Infra Projects A Boon for Steel Sector

The steel industry is expected to experience positive growth in 2024, with demand to be spurred by the commencement of infrastructure projects, says the Malaysian Iron and Steel Industry Federation (Misif).

‌Misif president Datuk Lim Hong Thye said if the government is able to kickstart the construction of infrastructure projects such as the mass rapid transit line three or MRT3 by this year, it will boost steel demand from the expected 8.3 million tonnes to nine million tonnes.

‌“If all these infrastructure projects were to begin, the demand (for steel) would surge past nine million tonnes and then we would move closer to the optimum level. That would make a big difference to the industry,” he told the media after the launch of Misif’s report on the status and outlook of the iron and steel industry.

‌However, he pointed out that the country’s capacity utilisation of crude steel products at 39.1% and high amount of steel import of 7.2 million tonnes was rather concerning, affecting steel players’ ability to survive in the industry.

‌“The government needs to provide directions for the steel industry, so that our sector can stay intact and survive. The growth currently is not the recovery growth, but for us to reach a growth level to survive,” he added.

‌That being said, Investment, Trade and Industry Deputy Minister Liew Chin Tong said the ministry is committed to working with the steel industry to overcome the scrap metal challenge, finding ways to deal with shortages and create a better ecosystem and a virtuous cycle rather than the current vicious cycle.

‌He noted that the iron and steel industry is heavily influenced by global factors.

‌Hence, if any policy changes or market trends occur in China or the United States, it would leave a “butterfly effect” on profitability or the survival of the Malaysian steel industry.

‌Also highlighting Malaysia’s capacity utilisation of crude steel products – such as billets, blooms and slabs – Liew stated that it was significantly lower than the global level of 75.7% and the Asean-6 level of 60.1%.

“However, flat products may have a brighter prospect given that there is a once-in-a-generation relocation of the supply chain. With more manufacturing activities in South-East Asia, flat products commonly used in the automotive, heavy machinery and appliances industries should have a better prospect,” he said.

‌Liew went on to say that Malaysia will have to start implementing carbon pricing as a way to facilitate carbon trading, as well as looking into carbon taxing as the European Union (EU) prepares to commence its Carbon Border Adjustment Mechanism (CBAM) in 2026.

‌He stated that the collections should be channelled into green investments, including investment into green steel, as he acknowledged the challenges in its production (of green steel).

‌“Carbon pricing, trading and taxing are crucial aspects of the decarbonisation agenda. Under the CBAM, the export of steel and the other five listed items from Malaysia will be taxed by the EU, unless Malaysia collects the tax,” he added.

‌Liew also stated that the ministry is working with the Construction Industry Development Board and the Works Ministry to explore ways to enforce a more stringent localisation programme for government construction projects.