Boston, MA -- (ReleaseWire) -- 01/03/2013 -- BMI's Malaysia Metals Report for Q4 2012 examines how Malaysian steelmakers are responding to the challenge of falling prices and increased input costs and warns that operating margins will remain under threat while domestic steelmakers struggle to compete with low-cost Chinese imports. BMI assesses current debates on the regulatory environment with a particular focus on import tariffs on steel imports as pressure grows for a more protectionist stance. It also examines the prospects for the tin refining sector.
Q212 witnessed stronger domestic demand for steel products, which was largely fulfilled by improved capacity utilisation. As a result of improved consumption, the Malaysian market is witnessing increasing steel product prices amid rising activity in the construction industry. However, growth rates are still below the levels seen in 2011. Going into 2013, despite weakness in the regional market for steel due to the oversupply situation and overall weaker economic growth, demand will be underpinned by infrastructural activities from the country's Economic Transformation Programme (ETP).
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BMI is very positive on the prospects of refined tin production in Malaysia given strong indications of market growth and increased production. Still-elevated tin prices and tight tin supply in the market (at least until new concentrate production from Australia and other emerging economies comes online in 2013/2014), should mean that 2012 will be another growth year for Malaysian production. Moderation in Chinese output over the medium term as inefficient smelters are closed should see a tightening in the regional tin market thereby sustaining Malaysian refining margins.
Over the last quarter BMI has revised the following forecasts/views:
- BMI does not foresee any significant increase in the country's refined tin consumption rate as end-use industries, such as electronics or solders, are typically not Malaysia's strong points. We expect production to reach 55.4kt by 2016, a sharp increase from 2011 refined tin production levels of 40.2kt.
- In the medium term, Malaysian tin should benefit from a tightening regional market as the Chinese government acts to curb tin output. Moreover, Indonesia is looking to implement export restrictions that will further constrain an already tight market. While consumption growth will be limited, these measures should ensure that demand outpaces supply thereby supporting refined tin prices and maintaining healthy profit margins.
- The Malaysian steel industry will not escape the challenges of the weakening steel prices and lower demand seen across the international market. The situation in the Malaysian market is set to remain uncertain and therefore volatile until the results of the June 2013 general election. Capacity growth in 2013 will come from the 700ktpa expansion of Hiap Teck Venture Bhd.
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