Import Duty on Steel Wire Rods Positive for Malaysian Steel Sector

The Sun Daily reported that local steel association and analysts view the recent announcement of import duties on companies from Taiwan, China, South Korea and Indonesia positively said that it will help to increase demand for local steel wire rods and local players profit margins.

Malaysian Iron and Steel Industry Federation president Mr Datuk Soh Thian Lai is positive on the move by the Ministry of International Trade and Industry as it will reduce imports into the country.

Mr Soh said that players will now switch to buy from local steel millers who will see their revenue increase. He said that "Players will now source locally. In general it is positive for the whole industry. When buying locally the local pricing can also move up."

He said that close to 250,000 tonne of steel wire rods are imported per year. What we are asking from the government is that inferior products should be curbed and the imposition of import duties would help do that. It will help the local steel industry to grow positively."

An analyst with a local brokerage said the move is good news for local players especially steel wire rod producers like Kinsteel Bhd, Southern Steel Bhd and Ann Joo Resources Bhd.

On September 25th 2012 Misif had asked the government to impose temporary anti dumping measures on steel imports especially from China said that the cheap and inferior products flooding the domestic market are hurting local players' margins.

Following this Miti had announced that it would start imposing duties on steel wire rods from certain companies in Taiwan, China, Indonesia and South Korea for the next 5 years. The import duties vary from 3.03% to 25.02%.

MIDF Research analyst Mr Iqbal Zainal said that while it is a positive move the implementation of the import duties is incomplete as some of the major foreign steel producers are still enjoying zero duties.

He said that may lead to skeptics questioning whether the local steel producers will be fully protected from anti-dumping activities.

He said that "We are not entirely surprised on the news as the government has already imposed the temporary anti dumping measures since October last year. However local steel players will still have to struggle to compete with these major foreign steel producers which have the capacity to dump their steel products at very low prices into Malaysia."

Citing an example Mr Iqbal said that Jiangsu Shagang International Group still enjoys zero import duty despite it being one of the top 10 world's steel producers. MIDF Research maintains its neutral stance on the sector citing a bleak short term outlook following challenging external environment.

The research firm said despite promising domestic demand which is driven by improving construction activities the main external culprit is the overcapacity issue in China which has impacted the global steel industry including Malaysia.