Malaysia's steel sector faces gloomy outlook, analyst says

Malaysian steelmakers are unlikely to benefit from projected growth in domestic steel consumption, because of chronic overcapacity in China, according to analysts at a local bank.

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The Malaysian Iron and Steel Industry Federation (Misif) is forecasting that demand for steel in Malaysia will expand by 6% for several years in a row.

But that's unlikely to improve the fortunes of Malaysian steel companies due to import penetration, Malaysia-based Hong Leong Investment Bank Research said in a November 12 research note.

"We walked away from the recent steel conference with a neutral feeling about the sector due to the persistent overcapacity issue in China,” it said.

At a national steel conference in Petaling Jaya organized by MISIF last month, the steel federation projected Malaysia’s apparent steel consumption will hit 10.7 million tonnes by the end of this year, up 6.5% over 2013, before rising further to reach 11.3 million tonnes in 2015 and 12 million tonnes in 2016, underpinned by continued construction and infrastructure spending as well as property development activities.

However, imports are eroding the market share of Malaysia's own steelmakers, and the bank wasn't overly encouraged by the possibility of trade remedies to protect local suppliers.

Misif has tabled a series of proposals to the Ministry of International Trade and Industry (MITI) with the view that further measures are needed to protect the local industry.

"Dumping activities” from China looked likely to persist in the medium term unless MITI implement a more effective anti-dumping policy, the bank analysts said.

"While we took comfort that [the government] may introduce more measures in protecting the local steel producers’ interests, we believe such issues will likely remain a long drawn affair,” the analysts said. There have been "too many failed attempts, historically" to protect the local industry, it suggested.

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