SUBANG JAYA: Malaysia’s iron and steel industry currently stands at a critical inflection point, as intersecting structural pressures including increasing overcapacity, intensifying trade protectionism, and sustainability mandates pose challenges to growth and competitiveness.
Socio-Economic Research Centre executive director Lee Heng Guie said the industry is undergoing a significant transformation, marked by both domestic challenges and external headwinds.
On a global scale, steel production and consumption have trended downwards since 2023, with steel demand growth easing across key markets, signalling softer construction and industrial activities.
At the same time, global steel capacity utilisation continues to be subdued as planned steelmaking projects increase while demand is expected to lag, particularly in China, India and Asean.
“A widening gap will persist between rapid capacity expansion and global demand, which means we will continue to see depressed price pressure and margin compression in the iron and steel industry,” Guie said at the 15th Malaysian Iron and Steel Industry Federation (Misif) Conference on the status and outlook of the industry yesterday.
Masanobu Nakamizu, policy analyst at the Organisation for Economic Co-operation and Development said the real danger in this growing imbalance goes beyond short-term price drops, as lower profitability will limit companies from investing in green technologies and new innovations.
“Addressing this imbalance is not just about protecting market share today, it is about securing industry’s capabilities, investing in sustainable local futures,” he noted.
Meanwhile, the global shift towards protectionist trade policies and reciprocal tariffs presents a risk for the domestic steel industry. Asean, which serves as a key transshipment hub, has become a liability as a result of the United States’ increased scrutiny, secondary tariffs, and threat of trade restrictions, according to Misif.
Lee noted that the global steel market is now increasingly fractured as a result of tariff policies.
“What you see now is a two-tier global pricing system, and we are likely to see continued intense price pressure and also competitive friction in markets that are unprotected,” he said.
Meanwhile, secretary-general of the South-East Asia Iron and Steel Institute Yeoh Wee Jin opined that steel demand over the next two to three years will depend on factors such as the persistence of the oil crisis, the raising of US interest rates, and the rate of import penetration in the country.
“Anything below 15% of import penetration is not good for the country because it creates a monopolistic situation where it’s protected and companies aren’t being incentivised to improve, innovate, and compete.”
On the other hand, too much imports will result in local producers being displaced and forced to export, he said.
“While Asean economies are growing, the steel industry is unable to benefit from economic gains,” he noted.
Moreover, increasingly prevalent sustainability mandates have emerged as another existential challenge for the iron and steel industry.
In particular, the European Union’s (EU) regulatory Carbon Border Adjustment Mechanism requirements have resulted in a barrier for Malaysia’s iron and steel producers.
This is mainly due to local companies lacking sufficient emissions data, the higher financial obligation of the EU’s carbon prices, and the nation’s slow move towards readiness carbon reduction compared to other Asean countries, according to Misif.
According to Misif president Roshan M. Abdullah, decarbonisation is an entire value chain effort, in which responsibility lies with both steel manufacturers as well as users, as demand creation for green or carbon neutral steel is crucial to the success of such initiatives.
He added that the Malaysian steel industry has a duty to ensure it can move up global steel value chains.
“The better strategy is for us to move up and create a higher value product and complement our peers from other parts of the region. That is definitely the way for the iron and steel industry in Malaysia to evolve and become stronger and more resilient, rather than depending on just one sector,” he said. Yeoh added that the industry should differentiate, diversify, and focus on niches or grow customer-centric downstream products and services.
He also opined that Asean steel industry consolidation is an inevitable way forward as a region.
“Cross-border mergers and acquisitions for scale and competitiveness, as well as strategic partnerships will be needed.”
To address the industry’s ongoing constraints, Lee said a strong industrial foundation should be secured through safeguarding critical raw material supply chains and enforcing a fair rules-based market.
Another recommendation includes target interventions to address persistent overcapacity and fragmentation to create a more consolidated and technologically advanced structural core.
Beyond this, Lee added that driving domestic demand for green steel and de-risking decarbonisation pathways would serve to help accelerate the green steel transition, tackling one of the industry’s key long-term challenges.
Deputy Investment, Trade and Industry Minister Sim Tze Tzin said in his address at the conference that the ministry is working towards building an “enabling green market ecosystem” to formulate clear standards for green materials, explore green public procurement incentives, and foster supply chain collaborations.
“Capital investments in green steel production will only flourish if there is reliable, remunerative domestic and regional demand,” he said.
He added that the Investment, Trade and Industry Ministry will continue to actively support the industry’s digital transformation through targeted policies, regulatory facilitation, and capital incentives aimed at advanced manufacturing adoption.
