Boston, MA -- (SBWIRE) -- 05/05/2014 -- - BMI's Q2 2014 Malaysia metals report analyses trends within the country's metals sector as the industry looks to assert its dominance as a leading producer in the Asia-Pacific region. Growth in Malaysian production of key metals such as steel and tin will be assisted by an increasingly supportive government which continues to take steps to increase investment in the sector, while introducing measures to protect the sector against cheap imports, or 'dumping' by foreign companies. In 2014, we forecast growth in Malaysian production of both steel and tin, with output forecast to grow by 9.1% and 1.8% year-on-year respectively.
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2014 promises to be a solid year of growth across Malaysia's metals sector. With the Chinese economy set to cool in 2014 (we forecast GDP growth of 6.7%), Malaysian metals producers will be looking to the domestic market to drive demand, rather than imports. We retain a positive outlook towards the Malaysian economy in 2014, which we forecast to expand by 4.4%. We expect growth in the National Key Economic Areas (NKEAs) to remain relatively robust, lending support to the domestic industry.
In terms of tin production, we expect production levels to return to growth following two years of contracting output, while the country is forecast to be a regional outperformer in terms of steel production with output set to grow by 9.1% in 2014. Domestic metals demand will also remain robust with consumption levels for steel and tin forecast to grow by 4.5% and 4.8% respectively. 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.
Downside Risks Remain
We caution that our production forecasts contain an element for downside risk, particularly with regard to steel output. A key threat to steel producers 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, which has resulted in allegations of 'dumping' measures against a number of Chinese firms by the Malaysian government over recent months. The influx of foreign steel has already been shown to have eroded prices on the domestic market. According to reports by investment bank CIMB Investment, since end-2012, the selling price of steel wire rods has been trending at about 5-10% below the cost of steel bars, which represents a reversal of the previous trend.
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