Newsbreak

• StarBiz reported that the Ministry of International Trade and Industry (MITI) announced on Friday that the government has ended its probe over the alleged dumping of reinforcing bars from China and South Korea.

• The probe involved the reinforcing bar in plain rounds form, which was a non-deformed or smooth reinforcing bar in straight length form, equal to or less than six metres for nonconstruction industry usage.

• MITI said the anti-dumping duty investigation on the rebar imports was initiated on 2 Sept, 2014 after the investigating authority received a petition from Ann Joo Steel Bhd.

• MITI deemed that the reinforcing bars from China and South Korea would not impact the domestic industry as the probe found that the export price of the product merchandise was higher than its normal value, thus causing no material injury for the local domestic steel players.

Comments

• We believed that the news is negative to local steel bar players such as Ann Joo, Malaysia Steel Works and Lion Industries as they are hoping that the Malaysian government will be lending a hand to help the local steel players to turn around their fortunes.

• We are slightly surprised with the move by MITI as we expected that the government will be implementing more measures to curb the influx of cheap steel to protect the fortunes of the local steel players.

• However, even if there is intervention, we remained cautious and suspect the effectiveness of any anti-dumping measures, given failed attempts in the past.

Forecast

• Maintained. Catalysts Steel sub-segment

• More effective measures introduced by the Chinese authority to curb steel capacity.

• Potential effective trade action(s) by the government on steel dumping activities.

Risks

• Overcapacity in China remains over the longer term;
• Increase in raw materials which will reduce margins.

Rating

NEUTRAL Steel sub-segment

Negatives

• Overcapacity results in volatile earnings.

Positives

• Potential effective trade action(s) on steeldumping activities.

Sector View

Maintain NEUTRAL stance on the sector with a SELL call on Ann Joo Resources TP:RM1.00 and HOLD call on CSC Steel, TP:RM1.06.

Source: Hong Leong Investment Bank Research - 4 Feb 2015