MSA Metallurgists Wish List for 2022 Budget

Steel companies MSA want the government to provide special incentives, tax breaks and schemes to help stimulate the consumption of local iron and steel products in the country.

Tang Sri William Cheng, President of the Malaysian Steel Association (MSA), said that the steel industry, which has suffered from over-imports in recent years, has faced enormous challenges due to restrictions and thus reduced capacity.

He told StarBiz that MSA's 2022 budget wishlist for the government should be to accelerate the rollout of infrastructure and construction projects, estimated at RM200bil, to boost demand for steel products here.

"We also look forward to meeting local content requirements for domestic projects and a buy local policy for steel products." At the same time, local raw materials such as scrap metal to be processed locally into high value-added steel products should be retained rather than exported.

Cheng pointed out that local steel mills are forced to import scrap metal due to a lack of supply in the country.

MSA also proposed not to issue new licenses for the production of similar steel products, except for those that are not produced or available locally.

“Large domestic mining companies with an investment value of over RM200 million should receive tax incentives for reinvestment.

"For example, for the first five years, a 75% exemption from business income should be granted, and after five years, profits should be entitled to a 50% exemption from business income," Cheng suggested.

He added that the tax credits saved on tax credits could be reinvested in increasing production capacity, increasing productivity, conducting research and expanding activities in new locations.

To ease the financial burden on local steel producers, MSA is proposing a 50% cut in electricity and gas tariffs for the next 12 months, which will be revised later, and proposed a moratorium on loan repayments and financing for all steel mills. for six months and subsequent deferral of loan repayment, subject to approval by the relevant banking institutions.

Meanwhile, Malaysia Steel Institute (MSI) CEO Jarrod Lim (Figure below) agreed that the government should revive or roll out megaprojects over the next 24 months to boost demand for steel-related products.

“There needs to be broader support schemes to rigorously implement and enforce the buy Malaysia first principle, which is currently not the case,” he added.

MSI is also offering more export-oriented incentives and schemes under the 2022 budget to facilitate exports.

Lim noted that the average utilization rate in the local iron and steel sector is below 40%, well below the industry sustainability benchmark of 80%.

“Opening up new markets through exports is important for improving the competitiveness and resilience of the industry, as in other steel-producing countries such as the European Union, Japan, South Korea, India and China,” he added.

The steel industry white paper also proposed increasing the apparent consumption of steel and becoming an export-oriented, high value-added industry with a focus on the Asean market.

Therefore, the government should consider special incentives, including promotion and assistance to penetrate existing and newly identified markets, to support the export of locally produced iron and steel products.

Lim said more attention should be paid to existing schemes such as a service export fund, a market development grant, e-commerce and mid-range development programs.

The proposed support measures under the 2022 budget should include reinvestment incentives to help motivate existing steel players to modernize their facilities to develop new steel products not available in Malaysia.

Another important incentive, Lim said, is the allocation of a budget to train the local workforce.