Malaysia Tackles Scrap Export Duty Evasion to Protect Steel Industry

Malaysia’s Scrap Export Duty Evasion Crackdown

Malaysia has initiated a nationwide operation, “Ops Metal,” led by the Malaysian Anti-Corruption Commission (MACC) to combat evasion of the 15% export duty on steel scrap. This crackdown aims to protect the domestic steel industry, which contributes 2.5% of Malaysia’s GDP. The Malaysian Steel Association (MSA) strongly supports the initiative, highlighting that illegal scrap exports cause domestic shortages, raise raw material costs, and threaten local steel production volumes.

The steel industry depends heavily on scrap as a critical raw material for producing low-carbon steel. The illegal outflow not only disrupts local supply chains but also leads to significant tax revenue losses, estimated by MACC at over 950 million Malaysian ringgit ($223.6 million) in six years. Malaysia remains a stable, though nominal, supplier of scrap to regional markets such as Bangladesh and other Southeast Asian countries, but uncontrolled exports distort regional trade and hamper decarbonization efforts.

Regional and Global Context of Scrap Export Controls

Malaysia’s crackdown aligns with global trends where 77% of steel-producing countries have implemented or plan to introduce restrictions on scrap exports. Neighboring India recently launched a large audit targeting scrap dealers evading goods and services tax (GST). Meanwhile, Poland’s ferrous scrap exports have grown steadily, reshaping European raw materials logistics and increasing imports from Ukraine.

The European Union is also considering export restrictions on secondary raw materials, and Ukraine proposed zero quotas for scrap exports in 2025. These measures aim to secure domestic supply chains and support sustainability goals, echoing Malaysia’s focus on protecting its steel industry from illegal export activities.

SuperMetalPrice Commentary:

Malaysia’s decisive action against scrap export duty evasion signals growing awareness of scrap’s strategic role in the steel supply chain. As governments worldwide tighten controls, the steel industry faces increasing pressure to secure raw materials sustainably and compliantly. For Malaysia, maintaining a closed-loop economy will help stabilize domestic prices and support the country’s decarbonization ambitions. Industry stakeholders must monitor these developments closely as they reshape regional scrap trade and influence global commodity pricing.