Malaysia Metals Report Q1 2012

The Malaysian steel industry is developing apace and will continue to grow over the next five years, despite economic headwinds, according to BMI’s latest Malaysia Metals Report.
BMI estimates Malaysian crude steel output grew 14.8% year-on-year (y-o-y) in 2011 to 6.54mn tonnes, while hot-rolled output grew 16.1% to 5.74mn tonnes. This is a significant upward revision from the previous quarter. We believe domestic demand remained resilient in H211, offsetting the effects of a US downturn, as a tight labour market provided support for private consumption growth. The implementation of the government's Economic Transformation Plan continued to provide support for gross fixed capital formation growth. Hot-rolled output has been bolstered by the country’s 25% import duty on hot-rolled coil; the government has refused a request by flat steel producer Megasteel for a rise to 35%. Imports remained subdued due to the high tariff barrier, growing just 0.2% to 5.05mn tonnes in 2011. We forecast a gradual rise to 5.97mn tonnes by 2016. Nonetheless, Malaysia's economic growth should remain subdued in coming quarters. In light of a deteriorating outlook for external demand, we downgraded our real GDP growth forecasts to 3.2% for 2012. Steel consumption and output growth will slow accordingly.
The construction sector is vital to the recovery of the Malaysian steel market as it represents 71% of the country’s steel consumption. Construction activity was boosted by the sizeable influx of public infrastructure projects being implemented in the latter half of 2011. Accordingly, we are maintaining our 2011 full-year estimate for the Malaysian construction sector, with real growth projected to reach 5.6%yo- y. However, beyond 2011, we expect construction activity to decline due to a lack of financing from the private and public sectors, pulling down construction real growth to 4.8% in 2012 and falling in subsequent years. This will limit growth in the Malaysian long steel market.
The industry will be boosted by capacity growth over the forecast period with Hiap Teck Venture Bhd’s planned 700,000 tonne per annum (tpa) first phase coming onstream in mid-2013 with a further 800,000tpa in the second phase. Around 40% of output will be exported to Asian markets with the rest sold locally. This should help ensure output of 9.5mn tonnes in 2016, up 46% over 2011 levels.
Malaysia will increase the value of production with downstream operations. The commissioning of the first phase of Acerinox’s Bahru Stainless complex in December 2011, with capacity of 240,000tpa, has significantly enhanced the competitiveness of Malaysian stainless steel production. The construction of phase two is now proceeding with start-up scheduled for Q113, increasing capacity to 400,000tpa and allowing Bahru Stainless to produce special steel grades and thin gauges, adding more value to production. In its final stage, the project will become an integrated stainless steel factory with a melting capacity of 1mn tpa and a cold rolling capacity of 600,000tpa to be established by 2020. Around 70% of output will be destined for export.

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Executive Summary 5
SWOT Analysis 6
Malaysia Political SWOT 6
Malaysia Economic SWOT 7
Malaysia Business Environment SWOT 8
Global Market Overview – Steel Forecast 9
Table: BMI’s Steel Forecast 9
Table: Steel Price Data 10
Commodities Forecast 15
Copper 15
Aluminium 16
Lead 17
Nickel 18
Tin 19
Zinc 20
Regional Overview 21
Table: Top 10 Asian Steel Producers, 2009 21
Industry Forecast Scenario 25
Steel 25
Table: Malaysia’s Steel Industry, 2008-2016 (‘000 tonnes, unless otherwise stated) 27
Macroeconomic Forecasts 28
Table: Malaysia – Macroeconomic Activity, 2011-2016 30
Competitive Landscape 31
Table: Malaysia’s Top Integrated Steel Companies 33
Regulatory Landscape 34
Company Profiles 36
Perwaja Steel 36
The Lion Group 37
Global Assumptions 38
Table: Global Assumptions, 2009-2015 38
Table: Global And Regional Real GDP Growth, 2010-2013 (% y-o-y) 39
Table: Selected Developed Market Exchange Rates, 2010-2013 (average) 39
Table: Selected Emerging Market Exchange Rates, 2010-2013 (average) 40
Developed States 40
Table: Developed States Real GDP Growth Forecasts, 2010-2013 (% y-o-y) 41
Emerging Markets 42
Emerging Markets 42
Table: Emerging Markets Real GDP Growth Forecasts, 2010-2013 (% y-o-y) 43
Consensus 44
Consensus 44
Malaysia Metals Report Q1 2012
© Business Monitor International Ltd Page 4
Table: Real GDP Growth Consensus Forecasts, 2011-2012 (%chg y-o-y) 44
Country Snapshot: Malaysia Demographic Data 45
Section 1: Population 45
Table: Demographic Indicators, 2005-2030 45
Table: Rural/Urban Breakdown, 2005-2030 46
Section 2: Education And Healthcare 46
Table: Education, 2000-2003 46
Table: Vital Statistics, 2005-2030 46
Section 3: Labour Market And Spending Power 47
Table: Employment Indicators, 2001-2006 47
Table: Consumer Expenditure, 2000-2012 (US$) 47
Table: Average Annual Manufacturing Wages, 2000-2012 48
BMI Methodology 49
How We Generate Our Industry Forecasts 49
Cross Checks 49
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