Malaysia Iron and Steel Industry Federation (Misif) has estimated a revenue loss of MYR3.2bn due to the lockdown period declared by the government. The lockdown which was supposed to end on March 31, has been extended till April 14.
The iron and steel industry in Malaysia is classified as a non-essential, disallowing it to operate during the lockdown. The extension of lockdown will significantly impact cash flow and the profitability of long steel product manufacturers who are already reeling under softening of steel prices since 2018 as per Malaysia Steel Association (MSA), an association of long steel manufacturers.
Globally, steel companies require around 70 to 80pc capacity utilisation to sustain. Malaysia’s total installed steel capacity in the country was around 24.64mn mt in 2018. Of this, long steel capacity amounts to 12.64mn mt and flat steel to 12mn mt. Steel consumption in the nation was around 9.77mn mt, less than 40pc of long and flat steel production capacity.
Capacity utilisation in long steel products was nearly 28pc in 2018, down from 46pc in 2014. The utilisation rate for flat steel was also around the same. Misif has appealed to the Malaysian Investment Development Authority (Mida) to roll out policies which could assist the iron and steel industry tide over the economic impact of the COVID-19 lockdown.
A few initiatives planned include exemptions on sales and services tax, speeding up of refund on overpaid goods and services, assistance with funding, financial relief and reduction in tariffs for electricity.
MSA has also sought stimulus through infrastructure and construction projects worth MYR200bn for the next 24 months to help the sector and the GDP of the country.