Upfront Financing Needed To Support Malaysia’s Green Steel Transition - Think Tank
KUALA LUMPUR, Oct 29 (Bernama) -- Upfront financing support is needed to help Malaysia’s iron and steel producers fund capital-intensive investments and transition to green steel production, said the Socio-Economic Research Centre (SERC).
Its executive director Lee Heng Guie said government support should extend beyond tax incentives to include working with banks to help producers finance production upgrades and reduce carbon emissions.
“This industry needs a lot of capital. So this comes to the question of how the government can support them financially, not just through tax incentives, but also by working with banks to support this industry,” he told reporters on the sidelines of the 15th Malaysian Iron and Steel Industry Federation (MISIF) conference on the state and outlook of the industry here today.
Lee said producers face challenges in securing financing as they work to meet environmental requirements while operating in an industry driven by carbon-intensive production processes.
In his presentation on the 16th MISIF Report on the industry outlook, he highlighted the need for upfront capital to cover high capital expenditure and green energy premiums, noting that Malaysia’s funding mechanisms remain tied to future carbon-tax or fee-based revenue.
He said that the Steel Industry Roadmap 2035 explores a Carbon Competitiveness Fund, but its dependence on future tax or fee collection leaves producers needing capital before the funding pool is fully available.
His recommendations included measures to bridge the green-energy cost gap, reduce investment risks for capital-intensive green projects and implement a carbon-tax and incentive system that supports decarbonisation.
Lee said 81.2 per cent of Malaysia’s crude steel output in 2024 came from the blast furnace-basic oxygen furnace route, underscoring the scale of the industry’s transition towards lower-carbon production.
“The roadmap sets the direction for the industry to upgrade production, develop higher-value products and meet carbon-emission targets.
“Therefore, closer cooperation is needed between the government and industry to address a mismatch between locally produced steel and the products required by domestic manufacturers,” he added.
Malaysia produces substantial volumes of long steel products for construction, while demand for certain higher-quality products continues to be met through imports, he said.
Lee said the automotive, semiconductor and data centre sectors offer opportunities for steelmakers to develop products that meet industrial requirements.
However, he said demand growth may remain moderate amid regional excess capacity and competition from imported steel, with future demand increasingly driven by industrial development as steelmakers look beyond government mega projects for sustainable business opportunities.
-- BERNAMA