Posted on 04 Mar 2025
THE Independent Steel Committee, established by the Ministry of Investment, Trade and Industry (Miti) in January 2024, has published its findings and policy recommendations in a report that was presented to the ministry.
While the report has not been made public, Malaysian Iron and Steel Industry Federation (Misif) president Roshan Mahendran Abdullah mentions some of the key highlights.
“The Independent Steel Committee recognises the iron and steel sector as a strategic sector that plays an important role in Malaysia’s economy, serving as a crucial driver of construction, infrastructure and manufacturing activities. Its findings, proposals and recommendations address challenges that the sector faces and the way forward towards a competitive, sustainable and healthy iron and steel industry that plays a crucial role in supporting our nation’s aspirations to become a high-income nation,” Roshan tells The Edge in a recent interview.
The recognition as a strategic sector could serve as a game changer for the long-struggling industry, especially when the US has announced a 25% tariff on all steel and aluminium imports and even ended previous exemptions for allies. The tariffs cover upstream, midstream and downstream products.
While Malaysian iron and steel exporters to the US will be directly affected by the 25% tariff, the bigger worry for the industry is the diversion of trade, which Roshan says will leave the sector “very vulnerable to injury and potentially irreversible damage” in the absence of proactive measures.
In 2023, Malaysia exported 8.2 million tonnes of iron and steel products, with Turkiye (1.18 million tonnes), Hong Kong (1.04 million tonnes) and Singapore (996,000 tonnes) being the major markets. Exports to the US made up 300,000 tonnes, according to Misif’s Malaysian Iron & Steel Industry 2024/2025 report.
Imports of iron and steel products amounted to 7.3 million tonnes in 2023, 27.9% or 2.04 million tonnes of which were imported from China.
As for the local industry, crude steel industry production amounted to 7.5 million tonnes in 2023, representing a 4.5% increase from 2022. However, the industry’s capacity utilisation rate remained low at 39.1% in 2023 and far below the global average of 75%.
The trade diversion resulting from the 25% tariff on imports imposed by the US will likely result in the steel capacity originally meant for the US market heading to a new destination.
Notably, the US is the world’s largest net importer of steel, amounting to 20.6 million tonnes in 2023. The bulk of its steel imports are from Canada, Mexico, Brazil and Vietnam.
“The effects [of the 25% tariff on steel imports to the US] are already being felt, even though the implementation date is set for March 12. The vast majority of the steel that was originally intended to be exported to the US will now need to find a new destination,” says Roshan, who believes that much of this excess steel could land in Southeast Asia.
“At the same time, North and South American countries have announced that they are imposing tariffs on China. So, where will the material go?”
Nevertheless, governments in this region have already begun taking steps to address the influx of steel, with Indonesia, Thailand and Vietnam tightening access to steel imports recently, Roshan says. This leaves Malaysia in a vulnerable position if it does not strengthen legislation and take a proactive stance to address the influx of steel into the country, he adds.
The local steel industry would most likely suffer from additional idle capacity, and if prolonged would result in closures. “If the government fully recognises the steel industry as a core and crucial sector for national security, then maybe things will change,” says Roshan.
To make matters worse, the already struggling industry has to face “phantom coil”, or smuggled imports. In recent weeks, the Royal Malaysia Police confirmed on its website that it had carried out raids that resulted in the arrest of six individuals as well as the confiscation of goods worth RM113.9 million from the premises, which process and supply iron and metal products for the construction sector.
Bukit Aman Internal Security and Public Order Department director Datuk Seri Azmi Abu Kassim said in a statement that the authorities found iron goods categorised as “end products” without certification of compliance from the Construction Industry Development Board as well as iron and metal goods categorised as “semi-finished products” believed to be illegally imported.
An earlier article by The Edge quoted sources as saying that more than 8,000 tonnes of iron and steel had been seized from the premises.
“We hope that all agencies will step up their enforcement because this is not only a loss of revenue for the government and injures the domestic steel industry but it is also a huge safety concern because these illegal steel materials coming into the country do not undergo testing and are subsequently used in the construction of buildings or infrastructure,” says Roshan, who is CEO of Mycron Steel Bhd (KL:MYCRON).
In many economies around the world, the steel industry is seen as the backbone of the manufacturing, construction and infrastructure sectors. The case of the US government under former president Joe Biden’s administration blocking Nippon Steel’s proposed US$14.9 billion purchase of US Steel in January this year is one example of how the country considers its steel industry as a national security asset.
It is also a sector that receives a significant amount of state support, and in some instances, this support comes in the form of subsidies, like in China. The country produced about 1.05 billion tonnes of crude steel in 2024, representing about 50% of global production, but only a handful of the steel manufacturers were profitable, according to news reports.
Roshan says the industry is not operating on a “level playing field” right now for Malaysian steel producers as it does not receive support from the government or any form of subsidy to operate.
“People always say Malaysian steel is not competitive. But the other thing I want to remind everyone is that we are the product of the environment that we are in. If they say that Malaysian steel is not competitive, does it mean that TNB (Tenaga Nasional Bhd) is not competitive and Petronas (Petroliam Nasional Bhd) is not competitive?” he asks, pointing out that electricity tariffs and natural gas prices make up a substantial amount of steel players’ cost.
For the iron and steel industry, raw materials are 70% to 80% of the total cost, while electricity and gas make up 10% to 15%.
Roshan emphasises that, contrary to popular belief, the steel industry does not enjoy a subsidy for the electricity it uses and laments that the electricity tariffs are “very high”.
“Some of the steel mills in the US pay significantly lower tariffs than we do here in Malaysia. So, it is a misconception to say that the Malaysian steel industry pays a lower subsidy or tariff. That is not the case. We pay the full rate. And as an industry, we are paying too much,” he says.
Roshan notes that for the industry to be sustainable, it needs access to low-priced, competitive renewable energy. However, because there isn’t sufficient supply at this juncture, it needs competitive electricity rates to compete on the global stage.
With higher electricity rates and a higher minimum wage than in other countries, the Misif president — while agreeing that Malaysians deserve higher wages — points out that the steel industries of other countries have a huge advantage over steel manufacturers in Malaysia.
One way to level the playing field is through the anti-dumping duties that Malaysia has had in place for many years. However, the effectiveness of these duties is in question.
“To say that these duties are not effective would be unfair. But if you ask me if they have reached their intended goal, I would say no,” says Roshan.
In some instances, there are inconsistencies in the anti-dumping duty rates, with different rates imposed on different companies from the same country.
“It’s ineffective. What it creates is that all the imports from the same country will now only go through these loopholes [companies with the lowest rates] because some companies have very low anti-dumping rates,” says Roshan, who calls for the legislation to be strengthened.
Does this mean that Malaysia needs a Trump-like tariff to help lift the steel industry?
No, as there will be a backlash from other industries that consume steel, he says, adding that it would be a very “draconian” approach to the problem. Misif is appealing to the government to be more supportive of the steel industry. One way it sees this happening is by virtue of having policies that promote the use of local steel content in the various infrastructure that the country undertakes.
“The steel industry has been asking the government to localise the content of government infrastructure projects. It can also encourage the private sector to do so by perhaps providing tax incentives for using more localised content in their construction. There are so many ways of how this can be done,” Roshan says, adding that the industry is not asking the government to subsidise it in any way but to try to provide an environment in which it can thrive and be held accountable at the same time.
One common criticism of the steel industry is that it is in its current state because of its inability to reinvest.
“How do you reinvest if you’re always posting losses? Which shareholder is going to agree to that? The steel industry in Malaysia is focused on survival. We first need to survive, then we can focus on developing and growing. We have to conserve what we have to persevere through this difficult period,” Roshan says, stressing that this is why there is a need to level the playing field for Malaysian steel manufacturers.
“We want to focus on building something for our country and it is not in our interests to go to the government and complain every day. The steel leaders always have our backs against the wall and we would like to just focus on growing, developing, moving up the value chain and producing high-value steel products.”
The steel industry contributed about 1.7% to the country’s GDP in 2024 and provided about 278,000 jobs, proving that it is not an insignificant sector.
The steel capacity in the Asean region is projected to increase significantly in the coming years as Chinese-owned mills come on stream, leading to overcapacity and presenting a threat to the Malaysian industry.
Misif hopes that the government will move quickly to address the industry’s issues, following its first step to initiate the Independent Steel Committee.
Source:The Edge
