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Malaysia Metals Report Q1 2011
Business Monitor International, Jan 2011, Pages: 50
The Malaysia Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Malaysia's metals industry.
The Malaysian steel and aluminium industries are set to sustain a recovery in 2011, lifted by increasing exports and government-financed projects. However, protectionist measures are likely to benefit mills atthe expense of downstream fabricators and manufacturers, according this latest Malaysia Metals Reportfrom BMI.
Construction steel consumption declined from a peak of 3.88mn tonnes in 2007 to 3.12mn tonnes in 2009, but saw a rebound in 2010, with BMI estimating growth of 10% to 3.37mn tonnes, reversing muchof the decline seen in recent years. In 2011, growth in Malaysian steel consumption will be determined bythe speed of implementation of infrastructure projects under the Economic Transformation Programme.The construction sector will be vital to the recovery of the Malaysian steel market as it represents 71% ofthe country’s steel consumption. Government contracts are expected to underpin growth in the steelindustry. Malaysia Steel Works (Masteel) expects to increase its turnover from government contracts to20-25% (from 15%) under the 10th Malaysia Plan. The government has allocated some MYR63bn to 52large projects, compared to MYR33.1bn under the ninth plan. Output will also be encouraged by a rise inMasteel’s production capacity from 450,000 tonnes per annum (tpa) to 500,000tpa.
While a stronger recovery is expected in 2011, with crude steel output growth of 8.9%, the industry is not expected to return to pre-crisis levels of output until 2013 at the earliest. Exports will lead output growthwith 19.1% growth to 3.19mn tonnes in 2011. However, domestic demand will be sluggish with finishedsteel consumption growth of 7.2% to 8.1mn tonnes in 2011, only partially offsetting the decline in recentyears. BMI does not believe that growth in demand will be sufficient to prompt a rapid rise in marginsover the level seen in 2010, due to regional price volatility and the rising cost of raw materials. Flatsconsumption, which saw an estimated 5% rise to 4.18mn tonnes in 2010, should pick up pace as sectorssuch as the automotive industry begin their recovery. This should be boost Malaysian flats producerMegasteel, which has a production capacity of 2mn tpa.
At the same time as the expansion in steel output, investment is being directed towards the aluminium sector. China’s Ye Chiu Group is building a secondary aluminium smelter with capacity of 120,000tpawhich is due to start operations in H112, while Abu Dhabi’s Mubadala Development Company isplanning to invest US$7bn in Malaysia's aluminium sector as part of its strategic partnership deal with1Malaysia Development Berhad (1MDB). Japan’s Sumitomo Corporation has also acquired a 20%share in Press Metal Sarawak’s new 120,000tpa primary aluminium smelter, which was started up in Sarawak in 2010, with the potential for doubling capacity to 240,000tpa.
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