Two leading longs steel producers in Malaysia, Ann Joo Resources Berhad (AJR) and Southern Steel Berhad (SSB), have signed a memorandum of understanding to create a strategic alliance to become one of the biggest producers in Southeast Asia. As a result, the bigger manufacturer will have higher competitiveness, which has been hit since large mills with Chinese investments have started to appear in the region.
The proposed alliance of AJR and SSB will lead to the creation of a joint venture (JV), in which AJR will own 55 percent of shares, while SSB will have the remaining 45 percent. “The proposal aims to establish a joint venture comprising the long product steel manufacturing businesses of AJR and SSB, both of which are established players in the steel industry, to promote business efficacy and obtain synergistic benefits for such businesses,” according to the companies’ stock exchange announcement.
The combined crude steel production capacity of the mills in the JV will be slightly higher than 1.3 million mt per year, while their rolling capacity will be even higher, SteelOrbis has learned.
After Alliance Steel, the foreign investment enterprise jointly invested in by Guangxi Beibu Gulf Port International Group Co. and Guangxi Shenglong Metallurgical Co., launched production in Malaysia, most local steel mills started to suffer from falling sales volumes and drops in prices. Alliance Steel’s capacity is 3.5 million mt per year and so the weak local steel demand has been insufficient for everyone. In 2017, most local producers were working with utilization rates not below 50 percent, while in 2019 the rate has fallen below 40 percent at some mills, local sources said.
