M A L A Y S I A N I R O N & S T E E L I N D U S T R Y F E D E R A T I O N

23 May 2017 2017 SEAISI Conference & Exhibition

Singapore

Presented by: Dato’ Soh Thian Lai (President)/

Frankie Wee (CEO)Malaysian Iron & Steel Industry Federation

Country Report – Malaysia

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Presentation Topics

The Malaysian Economy in 2016 and Outlook for 2017

Status and Updates of the Malaysian Iron & Steel Industry

Malaysian Iron & Steel Industry – Concerns, Challenges and

Way Forward

Outlook 2017

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The Malaysian Economy in 2016 and Outlook for 2017

KEY ECONOMIC INDICATORS 2014 2015 2016 p 2017f

Real GDP (% change) 6.0 5.0 4.2 4.3 - 4.8

Unemployment rate (as % labour force) 2.9 3.1 3.5 3.6 - 3.8

Inflation Rate (%) 3.2 2.1 2.1 3.0 - 4.0

External Trade (Annual Change %):Gross Exports Gross Imports

6.35.3

1.60.4

1.11.9

5.56.4

Current Account Balance (RM billion) 48.6 34.7 25.2 17.4

Movement of Ringgit (against USD) (%)(as at end-year)

-6.1 -18.6 -4.3 -

Interest rates (as at end-year):Overnight Policy Rate (OPR)Interbank Rates (1-month)

3.253.38

3.253.45

3.003.10

--

Source: Bank Negara Malaysia Note: P – Preliminary F- Forecast

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The Malaysian Economy in 2016 and Outlook for 2017

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Outlook for the Malaysian Economy in 2017

The Malaysian economy is projected to register asustained growth of 4.3% - 4.8% in 2017

Domestic demand continues to be the principaldriver of growth, underpinned by private sectoractivity

Malaysia’s external sector is expected to remainresilient despite continued uncertainties in theglobal environment. Both imports and exportsexpected to strengthen in 2017

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Outlook for the Malaysian Economy in 2017

All economic sectors are projected to registerpositive growth. The services and manufacturingsectors would be the key contributors to overallgrowth

Headline inflation projected to increase in 2017averaging between 3.0% – 4.0% reflecting primarilythe pass-through impact of the increase in global oilprices on domestic retail fuel prices

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Status and Updates on the Malaysian Iron and Steel Industry

RM 260 Billion of development expenditure underthe 11th Malaysia Plan (2016-2020) represents a16.0% increase from the previous plan

The Malaysian economy expected to grow by 4.3%– 4.8% in 2017 including 8.0% growth in theconstruction sector

New products and technologies including theIndustrial Building System (IBS) seem to be gainingsome traction in the market

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Status and Updates on the Malaysian Iron and Steel Industry

MIDA reported that there are currently 2,190projects in the iron and steel sector with totalemployment of 160,000 workers

Average annual growth rate from 2016 to 2018 isforecasted at 4%

ASC per capita forecasted to reach 326 kg in 2016(population of 31.7 million) and then growsfurther to 336 kg in 2017 and 345 kg in 2018

Malaysia’s steel demand is currently 4th largest inASEAN

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Malaysia’s Steel Consumption (ASC)

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Note: E - Estimate

Long versus Flats Products

• Early estimate - Apparent Steel Consumption - estimated to increase by 3.4% from10.00 million mt in 2015 to 10.34 million mt in 2016

• Overall long products consumption (59.5%) is still higher than flats (40.5%)

8,491

6,645

8,314 8,238

8,922

10,049 10,079

10,001 10,339

-

(21.7)

25.1

(0.9)

8.3

12.6

0.3 (0.8)

3.4

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

-

2,000

4,000

6,000

8,000

10,000

12,000

2008 2009 2010 2011 2012 2013 2014 2015 2016E(‘0

00

MT)

ASC ('000 tonnes) Growth %

49.5 46.5 43.3 43.9 34.6 35.4

40.5

50.5 53.5 56.7 56.1

65.4 64.659.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016E

Flat Long

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• In 2016, finished steel production recorded a negative growth of 2.4% to6.77 million mt from 6.93 million mt in 2015

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010 2011 2012 2013 2014 2015 2016' E

6,251 5,690

7,231 7,494 7,385 7,490 7,478

6,931 6,768

‘00

0 M

T

Year

Finished Steel Products ('000 tonnes)

Production of Finished Steel Products

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Malaysia’s Production, Import, Export and Consumption of Selected Steel Products (‘000 MT), 2016

Note:

*(Not included - Cold Rolled Electrical Sheet)

**(Include - CGI, EGI, Tinplate, Zn-Al, Colour Coated & Other Metallic Coated)

Products Production (Estimate)

Import Export Consumption

Bars 2,879 793 105 3,567

Wire Rods 649 1,055 62 1,642

Sections 40 696 49 687

HR Sheets & Strips 77 2,015 31 2,061

Plates 220 351 45 526

CR Sheets & Strips* 892 1,244 271 1,865

Coated Sheets and Strips** 1,162 647 242 1,567

Pipes and Tubes 850 553 246 1,157

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Steel Import 2016

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China40%

Japan19%

Korea11%

Taiwan11%

India4%

ASEAN9%

Others 6%

Hot Rolled Sheets & Strips24%

Bars20%

Cold Rolled Sheets & Strips

15%

Wire Rods12%

Sections8%

Pipe & Tubes7%

Galvanised Sheet5%

Plates4%

Zn-Al, Coated & Others (2%)

Others 3%

Malaysia’s Steel Import by CountryMalaysia’s Steel Import by Products

• Malaysia imported 9.13 million mt, a surge of 15.3% from the previous year. Majorimported products are hot-rolled, bars and cold-rolled

• China remained the largest source of import for Malaysia with the total volume of3.67 million mt, increased 6.7% (2015: 30%)

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Steel Export 2016

ASEAN 41%

Korea14%

India8%

Japan4%

Taiwan3%

China 3%

Australia3%

Europe (EU25)3%

United States

2%Others

19%

Cold Rolled Sheets & Strips

25%

Pipe & Tubes23%

Galvanised Sheet11%

Bars10%

Plates6%

Wire Rods6%

Zn-Al, Coated & Others6%

Others13%

Malaysia’s Steel Export by Products Malaysia’s Steel Export by Country

• Export declined 2.7% from 2.3 million mt in 2015 to 2.2 million mt in 2016, 41%within ASEAN

• Major steel export products are cold-rolled, pipes & tubes and galvanized sheet

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Malaysia’s import/export gap has moved strongly into deficit

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5,468

4,035

5,233 5,166

6,022

6,924

7,731 7,923

9,139

2,797 3,015

2,792

3,319 3,150

2,104

2,765 2,339

2,275

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

('00

0 M

T)

Import Export

Malaysia Imports and Export of Iron and Steel Products

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Excess capacity in China/Influx of imports/ Circumvention of Imports

Widening of Import-Export Gap

High Volatility in Prices

Under-Utilisation of Capacity/Shrinking Market Share

Growing capacities in ASEAN Countries

Industry Liberalisation (2020 and beyond)

Rising Costs of Doing Business

Concerns and Challenges for the Iron and Steel Industry

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Gloomy to Positive Outlook for the Local Steel Industry if . . .

China remains committed and steadfast in cutting its steel

output capacity and other proactive actions which will

prevent the dumping of cheap steel exports to Malaysia

Price normalization is sustained or further improved

Recovery in the local currency

Escalating cost of doing business (gas, electricity, foreign

workers and levies, etc.) is addressed and

Enforcement of the Government’s Policy on Procurement

of Locally Produced Products

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Local Demand Outlook

Majority of steel products produced locally is destined for

infrastructure and construction sector applications. Hence,

the outlook for the steel industry depends much on the growth

and performance of this sector. The construction sector is

expected to maintain its robust performance with a targeted

double-digit growth rate of 10.3% and through new construction

works valued at RM138 billion in 2017.

The realization or implementation of projects (especially high

impact mega infrastructure and government social and

development projects) announced by the Federal Government

will undeniably boost the demand for steel products and generate

positive outlook for the local steel industry and multiplier effect on

the national economy when supported by the enforcement of the

Government’s Policy on Procurement of Locally Produced

Products.

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Malaysian Steel Industry - Way Forward

Buy-Malaysian-Products First Policy

Government’s continuous encouragement and

promotion of the Industrialised Building System (IBS)

Limit unfair imports through continuous regulatory

development and enforcement including by moving

rapidly to curtail/prevent import circumvention and

dumping of products into the country

“One-Belt-One-Road (OBOR)” – high demand for

infrastructure, construction materials, etc. Must benefit

the nation and industries

Mergers & Acquisitions (Vertical and horizontal)

/Consolidation/JVs

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Deals worth RM31 Bil signed

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Thank you