STEEL SECTOR SET FOR BUMPER YEAR
Rising prices, rollout of mega projects to boost domestic production
MALAYSIA’S steel industry is projected to pick up this year after a slowdown last year, in line with rising global steel prices and the rollout of mega projects by the government.
Industry players said this will be boosted by the New Industrial Master Plan 2021-2030, which will chart the direction of industrial development in the country.
The Lion Group said the strong demand for steel products, coupled with the shortage of raw materials such as iron ore and scrap metal, will see steel prices improve.
“In addition, the new themes in electric vehicles, green energy, 5G, big data and the Internet of Things will boost the steel industry as it moves up the value chain,” a company spokesman told the New Straits Times.
The spokesman said domestic steel production growth has been on the uptrend since 2017, with the exception of last year due to the Covid-19 pandemic.
“Malaysia’s economic recovery trajectory is shaped by the extent of Covid-19 cases, the pace of vaccination and how much the country is able to benefit from the global economic recovery.
“Considering a modest domestic steel demand amid an improved economic outlook with firmer crude palm oil and oil prices, the current global steel supply shortage and favourable pricing will boost domestic steel production to exceed pre-pandemic levels.”
According to a Bloomberg report, prices of hot-rolled coils, a benchmark steel product, had edged up threefold in North America from pandemic lows and they were also soaring in Europe.
Malaysia’s hot-rolled coils have been imported mostly from Asian countries since the closure of Megasteel Sdn Bhd in 2016.
“Hence we plan to restart our hot-rolled coils plant for domestic and export markets. The government’s support will augur
well for our production,” the spokesman said.
Sarawak-based Asteel Group commercial director Fong Fui Yee said domestic steel manufacturers are receiving many enquiries.
“We find that the demand in Malaysia is spurred by earlier purchases made by players such as the construction and automotive industries.”
Asked if Malaysian steel players can ride along big players from South Korea and China in meeting the global surge in demand, Fong said some Malaysian steel players are only passing the costs to the next supply chain.
“Instead of enjoying the bullish price, players are taking a more cautious approach to the potential price avalanche to better manage safety stock inventory levels. This is a lesson learned from the steel price crash in 2008.”
Asteel managing director Datuk Seri Victor Hii Lu Thian pointed out that the Malaysian Iron and Steel Industry Federation has projected domestic steel
production to grow to 12.4 million tonnes in 2025 at a compound annual growth rate of 3.5 per cent.
“We are hopeful that this is still achievable, and we believe that if we start our post-pandemic recovery efforts from now coupled with help from the government, we may have the opportunity to reach greater heights.”
Asteel, a wholly owned subsidiary of YKGI Holdings Bhd, expects higher steel consumption this year due to efforts by governments around the world in rolling out economic stimulus packages.
“On the local front, we forecast a double-digit growth in steel consumption this year,” Fong said.
Meanwhile, CSC Steel Sdn Bhd feels that demand in the domestic market will not significantly change in the coming months.
Its special assistant to the managing director, Chiu Ping-Tung, said the domestic downstream industries have switched to buying from local producers since the fourth quarter of last year.
This has given the impression that local steel demand is increasing, but in fact, there are no significant changes in the steel demand locally, Chiu added.
“The sharp increase in steel prices is driven by the shortage of steel supply globally rather than the surge in demand.”
Chiu said many steel producers around the world have reduced their export volumes due to high demand in their own countries.
He said steel production in the US and European Union continues to climb because of strong demand that has also driven the prices to record highs.
“On the other hand, measures implemented by China’s government such as decarbonisation and cancellation of export tax rebates may affect steel production and prices.”
Chiu said the company is focusing on the domestic market to support local steel-related industries.
“We have optimised our production in order to fill the gap in the supply and demand in the domestic market,” he added.