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NEWS UPDATES Asean Affairs             23  July 2011

Malaysian steel industry faces challenges

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With an unbalanced domestic liberalized steel sector and the unfavourable bilateral Free Trade Agreements (FTAs) between Asean and China, Malaysian steel players appear to be operating in an increasingly uncompetitive environment, exacerbated by hikes in electricity tariffs, natural gas prices and substandard products in the market.

Mid and downstream steel manufacturers as well as foreign steel companies are also crying foul over a petition by Lion Group's unit Megasteel Sdn Bhd, the country's sole hot-rolled coils (HRC) producer seeking a safeguard measure on HRC. Many players say the petition will benefit and continue to protect only one segment of the industry's value chain.

Interestingly, these developments are happening in the thick of a split in the country's steel fratenity, which has resulted in two camps - the 30-year-old Malaysia Iron and Steel Industry Federation (MISIF) and the barely one-year-old Malaysia Steel Association (MSA).

In terms of the liberalisation policy and FTAs, Chow laments that the government has overlooked the entire value-chain of the steel industry.

“MISIF was not consulted when the Asean-China FTA (ACFTA was the first FTA) was signed.

“Subsequent FTAs signed mainly replicate ACFTA whereby the Government offered materials/products produced by upstream players (particularly HRC) into Highly Sensitive (HS)/Sensitive (SL) lists with high duties reducing at longer timeframe, meaning slower liberalisation as compared with downstream players who had to contend with normal track or fast track.”

He adds that MISIF would prefer a cap of 5% instead of zero for all steel products that are produced locally in view of more favourable logistic and payment terms as compared with imports.

As a result of faster liberalisation for downstream finished steel products in contrast to slower liberalisation for the upstream steel products, Chow also claims that downstream activities are facing stiff competition from China which have larger economies of scale.


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