Steel - Probe on Dumping of Steel Wire Rods

kiasutrader

Publish date: Fri, 29 Jun 2012, 09:47 AM

THE BUZZ

StarBiz reported that the International Trade and Industry Ministry (MITI) has received a petition from domestic producers alleging that imports of steel wire rods originating in or exported from Taiwan, China, Indonesia, South Korea and Turkey were being brought into Malaysia at much lower prices than those offered in those countries' respective domestic markets. MITI is initiating a preliminary investigation on such imports from those countries and will study the imposition of anti-dumping duty on steel wire rod imports.

OUR TAKE

Wire rods being dumped in Malaysia? We are not entirely surprised with the petition from steel manufacturers as we have heard complaints from some of them of late. Although a few countries are being targeted in the investigation, we learned that the major competition is coming from China, whose manufacturers have made use of the 9% Value Added Tax (VAT) refund on exports of boron-added steel. Nonetheless, the wire rods imported into Malaysia have only minimal boron content and does not change the characteristic of the material, which is instead still similar to regular carbon steel.

Local wire rods manufacturer may have reason to cheer. The petitioner claimed that the dumping has caused material injury to the domestic industry in Malaysia, and that imports from those countries have increased in terms of absolute quantity. Meanwhile, the import of wire rods jumped significantly to 474,561 tonnes in 2010, based on data compiled by the South East Asia Iron and Steel Institute (refer to Figure 1). We also understand from our sources that the competition from imported wire rods have resulted in local manufacturers pricing the products at around RM2,100 a tonne compared to the price of steel bars at RM2,300 a tonne, although wire rods are normally priced at a premium in the international market. In accordance with the Countervailing and Anti-Dumping Duties Act 1993 and its related regulations, preliminary determination will be made within 120 days from the date of initiation. If the final determination is affirmative, the Government might impose an anti-dumping duty at a rate that would rectify the situation. Thus this may bring cheer to local wire rods manufacturers like Lion Industries, Southern Steel, Kinsteel and Ann Joo.

NEUTRAL on steel sector. While we welcome MITI's move, investigations may take another quarter before the government makes the final decision. We remain cautious on the gloomy outlook for the steel industry, especially since steel demand is only projected to pick up after the conclusion of Malaysia's next General Election, which may then see ETP projects eventually take shape. These aside, we are also wary that the recent sharp plunge in steel scrap price ' which has consolidated at USD450 to USD400 a tonne - may lead to negative sentiment in the steel market spilling over to the prices of locally finished steel products.

Source: OSK

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