The Malaysian government supports the consolidation of local steel players to create stronger and more competitive entities to compete in the global market, says International Trade and Industry Minister II Datuk Seri Ong Ka Chuan.
“The consolidation among players is of course on a voluntarily basis,” says the minister. “The ministry, through dedicated agency Malaysia Steel Institute (MSI), is just undertaking the effort to provide the platform for the sustainability of the sector.
“The consolidation efforts could include mergers and acquisitions, as well as joint ventures with international partners.
“What we want in the end is that the players are able to produce globally competitive steel products both in terms of quality and pricing,” he told reporters after delivering his keynote address at the Iron and Steel Conference: Sustainable Consolidation Effort for Malaysia’s Iron and Steel Industry recently.
Ong explained that in the past, steel players had requested the Government to increase the import duty on steel products following the influx of cheaper steel products into the country.
“But increasing the import duty would only solve their problem on a temporary basis, as expensive steel products will have adverse effects on the construction industry especially, and it will eventually trickle down to consumers who will have to bear the brunt,” he said.
MSI estimates that there will be a 40% reduction in the number of steel upstream and upper-middle-stream players to about 25 from 40 companies.
Ong said consolidation is nothing new to the world’s iron and steel industry.
“We have seen it hitting the industry since the merger of steel giants Luxembourg-based Arcelor SA and Netherlands-based Mittal Steel Co in 2006.
“And presently, the merged entity, Arcelor-Mittal, controls 10% of the world’s steel production, making the company the number one steel maker globally. Thus, I urge all industry players to fully participate in this effort,” said Ong.
He said this effort also promoted healthy competition and the standardizing of steel product prices.
“Realizing the challenges faced by the local iron and steel industry, the Government will continue to support the industry,” he said.
MSI intends to embark, as the facilitator, on this consolidation effort through three phases over a five-year period.