Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The Malaysian Department of Mineral and Geoscience has announced a suspension of mining activities in the states of Terengganu, Pahang and Johor, in order to contain the spread of the COVID-19 virus. 

The government, announced on Monday, that all non-essential activities in the country will be halted for 14 days, from March 18-31. 

The suspension of mining operations will lower supply of iron ore to the domestic market. 

Major blast furnace steelmakers in the country are dependent on up to 30pc-40pc of local iron ore. 

These makers blend low-grade domestic iron ore with high quality ore imported from Australia and Brazil. 

On such short notice, steel makers will not be able to restock. 

Steel producers who are on-spot iron ore purchasers, ensuring deliveries are just in time to be blended into sinters, are likely to be feel the acute impact of the shutdown. 

Steelmakers switching off furnaces is a possibility, not yet on the table because mills may keep furnaces alive using coal supplies to save on restarting costs.

There are two major iron-ore consuming steelmakers located in Terengganu state, Alliance Steel and Eastern Steel, with annual production capacities of 3.5mn mt and 0.7mn mt, respectively.


Exempt and discount

The Federation of Malaysian Manufacturers (FMM) has expressed concern over the imposition of the restrictions, warning that it can potentially damage the county’s economy. 

The association has requested an exemption for factories producing essential goods, including supporting supply chains. 

Companies with export commitments are also in the firing line as a total shutdown will dent business substantially. 

Rotary kilns and smelting facilities for steel and aluminium have been cited by the federation as a possible case for exemptions.

The federation has also advised members to ramp up production of critical goods essential to the fight against COVID-19. 


Fund it to fix it
The federation is seeking an increase in funds allocated by the government to contain the outbreak, with RM1bn ($0.23mn) being cited as the new figure. 

Also, fund allocation under the 2020 Economic Stimulus Package needs to be doubled to RM40bn ($9.1mn), the federation proposed, requesting a 5pc discount for all power consumers in the commercial, industrial, agriculture and domestic sectors.

A 2pc discount was announced on Monday. 

To accelerate local infrastructure projects such as the East Coast Rail Link, High Speed Rail and Light Rail Transit 3, banks need to extend payment terms for affected companies, declassifying non-performing loans from three months to six months, the federation requested. 


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