The Malaysian government is to impose a 15% duty on exports of ferrous scrap, according to a release in its official gazette March 19, with local mill sources hailing the move as a way of protecting the overcapacity domestic steel market. The export duty will cover ferrous scrap with HS codes 7204.10.0000, 7204.29.0000, 7204.30.0000, 7204.41.0000, and 7204.49.0000, and will be in effect from March 25.
Prior to the announcement, exports of ferrous scrap from Malaysia had no duties. The move has been heralded by local players since Dec. 31, with the publication of a White Paper proposal from the Malaysian Iron & Steel Industry Federation pressing for a series of revisions to the country's iron and steel policy. "Malaysia is ultimately a net importer of scrap. Local generation previously were only able to feed about 30% of local requirements, and this was even before Alliance Steel came into the picture," a local steelmaker said. "The export duty has to be imposed in order to deter the needed volumes from being exported."
In 2020, Malaysia exported 454,798 mt of ferrous scrap, up 14% from the previous year, according to the country's statistics department. In comparison, 2013-2015 saw an average consistent yearly exported volume of only 50,000 mt. 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 173,053 mt, Indonesia (99, 696 mt), and Singapore (69,203 mt). 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 mt 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 2 million mt of scrap metal, which against Malaysia's total domestic scrap supply in 2018, amounted to 67.6%.