Posted on 16 Aug 2017
STEEL miller Megasteel Sdn Bhd is once again seeking the imposition of safeguard duty on imported hot rolled coils (HRC). It is learnt that a new petition was submitted to the Ministry of International Trade and Industry (Miti) in late June.
When contacted, Miti confirmed that it had received the petition. “However, we cannot disclose any details at this point in time as the assessment is undergoing due process,” it said in a brief email reply.
This is Megasteel’s third safeguard duty petition since 2011. According to the Safeguards Regulations 2007, the government has 30 days from the receipt of the petition to decide whether or not to initiate a safeguard investigation.
However, the regulations also empower the government to extend the consideration period by 30 days if needed. Lion Group, which controls Megasteel, had yet to respond to The Edge’s queries at press time.
Megasteel is the country’s first integrated steel mill to produce flat steel products that are used in the automotive, heavy machinery and construction industries, among others.
Until the temporary closure of its 18-year-old Banting plant last year, Megasteel had an annual production capacity of 3.2 million tonnes of HRC and 1.45 million tonnes of cold rolled coils (CRC). HRC is a flat steel product that is milled by an upstream miller for use by other re-rollers into semi-finished steel products such as billets and slabs.
Megasteel is a 79%-owned subsidiary of Lion Corp Bhd and 21% associate of Lion Diversified Holdings Bhd. Both companies are part of the Lion Group, which is controlled by group executive chairman Tan Sri William Cheng.
Lion Corp was delisted last October after Bursa Malaysia Securities Bhd rejected its request for more time to submit a regularisation plan. It decided not to appeal against the decision.
Its core business activity is the manufacture of flat steel products, which is undertaken by Megasteel.
Recall that Lion Corp fell into Practice Note 17 (PN17) status in October 2013 as auditors cast doubt on its ability to continue as an ongoing concern, highlighting that its current liabilities had exceeded its current assets by RM1.9 billion at the time.
Lion Diversified Holdings is also a PN17 company, triggered in August last year. Its deadline for submitting a regularisation plan is on Aug 24. Last week, it said it intends to seek an extension of time from Bursa Securities.
While Megasteel had enjoyed safeguards in the past — a 25% import duty in 1999, which was later increased to 50% in 2002 — its past two safeguard duty petitions were not successful.
The latest petition is also likely to spark strong opposition from downstream steel players that use HRC as a raw material to manufacture products such as CRC and galvanised iron products.
It comes on the heel of a Miti decision in April to impose safeguard duties on steel concrete reinforcing bar (rebar) as well as steel wire rods (SWR) and deformed bar in coils (DBIC). Among the petitioners for the safeguard duty are Amsteel Mills Sdn Bhd and Antara Mills Sdn Bhd, which are also subsidiaries of Lion Group.
The safeguard duty on rebar is set at 13.42% until April next year, and will be reduced to 12.27% and 11.1% respectively in the two subsequent years. Meanwhile, SWR and DBIC will be subject to duties of 13.9% for the year to April 14, 2018. The rate will be reduced to 12.9% and 11.9% respectively for the two subsequent years.
To recap, in April 2011, Megasteel had sought a 35% safeguard duty on HRC, claiming that imports between 2007 and 2010 had seriously harmed the domestic steel industry. The request, if successful, would have increased the duty payable on HRC to 60%. It was the first petition under the Safeguards Act 2006 and the Safeguards Regulations 2007.
Following a public hearing, during which strong objections were raised by local downstream steel players as well as representatives from countries such as Japan, China, Indonesia, South Korea, Taiwan and Thailand, Miti made a negative preliminary determination, recommending that the safeguard investigation be terminated.
Megasteel submitted another petition in July 2015, but it was also rejected.
According to its notice of negative preliminary determination dated Jan 6, 2016, Miti said investigations had found an increase in imports of HRC from January to December 2014, but the increase was neither sharp nor significant.
“The investigating authority has reached a conclusion that the imports of the products have not caused and are not threatening to cause serious injury to the domestic industry that produces like or directly competitive products,” it added.
Interestingly, in 2015, Megasteel succeeded in its anti-dumping petition against HRC from China and Indonesia. The anti-dumping duties took effect from Feb 14, 2015, and will be applicable until Feb 13, 2020. For HRC imports from China, the duties are set at between 6.35% and 12.19% while those from Indonesia are fixed at 11.20%.
In its notice of final determination, Miti said the HRC imports were priced lower than their usual value and that dumping activities were found to have occurred. “The domestic industry in Malaysia producing the like product has suffered material injury that can be reasonably linked to the importation of the subject merchandise (HRC),” it said.
