17 July 2012
Lion Group had proposed to the Government for an immediate action to regulate the flat steel products industry through a consistent duty regime across the board, restructuring plan for Lion Group's steel manufacturing operations was still ongoing with a merchant banker appointed to look into the matter - chairman and chief executive officer Tan Sri William Cheng
A majority of domestic flat steel producers support Lion Group's proposal for stricter enforcement of the National Steel Policy on imported hot-rolled coils (HRC), cold-rolled coils (CRC), plates, coated steel and pipes, according to Lion Group chairman and chief executive officer Tan Sri William Cheng.
“We have garnered more than 60% of our customers' support,” Cheng said
There are four CRC producers, two steel plates makers, five coated steel producers, 26 steel pipes manufacturers and 21 steel service centres in Malaysia.
Measures to curb excessive imports would enable equal treatment of all flat product sectors and users, prevent manipulation of import documents and leakages through exemption and create a level playing field for local manufacturers to compete against cheaper steel imports, Cheng told a press conference yesterday.
Lion Group had proposed to the Government for an immediate action to regulate the flat products industry through a consistent duty regime across the board.
The specific flat steel products are hot-rolled coils, cold-rolled coils, coated steel as well as pipes and tubes.
“Bear in mind that Lion Group is not seeking protection for only the upstream or HRC by Megasteel Sdn Bhd, the country's sole producer of HRCs, but for all domestic flat steel producers involved in HRCs, CRCs, coated steel and pipes.
“They (flat steel producers) are also suffering from under-utilisation due to rampant imports and leakages,” he explained.
Cheng has proposed that the Government invite all local flat steel product manufacturers to sit on the technical committee on duty exemption for the respective flat product sectors. Under the National Steel Policy, duty exemption is only granted to those grades which are not available locally and for imports of raw materials for processing for export.
“Hence, submissions for duty-free imports of flat products, i.e. HRC, CRC, coated sheets and pipes that are available locally, threaten not just the sectors concerned but the entire local flat steel industry and violate the National Steel Policy.”
The apparent total consumption for flat products is over four million tonnes annually compared with imports of about three million tonnes.
Of the total imports, local producers can supply about 80% or 2.4 million tonnes, Cheng pointed out.
Earlier this year, CRC producer Mycron Steel Bhd had sought for duty-free iron-ore based HRCs the import into Malaysia claiming that the local HRC producer was not able to manufacture quality product as required by its customers.
According to Cheng, it is quite disappointing some CRC producers do not want to acknowledge or purchase local HRCs which are of comparable in quality with imported ones.
“We have a HRC capacity of about 3.2 million tonnes but a current utilisation of 1.2 million tonnes or less than 40% capacity.”
He pointed out that Megsteel had a product development roadmap to constantly develop new grades and was producing American Petroleum Institute's grades for the oil and gas sector, and Corten grade for marine cargo containers.
“We are using direct reduced iron and iron ore based scrap to produce grades of quality required by customers in the automotive inner parts, oil and gas and the pipes sector.
“So far, we have no problem supplying to the overseas market, but it is ironic why a few locals would question our product quality,” he added.
On the corporate front, Cheng said the restructuring plan for Lion Group's steel manufacturing operations was still ongoing with a merchant banker appointed to look into the matter.
He said several foreign parties from China and South Korea had indicated interest to take up stakes in Lion Group's steel subsidiaries but “these prospective investors wanted to see a clearer iron and steel policy to be put in place by the Malaysian goverment before investing.”
Lion Group is also eyeing for iron ore concessions in Terengganu, Pahang and Johor to secure consistent and cheaper supply of iron ore for its Megasteel's blast furnace plant in Banting, Selangor.
He also explained that Megasteel would still need to service its term loans with high interests and depreciation.