2012 CEO Outlook series: Masteel expects demand to remain steady

Malaysia Steel Works (KL) Bhd (Masteel) CEO Datuk Seri Tai Hean Leng shares his views and outlook on the year ahead.

TEFD: What are your expectations for 2012, for your company and the industry?
Tai: We expect demand for our steel products to remain steady due to the many ongoing construction projects, particularly in the residential and commercial sectors which have been well-supported by the many successful launches and uptake in the past 12 to 18 months. Most of these projects will typically require 24 months to 36 months to complete.

Fortunately, due to the proximity of Masteel's steel mills to the sites of the major construction activities within the country, we expect substantial savings in time and handling and transportation costs in the delivery of our steel products to our customers.

What impact, if any, do you expect from the euro crisis?
We expect the eurozone financial crisis to precipitate a higher degree of cautiousness by local financial institutions, resulting in lending curbs which would (in turn) cause some degree of contraction in liquidity in the first half of 2012. The rate of reversal of this contraction would be dependent on the pace of the resolution to the euro debt crisis.

However, the above situation is expected to be partly counter-balanced by the higher public expenditure with the commencement of the many major infrastructure projects located within the Klang Valley such as the RM50 billion MRT project, the RM25 billion Kuala Lumpur International Financial District and the RM 7 billion LRT extension.

The government is expected to be well within its capacity to fund these projects due to the projected higher tax revenues for 2012.

Easier monetary policy in the form of lower base lending rate by Bank Negara Malaysia to mitigate any sluggishness in demand is also forecast. It is expected that the euro crisis will end by the second half of 2012.

What are the main challenges for the company?
The main challenge for us is to avert compression of operating margins despite a high rate of utilisation of our manufacturing facilities.

What are the company's plans and focus for 2012?
Masteel will be focusing on three strategic directions. Firstly, we will enhance our delivery and service levels to cater for the specific requirements of major construction projects such as the MRT project. Secondly, we will commence the construction of our new RM100 million downstream manufacturing complex. Thirdly and finally, we want to bring to fruition our other strategic investments such as the Iskandar commuter train project with KUB Bhd.

What is your wish list for 2012?
I hope the euro debt crisis will be defused in an orderly manner and for a steady recovery of the US economy. At the same time, I wish for the timely and rapid implementation of the appropriate expansionary monetary and fiscal policies by the government to bolster domestic lending, confidence and consumption. And above all, we would like the Masteel group to continue to consolidate its position as the premier niche steel manufacturer in the region.