FOCUS: Malaysia battling China for wire rod dominance in Asia

Malaysia-origin wire rod is fighting against Chinese cargoes with the smaller country trying to take a slice of the Southeast Asia market.

What has been a China-dominated import market could see continued fierce competition, with newly-started Malaysian producer Alliance Steel beginning to ramp up its export volumes.

Alliance’s wire rod cargoes are being offered at prices $5-10 per tonne cheaper than similar product from China.

Deals have been concluded at $580-585 per tonne cfr Southeast Asia for Malaysia-origin materials in recent weeks, sources have told Metal Bulletin.

In comparison, China-origin cargoes - such as those from active exporters Benxi Iron & Steel, Beitai Iron & Steel, Shagang and Yonggang - are being offered at $595-600 per tonne cfr Southeast Asia because of the high prices in the Chinese domestic market.

A crackdown on smuggling has resulted in Chinese wire rod traders holding back from offering wire rod cargoes, which in turn has led the country’s steel mills to raise their offer prices because of the shortage of China-origin wire rod in the market.

Buyers in Southeast Asia are shying away from these high offers, however, and are booking Malaysia-origin cargoes due to their more competitive prices. They are currently waiting for shipments to arrive so that they can examine the quality of the material.

“This is the first time that some buyers have bought such material, and not all the shipments have arrived yet,” a trader in Southeast Asia said.

Metal Bulletin assessed the import price of wire rod in Southeast Asia - which mainly looks at low-carbon mesh-quality material sold from China into the Philippines and Vietnam - at $585-595 per tonne for the week ended Monday July 23, up from $580-585 per tonne a week earlier.

The export price of wire rod from China was assessed at $570-580 per tonne fob China on July 17.

Alliance Steel started up its integrated mill and fired up its 1,080 cubic meter blast furnace late in December last year. It plans to commission another similarly sized blast furnace at some future time, according to data from the South East Asia Iron & Steel Institute (SEAISI).

This unit is located in the Malaysia-China Kuantan Industrial Park, on Malaysia’s east coast about 250km north-east of Kuala Lumpur. It will have capacity to produce wire rod, steel bar and H-beam with a combined volume of 3.5 million tonnes per year.

The wire rod mill has a maximum rolling speed of 105 meters per second while the bar mill is limited to 45 meters per second.

Alliance Steel is one of Malaysia’s largest iron and steel plants, and is a collaboration between the country and China under the latter’s “One Belt, One Road” strategy of promoting economic cooperation among countries along its export trade routes.

Dominance under threat
China’s dominance of the Southeast Asia wire rod import markets could continue to erode with producers in the region increasing their long steel capacities.

This trend has been evident since 2016. China’s share of the Southeast Asia import market dropped to 67% of a total volume of 4.68 million tonnes in 2017, from 79% of 6.34 million tonnes in 2016, according to data from SEAISI.

There were four key sources for imports of wire rod into Southeast Asia in 2017, which together provided about 79% of all deliveries into the region.

Thailand imported 28%, or 1.31 million tonnes, while Vietnam imported 19%, or 889,200 tonnes. Both the Philippines and Malaysia imported 748,800 tonnes that year.

Other significant sources of wire rod imports into Southeast Asia last year included Japan, South Korea and Taiwan, which sent 514,800 tonnes, 374,400 tonnes and 187,200 tonnes respectively.

But Southeast Asian producers are now starting up their own new wire rod capacities.

For example, major Philippines producer SteelAsia Manufacturing plans to increase its capacity to 6 million tonnes per year within six years with the start of three greenfield mills.

Major Vietnamese integrated producer Formosa Ha Tinh has also begun wire rod exports after starting up new blast furnaces. It currently has capacity for 600,000 tpy of wire rod.

It produced 43,000 tonnes of wire rod in July, exporting 18,000 tonnes and allocating 25,000 tonnes for the domestic market.

Market sources expect the import liquidity of wire rod into Southeast Asia to thin out gradually.

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