Business

Thursday June 18, 2009

Abolition of import curbs a boost for steel industry


PETALING JAYA: The Government’s decision to abolish certain import restrictions within the steel industry will allow finished steel product makers to competitively source their raw material needs.

The latest move by the Government, viewed as a step towards full liberalisation of the industry, was designed to “enhance competitiveness” of the local steel players.

Steel manufacturing licences will be granted “without restriction” effective Aug 1 “to meet the demand for domestic and export markets,” the International Trade and Industry Ministry (Miti) said in a statement yesterday.

By granting “free” steel manufacturing licences, steel millers would be able to produce any type of flat or long steel products that are in short supply at home, or in demand overseas.

The ministry also said import controls on flat products – hot-rolled coils (HRC), cold-rolled coils (CRC) and electro-galvanised iron (EGI) – that are used for production of finished products for export market would also be lifted from Aug 1.

The latest review followed a series of discussions held with the Malaysian Iron and Steel Industry Federation (MISIF) since early 2007, Miti said.

MISIF, however, had yet to issue an official statement as at press time yesterday.

Meanwhile, the Master Builders Association Malaysia hailed the move which it said would enhance competitiveness of the local industry and assist the growth of the construction industry.

For downstream players, the latest liberalisation means steel product manufacturers can now buy 100% of their flat steel requirement from overseas. Currently they are allowed to import up to 40% of their steel requirement duty-free while the balance is subject to a 50% tax.

Megasteel Sdn Bhd, a unit of the Lion Group, is the sole producer of HRC in the country.

“The move will allow HRC users to competitively source their needs for the production requirement,” said an offical of a listed local steel pipe maker, who declined to be named.

The CRC producers in the country include Megasteel, Mycron Steel Bhd, CSC Steel Holdings Bhd and Yung Kong Galvanizing Industries Bhd.

These semi-finished flat steel products – HRC, CRC and EGI – are then used by manufacturers to make pipes, furniture, cars and consumer durables.

“We believe steel pipemakers that have already secured international certification would be the immediate beneficiary,” AmResearch senior analyst Mak Hoy Ken told StarBiz yesterday.

Products meant for the export markets can enjoy free import duty on their flat steel imports.

Raw materials imported to make end products for domestic use would be subjected to lower import duty.

Import duty on flat products imported from outside Asean countries would be reduced in stages, with the current duty slashed from 50% to 25% from Aug 1.

The rates will be further cut down to zero and 10% from Jan 1, 2018.

OSK Research steel analyst Ng Sem Guan said the 25% duty imposed on imported flat steel products “looked negative” as currently the HRC sourced from Megasteel was not 25% more expensive than the imported ones.


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