Reciprocal tariff impact on Malaysia's construction sector is minimal - MIDF

The investment bank said construction is fundamentally a domestic-facing industry, and unlike sectors such as automotive or consumer electronics, it does not rely on exports for revenue.

As such, it is largely insulated from trade-related shocks, apart from potential cost pressures.

"Tariffs may indirectly affect the sector via input inflation, especially if global steel or cement prices rise due to supply chain distortions.

"However, most companies under our coverage, namely Malaysian Resources Corporation Bhd, WCT Holdings Bhd, Malayan Cement Bhd, Cahya Mata Sarawak Bhd, Gamuda Bhd and Sunway Construction Group Bhd (SunCon), have no direct revenue exposure to the US market," it said in its Construction - Sector Report note today.

MIDF further said IJM Corporation Bhd does have some exposure in the form of industrial concrete products exports to the US, but it is limited and not expected to materially impact the company's outlook.

Even in cases like SunCon's data centre projects for US-based hyperscale clients, the construction work is done locally in Malaysia for domestic infrastructure, meaning it falls outside the scope of US tariffs.

"Overall, while some indirect effects may emerge through raw material pricing, the broader construction sector remains well-shielded from the immediate implications of the US-Malaysia tariff action," it said.

Meanwhile, MIDF said it stays positive on the construction sector, supported by a favourable cost environment and steady project momentum.

Steel bar prices have continued to ease for the fourth consecutive month amid global oversupply, while cement prices remain stable due to disciplined domestic production and raw material cost control.

These dynamics help cushion contractors from margin pressures.

"While recent geopolitical developments such as the Liberation Day tariffs have introduced some volatility, we see limited impact on the sector given its domestic focus and low direct exposure to US markets.

"Moreover, key inputs remain reasonably priced, and sector fundamentals are supported by healthy job flows, a strong pipeline of industrial and infrastructure projects, and sustained data centre demand," said MIDF.

As at February 2025, the monthly average price for the binding substance has remained unchanged for the 19th consecutive month since July 2023, holding steady at RM380 per tonne.

This prolonged price stability is attributed to a balanced supply-demand dynamic in the market and consistent raw material costs, leading to easing cost pressures that help to sustain prices.