New Report Available: Malaysia Metals Report Q4 2013

From: Fast Market Research, Inc.
Published: Mon Oct 07 2013

In Q413 we maintain an optimistic stance regarding the outlook for Malaysia's metals industry, with the government making efforts to encourage increased investment in the sector. While we expect Malaysia's nascent gold mining sector to account for the bulk of mining growth over the coming years, we maintain a positive outlook for steel and other industrial metals. However, cheap Chinese imports continue to undermine the growth prospects for domestic steelmakers.

A more proactive government approach towards metals and mining activity is one of the key reasons behind our optimistic expectations for the industry. In August 2013 Malaysia's Minister of Natural Resources and Environment, Datuk Seri G Palanivel, revealed that the government was looking at ways to increase its mineral and metals production and was investigating potential new exploration sites.

According to government statistics, total metals production increased by 9.8% in 2012. We note that the government is targeting increased foreign investment as part of its expansion plans for the sector. A total of 988 exploration licences, 337 mining leases and 144 propriety mining licences have been issued between 2008 and 2012.

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Steel Sector Looking Sturdy

In our view, the BN's recent victory in the general election was a positive development for the country's long-term political and macroeconomic outlook. We expect growth in the National Key Economic Areas (NKEAs) to remain relatively robust, lending support to the domestic steel industry. A key threat to steel producers, however, is the influx of cheap steel exports from China. An increasing number of Chinese steelmakers are shifting their attention towards the seaborne market due to sluggish demand and persistent overcapacity in China.

Meanwhile, demand for tin demand is expected to remain steady going into Q413, with consumption expected to be supported by growth in the country's electronics industry. Production of electronic goods accounts for 50% of global tin consumption with the material used for soldering purposes. The success of Malaysia's electronics industry is reported to be driving an increase in demand for the commodity with the industry having attracted achieved US$1.5bn in foreign direct investment (FDI) and US$154mn in domestic direct investment (DDI) between January and April 2013. Looking ahead, we forecast domestic tin consumption levels to remain steady over our mid-term forecast period.

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