Posted on 30 Dec 2024
Malaysia's steel sector faces significant headwinds from US tariff policies and an influx of low-priced Chinese steel imports, an analyst says, despite anticipated infrastructure-driven demand and mitigating domestic measures.
Kallanish notes from a recent CIMB Securities report that the incoming US administration's tariff policies could cause near-term volatility in construction material prices, but Malaysia's infrastructure projects should bolster demand for steel in 2025.
It also notes potential support from fresh stimulus measures in China, which could stabilise regional steel prices.
Meanwhile, the upcoming domestic policy shifts, such as a proposed carbon tax, the multi-tier levy system, and mandatory EPF contributions for foreign workers, are expected to increase production costs for steelmakers, which already grappling with squeezed margins.
CIMB also notes that prolonged tariff escalation could divert surplus Chinese steel to markets with weaker trade barriers, including Malaysia.
It predicts local steel prices will fluctuate in the near term before normalising in 2025 as mills pass incremental costs to end users.
On the domestic front, the research house highlights Malaysia’s potential carbon tax on steel imports, designed to level the playing field and fund the nation’s green transition.
It also notes that the Ministry of International Trade and Industry is preparing a report to address challenges posed by surplus Chinese steel, with ASEAN's steelmaking capacity expected to double to 150 million tonnes/year by 2026.
From 2015 to 2023, Malaysia implemented nine anti-dumping measures and three protective actions against steel imports, including investigations targeting Chinese products.
Source:Kallanish
