Introduction
1. It is a pleasure to address you today. Last year, also at the MISIF conference, I identified two critical challenges the steel industry is facing: overcapacity and green transition. These challenges persist, but over the past year, the Malaysian government, in collaboration with industry stakeholders, has made progress in reframing the issues. We are working to shift mindsets and explore new policy frameworks to drive sustainable growth.
2. Before addressing Malaysia’s situation, I would like to briefly touch on the global landscape. Construction steel consumption, especially in China, is on a downward trend. However, the production capacity built over the years remains, resulting in an excess production volume and the subsequent unloading, flooding and even dumping of steel products in the global market. Here in Southeast Asia, the steel industry is not spared from these challenges.
Independent Steel Committee
3. In January 2024, MITI Minister Tengku Zafrul Aziz established an independent committee led by Dato’ Omar Siddiq, CEO of HSBC Malaysia. Its members include former Deputy MITI Minister Professor Dr Ong Kian Ming, Secretary General of the South East Asia Iron and Steel Institute (SEAISI) Yeoh Wee Jin, Chief Investment Officer of Khazanah Hisham Hamdan and former Senior Partner at Mckinsey & Company Chen Li-Kai. The independent committee’s mandate is to address the twin challenges of ensuring that the iron and steel industry remains both economically and environmentally sustainable.
4. The independent committee’s report, which will be tabled to the Minister in due course, seeks to address these concerns.
5. Among the findings of the independent committee is that Malaysia’s steelmaking capacity is underutilised compared to our regional peers. Additionally, there is a need to create a level playing field between electric arc furnace (EAF) operators and blast furnace players, as well as between foreign and local companies, in terms of technology and scale.
6. The independent committee has also uncovered a long-standing issue of illegal steel operations without manufacturing licence or local authority approval, which MITI is working with the relevant authorities to carry out enforcement actions.
Economic and Environmental Sustainability
7. I must emphasise that the twin challenges of economic and environmental sustainability are deeply interconnected.
8. Last year, Prime Minister Datuk Seri Anwar Ibrahim launched three major economic policy documents: the Madani Economic Framework, the National Energy Transition Roadmap (NETR), and the New Industrial Master Plan (NIMP 2030). For the first time in decades, the government is committed to ensuring that industrialisation and energy transition move forward in tandem.
9. For the iron and steel industry, this means addressing the imbalance between local long product capacity and imported flat product volume. With investments directed towards building up the local capacity in both manufacturing and utilisation of flat products, we hope to see an improvement in this imbalance and increase the economic sustainability of the industry.
10. However, we need to be cautious of the emissions that follows – if all the approved steel capacity comes online, the emissions would be equivalent to having six coal-fired power plants, challenging our commitment to achieve net-zero emissions by 2050.
11. Mechanisms need to be put in place to facilitate the green transition of the iron and steel industry.
12. This brings us to the introduction of a carbon tax to the industry, which was announced by Prime Minister Anwar in his Budget 2025 speech. Once implemented, among others, the carbon tax collected can be utilised to fund the green transition of the iron and steel industry.
13. Not too long ago, the Malaysian discourse was all about worries concerning the European Union’s carbon border adjustment mechanism (CBAM). Very soon, once Malaysia implements our own carbon tax, we will need a CBAM of our own to level the playing field and to ensure foreign steel pays Malaysian carbon tax.
14. Moving forward, the Malaysian government is also committed to working with the Chinese government to establish a G2G mechanism for capacity management and technology sharing within the steel industry. We are also advocating for discussions on the steel industry’s challenges and potential collaboration with China at the ASEAN level.
Governance of the Steel Industry
15. I would now like to touch on improving the governance structure of the iron and steel industry. Currently, we have various bodies such as the Malaysian Steel Council (MSC) and the Malaysian Steel Institute (MSI).
16. However, we see the need to improve the MSC to ensure it meets more regularly and receives more robust input from the industry.
17. Similarly, the MSI requires a total revamp of its roles to be a credible source of robust policy input.
18. I hope today’s conference will encourage critical thinking around achieving the twin sustainability goals: economic and environmental sustainability. The government’s ambition is to ensure that the steel industry remains profitable and environmentally resilient.
19. We are optimistic that the industry will thrive, driven not only by infrastructure projects but also by the wave of new investments – a second takeoff – with more advanced manufacturing including aerospace. We believe this second takeoff will benefit everyone, including the iron and steel industry.