Foreign steel players may petition WTO

SHAH ALAM: If Megasteel Sdn Bhd succeeds in its petition for the government to impose an additional 35% duty on imported hot rolled coils (HRC), the matter may gain international attention as foreign-owned steel players to prepare appeal to the World Trade Organisation (WTO).

Additionally, it may result in an exodus of these manufacturers from Malaysian shores.

The Ministry of International Trade and Industry (Miti), which initiated a safeguard investigation on the petition lodged by Lion Group Bhd-owned Megasteel, is expected to decide on the issue by July 29 but has the right to delay its decision by another month.

The ministry is expected to announce whether it will continue its investigation into the matter, terminate it or impose an interim duty (which can be in form of duty or quota).

The safeguard investigation will determine whether the alleged surge in imports of HRC has affected production and caused serious problems to Megasteel, the sole domestic producer.

HRC is used in the fabrication of many steel products which in turn form the critical raw material for many other finished products, especially in the electrical and electronics industry. The government has already imposed a 25% import duty on HRC to safeguard the domestic player. The additional 35% would mean that foreign players are slapped with a 60% duty.

And they are far from happy about it. It is understood that several foreign-owned iron and steel companies including a Japanese electrical goods brands based in Malaysia, are ready to take the matter up with the WTO.
Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long (right) says it would be detrimental to the iron and steel industry if the government were to impose an additional 35% duty on imported hot-rolled coils as foreign-owned iron and steel firms are set to refer the matter to the WTO. With him is Misif member Datuk Soh Thian Lai.

It is learnt several foreign-owned iron and steel companies and a Japanese electrical brand based here are set to refer the matter to WTO if the 35% safeguard duty is imposed.

Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long told a press conference yesterday, “ We have already seen the foreign companies participate in the public hearing (on June 28) with their own lawyers and some of them have even notified the WTO.”

Chow said the 35% safeguard measure would be detrimental to the industry as a whole. It would, among other things, allow Mega-steel to raise prices substantially, protected as it is by the tariff wall and with no other domestic competitor in the market. He added that if the other players depart, Megasteel will not be able to take up the slack. If it refuses or is unable to supply the HRC promptly, it will destroy certain businesses.

An increase in prices would render end products due for export, uncompetitive. In addition, if other countries should consider the new duty a protectionist measure and initiate anti-dumping duties on Megasteel, all its downstream customers will be affected as well.

“While Megasteel may receive some short-term benefits from the safeguard measures, the impact on its customers as well as those industries using its customers’ products would be deep and far-reaching. In fact, should anti-dumping and countervailing duties be imposed by other countries, it would even reduce Megasteel and its customers’ export businesses,” said Chow.

He pointed out that the new duty would affect a wide range of industries including the electrical and electronics, automotive as well as other export-based manufacturers.

Misif member Datuk Soh Thian Lai added that Megasteel’s petition is flawed as it fails to demonstrate any surge in relevant imports and is motivated by material aspirations. “If the measure is introduced, the government will be exposed to WTO challenge and there would be a lot of multi-billion claims if the exporters succeed,” said Soh.

Asked if the 52% of steel import, cited by Megasteel in a public hearing, has any basis, Chow said the figure was taken from the Statistics Department but it is a general one. “It does not discount the grades (of steel) that Megasteel cannot and does not produce. These are all added in the total figure,” he said.

On how it would affect the steel players if the duty is imposed, Chow replied: “There is no way anybody can survive paying that kind of duty on raw materials.”

He added that the added duty would make them uncompetitive in relation to finished products from Asean which are free of any import duty.

Sumiputeh Steel Centre Sdn Bhd managing director H Hank Yoshioka said if the additional duty is imposed, it would cause a lot of hardship for the Japanese manufacturers based here since they import steel from Japan.

“The Malaysian import duty of 25% is higher than the world rate of 0% to 5%. If they have to pay 60% [including the 35% safeguard duty], they will probably shut down their operations here.”

Sumiputeh imports and processes steel for its Japanese customers in Malaysia.

The Japanese Chamber of Trade and Industry Malaysia (Jactim) attended the public hearing end-June with its lawyers, Skrine & Co.