Steel policy revamp begins Megasteel to start first phase of restructuring by month-end

The Star Online 

Wednesday January 16, 2013


Megasteel’s hot-rolled coil operation. The company has been badly affected by the inflow of cheaper imported products into the country

PETALING JAYA: The first phase of the restructuring of the national steel policy is expected to be implemented by month-end, with debt-laden hot-rolled coils (HRC) producer Megasteel Sdn Bhd kick starting things, said industry sources.

Megasteel, a Lion Group unit, had sought Government assistance to impose stricter enforcement on the import of HRC, cold-rolled coils (CRC), plates, coated steel and pipes into Malaysia, as the influx of cheaper imported products into the country had placed many a flat steel producer in an uncompetitive position, resulting in severe margin squeezes.

Megasteel itself has been badly affected by the inflow. For the financial year ended June 30, 2011, it recorded a net loss of RM223.7mil on the back of an RM2.8bil revenue.

An industry source told StarBiz that the International Trade and Industry Ministry (Miti) was currently in the final stages of helping Megasteel. Solutions include placing the company's restructuring under the framework of the Corporate Debt Restructuring Committee, monitoring its turnaround period, keeping its HRC prices within an agreed range and stricter enforcement of duty exemptions on imported steel goods.

The official statement by Miti is expected to be issued, at the latest, by the end of the month, added the source.

The source who dismissed talk of a possible delay in the implementation of the steel policy however, admitted that the full restructuring of the national steel policy cannot be carried out at “one go”. It would need to be implemented in stages this year due to the complexity of the various issues brought up by local steel players, explained the source.

In February last year, Miti hired the Boston Consulting Group (BCG) to undertake a comprehensive study on the strategic RM40bil local steel industry on the back of increasing petitions and submissions from disgruntled steel manufacturers on the lack of competitiveness of local steel products as opposed to the imported ones.

BCG then put forth its recommendations to the ministry last July for further action.

This resulted in five steel working groups formed by Miti who meet regularly to discuss the issues and make recommendations to the newly established Malaysia Steel Council (MSC), headed by Industrial Trade and Industry Minister Datuk Seri Mustapa Mohamed himself.

The recommendations made to the MSC Technical Working Committee will basically form the framework for the restructuring of the national steel policy, thus dispelling the unfairness or disparity currently existing in the local sector and moving towards a level playing field.

“In fact, the Megasteel solutioning is only part of the measures to tackle the entire local steel industry's problems,” said a prominent steel player who declined to be quoted.

He said the Government would need to formulate effective mechanisms for local players to stay competitive and be on par with other regional players amidst the influx of cheaper imported goods, increasing protection measures and volatility in the prices of raw materials.

Post-Megasteel solutioning, the steel player expects the Government to impose, for the very first time, an anti-dumping duty on imported steel products beginning mid-February should Miti's current investigation on anti-dumping on imported steel wire rods (SWR) from several countries into Malaysia yields proof.

“This type of measure is in compliance with the practices under the World Trade Organisation.

“However, the local importers of SWR will have to understand the implications of this, especially pertaining to imports from certain countries,” he pointed out.

It should also be noted that the net effect of the recommendations made by the five steel working groups in relation to the Megasteel solutioning, access to key inputs, steel industry capabilities, standards and the importation process, and trade measures would eventually result in the full restructuring of the domestic steel industry.

The steel industry player concluded: “If the various issues are identified and addressed, it should augur well for the domestic steel industry towards competitiveness in the long term.”