Malaysia steel market to remain firm despite hurdles

The global steel industry was faced with a challenging environment in 2010 and 2011, arising from higher input costs and the increasingly adverse external environment. International steel demand was soft, whilst raw material prices remained volatile. Despite these challenges, Malaysia's steel consumption reached 8.3 million tonnes in 2010, an increase of 24.9% y-o-y. Likewise, production of crude steel also increased 6.3% y-o-y to 5.7 million tonnes.

According to the Malaysian Iron and Steel Industry Federation (MISIF), the local steel industry, in consumption terms, will grow at a rate of 5-7.5% in 2011. It also estimated the crude steel production to reach 6 million tonnes in 2011.

Demand for domestic steel products is expected to remain firm, driven primarily by the strong domestic demand from the private sector and the initiatives implemented under the government's Economic Transformation Program (ETP).

The majority of local steel companies were affected by the unfavourable situation of higher average raw material costs and almost stagnant selling prices, which had eroded profit margins. The five leading players covered in the report include Lion Industries Corporation Berhad (LIONIND), Ann Joo Resources Berhad (ANNJOO), CSC Steel Holdings Berhad (CSCSTEL), Southern Steel Berhad (SSTEEL), and Kinsteel Berhad (KINSTEL).