Spotlight on web of ownerships in anti-dumping probe

Posted on 25 October 2017

Source: The Edge

SHAREHOLDER links take centre stage in Malaysia’s latest anti-dumping investigation as the countdown begins for the Ministry of International Trade and Industry (Miti) to make a final decision on the duties imposed on cold-rolled stainless steel (CRSS) imports.

The 120-day countdown began after Miti announced last Thursday that its preliminary investigation into Bahru Stainless Sdn Bhd’s anti-dumping petition had found sufficient evidence to warrant further investigation.

Accordingly, Miti imposed provisional anti-dumping duties that vary according to company, ranging from 7.27% for some South Korean exporters to 111.61% for some Thai exporters of CRSS. In addition to the two countries, the provisional duties also affected China and Taiwan, according to a federal gazette dated Oct 11. It is the latest such action in the steel industry following the conclusion of a safeguards investigation in April, when Miti imposed safeguard duties on imports of concrete reinforcing bars, steel wire rods and deformed-bars-in-coil for three years.

In a nutshell, some interested parties question the legitimacy of the petition by Bahru Stainless as some of its shareholders are related to some of the foreign exporters it is petitioning against.

Bahru Stainless is an upstream stainless steel products manufacturer based in Pasir Gudang, Johor. It is 67%-owned by publicly listed Spanish stainless steel manufacturer Acerinox SA while its other shareholders are Nisshin Steel Co Ltd (30%) and Metal One Corp (3%).

Last year, Bahru Stainless also exported its products to 38 countries on five continents, according to a consolidated directors’ report of Acerinox and its subsidiaries. Last year, its cold-rolling production was nearly 170,000 tonnes.

According to its petition, Bahru Stainless is the sole producer of CRSS in Malaysia. It says there is no difference between imported CRSS and that produced locally. CRSS has a wide range of uses, including in the manufacture of automotive parts, household utensils, building materials and computer parts. Bahru Stainless’ petition had listed about 70 foreign exporters that had shipped CRSS to Malaysia during the period of injury determination between Oct 1, 2013 and Sept 30, 2016. It also listed 20 Malaysian-based importers of the products.

The foreign exporters include Ningbo Baoxin Stainless Steel Co Ltd and Baosteel Co Ltd, both in China. Interestingly, Bahru Stainless’ shareholder, Nisshin Steel, is a joint-venture (JV) partner with Baosteel. Nisshin Steel is also a 20% shareholder in Ningbo Baoxin.

On the flipside, Nisshin Metal Services (M) Sdn Bhd — Nisshin Steel’s 75:25 JV vehicle with Bursa Malaysia-listed Tatt Giap Group Bhd — is also listed in Bahru Stainless’ petition as an importer of foreign CRSS products.

A submission from South Korean conglomerate POSCO, sighted by The Edge, argued that the links between Bahru Stainless’ shareholder and some of the exporters allegedly dumping CRSS meant that it had no standing to file the petition in the first place.

This argument, one of various points of contention between the petitioner and other interested parties, is based on Section 2(1) of the Countervailing and Anti-Dumping Duties Act 1993, which, among others, defines “domestic industry” as producers who are unrelated to exporters or importers of a particular product.

In other words, the argument claims that the links between Bahru Stainless and the alleged exporters mean it cannot be deemed a domestic industry and, thus, should not be allowed to file the petition in the first place.

That said, it is not a clear-cut case as the link is via a common shareholder and not direct shareholding. The 120-day period will end on Feb 8 next year, although Miti could arrive at a final determination before that time.

The provisional duties would be of interest to a number of listed steel manufacturers. Among the interested parties who had made submissions in opposition to the anti-dumping petition is steel processing firm POSCO-MPKC Sdn Bhd, a JV between POSCO and Prestar Resources Bhd. It is worth noting that POSCO-MPKC supplies automotive parts to local carmakers Perodua and Proton, in addition to other sectors such as electrical and electronics, according to the company’s submission to Miti in response to the petition.

Other interested parties that responded to the petition include Central Aluminium Manufactory Sdn Bhd, a unit of CAM Resources Bhd, and Hoto Stainless Steel Industries Sdn Bhd, which is a subsidiary of UEM Builders Bhd, ultimately owned by Khazanah Nasional Bhd.

In addition, Pantech Steel Industries Sdn Bhd, a unit of Pantech Group Holdings Bhd, and Tatt Giap subsidiary Superinox Pipe Industry Sdn Bhd were listed in Bahru Stainless’ petition as importers of CRSS.

In the petition, Bahru Stainless claims that the alleged dumping activities had hurt its sales and caused it to suffer from capacity underutilisation. It also says it was not profitable during the period of injury determination and claims that the dumped imports had stunted its original plans for further investment to increase capacity. It also argues that it is in Malaysia’s public interest to have a thriving stainless steel industry that is protected against “unfair means of competition”.

In response, some of the opposing interested parties had separately argued that Bahru Stainless was unable to meet local demand and that anti-dumping duties may have negative consequences. For example, a letter from Hoto Stainless Steel to Miti, sighted by The Edge, argues that such a situation “would jeopardise local production due to the uncertainty of getting the material” and that the absence of anti-dumping protection would force Bahru Stainless to be more competitive.

In the Oct 11 federal gazette, Miti said its preliminary investigation had found that the export price of CRSS in the countries being looked at had been less than its normal value.

“The domestic industry in Malaysia producing the like product had suffered a material injury that can reasonably be linked to the importation of the subject merchandise into Malaysia,” says Miti. “The dumping margin is found to exist.” 

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