Reshaping the Malaysian Iron and Steel Industry

The Malaysia Steel Council (MSC) is a consultative body constituted by the MITI, government agencies and the representatives of the steel industry. MITI Minister Tengku Zafrul Tengku Aziz has kindly appointed me to chair the council from 2023. 

Since the previous Council meeting on 13 July 2023, there have been four key developments:

  1. The establishment of the Independent/Special Committee (ICS) for the Iron and Steel Industry in Malaysia;
  2. A moratorium on new steel investments;
  3. Raising Malaysia’s concerns about steel overcapacity at the ASEAN level;Instituting measures to ensure fair competition in the steel industry
  4. Establishing mechanism for carbon reporting

Independent/Special Committee for the Iron and Steel Industry in Malaysia

In January 2024, MITI Minister Tengku Zafrul Tengku Aziz appointed an Independent/Special Committee for Iron and Steel Industry in Malaysia, chaired by Dato’ Omar Siddiq, CEO of HSBC Bank Malaysia. Its members are:

i)          Dr. Ong Kian Ming, former Deputy MITI Minister
ii)         Mr. Yeoh Wee Jin, Secretary General of the South East Asia Iron and Steel Institute
iii)        Datuk Hisham Hamdan, Khazanah
iv)        Mr. Chen Li-Kai, McKinsey and Company, Malaysia
v)         Deputy Secretary-General (Industry), MITI (Ex officio)
vi)        Senior Director, Industry Development Division, MITI (Ex officio)
vii)       Director, Resource-based Policy Section, Industry Development Division, MITI (Ex-officio)
viii)      Director, Machinery & Metal Technology Division, MIDA (Ex-officio)

The ISC is tasked to review and provide proposals on the short, medium and long term roadmap for the entire value chain of the iron and steel industry in accordance with the New Industrial Master Plan (NIMP 2030), and provide a blueprint for the green transition of the steel industry.

It is also set up to provide guidance on how to expand the domestic steel industry to include higher value-added products (such as H-Beams, High Quality steel for the automotive industry) which are currently not being produced domestically, as well as to study and provide inputs on how to improve the current governance structure of the iron and steel sector in the country (legal and policy frameworks).

Moratorium

MITI has implemented a two-year moratorium beginning 15 August 2023 on all inquiries, assessment of current applications, new applications, license transfers, expansions, regularisations, and diversifications for manufacturer licenses, as well as the issuance of certificates for exemption from manufacturing license (ICA10) under the Industrial Coordination Act, 1975 (Act 156) for manufacturing activities in the iron and steel industry, including recycling activities for the non-ferrous segment.

All decisions on new iron and steel investment are subjected to the moratorium and will only be considered after the ICS completes its report.

ASEAN level discussion on steel overcapacity issue

The capacity of steel making in Southeast Asia is expected to increase from 75.3 million ton in 2021 to 151.9 million ton in 2026 if all potential investments are materialised. Malaysia has raised the issue of overcapacity in the steel industry in Southeast Asia at the ASEAN Economic Ministers’ Retreat in March 2024 and the ASEAN Secretariat has agreed to elevate this agenda for ASEAN-wide discussion.

Issues Deliberated and Outcome

A number of important issues concerning the iron and steel sector were discussed. Among the key decisions made were as follows:

1.1      Enforce Government Procurement (GP) in construction projects, in complianceto PK 1.4 Dasar Bahan, Barangan Dan Perkhidmatan Tempatan Dalam Perolehan Kerajaan Malaysia where local content is mandated at the main contractors’ stage, and to permeate through the supply chain with objective to safeguarding the ringgit, enhancing the local supply chain and to ensure compliance to local content requirement (LCR), particularly within the context of GP in the steel industry.

    1.2      Strengthen enforcement by relevant authorities to ensure compliance with export declarations for steel scrap which are subject to a 15% export tax. This measure aims to prioritise the use of scrap for local steel mill consumption, thereby bolstering domestic production and reducing reliance on imports which will contribute to the sustainability and growth of the local steel industry.

    1.3      Prevent circumvention of imported flat steel and ensure fair trade within the industry, it’s essential to implement comprehensive measures aimed at detecting and addressing any attempts to bypass trade regulations or tariffs. This includes robust monitoring of import activities, rigorous inspection of documentation, and collaboration with relevant authorities to investigate suspicious transactions.

    1.4      MITI, Malaysia Steel Institute, and the members of Malaysia Steel Council, will collaborate to adopt a carbon emission reporting method and implement across the industry in the second half of 2024, as the initial step towards carbon pricing, trading and taxing. 

    I also urge the review of the roles of Malaysia Steel Association (MSA) and Malaysian Iron and Steel Industry Federation (MISIF) for a potential merger of the two organisations to strengthen the steel industry as a whole.

    MITI views the iron and steel industry as a strategic sector and continues to be committed to improving the industry in accordance with the New Industrial Master Plan (NIMP 2030). MITI looks forward to working with the industry players to create a more sustainable, dynamic, and internationally competitive iron and steel sector.

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