Malaysian steel companies will continue to face tough market conditions in 2011, with increased competition from regional and China-based steel players.

The implementation of the Asean Free Trade Area (FTA) and Asean-China FTA, which started in January last year, had these other steel players ramping up their capacities to take advantage of the new markets.

Prices of major raw materials including iron ore, coking coal and scrap metal are expected to rise this year, in view of the continued oligopoly by top global iron ore producers as well as the short supply of coking coal and scrap.

The Malaysian Iron and Steel Industry Federation said domestic steel players should continue to explore new markets such as the Middle East, Vietnam and Indonesia rather than focusing on traditional markets such as Europe or the US which were still grappling with economic recovery.

It said recent global developments such as the quarterly price increases in iron ore, deepening euro sovereign debt crisis, potential slowdown in China as well as rising costs from the removal of subsidies in Malaysia, had severely affected domestic steel companies.