Govt ready to offer more incentives to steel manufacturers

PETALING JAYA: The government is prepared to offer fresh incentives to Malaysian steelmakers investing in higher-value products, including automotive-grade steel and high-tech components, as the industry faces stiff import competition and pressure to upgrade its capabilities.

Malaysia's steel industry is valued at about RM35 billion, equivalent to 1.7 per cent of gross domestic product.

Deputy Investment, Trade and Industry Minister Sim Tze Zin said manufacturers faced pricing pressure from imported steel, making it increasingly important to move beyond conventional products into higher-margin segments.

Sim said manufacturers seeking to produce more sophisticated steel products could receive additional support, building on existing incentives such as pioneer status and investment tax allowances.

"We are prepared to help local steel manufacturers enhance their capabilities through incentives and other forms of assistance, Some industry players have already received government incentives, including pioneer status and investment tax allowances.

"If they want to make additional investments to produce more complex products, the government is prepared to assist them through further incentives," he told reporters at the 15th Conference on the Status and Outlook of the Iron and Steel Industry here today.

Additional incentives could help reduce the cost of that transition, although manufacturers will still need to secure sufficient demand to justify the investment, he added.

The push comes as the industry grapples with structural challenges, including excess capacity and competition from imports.

The country both imports and exports substantial volumes of different steel products.

Malaysia produced 7.71 million tonnes of crude steel in 2025, down from a record 9.01 million tonnes in 2024, according to the Malaysian Steel Institute.

However, the dependence on imported flat steel is clear. In 2023, domestic production reportedly stood at 2.2 million tonnes against consumption of 3.7 million tonnes.

That means local production was equivalent to about 59 per cent of flat steel consumption, with a substantial supply gap.

The government has extended restrictions on new upstream steel capacity to address the mismatch between domestic production capacity and demand, while encouraging a shift towards higher-value products.

Import competition remains a concern.

In August, Malaysia launched an anti-dumping investigation into certain coated steel products from China, Taiwan and Vietnam following complaints from local manufacturers that low-priced imports were hurting the domestic industry.

The pressure has also prompted greater scrutiny of trade practices. Eight of Malaysia's nine existing anti-dumping measures cover iron and steel products, according to the Investment, Trade and Industry Ministry.

The government's longer-term challenge is to help domestic producers compete on technology, product quality and productivity rather than price alone.

Automotive-grade steel and specialised materials for advanced manufacturing offer potential growth opportunities, but require investment in production technology, technical expertise and quality standards.

Sim said local steel industry had traditionally relied heavily on the construction sector, including residential and infrastructure development, but opportunities were emerging in the aerospace, automotive and data centre industries.

The aerospace sector, in particular, offered opportunities to manufacture high-tech steel components with higher profit margins, even at relatively low production volumes.

"Malaysia has an aerospace maintenance, repair and overhaul industry that requires various steel-based components. This creates opportunities for local manufacturers to explore low-volume products that offer high profit margins," he said.

In the automotive sector, Sim said local steel manufacturers needed to invest more in producing automotive-grade steel that met stricter safety standards.

However, efforts to replace imported steel remained constrained by pricing competition and the reluctance of some manufacturers to commit substantial investments to producing the required grades.

Sim said the government was developing a dedicated incentive mechanism to encourage vehicle manufacturers to increase their use of locally produced components, including steel.

The initiative, known as the New Customised Mechanism, is expected to be implemented next year, with Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani to announce further details in due course.

Sim said Malaysia currently imported about 60 per cent of its steel requirements, highlighting the need to strengthen domestic production capabilities and reduce reliance on imports.

He added that the growing data centre industry also presented opportunities for local steel manufacturers to supply components such as server racks and related equipment.

Some manufacturers had already begun exploring opportunities in the sector as part of efforts to diversify beyond traditional markets.

Sim said the government would continue supporting local steel manufacturers in upgrading their capabilities to produce more complex, higher-value products for high-tech industries.