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Malaysian steel associations called for immediate freezing of new licenses for steel manufacturing projects in the country to arrest overcapacity in the local steel industry. In a statement, two major steel associations, Malaysian Iron & Steel Industry Federation (MISIF) and Malaysia Steel Association (MSA) opposed a proposal new steel manufacturing project in Bintulu, Sarawak region.


The association expects the proposed project of 10mn mt/yr finished steel capacity in Bintulu with investment from China’s Wenan Steel could increase the oversupply situation in Malaysia. Construction for the plant is scheduled to begin midyear.  


Malaysia has a total installed steel capacity of 24.64mn mt, with 12.64mn mt long steel production and 12mn mt flat steel production. 


Why the opposition?

The country is facing challenges caused by low capacity utilisation rates for the past few years. Utilisation rates fell to 28pc to 9.77mn mt of domestic steel consumption in 2018 from 46pc in 2014. Malaysia consumed 1.68mn mt steel in 2018 while its existing and upcoming capacity of hot-rolled product is around 6mn mt. The global benchmark for steel companies to remain sustainable is around 70-80pc utilisation rate.


In 2018, domestic ferrous scrap generation in Malaysia was 2.96mn mt and a gap of around half a million metric tonnes was filled by the imports. Ferrous scrap imports were at 558,000mt. Increased import of ferrous scrap imports could result in a trade deficit and foreign exchange loss and additional costs including freight and insurance charges. If the new project begins production, imported ferrous scrap demand in Malaysia is expected to increase by around 2mn mt for the production of 10mn mt steel.  


Malaysian steel associations have opposed new capacity but are interested in investments for steel-grades and products not manufactured locally such as seamless pipes, hot-rolled sheet piles, electric sheets and railway tracks to aid domestic industries to move up the steel supply value chain.

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