KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
The Malaysian steel industry is poised for significant growth, driven by the rapid expansion of data centers and the semiconductor industry. As technology companies like Google make substantial investments in Malaysia, the demand for steel is expected to surge, presenting unique opportunities for investors.
Technology-Driven Demand for Steel
The Malaysian Iron and Steel Industry Federation (Misif) forecasts that domestic steel consumption will grow to between 8.3 million tonnes and 9 million tonnes this year. This growth is primarily fueled by the construction of data centers and the expansion of the semiconductor industry. Notably, Google has announced plans to invest US$2 billion in Malaysia, establishing the country's first Google data center and Google Cloud region. Such investments are set to significantly boost steel demand.
Current State of the Steel Industry
In 2023, Malaysia’s domestic crude steel production exceeded pre-pandemic levels, reaching 7.5 million tonnes, a 4.5% increase from 2022. Imports of iron and steel rose by 17.3% to 7.3 million tonnes, with China being the largest source, followed by Taiwan, Vietnam, Japan, and South Korea. Exports of iron and steel grew by 14.5% to 8.2 million tonnes. These figures indicate a robust recovery and steady growth in the steel sector.
Opportunities and Challenges
The burgeoning demand from data centers and the semiconductor industry presents lucrative opportunities for investors. Companies involved in steel production and those supplying to tech-driven industries are well-positioned to benefit from this growth. However, the industry still grapples with challenges like overcapacity, with average capacity utilization at just 39.1% last year, compared to the global average of 75.7%. Additionally, competition from Chinese exports continues to pose a significant challenge.
Government Support and Industry Requests
Misif has called on the government to address unfair imports and support the local steel industry. They are seeking incentives to encourage steel mills to move up the value chain, attract foreign investments, and promote technology transfer. These measures could enhance the competitiveness of the Malaysian steel industry and support its long-term growth.
Investment Insights
For investors, the Malaysian steel industry offers promising growth prospects. Key areas to watch include companies involved in the production of steel for data centers and the semiconductor industry. Stocks of companies that are poised to benefit from government incentives and are adapting to the growing demand from tech-driven sectors present attractive investment opportunities.
Conclusion
The Malaysian steel industry is on the brink of a significant upturn, driven by the expansion of data centers and the semiconductor industry. Investors should stay informed about industry trends and government policies to capitalize on the long-term growth potential in the steel sector. With strategic investments and support, the steel industry is set to play a crucial role in Malaysia's economic development amidst technological advancements.
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