Should the Lion Release Its Lion Share of the Malaysian Steel Industry?

Abstract

Recent developments in the multi-billion dollar Malaysian steel industry paint a gloomy picture, depicting a collage of unbalanced domestic liberalized steel sector, and unfavourable bilateral Free Trade Agreements between ASEAN and China. These developments which unfold in an environment spiked by higher electricity tariffs, increasing price of natural gas and sub-standard products in the market pose serious threats to steel companies. Amidst this situation, Lion Industries Corporation Bhd, the biggest player in the Malaysian steel industry has indicated that it may potentially exit the cyclical steel industry to unlock value of its steel unit. Although no official agreement is in sight, the media has reported two possible interested buyers – China Boasteel and Taiwan’s Chine Steel Corp. However, the weakening economic outlook might now be a stumbling block to the deal and analysts reckoned that the conclusion of any merger and acquisition transaction would still depend on the final price tag acceptable to both parties. Would it be a strategic move for this giant company to walk out the industry door?