The steel surplus trap

EVERY tonne of steel produced in excess of demand has to find a home.

As China, the world’s largest steel producer, grapples with a property market slowdown and weak domestic demand, its mills are left with more steel than the country can absorb.

The result is a surge of exports into markets abroad, pushing steel prices lower and intensifying competition across Asia, including in flat steel products such as cold rolled coil (CRC), which are widely used in the automotive sector, appliances and the manufacturing industry.

Malaysia has not escaped the fallout.

To protect domestic producers, the government has imposed anti-dumping duties on certain CRC imports from several countries.

In June 2025, the Investment, Trade and Industry Ministry or Miti extended anti-dumping duties on CRC imports exceeding 1,300mm in width from China and Japan for another five years until June 2030 following a sunset review.

Duties on imports from South Korea and Vietnam were lifted after authorities concluded that removing them was unlikely to result in renewed dumping or injury to the domestic industry.

Meanwhile, anti-dumping duties on CRC imports measuring between 700mm and 1,300mm in width from China, South Korea and Vietnam have been in force for the past five years.

But these duties, which can reach 42.08%, are scheduled to expire on Oct 8, 2026 unless extended.

Mycron Steel Bhd is urging the government to extend the measures, warning that removing the protection could further weaken Malaysia’s flat steel industry amid worsening global overcapacity.

Its executive chairman Tunku Datuk Yaacob Khyra says Malaysia should not lower its trade defences at a time when regional peers including Vietnam, Thailand, Japan and South Korea are strengthening measures against unfairly traded steel imports.

He says the global steel market had deteriorated significantly due to persistent excess capacity, with China at the centre of the imbalance.

According to Tunku Yaacob, China accounts for over 50% of global excess steelmaking capacity and exported a record 131.2 million tonnes of steel in 2025.

“When that surplus floods a market, it displaces local production. That is not theory. It means lost jobs and a steel industry whose very viability is put at risk. Malaysia is squarely in its path,” he tells StarBiz 7.

Malaysia, he says, faces a double impact from the global steel surplus. On one hand, the country competes directly with cheaper Chinese imports.

On the other, as regional markets tighten restrictions, excess steel could be redirected into markets with fewer barriers.

“We are hit twice – directly by cheap Chinese imports, and again by the volumes diverted out of South Korea and Vietnam.

“We sit at the end of the line, absorbing the surplus of the entire region,” he says.

Data compiled by the World Bank through its World Integrated Trade Solution or WITS platform indicate that Malaysia’s imports of Harmonised System (HS) Chapter 72, which covers iron and steel, reached US$5.81bil in 2025.

Tunku Yaacob says Malaysia should not lower its trade defence at a time when regional peers are strengthening measures against unfairly traded steel imports.

He points to measures taken by regional peers, saying Vietnam had extended duties on certain cold-rolled products to December 2030 and tightened loopholes used to avoid the measures.

Thailand confirmed a further five-year extension in January 2026, while South Korea has strengthened Customs enforcement against evasion and Japan opened fresh investigations in 2025, he adds.

“Every one of these governments knows the distortions are still very much with us. Malaysia should not be the one that drops its guard,” he says.

Tunku Yaacob warns that allowing unfairly traded imports to enter without restraint would put local manufacturers at risk of losing production capacity built over decades.

“We risk not only losing production capacity, but an industry that has taken decades to build. Once that capability is lost, it cannot be recreated overnight.”

He says Malaysia’s flat steel industry has already suffered from prolonged import competition, with producers closing and capacity shrinking over the past decade. “Every closure takes skilled jobs and hard-won expertise with it, and we do not get them back.”

Beyond this, Tunku Yaacob also warns against circumvention and transshipment, where exporters bypass trade measures through misdeclaration or by routing products through third countries.

While welcoming enforcement initiatives such as Ops Padu 1 and 2 as well as Op Metal, he says trade remedies must be backed by effective enforcement.

“Effective trade remedies and strong enforcement must go hand in hand. One without the other is simply not enough.”

Despite the challenges, Tunku Yaacob believes Malaysia has sufficient production capacity to meet domestic demand.

“The capacity is there – that is not in question. Malaysia has capable production within its steel industry. The problem is that imports still account for the majority of domestic consumption and remain the primary source of supply.”

Beyond trade pressures, unfortunately, steelmakers are also preparing for another major challenge – decarbonisation.

The European Union’s Carbon Border Adjustment Mechanism or CBAM, which will cover steel, is expected to increase pressure on exporters to reduce carbon emissions as global buyers place greater emphasis on low-carbon manufacturing.

Tunku Yaacob says the transition towards greener steel production is no longer simply an environmental responsibility, but an increasingly important commercial requirement.

He points to Malaysia’s National Energy Transition Roadmap and the Steel Industry Roadmap 2035 as providing the framework for a cleaner and more competitive domestic steel industry.

At the same time, he cautions that decarbonisation requires substantial long-term investment.

“If unfairly traded imports continue to erode margins, there will naturally be fewer resources available to invest in cleaner technologies. That is why fair competition and sustainability must go hand in hand.”

Looking ahead, Tunku Yaacob says Malaysia’s steel industry could remain competitive if manufacturers are able to compete fairly while continuing to invest in automation, digitalisation and lower-carbon production.

“Ultimately, the future of Malaysia’s steel industry is about much more than producing steel.

“It is about maintaining a strong manufacturing base that supports jobs, investment and the wider economy.”