Koay Chin Oon: Malaysian steel market to make progress in Q2 of 2013 but still confronted with a hard time in following two years

Asian Metal: Good morning, Mr. Koay, thank you for your support to Asian Metal and accepting the interview. Well, could you please give us a brief introduction of Steel Wire Association of Malaysia (SWAM)? I know it has more than 50 members in Malaysia, right?

Koay: Ok. Actually, our members have increased to over 60 and the membership consists of many wire manufacturing and relevant industry companies such as GI wire mills, welding wires mills, nail manufacturing companies and so on. The most important role SWAM plays is providing help to our members on both domestic and international affairs. We give them some guide on the international steel market information and they can seek solutions and support from SWAM when they are confronted with difficulties and disputes, for example, we help many small-scale companies get licenses to run business.

Asian Metal: Ok, thanks for your introduction. Now, let’s talk about the market. In China, the steel market has been sluggish since the Chinese New Year, so can you talk about the market situation in Malaysia?

Koay: Yes, I know, because we Malaysian also very concern about the Chinese market. Generally speaking, there is no much difference in Malaysia or other countries because the situation in the whole world is unpromising. Steel producers and traders are all facing heavy pressure and in my opinion, the main reason is that they are expanding production capacities but the demand from downstream industries has not released so much and so rapidly. Traditionally, both steel markets in China and Malaysia experience fluctuations after the Chinese New Year, and the regular movement is up-down, but this year, in 2013, the situation seems worse and prices of all steel products kept decreasing before they moved up much. Well, I think it should be attributed to the high inventory before the festival. In Malaysia, the price of wire rod also failed climbing up after the Chinese New Year and I believe the reason is the continuously soft demand.

Anyway, I think there is one point that we should notice, that most producers, wire manufacturers or traders are still getting development and improvement. For example, the total output of wire rod in Malaysia in 2009 was 5 million tons and now it has reached 7 million tons, but the current consumption is 6 million tons, so most of us think the market is dull, but ignore the fact that the demand also increased.

Asian Metal: Yes, right. Well, we know that Malaysia started the anti-dumping policy on wire rod imported from Southeast Asia as well as Turkey from last October, and from February of this year, the anti-dumping duty was levied as high as over 25%, so may I know your opinion about the policy?

Koay: Well, in my opinion, the anti-dumping is normal and common in international trade, and in WTO it is also allowed. When products from other countries pour into the local market with a super-low price and damage local manufacturers’ interests, the government will consider the policy to balance the import and export in the local market.

Well, about the anti-dumping policy on wire rod issued by Malaysia government, I think the main reason is that European countries exported too many materials to Southeast Asia two or three years ago, to relieve the sales and production pressure brought by the European debt crisis. Consequently, the surge of low-cost materials weakened wire rod producers’ interests here and they asked the government to take some measures to keep it down. Generally speaking, the purpose is to make balance between import and local production. Of course, the anti-dumping does not mean to restrict the free impex, and now Malaysian traders and wire manufacturers are still allowed to import.

Asian Metal: Okay thank you for your explanation. Then what do you think those wire rod producers in Malaysia will get or learn from the protection policy?

Koay: I still think it will make a better balance, no matter for the whole market or for the participants, because the pouring of cheap resources will definitely diminish local players’ interests and it is unfair in the international trade in a long run. Well, about local wire rod producers, I believe they will consider improving their competitiveness and the ability of coping with risks that may appear in the international affairs, by means of adjusting the production structure, or merger or restructuring.

Asian Metal: In 2013, there is another major event in Malaysia-the government General Election, so what significant influence do you think it will bring to the steel market?

Koay: Yes, everyone is waiting for the General Election and the impact will certainly be great. We all know that the economy will always be subject to the political and in past two years, many projects in Malaysia was postponed to operate because of the suspension of election, resulting in an extremely depressed steel market. Every new government will re-release policies to stimulate its economy, so we are also looking forward to the new policy from the new leadership after the election.

Asian Metal: So, what is the date to hold the election?

Koay: Almost there. I guess it should be at the end of March or early April, and the steel market after it would be hopeful, as there must be some major projects to be put into construction. Thus, the long-time depressed steel market will be encouraged and I think the market will turn better in Q2, with prices moving up continuously.

Asian Metal: Thank you and hope so. Last, could you say something about the steel market in following one or two years? And do you have any advice for steel traders or producers to cope with the forthcoming challenges and opportunities?

Koay: In my personal point of view, the steel market in next two years will continue to be slow and the hope for recovery is slim. It may be better after 2014. Well, there are many influencing factors, and the most important is the unpleasant global economic situation. Economies are difficult to get recovery from the recession so soon. Besides, the global crude steel production is still in expansion, which puts heavy pressure on the finished steel market. In 2012, the total global output of crude steel is nearly 1.6 billion tons, increasing for the third consecutive year, with an overcapacity of 400-500 million tons, while the output is likely to keep climbing up in 2013. I believe it will be tough in following two years and many enterprises may be “kicked out”. It will be inevitable for companies to merge or reorganize, so that they could cope with uncertainties and challenges in the world trade. In addition, we also welcome foreign companies to invest in Malaysia and cooperate with our members. I heard that there is a Chinese welded mesh association to visit Malaysia in the near future and I would like to talk with them and seek a chance for the cooperation.

Asian Metal: Believe there will be. Thank you again for accepting the interview and wish everything goes well for your work in the future.