Malaysia sets ferrous scrap tariff at 15 per cent

Nation’s steelmakers had been urging an export ban or restriction.

The Malaysian government reportedly has finalised its system to impose a 15 per cent duty on ferrous scrap exports, enacting a policy favoured by that nation’s steel industry.

A March 19 online news report by S&P Global Platts says a Malaysian government gazette entry on that day points to the March 25 enactment of the 15 per cent duty on outbound shipments for scrap with the Harmonised System (HS) codes of 7204.10.0000, 7204.29.0000, 7204.30.0000, 7204.41.0000 and 7204.49.0000.

The Selangor, Malaysia-based South East Asia Iron and Steel Institute (SEAISI) has been expressing concern since at least October 2020 about additional steel capacity being added in the nation. The association fears downward finished steel price pressure accompanied by a scramble for raw materials.

“It will take about 20 years for demand to catch up with this planned capacity level,” SEAISI wrote in October about blast furnace/basic oxygen furnace (BOF) capacity being added in the nation.

The new BOF projects also will create additional competition for ferrous scrap supplies needed by Malaysia’s existing electric arc furnace (EAF) steelmakers.

With those projects likely to continue, the government has instead opted to disincentivise Malaysian traders from sending ferrous scrap overseas. According to S&P in 2020, Malaysia exported 454 798mt of ferrous scrap, up 14% from the previous year, according to the country’s statistics department. In comparison, 2013 to 2015 saw an average consistent yearly exported volume of only 50 000mt. Exports begun to surge in 2016, after the country lifted a previous export tax of 10%.

The majority of 2020’s exports were bound for India, at 173 053mt, Indonesia (99 696mt), and Singapore (69 203mt).

Amid the fanfare, local steelmaker sources said they were also still concerned about the Wenan steel project in Bintulu, Sarawak, which would see an estimated 10 million metric tons new annual capacity injected into the local market, potentially leading to greater competition for scrap demand, and pressure on steel prices.

Based on previous estimations by steel associations in Malaysia, and with scrap consumption of 20%, the added demand from the Wenan steel project could see further demand of up to two million metric tons of scrap metal, which against Malaysia’s total domestic scrap supply in 2018, amounted to 67.6%.