“ What is the demand[ 1 ]and supply[ 2 ]of steel industries around Nilai at the beginning of the recession? ”
Nilai is one of the feverish towns in Negeri Sembilan, Malaysia. Due to its propinquity to Kuala Lumpur and Kuala Lumpur International Airport, it is quickly a developing town. Other than that, Nilai besides filled with assorted sorts of industries like steel industry, fictile industry and some other more. Steel industry in Nilai is bettering in a really great advancement and consists of many steel companies. This industry somehow gives important consequence to the economic growing of the state and besides the gross domestic merchandise[ 3 ]( GDP ) . As portion of the busy universe in Malaysia, there were huge sum of companies based on the steels and metals production in Nilai. The impact of 2008-2009 recession phase had clearly struck most of steels companies at Nilai. Clear observations and researches had been done in the steels and metals industry in Nilai. The research done based on a few steels and metals companies and to more than 100 employers involve in the industry. The chief companies which had been investigated were MOZA Enterprise, Sepakat Muhibbah Steel Sdn. Bhd. , Nilai Impian Metal Sdn Bhd, Aluminium Alloy Industries Sdn. Bhd, Tunas Asal Sdn. Bhd, and Advance Metal Substrate Sdn. Bhd. All of these companies are largely supply metals and chromium steel steels natural stuffs to the steels and metals jobber.
STEEL AND METAL INDUSTRY IN MALAYSIA
There are presently 230 companies bring forthing these merchandises with an one-year end product of RM32.2 billion and entire employment of 30,100 workers. The Fe & A ; steel industries provide an of import linkage for the supply of basic natural stuffs and constituents to other sectors of the Malayan economic system, particularly the building industry, electrical or electronic industry, automotive industry, furniture industry, machinery industry and technology fiction industry. Meanwhile non-ferrous metals sectors in Malaysia covered about 180 companies with one-year end product of RM 8.9 billion and entire employment of 18,300 workers.
The non-ferrous metal[ 4 ]industries provide linkages chiefly in the building industry, electrical or electronic industry, automotive industry, nutrient and packaging industry. However, 2008-2009 had reported the slack of steel and metal industry in Malaysia due to the great alterations of universe monetary values of merchandise from steel and metals footing. The mentality for the Malayan steel industry was hapless in 2009 where many steels workss were running at 35-50 % of nameplate capacity harmonizing to the Malaysian Iron and Steel Industry Federation. However, statistical beginnings showed that the state of affairs was far from good. In June 2009, Malaysia ‘s fabrication gross revenues fell 25.5 % twelvemonth over twelvemonth, led by a big autumn in the Fe and steel sector. This followed a similar diminution in the old month. Gross saless are still likely to be down by 19 % by the year-end, with major infrastructural undertakings likely to take clip to be after and implement, with finished steel ingestion falling to 8.64mn metric tons, petroleum end product down 24 % to 5.15mn metric tons and hot rolled production down 27 % to 4.17mn metric tons.
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BMI believes that the Malayan steel industry will bounce strongly in 2010 and by 2013 should hold reached or exceeded pre-recession degrees. Over the medium-term, the industry ‘s development will be determined by trade liberalization, with the move towards the decrease of responsibilities on imported level merchandises from August 1, 2009. This should better the fight of cold rolled Millss, whose capacity far exceeds domestic ingestion and are hence reliant on export markets for growing. While domestic flats manufacturers have voiced concerns over the steps, their anxiousnesss should be allayed by the authorities ‘s pledge to implement strict quality criterions on both imports and domestically produced steel merchandises to forestall the market from being flooded with deficient stuff.
Due to the recession which cause the lag of the economic system, the universe monetary value of the steel goods will probably diminish at a really high rate. This will do great loss net income to the steel manufacturers. In order to cut down the costs of production, most manufacturers will cut down the supply of the steel goods. With low monetary value and less supply of steels, the investing in this industry will diminish and cut down the aggregative demand of the steel goods.
1.3 OBJECTIVES OF RESEARCH
The first aim is to look into the impact of recession to the alterations of demand and supply of steels and metals in some of steels companies in Nilai. The probe will include the monetary value alterations of steels stuffs throughout the twelvemonth from early of 2008 to the mid of 2009. Besides that, the happening of the recession would besides be investigated due to its impact on the schemes of those companies in get bying with the fortunes. The other aim of this probe is to detect the alterations of the demand and supply of the steels and metals in the steel industry in Nilai. These alterations of monetary value and the demand of steels production so will be compared with the alterations of steels universe monetary value and the universe demand from 2008 to 2009.
In order to turn out the hypothesis, an extended research base on some methodological analysiss had been done. First, few good known steel companies around Nilai proviso is been identified. There are six chosen steel companies in the research and the companies are MOZA Enterprise, Nilai Metal Sdn. Bhd. , Sepakat Muhibbah Steel, Nilai Impian Metal, Aluminium Alloy Sdn. Bhd. , Tunas Asal Enterprise, and Advance Metal Substrate. Questionnaires were distributed to the employess encompassed the high and low direction in acquiring some excess information. These questionnaires were used in obtaining the status and sentiments of the employee due to the economic system status in the state. Interview Sessionss besides had been done to some of the proprietor of the steel companies in acquiring solid replies of the impact of the recession to the supply and demand of steels. Other than that, those companies ‘ one-year study is surveyed to acquire the accurate informations of the steels supply in 2008.Secondary beginnings of information like economic books and cyberspace are referred in strengthen the research result. Economic books are good referred in order to use right economic constructs in the research. Daily newspapers and Internet nevertheless referred to achieve current status of economic system development non merely in Malaysia but besides worldwide. This secondary information are really important in acquiring points of outlooks of the future economic system status predicted by economic expert along with the current alterations of steels ‘ monetary value.
1.5 RESEARCH LIMITATIONS
Throughout the research made, there are few restrictions and restraints encountered and affected the probe consequence. The chief restriction is the figure of companies based on steels and metals are more than 30 companies. It is best to acquire all of the information from all of those companies but somehow it is about impossible to make so as Nilai is really large and some of the companies are undetected. Furthermore, non all of the companies would wish to give their best cooperation as they would wish to maintain their concern information confidential. Hence, this would forestall this probe to successfully achieve its best and precise consequence. Other than that, there are 1000s of merchandises base on steels were produced but it is impossible to turn to all of them and their alteration in monetary value in this research due to the limited words. Therefore, the consequence obtain might be less accurate and it will bring forth weak decision to the research inquiry.
2.0 RESEARCH FINDING AND EVALUATION
2.1 CHANGES OF PRICES ON STEELS AND METALS IN NILAI.
The demand and supply of steels stuffs are really dependent to the alterations of the monetary value. Based on the interview, the alterations of steels ‘ monetary value in Nilai can be divided into three footings from 2008 to 2009. This could be seen more clearly in the undermentioned tabular array and diagram.
Based on the tabular array 1.0 above, from 2008 to 2009, the monetary values of steels and metals had changed from RM 2.20/kg at January to July of 2008 to RM 0.40/kg at the terminal of 2008. The per centum lessening of the monetary values between these two periods is about 82 % . However, the monetary value starts to slowly addition from the terminal of 2008 to the early twelvemonth of 2009 ( Jan-Jun 2009 ) for approximately 50 % which is from RM 0.40/kg to RM0.80/kg.
The chief factor which causes the fluctuation of the monetary value is the recession in United State of America ( USA ) . As the planetary monetary value of steels is controlled by USA, the debasement of economic system in USA will give such an adversely consequence to the alterations of the steels monetary value in Nilai industry. USA economic system is merely midway through a recession started in December 2007. USA GDP is predicted to undergo terrible contraction boulder clay 2009 with a cumulative end product loss of 5 % . Furthermore, the USA GDP growing in 2008 undertaking about -6 % in the aftermath of crisp autumn in personal ingestion besides the private investing. This planetary dislocation of the economic system had cause the unstable monetary value of steels in the universe market. However, due to the 30 billion dollar stimulus revitalized by US president, the monetary value of steels somewhat increases. Holistically, the steel and metal industry in Nilai is depending on the universe market, therefore Nilai industry significantly affected by the unstable monetary value of steels and metal in the universe market.
Based on the jurisprudence of demand, the alterations of monetary value of steels merchandise significantly affect the addition or the lessening of the demand on the steels merchandise. The higher the monetary value, therefore the demand on the merchandise will significantly diminish in given clip. The theory can be good presented by utilizing the undermentioned graph:
Based on the alterations of monetary value of the steels merchandise, from the January to July, the per centum of monetary value reduced every bit much as 82 % and largely affected the steel industry as a whole in Nilai. During this term, recession was likely to happen and cut down the ingestion besides the investing in this industry. The demand on steels and metals are cut down to a really minimal ingestion and by and large caused the industry to cut down the monetary value of steels and metals to the lowest monetary value. In order to get by with the
status, most of steel companies cut down their cost of production. One of the manner taken by those companies are to extinguish their employees yet give out more job to the economic system as the rate of unemployment will increase to a really higher rate as due to the importance of this industry. However, from the August to December, the monetary values of merchandises were easy increased and it is clearly stated that there are grasp of steels ‘ monetary value was about 50 % . This betterment so will give much infinite for the steels companies to retrieve their loss back and cut down the consequence of recession.
2.2 Demand AND SUPPLY OF STEELS AND METALS IN NILAI STEEL INDUSTRY.
Demand OF STEELS IN NILAI STEEL INDUSTRY
Six companies in Nilai were taken to detect the alterations of demand and supply steels and metals merchandises. The addition in demand is due to the permutation consequence and implies that as the monetary values of merchandise falls and so the merchandise will be comparatively purchased by consumers. Therefore, the alterations of demand are investigated by the alterations of monetary value of merchandise made up from steels and metals in Malaysia ‘s market from 2008 to 2009. The alterations of monetary value are shown harmonizing to the tabular array below.
Diagram 1.2 above summarises the alterations of monetary value of some merchandises based on steels and metals from twelvemonth 2008 to twelvemonth 2009. Based on the informations above, the monetary value for the full merchandise undergoes rather a important disposition from 2008 to 2009. Small lorry organic structure which made up of wood and supported with solid steel had increasingly undergoes high disposition in monetary value of 10 % from RM 2475 ( 2008 ) to RM 2723 ( 2009 ) . Meanwhile, residential Awning and transformers besides had little addition in monetary value from 2008 to 2009. There were 1 % and 5 % increased for both merchandise which are from RM330.4 ( 2008 ) to RM347.0 ( 2009 ) for the transformers and from RM344.5 ( 2008 ) to RM350.0 ( 2009 ) for the residential sunshade. This besides happened to residential range pole where at that place 20 % addition from 2008 to 2009 where RM 150.6 ( 2008 ) addition to RM159.8 ( 2009 ) . Harmonizing to jurisprudence of demand, as the monetary value of merchandise rises, the measure demanded on the merchandise will normally diminish, ceteris paribus[ 5 ]. Therefore, this clearly shows that the demand on the steels and metals are diminishing to a certain rate. Consumers were likely chose permutation merchandises which can replace the metal or steels footing merchandises.
Supply OF STEEL IN NILAI INDUSTRY
Meanwhile, those six steel companies in Nilai were besides observed and investigated for the supply of steels in 2008. One of the determiners of supply is the cost of factors of production. As the cost of production of the houses additions, they will probably to cut down the supply in order to cut down their cost. Therefore, supply of steels of those companies in 2008 is summarised based on the tabular array below.
Based on the graph above, there is assorted tendencies of steels supplied distribution by those steels companies in Nilai. The consequence above clearly illustrated that at the midterm of 2008, most of companies had supply their maximal figure of steels into the market. As illustration, both companies of MOZA Enterprise and Advance Metal Substrate supplied their upper limit of 25 metric ton of steels which is at August 2008. The proprietor of MOZA Enterprise claimed that they can make really high supply of steels at the midterm of 2008 because of the Olympic expansive event held in Beijing China. He said that in order to construct some excessive athleticss edifices, China required a really big sum of steels and imported steels from neighboring states. Therefore, the supplies of steels reach its extremum at the in-between twelvemonth of 2008. However, the supply so degraded from September till the terminal of 2008. For case, steels supplied by Aluminium Alloy Company had autumn from 24.6 metric ton at August to merely average of 15 metric tons per month after that. The negative impacts were besides seen in Sepakat Muhibbah Steel Company where the sum of steel supplied had plummeted about 50 % autumn from July 2008 to August 2008. The sum of steel supplied was reduced from 11.3 metric ton to merely 5.9 metric tons and the sum was wholly changeless merely at a really low sum until the terminal of 2008.
Based on the graph above, the supply and demand of steels in Nilai industry were cut downing and implies that the supply and demand curve displacement to the left. The supplies of steels were shifted to the left which is from S2 to S1 as shown above. For the autumn of demand of steels, the demand curve will besides switch to the left which is from D2 to D1. All of the displacement of the curve of demand and supply had caused the measure of steels demanded in Nilai industry to besides fall which is from Q2 to Q1. As the demand and the supply of steels were degrade, so the monetary value if steels to fall from RM2.20 per kilogram to RM0.40 per kilogram. This status is clearly seen during Jan-July 2008 and Aug-Dec 2008.
2.3 IMPACT OF FALL OF SUPPLY AND DEMAND IN STEELS INDUSTRY.
After some thorough probe on the alterations of supply and demand of steels, it shows that the supply and demand of steels had autumn from early 2008 to 2009. Due to the autumn, there are some important effects impacting the companies. As the industries were surprised by the sudden consequence of recession, most of the companies try to cut down their cost of production by several ways like cut downing their physical and human capitals. The consequence is clearly shown in the tabular array below.
Prior to the recession which started at the terminal of 2008, some of the schemes adopted by these companies in order to cut down their cost of production is to put off workers and cut down their physical capital. During this underwhelmed circumstance, the involvement rate[ 6 ]is really high and all of the companies did non make bold to take the hazard of debt. The higher the involvement rate, more investings between companies will be reduced in order to prolong the cost of production from transcending the budget of the companies. From 2006 to 2008, the involvement rate virtually increases from RM3.00 to RM3.50 and hence unemployment is seen as the best option for most of the steel industries in Nilai. Another method considered is to cut down the cost of their disbursal like the cost of life of the employees or the wages of the employees. Some of the company besides decided to halt or cut on some of their physical capitals. Based on Table 4 shown above, about all of the steels companies took the determination to put off their employee ( s ) encompasses the high-management and besides the low-management employee from 2008-2009 except for Tunas Asal Company. However, Tunas Asal Company reduced their supply of steels to pull more demand on their steels production. Meanwhile, MOZA Enterprise had to cut down its physical capital by shuting on of their subdivision steel company at Tampin to cut down their cost of production. Aluminium Alloy Company and Advance Metal Substrate Company were taken the steps of cutting off the employees ‘ wages for 20 % and 15 % severally. It is believe that they could salvage some of the cost to turn over on more concern. All of the schemes taken by these companies indicate the autumn in the steels market of Nilai steel industry and besides the lag of Malaysia ‘s economic system. However, all of these schemes taken by the companies will somehow make some jobs to the state. For cases, high unemployment rate will do loss to the state as it will cut down the effectual productiveness in state. This can be explained by the Productive Possibility Curve[ 7 ]( PPC ) illustration below.
Based on the graph illustrated above, the productiveness of the state would merely accomplish to the curve A merely. Due to the high rate of unemployment, Malaysia can non accomplish the full degree of employment of the resources. Therefore, there is broad scope between curve of A and B indicates that the state failed to develop its full resources in making the maximal productiveness. High rate of unemployment non merely cut down the productiveness of the state non besides increase the cost of the authorities as more people will be accounted non to pay the revenue enhancements and will increase the chance cost of the authorities. This will take to higher effects where the development and growing of the state will be reduced.
2.4 WORLD Monetary value
Based on the graph portrayed above, it is clearly seen that monetary value of all type of steels are quickly increasing from January 2008 and make it highest extremum at July 2008. For the hot rolled steel spiral, at January 2008, the monetary value is 639USD per metric ton. However, the monetary value keeps increases to 1099USD per metric ton. For hot rolled steel home base, the monetary value is 847USD at January 2008 and soars into the higher monetary value around 1300USD per metric ton. Cold rolled steel spiral meanwhile started at 716USD per metric ton and make highest monetary value at July 2008 for 1186USD per metric ton. It is different with the steel wire rod where the monetary values started merely at 621USD per metric ton and make its extremum at 1067USD per metric ton in July 2008. For medium steel subdivisions, at early twelvemonth of 2008, the monetary value is about 871USD per metric ton and monthly increasing until July 2008 where the monetary value is about 1234USD per metric ton. Obviously, the universe monetary value of steels undergoes good disposition from the early twelvemonth of 2008 until mid twelvemonth of 2008. However, the monetary value for all type of steels all of a sudden slump somewhat at August and September of twelvemonth 2008. Then the monetary value for all type of steels persistently decreases until the terminal twelvemonth of 2008. To be observed that the tendency of universe monetary value of steels merchandise is about similar to the tendency of alterations of monetary value of steels in Nilai steel industry. In add-on the tendency is besides parallel to the tendency of alterations of demand and supply of steels and metals in Nilai steel industry.
3.0 RECOMMENDATIONS AND CONCLUSION
In decision, the alterations of monetary value in steels and metals in Nilai steel industry are adversely affected by the universe monetary value in the universe market. Within these two old ages ( 2008-2009 ) the monetary value of steels and metals is unstable where the monetary value reduced from RM2.20/kg to RM0.40/kg in 2008 and somewhat increased in 2009 which is RM0.80/kg. Due to recession, the unstable monetary value besides affects the alterations of demand and supply of steels and metals in Nilai steel industries. The monetary value of steels based merchandise had increased at a certain per centum and caused the demand on the merchandises of steel footing to be reduced. Furthermore, the supply of steels in Nilai steel industries were besides unstable where most of the steels supplied reduced from the midterm of 2008 till the terminal of the twelvemonth. The demand and supply of steel had reduced continuously and do economic lag to the Nilai steel industry. The impacts were evidently seen where there are few steps or schemes taken by the Nilai steel industries in prolonging the cost of production. More physical capitals and employees were reduced and caused the GDP of the state to cut down along with the addition of unemployment rate. Both of these effects were determined to be the major factors of falling economic growing and development in the state as steel industry in one of of import industry in the state. The tendency of alterations of demand and supply of steels in Nilai steel industry is similar to the universe tendency turn outing that this industry is really depending on the stabilization of the universe market as a whole.
Throughout this research, there are few recommendations suggested in bettering the steels industry in Nilai. First suggestion is to increase subsidies by authorities to those companies so that they were motivated to provide more steels and metals stuffs. This will cut down the rate of unemployment because they will use more workers to provide more steels stuffs. Other than that, authorities besides can step in by increasing their investing into these companies. Increasing investing besides will better these companies economically. Hence, they do n’t hold to cut down their physical capitals and besides will increase the GDP of the state. Government besides can cut down the rate of unemployment in our state by cut downing the taken of import workers from other states. This so will open more occupations chance to domestic workers and besides will increase the mean income of the people in this state, Increase of income so will increase the ingestion and hence addition the demand on the merchandises made up of steels or metals. All of these recommendations will better and develop the economic system if this state.