Posted on 01 Jul 2016
AMSTEEL Mills Sdn Bhd, Ann Joo Steel Bhd and Southern Steel Rod Sdn Bhd have jointly submitted a petition for safeguard investigations into imports of drawn or rolled wire rods and deformed-bar-in-coils (DBICs).
This is yet another safeguard investigation petition filed by Lion Group, after Megasteel Sdn Bhd’s unsuccessful bid to have the government protect the local hot-rolled coil steel manufacturing industry from imports.
According to the new petition sighted by The Edge, the petitioners are asking for the investigation as there was a surge in imported wire rods and DBICs between Oct 1, 2012 and Sept 30, 2015. (The periods of investigation are separated into three — Year 1: Oct 1, 2012 to Sept 30, 2013; Year 2: Oct 1, 2013 to Sept 30, 2014; Period of injury determination (POID): Oct 1, 2014 to Sept 30, 2015.)
“The Malaysia Steel Association is submitting the petition on behalf of all four domestic producers operating in Malaysia whose collective output of like products or products [that] directly compete with the products under investigation constitutes 100% of the total domestic production of those products,” reads the petition.
Amsteel, Ann Joo and Southern Steel are listed as petitioners while Perfect Channel Sdn Bhd, a subsidiary of Kinsteel Sdn Bhd, is supporting the petition and has given its support letter directly to the Ministry of International Trade and Industry (Miti).
The petitioners say that during the periods of investigation, there was a substantial increase in imports of wire rods and DBICs into Malaysia, especially from China. Also, there are loopholes in the declaration of wire rods at exporting and importing points, they claim.
“The quantity of imported wire rods surged from 573,652mt in Year 1 to 771,670mt in Year 2, an increase of 34.5%. It rose further to 1,006,179mt in POID, up 75.4% compared with Year 1,” say the petitioners.
As for DBICs, they claim that there was a surge in imports from Year 1 to Year 2, up 39.9%, and a further increase to 310,171mt in POID. This is despite the Chinese government withdrawing export rebates on boron-added wire rods, effective Jan 1 last year.
“However, this did not prevent the exporters from replacing boron with other alloys and still enjoy the export rebate … from an imported quantity of 212,956mt in Year 1 to 310,171mt in POID, a jump of 45.7%,” say the petitioners.
Among the uses of drawn or rolled wires are the making of wire mesh, common nails, caging, welding wires, steel fencing, concrete nails, screws, bolts and nuts. DBICs are used as reinforcement of concrete.
The petitioners claim that due to the huge import of wire rods, which took up the market share of local mills, Amsteel had to close one of its plants — Amsteel 2 — in Banting in November 2014, while Southern Steel had to shut down one of its lines.
While Perfect Channel is hardly operating, the petitioners are made to understand that Kinsteel had zero production during POID.
The petitioners also claim that the importers are taking advantage of the loopholes, specifically in the declaration of wire rods, both at exporting and importing points.
Under the World Customs Organisation classification system, wire rods with a minimal added content of boron or chromium or other additives can be classified as alloy wire rods.
The mere addition of the minimum amount of boron or other additives is unlikely to have any commercial benefit and is unlikely to have been sought by end-users for commercial reasons, say the petitioners.
Instead, boron and the like are commonly added to simply gain tariff and similar revenue benefits, which distort the market, they say.
At the export point, the Harmonised System (HS) code description of alloy steel is used to classify commercial and construction grades as alloy grades with the minimal addition of boron or chromium to evade export tax in countries where that applies. At the same time, by declaring the steel as alloy steel, it entitles the importers to an export rebate, specifically from China, the petitioners claim.
“During POID, China accounted for 91.24% of total imports under HS 7227 for the three years under investigation. The declaration as alloy steel wire rod will also avoid mandatory laboratory testing to obtain Certificate of Approval, as required of imports into Malaysia,” they say.
Currently, wire rods and DBICs imported from most-favoured nations are taxed at 5%.
While it is still too early to tell whether the petition will be granted a public hearing and investigation by Miti, the impact of a safeguard on the wire rods and DBICs from imports will lead to higher construction costs in the country, say industry observers.
In the petition, Chin Well Holdings Bhd’s subsidiaries, Chin Well Fasteners Co Sdn Bhd and Chin Herr Industries (M) Sdn Bhd, are listed as importers of wire rods. Chin Well imports wire rods for the manufacture of fasteners such as screws, nuts and bolts.
When asked about the petition, Chin Well executive director Tsai Chia Ling says if the government decides to protect the local wire rod industry from imports, any measure taken must not hurt the local exporters’ competitiveness in the international market.
“We are talking to the government to see if we can avoid being taxed on the export items. [It is] best that we don’t have to pay [tax] when importing, but when we sell locally, we can pay tax. Or in the worst-case [scenario], we pay the tax in advance and when we export, allow us to claim it back,” says Tsai.
“Otherwise, we will lose competitiveness in the world market and we won’t be able to export anymore.”
Chin Well exports two-thirds of its products, mostly to Europe.
Apart from Chin Well, Chin Hin Group Bhd’s subsidiary, Metex Steel Sdn Bhd, is also listed as an importer. Metex Steel produces wire mesh and hand-drawn wires for the construction industry. Engtex Group Bhd and YKGI Holdings Bhd may also be affected.
While the steel product manufacturers are going to be directly hit if the government decides to protect the local wire rod and DBIC producers, construction companies and property developers will be affected as well.
