Steel prices in Malaysia recovering from China’s steel dumping

KUALA LUMPUR: The recent recovery in steel bar and wire rod prices is a worldwide phenomenon as prices are returning to normalcy after more than three years of steep global price decline caused by excess supply of steel from China.

According to a press release, although prices have recovered, over-capacity remains in China, its domestic prices are still only around historical lows.

Cost of steel making has also risen, with prices of raw material such as iron ore, coke and scrap having also increased.

In the last three years, Malaysian steel importers have imported unprecedented amounts of steel bars and wire rods, mostly from China and causing the utilisation rate of local steel mills to fall as low as 40 per cent.

This resulted in losses of up to RM2 Billion from 2013-2015 for the Malaysian long steel products, precipitating widespread closures of steel mills and retrenchment of workers. This situation was in contrast to the sizeable profits generated by property and construction companies.

Meanwhile in this prevailing period, consumers have enjoyed very low prices of steel domestically and internationally. In the last three years, housing prices does not correlate with the sharp decline in steel bar prices. A typical two-storey affordable terrace house only uses about three tonnes of steel bar.

The current tight steel supply situation both domestically and internationally have been exacerbated by the recent cancellation of numerous steel supply contracts by the Chinese sellers.

The past few years with the over reliance of imports of steel products into Malaysia at artificially unsustainable low prices have undermined the viability of the Malaysian steel industry by decimating its strategic role to buffer against international steel shortages that disrupts the country’s national development programmes.

Malaysia Steel Association (MSA) has in the past persistently highlighted the role and plight of the Malaysian steel millers to the Government, downstream players and users.

MSA members are striving to retool, rehire and restock their raw material to increase their production capacities. MSA expect the steel price increase to moderate within the next few months both domestically and internationally.

In the last three years, Malaysian steel importers have imported unprecedented amounts of steel bars and wire rods, mostly from China and causing the utilisation rate of local steel mills to fall as low as 40 per cent.