Steel still in demand
The steel industry, being one of the main arteries of the industrial age continues to be in demand till this very day given the metal’s widespread usage in various other industries.
Steel is a raw material that is used in other key industries such as the construction, oil & gas, automotive industry and heavy manufacturers.
There is an urgent need for Malaysian steel producers to quickly move up the value chain to produce flat products steel following the slump in mega projects in the medium term that will affect demand for construction type steel.
Steel used in the construction industry and civil engineering sector is also known as long products steel and is the primary mover of steel demand all over the world including in Malaysia.
Long products steel comprise of intermediate products such as steel bars, wire rods, angles and sections (semi-finished crude steel).
While steel that is further processed to flat products steel are used for downstream applications in industries such as oil & gas, machinery and automotive.
Flat products steel consists of intermediate products such as hot rolled plates & sheets, hot or cold rolled coils, pipes, tubes and coated coils. Despite this need to move up the value chain, steel manufacturers here are also keeping an open mind that demand growth is forecasted to still be driven by steel demand for the construction industry: long products steel.
The construction industry continues to be the main driver for steel demand and is expected to constitute 52% of steel consumption demand in the year 2025, according to estimates by the World Steel Association.
That being said, the industry today continues to be oversupplied globally due mainly to a steep rise in China’s steel capacity from new plants from the period between the year 2000 and 2013.
In 2013, China’s steel production capacities had exceeded 1,100 million tons which is equivalent to the steel capacities of the rest of the world.
Despite China already pledging to cut steel capacity to ease the oversupply situation of the industry, Malaysian Iron & Steel Industry Federation (MISIF) said in its 2018 report that the cuts will just be dents in the face of the overwhelming industry which is still oversupplied.
The oversupply situation was not always present and the industry had indeed enjoyed their good years before particularly more recently from the years 2003 to 2008.
This period saw high steel prices and tight raw material supply and is also known as the ‘long boom period’ with China driving demand growth then.
The good times ended abruptly in Aug 2008 when prices declined and demand dropped due mainly to the Global Financial Crisis which was triggered by the US-Subprime crisis.
Major manufacturers of long products include companies such as Southern Steel Bhd, Ann Joo Resources Bhd, Amsteel Mills Sdn Bhd, Malaysia Steel Works (KL) Bhd, Antara Steel Mills Sdn Bhd and Hiap Hin Chan Trading Company Sdn Bhd.
While major manufacturers of downstream steel products: flat products in Malaysia are YKGI Holdings Bhd, CSC Steel Sdn Bhd, Bahru Stainless, FIW Steel Sdn Bhd and NS BlueScope Malaysia Sdn Bhd.