPINES
BY JESSICA ANNE D. HERMOSA, Reporter
PRICES of steel goods should rise and stabilize early this year after falling steeply in the past two quarters, as raw materials become costlier and demand may be boosted by state infrastructure spending and house sales, industry leaders said late last week.
But realty firms may not hike prices of units, since they had already raised prices last year and will not want to risk losing buyers, a property analyst said.
Prices of flat steel sheets used for roofing and gutters will rise by 3%-5% within the first quarter from current prices, Filipino Galvanizers Institute President Salvio D. Perez said in a telephone interview.
An 8-foot long 0.4mm galvanized iron (GI) sheet, which currently costs P380, may rise to P400, Mr. Perez said.
"We are looking at price increases in the first quarter because prices of raw materials are going up after foreign mills started production cutbacks," Mr. Perez said, adding that scrap iron, also an input, have become costlier as well.
Sustained demand for sheets in the local market this year will also cause the price hike.
"Housing construction is still active because of government support for financing. While commercial projects like mall constructions may be affected [by the economic downturn], there is still a backlog in the supply of residential housing," he said.
Ramon Jose E. Aguirre, research manager of property consultancy Colliers International, concurred.
"Residential units will be in a better position, compared with office spaces. There will be an increase in sales and demand will hold in the second half," Mr. Aguirre said in a separate phone interview.
Prices of angle bars, reinforcing bars and similar products may also rise slightly this year, said Alexander Wang Ariza, chairman of TKC steel subsidiary Zhangzhou Stronghold Steel Works Co. Ltd.
"Generally, since hitting bottom in November, market prices have bounced back by 10%-20% this January," Mr. Ariza said in another phone interview.
"Moving forward, for February and March... there may be small increases, but not at the same rates as the first half last year...maybe 5%-10% [from current prices]," Mr. Ariza said.
A 9mm thick 4-square inch angle bar now costs P6,750, while a 4-inch flat bar also 9mm thick costs P2,850, a spot price check on a Metro Manila retailer showed.
"Traditionally, in Asia, the first half is the better half because of the summer months. More construction is expected," Mr. Ariza said.
"Buying activity might pick up, depending on how much the Philippine government is willing to spend [for infrastructure]. If you take that into account, maybe prices will continue to recover," he added.
Still, increase in prices of steel goods may not cause realty firms to adjust prices, Mr. Aguirre said.
"I don’t know how [realty firms] will reflect the increase but if they pass it on, they will bear the risk," Mr. Aguirre said.
"And most of their prices are already priced high [following steel price spikes in the first half of 2008] anyway," he added.
But projects now in the pipeline may be pushed back because of the rise in input prices, Mr. Aguirre said.