Steel wire rod players squeezed at both ends

Posted on 05 January 2018

Source: The Edge

THE Ministry of International Trade and Industry (Miti) has been working on harmonising the iron and steel value chain — upstream, midstream and downstream — for years. However, arguments and conflicts still arise due to different interests within the chain.

Steel Wire Association of Malaysia (SWAM) members — mainly downstream manufacturers — are facing a lot of restrictions on purchasing or sourcing steel wire rods (SWR) due to the many tariff or non-tariff barriers. Due to these restrictions, SWAM members can only buy SWR from local upstream players, except for the grades that are not produced locally.

On the one hand, SWAM members are facing limitations but on the other hand, their products, which are the finished or end products, can be easily imported with no duties or with duties limited to the maximum of 10%.

SWAM members are keen to work with local or international upstream players in order to gain a competitive advantage over suppliers of imported finished products. Not only that, it will also encourage SWAM members to be competitive in the international arena.

Besides these internal factors, SWAM members are also affected by external factors such as minimum wages, the Goods and Services Tax, depreciation of the ringgit and foreign labour issues. All these external factors add to the cost of this already capital-intensive industry. Hence, SWAM members are struggling to sustain their business with marginal profits, while some are even operating at a loss.

SWAM greatly appreciates Miti’s efforts to harmonise the industrial chain but we would appreciate it if the ministry could consider imposing barriers on the finished products instead of the raw material, SWR. By imposing restrictions on the imports of finished products, it will encourage the whole industrial chain to work together to plan for the future development of the iron and steel industry as a whole.

SWAM would like to seek Miti’s positive consideration and assistance in giving downstream manufacturers wider and more flexible ways to source for their SWR raw materials such as scraps and billets. This consideration will also assist the whole industrial value chain to spread its wings and gain market share globally.

Ernest Koay Chin Oon is president of Steel Wire Association of Malaysia (SWAM) 

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