Market & Business Insight • 26 May – 1 June 2025
Steel Softens, Ringgit Rebounds: Malaysia’s Construction Outlook
Economic Snapshot – Signals that Mattered
Inflation stays muted: April CPI held at +1.4 % y-o-y, its third straight reading at this level, buying contractors breathing space on wage-linked cost escalations.
Currency tail-wind: The ringgit firmed to RM 4.23/US$ (30 May close), trimming the landed cost of imported rebar and specialist equipment by roughly 2 % versus mid-April.
Cheaper steel in sight: LME data show HRC FOB-China slipping to US$ 466/t on 3 June, the lowest print this year and a proxy for ASEAN rebar offers just under US$ 450/t.
Liquidity still loose: Bank Negara’s earlier 100 bp SRR cut continues to release RM 19 billion into the banking system, helping contractors roll over working-capital lines at friendlier spreads.
Macro pulse: 1Q GDP growth came in at +4.4 % y-o-y with construction value-add up 14.5 %, confirming demand strength heading into 2Q tender season.
Key Market Trend – A Short “Spread-Compression” Window
With steel drifting below US$ 450/t, the ringgit 6 % stronger than its January trough and 10-year MGS yields hovering near 3.6 %, financing and material costs are moving in tandem for the first time since pre-Covid days. Internal estimates show that on a RM 250 million viaduct package, every RM 50/t drop in rebar plus a 15 bp fall in borrowing costs lifts gross margin 0.8–1.2 percentage points. Tender teams gearing up for MRT 3 and Pan-Borneo spur roads have a narrow window—likely June–July—to lock in hedges and debt mandates before global rate volatility re-emerges.
Business Strategy Highlight – IJM’s “Own-Extend-Reprice” Highway Play
On 23 May, IJM secured government sign-off for the New Pantai Highway Extension (NPE-X), a 15-km spur fully financed by its toll-road unit without federal capital. The package also folds an immediate toll-rate freeze on the existing NPE in exchange for a longer concession tail and digital open-road-tolling rollout. In effect, IJM:
Self-funds the capex (≈ RM 1.4 billion) but captures upside via land-use uplift along new interchanges.
Locks-in predictable cash flow by capping tariffs yet extending tenure—an attractive credit profile for sukuk refinancing.
Bakes in tech fees by bundling ETC system design and five-year maintenance.
The “own-extend-reprice” model turns IJM from plain concessionaire into an infrastructure asset-manager, unlocking multiple revenue levers while shielding headline toll rates—an approach peers like PLUS and ALR are now studying.
Opportunity Alert – Early-Works Flyover in Kelantan
JKR/IP/CJ/T/2025/16 – Kota Bharu Integrated Flyover & Bypass (Design-and-Acquire)
Scope: Early works for a grade-separated interchange on FT207/209 and 4 km of realigned carriageway; includes land acquisition management and preliminary BIM Level 2 coordination.
Bid window: Documents available 5 Jun – 26 Jun 2025; submission by 12:00 pm, 26 Jun.
Packages: G7, multi-discipline (CE01, CE21, CE36).
Digital land-survey data and drone progress reporting account for 20 % of technical marks—giving a head-start to firms already operating common-data environments on Sarawak federal roads.
International Insight – Mass-Timber Codes Tighten Carbon Math
Seattle released Draft Director’s Rule 2-2025 in early May, requiring embodied-carbon disclosure and favouring low-carbon materials for large buildings.
Australia’s National Construction Code 2025 (public draft opened 1 May) clears mass-timber buildings up to eight storeys without costly alternative solutions.
Why it matters here: Malaysian contractors exporting prefab modules—and those eyeing Kuala Lumpur’s upcoming low-carbon building incentive—must gear up for life-cycle carbon declarations and potential demand for engineered timber. Early partnerships with glulam or CLT suppliers could open premium niches while EU CBAM paperwork looms.