KUALA LUMPUR: Local steel wire product manufacturers, who have been neck deep in oversupply and overcapacity issues for some time now, will soon find that the only way out is to compete internationally and try to grab a bigger slice of the export market.

Otherwise, they may eventually drown in the suffocating competitiveness of the domestic market, which is set to reach saturation point soon, especially after more signing of free trade agreements (FTAs) between Malaysia and partner countries, according to the Steel Wire Association of Malaysia ( Swam).

“There will be more free trade agreements and common trade policies going forward. As a downstream industry, if we don’t increase our competitiveness, we will eventually lose out,”  Swam president Ernest Koay Chin Oon told The Edge Financial Daily after  Swam’s recent 40th anniversary dinner.

“Everybody is expanding production capacity. If we don’t enhance the competitiveness of the downstream sector and penetrate the overseas market, we will have to kill one another for a [bigger] share of the domestic market.

That means a lot of local companies would then have to shut down operations.

“If that is the scenario, it’s only a replacement of market players instead of a healthy market expansion,” said Koay.

In 2013, consumption of locally made steel wire products stood at 1.5 million tonnes to 1.6 million tonnes. Of that, some 40% or 600,000 tonnes were exported to Australia, Europe, America, Japan, South Korea, Taiwan and India.

This year, the consumption figure is expected to reach 1.8 million tonnes, which represents an improvement of 10% to 15%, with exports to contribute 50% of the volume.

That export contribution is predicted to reach 60% in 2015, while total volume is estimated to be around 1.8 million tonnes to 1.9 million tonnes.

Koay said local players produce RM3.3 billion to RM3.5 billion worth of steel wire products per year. They manufacture barbed wire, welding wire, wire ropes, wire mesh, and bolt and nut electrodes, which are supplied to various industries such as furniture, fabrication, automotive, engineering, construction and telecommunications.

 Swam has 57 members, including the subsidiaries of at least five public listed companies in Malaysia, namely Chin Well Holdings Bhd, Engtex Group Bhd, Leader Steel Holdings Bhd, Tatt Giap Holdings Bhd and Chuan Huat Resources Bhd.

In years to come, said Koay,  Swam members are encouraged to expand their businesses abroad to create more synergic effect, just as some local companies like Chin Well have investments in Vietnam and China.

“Geographically, we have yet to venture into Africa. This could be our next target market as there is still room for development in countries like South Africa, Kenya and Morocco,” he said.

This article first appeared in The Edge Financial Daily, on December 8, 2014.