The Malaysian government has reintroduced stricter COVID-19 restrictions on January 13, which has brought uncertainty to the local steel industry. Some sources predict that scrap delivery may be delayed and the recovery of the downstream market may be reversed.

The Ministry of Trade and Industry of Malaysia stated that Penang, Selangor, Malacca, Johor and Sabah, as well as the three federal territories of Kuala Lumpur, Putrajaya and Nabon, will be subject to movement control within two weeks until January 26.

Although production and steel production will be allowed to continue, under certain safety-related restrictions, two-week interstate transportation may become a problem.

A trader based in Kuala Lumpur said: “Because these major countries are blocked by COVID-19 restrictions, passenger flow will definitely be affected.” “Kuantan (in the east coast) and Penang (in the north) have their own ports and local areas. However, a large part of Malaysia’s waste comes from the capital, where transportation may face some problems.”

The disruption of domestic logistics may put short-term upward pressure on domestic scrap prices. Sources speculate that trucking companies or shipyards may take into account the additional fuel costs and divert transportation routes to factories farther from the city.

Due to the bullish shipping market, domestic scrap metal prices have been on an upward trend. For example, before the blockade, the bonus scrap delivered to the Kuantan Steel Plant on January 12 reached 1,680 mr/mt ($413/metric ton), an increase of 370 mr/mt since the beginning of December.

At the same time, in terms of product markets, blockade restrictions may once again inhibit trade activities in downstream industries such as construction and automobile production, reversing the recovery in the past six months.

Since the beginning of December, the market price of 12mm diameter steel bars has increased by 300 mr/mt, and it was in the range of 2,600-2,650 mr/mt (640-652 USD/mt) on January 12.

“Finished product sales may fall again, just like we faced when we first MCO in March,” said a klang mill source. “We may have to adjust production, but we will pay close attention to changes in customer demand.”

Posted by Chinese stainless steel pipe and fittings supplier, KAYSUNS.