Market Brief

Steel Overcapacity Looms in Malaysia, an Industrial Info Market Brief

Additional planned steel production is expected to further exacerbate Malaysia's steel overcapacity in the coming years as waves of Chinese foreign direct investments (FDI) are pushing more added capacity with new integrated steel mill and billion-dollar expansion projects in the next five years. Local steel-makers, currently with an installed capacity of 20 million tons per year, were previously disrupted by Alliance Steel Sdn Bhd when its new integrated steel mill came online mid-2019 and caused local steel mills to lower its utilization to less than 50%. New planned capacities are on the horizon, which will further result in an oversupply in the domestic industry, with the $5 billion integrated steel mill in Samalaju and Easter Steel Berhad's $1 billion Phase I steel mill expansion. The Malaysian Iron and Steel Industry Federation has warned the government that additional steel capacity will worsen the country's current overcapacity woes as it approves multibillion-dollar integrated steel mill projects. See graph below for investment by project type.