Steel, alloy of iron and carbon in which the

carbon content ranges up to 2 percent (with

a higher carbon content, the material is
defined as cast iron)

MARK ET REVIE W ON
ST EEL TRE ND
MARKET REVIEW ON STEEL TREND
TABLE OF CONTENTS
1.0 Steel Market Overview
2.0 Product Classification
3.0 Manufacturing Process Flow and Supply Chain
4.0 Manufacturers Landscape
5.0 Pricing Component of Steel
6.0 Pricing Trends of Steel
7.0 ASEAN Economic Performance
8.0 Covid Effect
9.0 Steps Taken to Revive the Economy
10.0 Conclusion

LIST OF FIGURES:
Figure 1: Malaysia 2021 Budget Allocation for Construction Sector
Figure 2: Categories and Types of Iron and Steel Products
Figure 3: An Illustration of Steel Supply Chain
Figure 4: Steel Manufacturers by Product Types and Production Capacity, Malaysia, 2016
Figure 5: Plant Location of Long Steel Manufacturers, Malaysia, 2016
Figure 6: Steel Production Plants and Capacity in Malaysia 2016
Figure 7: Main Players in the Steel Industry in 2018
Figure 8: Steel Rebar Pricing Trend for Selangor 2016-2020
Figure 9: ASEAN Average GDP Growth in 2019
 MAR K ET R EVIEW ON ST EEL TREND

1.0 Steel Market Overview

The construction sector has a high multiplier impact to promote economic growth and positive spill over to other sectors. Therefore, it has been chosen as
one of the main industries to be activated in sluggish economy which cannot be ignored easily.

Infrastructure Budget

1. RM15bil allocation for mega infrastructure project

Klang Valley Pan Borneo

Double Track Gemas-Johor Highway
(KVDT) Double Tracking

MRT 3
Johor-Singapore
Rapid Transit System

2. Separate allocation for Sabah and Sarawak 3. RM3.8bil of Road Upgrades in Peninsular
infrastructure development

Federal Highway
Upgrade

Sarawak Sabah

4.5bil 5.1bil
Central Spine Road Project
RM RM In Pahang and Kelantan

4. RM2.7bil of infrastructure development Second Phase

in the rural area Development of Klang

Figure 1: Malaysia 2021 Budget allocation for construction sector (source: The Star)

Malaysia recorded a 17.1% decline in the gross domestic product (GDP) in
the second quarter of 2020, the worst drop since the fourth quarter of
1998. In an attempt to bounce back the economy government allocated
17% of budget to help spinning the economic recovery. The government is
reviving the multi-billion ringgit Mass Rapid Transit Line 3 (MRT 3), Pan
Borneo Highway, Rapid Transit System Johor–Singapore, first phase of
Klang Valley Double Track (KVDT) and Gemas-Johor double tracking, Kuala
Lumpur–Singapore high-speed rail (HSR), to name a few mega projects,
under the Budget 2021 that will be a boom for construction companies
and increase demand for construction materials.
In 2019 CIDB had identified steel as the major materials and the most
frequently required for building projects and civil engineering works to a
value of RM18.4 mil. Steel is the most influential materials in determining
the construction cost, be it building or civil engineering structures.

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 MAR K ET R EVIEW ON ST EEL TREND

2.0 Product Classification

Malaysia’s steel industry is centred on 2 main types of products:

• Long products - mostly used more in the construction industry (residential, non-residential and infrastructure),

• Flat products - mostly used in the manufacturing related industries (automotive, electrical and electronics, machinery, and equipment, etc.)

Steel products are classified as semi-finished and finished products and further broken down into 3 main categories - primary, finished, and secondary
(refer figure 2).

Primary Products Finished products Secondary products

A. Iron products (scrap substitute)

• Hot-briquetted iron (HBI)
• Direct reduced iron (DRI)
• Pig iron
• Hot metal

B. Crude steel (semi-finished) C. Long products E. Secondary long products

• Billets • Bars (downstream wire & wire products)

• Blooms • Wire rods • Nails

• slabs • Sections • Wire

• Wire mesh
• Bolts & nuts
• Barbed wire
• Cold drawn bar
Figure 2: Categories and types of iron and steel products
• Shafting bar

D. Flat products F. Secondary flat products

• Hot-rolled plates & sheets • Coated/painted steel
• Cold-rolled coils • Tubes and pipes (seamed/welded)
• Stainless products • Process equipment
(including broilers &
pressure vessels)
• Roofing sheets, wall claddings,
roof trusses, window & door frames

G. Other fabricated products

• aluminium products
• alloy steel products

3.0 Manufacturing process flow

and supply chain
Steel is made from either scrap metal or iron products with iron ore being
a key raw material, sourced locally or imported from countries such as
Australia and Brazil.
Iron ore can be converted into direct reduced iron (DRI) and hot briquetted
iron (HBI) by undergoing processes in the direct reduction plant or fed into
the blast furnace (BF) to convert into hot metal, which would subsequently
go to either the electric arc furnace (EAF) or the basic oxygen furnace (BOF)
to be converted into liquid steel.
Scrap metal is the more widely used raw material for local steel millers
and is primarily sourced locally (86% of scrap supply in 2016), while the
remaining supply was imported, mainly from Singapore, Australia and the
United States.
a. Semi-Finished Steel Products
The liquid steel would be casted into semi-finished products such as billets,
blooms and slabs at prescribed lengths (however, blooms are currently
not produced locally).

b. Finished Steel Products

Billets and blooms known as semi-finished steel product would then
undergo rolling processes to produce long finished steel products (wire
rods, bars, sections), while slabs would be rolled into finished flat products
(hot-rolled plates and sheets, cold-rolled coil).

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 MAR K ET R EVIEW ON ST EEL TREND

The finished steel products for both long and flats are supplied by the manufacturers to distributors and major end users such as construction companies/
contractors and developers. A small portion of bars and wire rods are exported.

Secondary product
Manufacturers

IRON MAKING STEEL MAKING

FINISHED
LONG PRODUCTS Secondary Long Products

Wire Rods Wire Mesh, Bolts,

SEMI- FINISHED (Locally Product) Nuts, Nails, etc
LONG PRODUCTS
Wire Rods
Export market (Imported)
Billet
(Local Produced) Bar
Iron ore, Coke, Coal, Limestone Export market (Locally Product)
(Locally sourced and import)
Billet Bar
(Imported) Export market
(Imported)
Steel Millers Sections
Bloom (Local with roller) (Locally Product)
(Imported)
Steel Millers Sections
(Imported)
(Local) Oxygen Furnace
Pre-Cast Concrete
Iron products Manufacturer
STEEL
SEMI- FINISHED FINISHED Manufacturers
(Local) Blast Furnace
FLAT PRODUCTS LONG PRODUCTS

Slab Re- Roller Hot Rolled Plates & Sheets

(Locally Produced)
(Imported) (Local)
Steel Millers
(Local) Electric Arc vFurnace Hot Rolled Plates & Sheets
(Imported)
Slab Distributors
Distributors
(Local Produced) Cold-Rolled Coil
Hot Metal, Pig Iron
(Locally Produced)

Cold-Rolled Coil
Export market (Imported)
Contractors
Contractors

Flow of raw materials and semi-finish products

Direct- Reduced Iron (DRI)/
Flow off inished products
Hot-Briquetted Iron (HBI)
Developers
Manufacturing Players Retailers

Raw Materials & Semi-Finished Products

Scrap Metal Finished & Secondary Products
(Locally Sourced
and imported) Distribution Players
Export market
End Users
Iron products Manufacturer
(Local) Direct Reduction Plant Diy Builders/
Secondary Flat Products Home Owners
Tubes & Pipes,
Roofing Sheets, etc

Secondary product
Iron Ore, Coke, Coal, Limestone Manufacturers
(Locally sourced and import)

UPSTREAM MIDSTREAM DOWNSTREAM

Figure 3: An illustration of steel supply chain (Source: Mycc report)

Finished steel products manufacturers , supplied to secondary product
manufacturers for the production of wire mesh, nuts, bolts, nails, screws
(long) and tubes, pipes, roofing sheets, wall cladding (flats), etc. These
secondary products are distributed in a similar supply flow as finished
steel product.
In addition the flat products are also supplied by the manufacturers to the
steel service centres for processing, e.g. slitting, shearing, and cutting the
products to a specific shape or size as required by the end users. These
steel service centres could be associated with the steel manufacturers (i.e.
owned by the same parent company) or could be an independent entity.

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 MAR K ET R EVIEW ON ST EEL TREND

4.0 Manufacturers Landscape

In 2016, within upstream steel manufacturing, there are 4 manufacturers
in the production of iron products, namely Ann Joo Group (pig iron / hot
metal), Antara Steel Mills & lion DRI (HBI/DRI) – stop production in 2016,
Lion (DRI) – lion group – temporary stop production in 2016, Perwaja Steel
Sdn Bhd (HBI/DRI) – temporary stop production in 2013.
There are 10 manufacturers involved in the production of semi-finished
products (billets and slabs), with an estimated annual production capacity
of 12.4 million MT. Meanwhile, in the finished steel products category,
there are an estimated 15 manufacturers producing long products.
While 8 are involved in the production of flat products. Downstream
manufacturing of secondary products has the largest number of industry
players, i.e. approximately 70% of all manufacturers of iron and steel
products in Malaysia.
Figure 4 below summarizes the number of manufacturers involved in the
iron and steel production value chain as well as the estimated production
capacity for each product category. These manufacturers (including those
which have temporarily ceased operation) have a combined annual
production capacity of approximately 32 million MT. It should be noted
that the number within each category do not add up to the total number
of manufacturers in the entire value chain, as some manufacturers are
involved in more than one product categories.

CATEGORIES PRODUCTS NUMBER OF ESTABLISHMENTS * ESTIMATED ANNUAL PRODUCTION

CAPACITY, 2016 (‘000 MT)

Primary products Iron products (HBI, DRI) 3* 3,928

Iron products (pig iron, hot metal) 1 500

Semi-finished - billets 8* 8,420

Semi-finished - slabs 2 4,000

Finished products Long (bars, wire, rods, sections) 15* 8,921

Flat (hot-rolled plates and sheets,

8* 7,580
cold-rolled coils)

Stainless steel 1 400

Secondary products Long (wire mesh, bolts, nuts, nails) 56 2,053

Flat (tubes, pipes, roofing sheets,

59 4,289
wall cladding, coated steel etc.)

Figure 4: Steel manufacturers by product types and production capacity, Malaysia, 2016
* Number of establishments above are based on all the manufacturers that have been identified by MISIF (which also include non-members of MISIF);
however, there may be some small-scale establishments which are not captured in the above table

Within semi-finished and finished long products are 18 plants nationwide.
These plants have a combined total production capacity of 15.6 million MT
per annum. Selangor and Penang have the highest concentration of long
steel production plants, while East Malaysia has 3 plants.
These manufacturers accounted for approximately 83% or 12.9 million MT
of annual long steel production capacity in Malaysia. It should be noted
however, that capacity utilization rate was below 50% from 2013 to 2015
for long steel manufacturers and hence, production capacity does not
reflect the actual production of these manufacturers

1
Malaysia
NORTHERN REGION SARAWAK 1

4 SOUTHERN REGION EAST COAST REGION

CENTRAL REGION SABAH

7 2

1 2

Figure 5: Plant location of long steel manufacturers, Malaysia, 2016 (source- Mycc report)

6
 MAR K ET R EVIEW ON ST EEL TREND

Most of these manufacturers are vertically integrated in different parts of
the long steel manufacturing value chain (upstream, midstream and
downstream) via subsidiaries or sister companies. Generally, a vertically
integrated structure can potentially offer opportunities in cost reduction
due to economies of scale and improved supply chain coordination, which
may lead to more competitive pricing to the end consumers. It may also
increase the barriers to market entry by new players, or barriers to market
expansion by existing players. On the other hand, it may result in higher
cost due to lack of competition from external suppliers and upstream
capacity management issues.
In 2018 or after two years only 3 manufacturers manage to stay in the
league (Figure 7). The other top 5 companies are all investments from
China’s companies. As the case with Eastern Steel Company, operations
were halted in October 2015 due to diffcult market conditions caused by
the influx of cheap imports that started in 2013. Nearly three years after
the suspension of operations in Kemaman to minimise its losses, Hiap Teck
brought a new strategic partner, a China-based steel producer Shanxi
Jianlong Industry Co Ltd, into Eastern Steel and resume production.
When China-backed Alliance Steel (M) Sdn Bhd set up the country’s largest
steel mill in Gebeng, Kuantan, which has an annual capacity of 3.5 million
tonnes producing long steel products, about five years ago. Alliance Steel
is the most cost-effcient steel player in Malaysia due to its
state-of-the-art manufacturing facilities, economies of scale and technical
expertise.

Item Manufacturer Plant location Billet/ bloom Bar/ wire rod/ section
(‘000MT)

1 Lion group Klang, Selangor 3,050 2,680

(Amsteel mills Sdn. Bhd & Banting, Selangor
Antara steel mills Sdn. Bhd.) Pasir Gudang, Johor

2 Southern Steel bhd. Prai, Penang 1,500 1,650

3 Ann Joo resources bhd. Penang 820

Shah Alam, Selangor 710

4 Malaysia Steel Works (KL) bhd. Klang, Petaling Jaya, Selangor 700 600

5 Perfect Channel Sdn. Bhd. Gurun, Kedah 1,200

6 Kinsteel Bhd. Kuantan, Pahang 800

7 Syarikat PerniagaanPerindustrial Kucing, Sarawak 400 400

King Hong Sdn. Bhd

8 Established Metal Industries Sdn. Bhd. Rawang, Selangor 300 300

9 Steel industries (Sabah) Sdn. Bhd Kota Kinabalu, Sabah 150

10 Leader Steel Sdn. Bhd Penang, Kuching, Sarawak 83

11 HiapHin Chan Trading Co Sdn. Bhd Klang, Selangor 96

12 Integrate Steel Mill Sdn. Bhd Kuantan, Pahang 120

Figure 6: Steel production plants and capacity in Malaysia 2016

The above table excludes Perwaja Steel Sdn Bhd and Maju Steel Sdn Bhd which have temporarily. Ceased operation. Perwaja Steel has a billet production plant in Kemaman,
Terengganu with an estimated capacity of 1.65 million MT while Maju Steel has a rolling plant in Merlimau, Melaka with an estimated capacity of 132,000 MT

Item no Parent company Ownership Remarks

1 Mycron Steel Bhd. 74.13% Melewar Industrial Group Bhd

Bleeding and keep afloat by its

2 CSC Steel Holding Bhd i. 46.30% China Steel Asia Pacific Holdings Pte Ltd
galvanised iron and pre-painted galvanised

3 Eastern Steel Sdn Bhd i.40% Hiap Teck Venture Bhd. and
ii.60% Beijing Jianlong Heavy IndustryGroup Co. Ltd

4 Amsteel Mill Sdn Bhd i.100% Lion Industries Corp Bhd

a. Ann Joore sources Bhd.
b. Kinsteel Bhd.
c. Malaysia Steel Works (KL) Bhd

a. Largest HRC maker in Malaysia

5 Megasteel Sdn. Bhd. Sister company of Lion industries
b. Lion Industries bought over Megasteel

6 Ann Joo i. 48% Lim family blast furnace with annual capacity of 500000 MT

7 Malaysia Steel Works i.31% TYY Resources Sdn Bhd

8 Kinsteel i.9% Pheng family

Figure 7: Main players in the steel industry in 2018

7
 MAR K ET R EVIEW ON ST EEL TREND

5.0 Pricing Component of Steel 6.0 Pricing Trends of Steel

The key cost components in iron and steel making, excluding capital
expenditure, are:
a. Raw materials which account for up to 70% of total cost of production.
b. Energy
i. Mainly coal - for the production of coke, fed to the blast furnace.
ii. Electricity - for arc furnace, rolling mills and motors.
ii. Natural gas - for furnaces, power generators, blast furnace
injection and DRI production).
c. Other cost components include labour, transportation and logistics,
other materials used in the production of steel such as electrode,
ferroalloy, and refractory, as well as compliance to regulations
such as product certification and standards.
The prices of finished steel products are influenced by the supply of raw
materials, coal, currency exchange rates, electricity, natural gas tariffs,
supply and demand .Prices of local steel products are also influenced by
China’s steel prices.
The pricing trends shown below only for steel rebar in Selangor during
2016 – 2020 period. Prices for this trend analysis are sourced from CIDB,
which are based on the nett transaction price between contractors (across
different grades in selected states or cities) and suppliers (manufacturers
and distributors) under normal credit terms and for bulk purchase.
The price levels and movement trends are mostly similar across the
different dimensions. The rebar prices increased slightly during GST
implementation in April 2015, however immediately dropped again the
following month, and continued its gradual increase towards Q1 2016.
In March 2016, rebars saw their prices went up by 28% – 35% (Figure 8),
largely attributed to China’s commitment to significantly slash steel
production capacity and stronger growth in its own domestic demand.
This led to increase in bar prices due to sudden surge in demand for local
steel.

COST TREND FOR STEEL REBAR IN SELANGOR

2700

2600

2500

Steel Rebar
2400

2300

2200

2100

2000
2016 2017 2018 2019 2020

Figure 8: Steel Rebar pricing trend in Selangor (average yearly) 2016-2020

Prices continued to increase between 5% – 15% for the next two months. However wire mesh prices experience a decreased when mill are
By July 2016, rebar prices in Selangor appeared to have almost identical contesting with each other for orders. East Malaysia continued to maintain
price movements, and have fallen back to pre-GST price levels, ranging their prices above the Peninsular, with a price gap of about 20%.
from RM2,600 to RM2,700.

When the Anti-damping Act was introduced, the price of rebar dipped to
RM2,200 in Q2, 2019. The mills are not running in full capacity, only
operating on one shift. High raw material prices due to partial recovery of
global steel demand has caused the iron ore price to go up and resulted in
higher selling price for the finished long product. Besides that the credit
limits or market payment days are stretched. This result in longer wait for
payments and pushing up the finance cost.

8
 MAR K ET R EVIEW ON ST EEL TREND

7. Asean economic performance

Asean is the fastest growing regions in the world, with the Asean-6 nations expecting positive growth in the near future. IMF in its latest Worlds economic
outlook, cut its global growth forecast for 2019 to 3.3% before picking up to 3.6% in 2020, mainly on account of a number of global issues such as trade
tensions and Brexit. For Asean, the GDP growth forecast maintained at 5.1% in 2019 and 5.2% in 2020

AVERAGE GDP GROWTH IN % , 2019

ADVANCED
ECONOMIES

GDP

WORLD

ASEAN-6

CHINA

INDIA

0 1 2 3 4 5 6 7 8

GDP Growth % Major ASEAN

10

2016 2017 2018 2019 2020 2021 2022 2023

Source: IMF World Economic

Figure 6: ASEAN Average GDP growth in 2019

ASEAN is one of the most vibrant markets for steel with huge investment from China. These steel mills were unable to grow in china due to supply
reforms and forced to stop production. However, now they are able to export products steel back to China.

9
 MAR K ET R EVIEW ON ST EEL TREND

8. Covid Effect 10. Conclusion

The construction industry was sluggish during the Q1 2020. Due to the
unprecedented implementation of MCO to contain the spread of
COVID-19 has caused a standstill in the construction activities and cause a
domino effect on the supply chain, with most building materials manufac-
turers and distributors suspended their operation in tandem.
The construction output was dropped by -13.1% year-on-years in the
2Q20 after a record contraction of -44.9% in the previous period, amid
gradual reopening of the economy following the relaxation of COVID-19
during the Recovery Movement Control Order (RMCO). This was the third
straight quarter of fall in construction output, with the three sub-sectors all
falling at softer paces: residential buildings (-12 percent vs. -38.7 percent,
civil engineering (-13.6 percent vs. -55.2%), and non-residential (-16% vs.
-36.2%). Meanwhile, special trade activities grew by 1.6 percent, after a
28.7 percent plunge in Q2.
Moving forward, industry players are cautiously optimistic of better
growth outlook driven by mega projects, while acknowledging that there
are still challenges ahead in terms of low capacity utilization, lack of cost
competitiveness, rising operational cost, and growing production
capacities in ASEAN. The uncertainty with the production and export
volume of steel from China also remains a key challenge for the industry
and may pose significant impact to the local manufacturers. Meanwhile,
global outlook for the steel market is still uncertain especially with the
surplus of world steel production.
Hence, in an effort to grow the local industry, the government has to push
for technology upgrade and consolidation among the local steel manufac-
turers. It has been acknowledged that the industry needs to be more
competitive and resilient, which can be achieved through greater effciency,
economies of scale, cost reduction and higher-grade products.

Growth in the construction sector moderated during the quarter particu-

larly due to lower non-residential activity in the commercial sub-segment.
The civil engineering sub-sector remained dominant as the main contribu-
tor to the value of construction work done with 45.8 per cent share.
Residential buildings contributed 24.5 per cent, Non-residential buildings
(24.0%) and Special trades activities (5.7%).
For more information and data of other materials on various locations, can
be subscribed at www.n3c.cidb.gov.my. This website contain 150
materials details since 2012.
SCAN HERE

The third quarter 2020 (3Q20) saw the resumption of some construction
sites operating again, but it will be a long haul before the construction
industry can swing back to normal. 3Q20 did not see the much-anticipat-
ed kick off the mega infrastructure projects e.g. Mass Rapid Transit Line 3
(MRT 3), High Speed Rail (HSR), and Klang Valley Double Track Phase 2
(KVDT Phase 2). So far up to 3Q20 it has been a downward trend for the
construction sector which has been hard hit since the movement control
order (MCO) was initiated on 18 March 2020 which saw suspension of
many construction sites.

9. Step Taken to Revive the Economy Website: www.n3c.cidb.gov.my

The government had launched the “Buy Malaysian Products Campaign”

aims to revive the local economy especially the small and medium
enterprises. These sectors are the hardest hit by the Covid-19 pandemic.
This is the government way to help promote and increase the use of
locally produced building materials. Malaysian goods for the purpose of
this campaign means ‘The product must be manufactured in Malaysia and
contain at least 51% of the material / content and local products produced
shall involve the manufacturing process (manufacturing activity)”.

The government has imposed a provisional anti-dumping duty at 2.17% to

37.14% on flat rolled product of non-alloy steel plated or coated with
aluminium and zinc imported from China, South Korea and Vietnam,
effective not more than 120 days from 14 August 2020.

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 MAR K ET R EVIEW ON ST EEL TREND

Bibliography
1. Construction Industry Development Board (CIDB) Malaysia. Construction Industry Transformation Programme 2018–2019. CIDB, 2017.

2. Construction Industry Development Board (CIDB) Malaysia. Construction industry Review and Prospect 2018–2019

3. Department of Statistics Malaysia (DOSM)

5. Eleventh Malaysia Plan (11MP)

6. MBAM- Malaysia construction materials survey July 2020 – September 2020, n3c.cidb.gov.my

7. The Asean Steel Industry Situation (SEAISI March 2020)

8. Market Review of Building Materials – Mycc

9. MITI (Siaran Media: Sektor ekonomi Disaran Untuk

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12.https://www.metalbulletin.com/Article/3400576/Malaysias-steel-sector-faces-gloomy-outlook-analyst-says.html

13.https://www.globenewswire.com/news-r lease/2020/02/12/1983750/0/en/Malaysia-s-115-9M-Stainless-Steel-Shaft-Market-Outlook-and-Projections-2019-2027.html

14.https://www.statista.com/statistics/865869/import-value-of-iron-and-steel-malaysia/

15.https://steelguru.com/steel/seaisi-update-on-asean-steel-consumption-in-2019/560932

16.http://malaysiasteelinstitute.com/wp/index.php/news-and-events/steel-news/

17. Steel on News (malaysiasteelinstitute.com)

18. Gradual steel demand recovery likely from mid-2020 | The Edge Markets

19.https://www.mysteel.net/article/5016834-0503/CONF--Malaysia-steel-consumption-down-32-in-2019.html

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