SHAH ALAM: Mergers and acquisitions (M&As) are needed among Malaysian steel manufacturers to better tap the strong demand for steel products in the Asean region, said Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai.
“Malaysian steel players need to think about this. A large entity can increase production efficiency and obtain cost savings and economies of scale.
“The M&As can be either domestic or regional. Companies can look into other Asean contries like Indonesia and the Philippines,” Soh said at a Misif briefing.
“Total usage of steel in Asean in 2011 was 50 million tonnes. But Asean countries only produced 26 million tonnes.”
“Many big global players in steel are also looking at this region for growth. It is already happening. The Japanese and Chinese players are coming here to form strategic alliances,” said Chow.
Soh said the steel industry in Malaysia was fragmented, highly cyclical and intensely competitive.
“We need consolidation to face the challenges of a volatile world economy. Malaysia is not spared. Look at the recent merger of Nippon Steel and Sumitomo Metal Industries, which created the world’s second-biggest steelmaker.”
Soh said Malaysian steel manufacturers only needed to look at China, which is producing about two million tonnes of steel products per day. “China produces in five days the amount that Malaysia produces in a year.”
Melewar Industrial Group Bhd managing director and chief executive officer Azlan Abdullah said that in Malaysia, smaller players in the pipe-making segment might want to merge with bigger-sized companies.
“The pipe-making segment has about 20 companies, which range from big boys to small, backyard operators,” said Azlan.
Meanwhile, Soh urged the Government to review the current Iron and Steel Policy (of August 2009), and formulate a national policy that “incorporates the role of iron ore mines and a balanced handling of the entire value chain of steel manufacturers.”
He said pointed out that the recent study by the Boston Consulting Group on the country’s RM40bil steel sector had proposed a focus on three key initiatives providing advantaged access to selected raw materials, enforcing trade remedies and standards, and enhancing the industry’s capabilities.
“We urge the Government to take cognisance of these three initiatives.”
Soh said the Government should also look at implementing trade remedies for the local industry to compete against cheaper imports.
“The influx of under-specified (or inferior) and under-priced steel products have injured local manufacturers. This is affecting both the long and flat-steel product players.”
Misif also supports a proposal for the Government to increase export duty on scrap, one of the main raw materials for steel making, from the current 10% to 30%.
Chow said Malaysia was a net importer of scrap, with two to three million tonnes of imported scrap per year. “So we need to conserve scrap for local consumption.”
Source: The Star Online