Steel players seek measures to prevent dumping — sources

Posted on 09 February 2018
 

Source: The Edge

The three publicly traded cold-rolled coil (CRC) outfits, Mycron Steel Bhd, CSC Steel Holdings Bhd and YKGI Holdings Bhd are understood to have written in to the international trade and industry ministry (Miti) seeking several measures be implemented to prevent dumping.

According to the letter, countries said to be dumping CRC in Malaysia are Vietnam, India, South Korea and Japan.

Five measures have been proposed, namely the restrictions on imports or the implementation of quotas, secondly import licensing by Miti, thirdly that anti-dumping duties be made retrospective to the date of the breach, fourthly that any application for CRC imports be made through Mesyuarat Mingguan Besi Keluli (MMBK, which is a technical committee to evaluate import duty exemption applications for raw materials of iron and steel products) and that an independent, tier-one audit firm be appointed to ensure importers do not manipulate specifications or quality standards as a reason to import CRC at the expense of the domestic CRC players.

“The letter was sent yesterday to the ministry,” a source with knowledge of the matter said when contacted.

He added that all that the three local companies were looking for was intervention from the government to protect the local steel sector, the same way that other governments abroad did.

While other details of the letter were hard to come by, the source said that the letter was directed to Miti Minister Datuk Seri Mustapa Mohamed, its secretary-general Datuk Seri Jayasiri Jayasena and the ministry’s deputy secretary-general Datin K Talagavathi.

This is the second such letter the trio are sending. In April last year, they had written in as well, stating their “deepest concerns about the increase of CRC importations into Malaysia every year and the long-term repercussions.”

In May 2016, anti-dumping duties were imposed on CRC from Vietnam, China and South Korea, but it seems that due to the low quantum of duties, the entry of cheap CRC has not stopped.

These issues with dumping come at a time when the steel industry is also grappling with higher costs, brought about by the implementation of the goods and services tax from April 2015, and electricity and gas tariff hikes which were implemented this year.

According to industry players, the natural gas tariff increase has been by a 102% quantum over the past four years, and this translates to an additional RM200 million a year in costs.

For its first financial quarter ended Sept 30, 2017, Mycron posted a net profit of RM5.81 million from RM179.75 million in revenue. In contrast to the corresponding period a year ago, the company’s net profit fell 42.36% while revenue gained 7.31%.

Checks on Mycron’s segmental reporting indicate that out of RM8.11 million in pre-tax profit, CRC only contributed RM2.77 million, or 34.15%, with the remainder coming from steel tubes, although steel tubes generated RM66.36 million or about a third of revenue.

In its notes which accompany its financials, Mycron said: “The weaker performance for the current quarter compared with the preceding year’s corresponding quarter is mainly attributed to the lower gross profit achieved, due to lower sales volume and higher unit conversion cost arising from the lower production volume in the cold-rolled segment.”

YKGI for its nine months ended Sept 30, 2017, suffered a net loss of RM8.11 million from RM283.82 million in sales. For the corresponding period last year it registered net profits of RM6.28 million from RM293.75 million in sales.

In its notes YKGI said: “The group’s financial performance during the current quarter continues to be impacted by soft demand and low gross margin. The local steel environment remains very challenging.”

For its nine months ended Sept 30, 2017, CSC registered net profits of RM44.99 million from RM956.07 million in sales. Nevertheless, in contrast to the corresponding period a year ago, net profits were down 28.02% despite revenue gaining by close to 28%.

In its performance review, CSC said: “The significant drop in profit is mainly due to higher production cost as a result of significantly higher raw material costs, and marginal drop in the total sale volume.”

However, CSC with its strong parentage where China Steel Asia Pacific Holdings Pte Ltd is a 46.3% shareholder, puts it in a different league than the rest of the players.

CSC shares closed yesterday at RM1.53, giving it a market capitalisation of RM581.4 million while Mycron, which is 71.26%-controlled by the Melewar Industrial Group Bhd — the vehicle of businessman Tunku Datuk Yaacob Khyra — ended trading at 50 sen, translating to a market capitalisation of RM140.35 million.

YKGI, meanwhile, is 26.78%-controlled by Marubeni-Itochu Steel Inc, and 15.34% by Yung Kong Co Bhd, the vehicle of the Hii family. YKGI shares ended yesterday at 17 sen, valuing it at RM59.22 million. 



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