ASEAN KEY DESTINATIONS
Malaysian steel companies look ahead
Local steel players are expected to face tough market conditions in 2011, with increasing competition from regional and China-based steel players.
The implementation of the Asean Free Trade Area (FTA) and Asean-China FTA, which started in January last year, had these other steel players ramping up their capacities to take advantage of the new markets.
The Asean-China FTA is to date the world’s largest FTA, set to liberalise billions of dollars in goods and investments covering a market of 1.7 billion consumers.
Furthermore, prices of major raw materials like iron ore, coking coal and scrap metal are expected to rise this year, in view of the continued oligopoly by top global iron ore producers - Vale SA of Brazil, BHP Billiton and Rio Tinto Group – as well as the short supply of coking coal and scrap.
“The three mining companies hold considerable bargaining clout, controlling two-thirds of the US$88bil global seaborne iron ore trade,” said Malaysian Iron and Steel Industry Federation (MISIF) president Chow Chong Long.
“The focus will be on the trading of spot iron ore price this year. It will be on an uptrend but prices are not likely to escalate by 50%-80%, like what was experienced in 2008,” he added.
Chow told StarBizWeek that local steel players should continue to explore new markets like the Middle East, Vietnam and Indonesia rather than focusing on traditional markets like Europe or the US which were still grappling with their economic recovery.
“The Middle East economy is picking up especially with the rise in crude oil prices while Vietnam and Indonesia are expected to have good sustainable growth in steel consumption,” he added.
He noted that recent global developments such as the quarterly price increases in iron ore, deepening euro sovereign debt crisis, potential slowdown in China as well as rising costs from the removal of subsidies in Malaysia, had severely affected local steel companies.
Exacerbating the problem is the fact that these steel companies have become increasingly export-driven.
According to Chow, Asean steel players including those from Malaysia are fast losing their indigenous identities due to the implementation of the Asean FTA, Asean-China FTA and other FTAs in the pipeline.
“Asean steel producers are already facing a difficult situation with the flooding of steel products from China into the Asean markets.
However, on the local front, Chow expects domestic steel consumption to improve by the second half of this year.
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