Malaysia’s Federal Ministry of Industry has approved investment from China, under the flagship of Wenan Iron and Steel for a new 10mn mt per annum integrated steel mill in Samalaju Industrial Park in Bintulu, East Malaysia.
The project was approved on September 1, however, industry associations and participants remain concerned about these projects that could burden the ‘overcapacity situation’.
The steel plant will be located on the island of Borneo, bordering Brunei in the north, several Indonesian provinces to the south and the South China Sea to the west. This investment is promoted by a Chinese mill Xinwu’an Iron & Steel Group (Xinwu’an Steel), a steel producer based in Hebei province.
The project will be completed in two phases of 5mn mt each. The first phase will be commissioned with 5mn mt per year capacity of hot-rolled coil (HRC) and hot-rolled (HR) sheets worth MYR13bn ($3.15bn) soon.
In February 2020, the Malaysian Iron and Steel Industry Federation and the Malaysia Steel Association had opposed this project, calling for an immediate suspension of manufacturing licenses for new investments in long and flat steel products. Malaysian local steel industry, already hit by COVID-19, is facing concerns about overcapacity with most mills struggling with cheaper imports and heavy competition from the overseas markets.
In 2019, Malaysia’s total steel consumption was 9.47mn mt, down 3pc from 2018. On the other hand, the total installed capacity is estimated to be around 25mn mt, exposing a huge gap of underutilization of the capacity. However, Malaysian ferrous scrap and iron ore demand is expected to increase significantly with this move, turning suppliers optimistic about the news, said a trader.