By Ooi Tee Ching, Business Times

June 24, 2010

DOMESTIC steel usage is projected to grow at only 5 per cent to 7.5 million tonnes this year - lower than an earlier forecast of 8-10 per cent growth, an industry body said. Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long said Malaysia is estimated to consume 7.5 million tonnes of steel this year compared with 7.1 million tonnes last year. "There will be growth but the rate will be subdued. In the last two months, the government has been indicating of impending rise in natural gas and electricity prices," he said." Also, the implementation of government projects is not as consistent as we had anticipated," he added.

Chow was speaking to reporters at the Misif Outlook Conference 2010 in Shah Alam yesterday.

Also present were Thailand Iron and Steel Institute managing directior Wikrom Vajragupta, Vietnam Steel Association secretary-general Dinh Huy Tam, Indonesia's biggest steel maker PT Krakatau Steel marketing director Irvan Hakim and China Iron and Steel Association (CISA) deputy secretary-general Yang Zun Qing.

Chow said the 10th Malaysia Plan (2011 to 2015) should provide a strategic market for local steel consumption as exports would be very competitive in the years ahead. Malaysia's steel industry has always imported more than it exported.

Malaysia's steel industry has slackened in its growth in recent years and is now overtaken by Thailand and Vietnam.

"While there is no necessity to play catch-up in quantitative terms, there are still opportunities to improve the sector," Chow said.

Misif also wants the government to conduct a mid-term review of the third Industrial Master Plan (IMP) and review certain policies.

"The IMP should be streamlined with steel policies so that the industry would not be driven by more than one directive," he said.

China is the world biggest producer and consumer of steel. The Chinese government's financial and environment policies have an influence on Malaysia's steel output and imports.

Over the weekend, the Chinese government signalled a more flexible yuan currency exchange and ditch a dollar peg. The People's Bank of China announced that it would "further reform the yuan exchange rate regime and enhance the yuan exchange rate flexibility"

Yesterday, the China's Ministry of Finance announced an export rebate waiver on hot-rolled coil and cold-rolled coil from July 15 2010. Currently, there is a rebate of 9 per cent for hot-rolled coil and 13 per cent for cold-rolled coil.