'Steel industry faces regression, safeguard duty is essential’
By Chester Tay / The Edge Financial Daily | June 23, 2016 : 9:22 AM MYT
This article first appeared in The Edge Financial Daily, on June 23, 2016.
KUALA LUMPUR: Ann Joo Resources Bhd group managing director Datuk Lim Hong Thye has warned that the Malaysian steel industry is facing a regression and safeguard duty is essential to promote healthier growth in the future.
“Malaysia’s steel industry is regressing. A lot of steelmakers have regressed to become a re-roller, where they actually import billets from China,” he said.
Lim said that the import of long steel products from overseas at artificially cheap prices is affecting the local upstream players’ profitability.
“The whole industry is not able to progress when steelmakers are not able to make money. Even at Ann Joo, we have told the government that we are stopping our phase two development at our production plant in Prai (Penang),” he said.
Moreover, Lim is concerned that an acute shortage of steel supply would occur similarly to that in March and April this year, if Malaysia continues to rely on imports.
He views that the dependence on cheap imported China steel products would make the local steel industry vulnerable to China’s inconsistent supply.
“We all know by the second half of this year, a lot of infrastructure projects are going to start in a big way, so it is very important to have a consistent supply [of long steel products],” he said.
China steel vendors cancelled their export orders in March and April after its government announced measures to curb domestic capacity. The curb sent China’s domestic steel prices up by 54% to 3,150 yuan (RM1,932) per tonne on April 26, from just 2,042 yuan per tonne on Jan 4, 2016.
“These imports are predatory in nature, and they cause no long-term benefit, they are [also] going to harm the industry and make us less competitive. If we allow these imports to continue to disrupt the local industry, the progress of these infrastructure projects will be affected by China,” Lim warned.
The international trade and industry ministry late last month initiated a safeguard investigation on steel concrete reinforcing bars, steel wire rods and deformed bar-in-coils, after it received petitions that alleged the increase of imports.
Lim said that it is crucial for the government to play a role in protecting Malaysia’s steel industry from irrational competition from cheap imports.
“It is not that the local industry is inefficient, and we are not taking any government grant. What we have is just tax exemption, which also means that we need to make money in the first place. What is the point of having bulk of tax credit without any profit?,” he said.
“Ultimately, this is a decision the government needs to make. Do we want to be an importer, or we still view the steel industry as a strategic industry in Malaysia?” he said.