Strong objections from downstream steel players to Megasteel’s safeguard petition

KUALA LUMPUR: A safeguard petition by Megasteel Sdn Bhd, the country's sole producer of hot rolled coils (HRC), that asks the Government to impose additional duty on imported HRC, has received strong objections from local downstream steel players and foreign HRC exporters.

Megasteel, in its petition, is believed to be asking for an additional 35% duty imposed on imported HRC, which currently attracts an import duty of 25%.

“Should the Government decide to approve Megasteel's petition, many will suffer, having to pay a hefty import duty of about 60% for HRC.

“Downstream steel players are already bogged down with high electricity and gas prices and, now, high raw material cost,” said Malaysia Iron and Steel Industry Federation (MISIF) president Chow Chong Long.

If the safeguard measure on imported HRC is approved, it will represent the first safeguard measure by Malaysia to protect its domestic steel product, an industry source told StarBiz on the sideline of a public hearing on the safeguard investigation on HRC imports into Malaysia at the International Trade and Industry Ministry (Miti) yesterday.

The source also believes that the success of Megasteel's petition could set the precedent for more safeguard petitions by local steel companies.

“I heard that some are already preparing to seek protection for local steel wire rods and sections.”

High duty on imported HRC could also affect the exports of end-steel products produced by local downstream players to major countries like Japan, which in turn is one of the major suppliers of imported HRC to Malaysia, the source added.

HRC is widely used as base material in various industries such as automotive, construction, electric and electronics, fabrication, engineering and manufacturing.

Megasteel, which is owned by Lion Group, alleges that imports of HRC into Malaysia had increased from 2007 to 2010 and had caused serious injury to the domestic industry in Malaysia.

In the third quarter of 2010, the average domestic HRC price was RM115 per tonne versus the lower import HRC price of RM85 per tonne. For the same quarter under review, the market share of imported HRC in Malaysia was 52% compared with 48% for domestic HRC.

As a result, Megasteel claimed it suffered serious injury in terms of declining market share, sales, production, capacity utilisation, insufficient cash flow and net losses.

Megasteel's petition is also being supported by members of the Malaysian Steel Association (MSA), which represents top upstream steel players such as Amsteel Mills Sdn Bhd, Antara Steel Sdn Bhd, Kinsteel Bhd, Perwaja Holdings Bhd, Perfect Channel Sdn Bhd, Ann Joo Steel Bhd, Ann Joo Integrated Steel Sdn Bhd and Malaysia Steel Works (KL) Bhd.

Meanwhile, MISIF deputy president Azlan Abdullah, who was at the public hearing, said MISIF members, particularly downstream steel players such as cold rollers, pipe and tubes and service centres, fully objected to Megasteel's petition.

At the hearing, MISIF was represented by its consultant Prof Jeffrey Waincymer of Howard Consulting Pty Ltd who explained the damaging impact of the safeguard measure to downstream steel players' business and bottomline.

Azlan, who is also Mycron Steel Bhd CEO, said: “Even foreign exporters are not happy with Megasteel's petition as reflected by their full attendance at the public hearing.”

Nippon Steel Corp, Sumitomo Metal Industries Ltd, Kobe Steel Ltd and Nishin Steel Co Ltd were represented by their respective lawyers, while JFE Steel Corp, Krakatau Steel of Indonesia, Taipei-based China Steel Corp and Chung Hung Steel Corp also sent their representatives.

The safeguard petition by Megasteel had also attracted the attention of embassies of countries such as Japan, China, Indonesia, South Korea, Taiwan and Thailand.

The public hearing yesterday was chaired by Miti Multilateral Trade Policy and Negotiations Division senior director J. Jayasiri.