Its deputy minister, Liew Chin Tong, said the collections should be channelled into green investment, including the investment into green steel.

“Carbon pricing, trading, and taxing are crucial aspects of the decarbonisation agenda.

“Under CBAM, the export of steel and the other five listed items from Malaysia will be taxed by the EU, unless Malaysia collects the tax,” he said at the launch of the Malaysian Iron and Steel Industry Federation’s 15th report on the status and outlook of the country’s iron and steel industry.

Liew said the ministry is committed to working with the industry to overcome the scrap metal challenge, finding ways to deal with the shortages and create a better ecosystem.

He also said the iron and steel industry is heavily influenced by global factors.

He said policy changes or market trends in China or the US would have a huge ‘butterfly effect’ on the profitability or even survival of the Malaysian steel industry.

“I believe the construction industry and the real estate sector in China are undergoing an unprecedented structural shift.

“Global demand for long products or construction steel will therefore be affected for an extended time, maybe for years,” he said, adding that global steel demand declined for the second consecutive year to 1,763 million tonnes in 2023.

Liew said the regional analysis provided by the federation’s report is important for policymakers and the industry to make decisions.

He said Malaysia’s capacity utilisation of crude steel products (billets, blooms, slabs) for 2023 stood at 39.1%, significantly lower than the global level of 75.7% and the Asean-6 level of 60.1%.

“However, flat products may have a brighter prospect, given that there is a once-in-a-generation relocation of the supply chain from China to Southeast Asia.

“With more manufacturing activities in Southeast Asia, flat products commonly used in the automotive, heavy machinery, and appliances industries should have a better prospect,” he said.