MIDF expects the mining sector GDP growth to hit 6-year high in 2022 while keeping its overall Malaysia’s GDP growth rate at +6.0% for the year.
The research believes the sector to achieve growth of +1.6% for 2022, which is the highest since 2017, with the resumption of Gumusut-Kakap oilfields and continuous elevated global energy prices will further boost mining activity in the second half with +4.4%yoy in the third quarter and +3.1%yoy in the fourth quarter. Moving into 2023, MIDF foresees a steady expansion path for the mining sector especially global crude oil prices set to remain above USD70 pbd.
Looking at the current uptrend in global energy prices, it is also expected the Malaysian Government to record higher-than-expected petroleum-related revenue this year. MIDFs estimate the petroleum-related revenue to come in at RM73.7b in 2022. The research firm maintains a positive stance on the oil and gas sector, with a renewed caution on the uncertainties of the demand shift, brought forth by: (i) unceasing geopolitical tensions, (ii) tighter crude supply, (iII) hiking prices of raw materials, and (iv) severely tightened monetary policy.
Refinery and shipping of hydrocarbon products may face impediments from the shift of global crude oil and LNG supply
to meet demands from Europe and India, and soon China; potentially impacting transportation of feedstocks to SE Asian region in general. Meanwhile, the high commodity prices are expected to remain elevated hence benefiting exploration and production (E&P), as well as the retail for petrochemical products
According to Malaysia Investment Development Authority (MIDA), the number of projects approved for the mining sector improved from a record-low 11 in 2020 to 19 in 2021. Approved private investment surged to a record-high RM17.1b with RM13b contributed by local investors and RM4.1b by foreign investors.
MIDF believes the uptrend was driven by the steady uptick in global oil price and well above the 2015~2019 average USD57.2pbd. In fact, it noticed a number of projects were on an increasing trend since 2017 as global oil prices stabilised above USD60pbd. Apart from the prospect of elevated global energy prices, it believes the pick-up of investment activity in the mining sector in 2021 will translate into higher production capacity for the second half of the year onwards.
