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Local steel players of malaysia hope miti will review current ironand steel policy by e55he swrzsnb
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Local steel players of malaysia hope miti will review current ironand steel policy by E55HE SWRZSNB
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| Article Posted: 12/10/2012 |
| Article Views: 221 |
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Local steel players of malaysia hope miti will review current ironand steel policy |
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It will be interesting to gauge the feedback from the local steelplayers based on the recommendations made by the Boston ConsultingGroup (BCG) which has completed a comprehensive study on thestrategic RM40bil steel industry. Hired by International Trade and Industry Ministry (Miti) in lateFebruary, BCG has put forth recommendations for the ministry toformulate an effective mechanism for the local players to staycompetitive and be on par with other regional players amid theinflux of cheaper imported goods, increasing protection measures aswell as the volatility in the prices of raw materials. One of the recommendations is for the country's sole hot-rolledcoil (HRC) producer Megasteel Sdn Bhd, a unit of the Lion Group, begiven a deadline till mid-2013 to record positive cash flow byforming strategic collaborations with foreign parties and improvingoperational efficiency. While Megasteel may be elated over the recommendation, somequarters expect the time extension given could be stronglychallenged by those in the midstream and downstream steel sector.
To them, Megasteel had been given enough protection by theGovernment for the past 13 years and it was time for Megasteel'smonopoly to end by way of duty exemption on imported HRCs. BCG is also said to be proposing a more stringent monitor onimported steel products. BCG has recommended to Miti to formulate an effective mechanism forthe local players to stay competitive and be on par with otherregional players. Imports from the major steel producing countries, especially Chinahad become a major threat.
The full implementation of theAsean-China Free Trade Agreement in January 2010 had resulted in ahuge surge of imports of various steel products from China into theAsean region. Many steel players feel that most of the steel exports from China,unlike Japan, are competing with similar products produced in theAsean countries including Malaysia. On the other hand, there has been very little export of steelproducts from Asean into China. Thus the steel trade is basically aone-way traffic.
There is also an increasing trend to instituteprotective measures among Asean countries to insulate theirdomestic industry from external threats. For Malaysia, about four petitions have been submitted to Miti sofar. Megasteel in June last year has put up a safeguard petitionseeking the imposition of an additional 35% duty on imported HRC,which currently attracts an import duty of 25%. The petition was terminated by Miti in August but Megasteel had inOctober asked Miti to consider reducing the import duty onflat-steel products to 15% from 25%. The latest petition, however,remains status quo.
Cold-rolled coils producer Mycron Steel Bhd has also sought forduty-free iron-ore based HRCs import into Malaysia early this year,while last month, an unnamed domestic steel producer has sought forthe imposition of anti-dumping duty on steel wire rod imports. It is a well known fact that Asean is not self-sufficient in rawmaterial supplies for its iron and steel sector. In Malaysia, rawmaterials constitute about 65% to 70% of the cost of production ofsteel. The high volatility in the prices of such materials poses agreat challenge to the steel players in managing cost and price oftheir finished products. Asean is also one of the few regions in the world that are stillexperiencing healthy growth in steel demand which has attractedkeen interest from major global steel players to increase theirinvestments in the region.
While this will bring about the much needed upgrade of technologyfor the industry, it could also lead to the crowding out of thedomestic players who might not be in a good position to competewith the big boys. Ultimately, the Malaysian steel players would want to see that therecommendations made by BCG could convince Miti to review theexisting iron and steel policy made effective in August 2009.
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