CHINA Metallurgical Group Corp (MCC) has become an active player in the local steel industry. The China-based construction giant’s unit, MCC Overseas Ltd, is involved in the construction of several mega steel manufacturing plants in Malaysia.

The latest project it will participate in is the RM13 billion integrated steel-making complex in Samalaju Industrial Park, Bintulu, Sarawak.

To recap, during Prime Minister Datuk Seri Najib Razak’s visit to China last August, a memorandum of understanding was signed between the Sarawak government and two Chinese state-owned companies — Hebei Xinwuan Steel Group and MCC Overseas — to set up a steel-making complex in Sarawak.

The complex, which will comprise a five-million-tonne capacity steel mill, a cement plant, a coke oven plant, a cold rolling factory and a welded pipe facility, will be developed in three phases. With a total investment of RM13 billion, it will be the biggest foreign direct investment for Sarawak.

According to MCC Overseas (M) Sdn Bhd managing director Robin Yang, MCC Overseas will only hold a minor stake (about 10%) in the project while the remaining stake will be held by Hebei Xinwuan Steel. MCC Overseas’ total investment in the project will be RM1.3 billion.

According to Yang, the group will seek approval for the project’s Environmental Impact Assessment and Detailed Environmental Impact Assessment (DEIA) from the authorities soon.

“The DEIA may take some time. If everything goes smoothly, we should be able to start construction work at the beginning of 2018. The investment for the first phase will be RM3 billion. We expect the plant to start operating in mid-2020,” Yang tells The Edge.

MCC is also the contractor for Alliance Steel (M) Sdn Bhd’s integrated iron and steel works project in Kuantan, Pahang and Perwaja Holdings Bhd’s steel plant in Kemaman, Terengganu. MCC’s role involves the management of the entire projects, from design to trial run.

Alliance Steel is jointly owned by Guangxi Beibu Gulf International Port Group Co Ltd and Guangxi Shenglong Metallurgical Co Ltd. Some RM4.2 billion will be invested in the 3.5 million-ton capacity facility to produce high carbon steel bars, wire rods, H-shaped steel and steel building materials.

Yang says the project, which had its groundbreaking ceremony last November, is scheduled to be completed in a year.

Tianjin Zhiyuan Investment Group Co Ltd (Zhiyuan), which will pump in RM1.8 billion to revive Perwaja, signed an engineering, procurement and construction agreement with MCC recently for upgrading works at Perwaja’s Kemaman plant.

It is learnt that Zhiyuan will start transferring facilities worth up to RM350 million to Perwaja after the regularisation plan is approved. The plant aims to produce stainless steel.

On the industry’s concern about an oversupply of steel, Yang says the three plants will try to offer different products to avoid unhealthy competition.

He notes that, unlike the steel mill in Kuantan — which will cater for demand in Peninsular Malaysia and export markets in Asean — over 80% of the products from the Samalaju plant will be exported.

Yang, who believes that the Chinese steel market will recover in three to five years’ time, opines that this is a good time to invest in order to ride the recovery.

He says steel makers in Malaysia are not competitive because of poor technology and the limited scale. With the Chinese investment, they should be able to move up the value chain, he adds.

Malaysian Iron and Steel Industry Federation president Datuk Soh Thian Lai says Chinese investment in the local steel industry is raising some concern among Malaysian manufacturers as some Chinese players are likely to produce the same types of products as the domestic steel mills.

Citing Alliance Steel as an example, Soh says the products will be basically commodity steel items, which may add to the overcapacity and worsen the under-utilised production capacity situation in Malaysia as well as the region. “This will be a larger threat as the local mills are already facing competition from cheap Chinese imports.”

He opines that the Chinese players should venture into the manufacture of high value-added products through either new foreign-owned steel mills or joint ventures with local players. “This should be encouraged as it will bring positive change to the local steel industry and create new downstream activities in various sectors.”

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