It is reported that Malaysian steel sector is set to become more exciting, perhaps not so much on the fluctuating steel prices but in the latest development on the corporate front.
Two weeks ago, Lion Group's unit Megasteel Sdn Bhd was back with a second attempt at what many described as another protectionist measure for its hot rolled coils and other locally produced flat steel products.
It is asking the Government to consider reducing the import duty on flat-steel products to 15% from the current 25%, with an abolishment of duty exemption. So far, downstream steel producers, who are major users of flat steel products including HRC, seemed okay with the proposal on the reduction in import duty but many totally rejected the abolishment on duty exemption.
Earlier in August 2011, the government had gunned down Megasteel's proposal for a safeguard petition to impose an additional 35% import duty on HRC on top of the existing 25% following strong objections from local downstream steel players and foreign HRC exporters.
This was despite Megasteel's plea that the influx of imported HRC into Malaysia had caused serious injury to its business in terms of declining market share, sales, production, capacity utilization, insufficient cash flow and net losses.
While the Government's decision on Megasteel's latest proposal is still unclear, Megasteel, the country's sole producer of HRC, however, expressed strong optimism to StarBiz recently that this time around the Government would likely give the green light. This is given the excessive importation of HRC and other flat products like cold rolled coils, galvanized iron, electro galvanized and color sheets from non ASEAN countries, which were duty exempted but easily available locally.
The act of these errant downstream producers is also not in line with the ASEAN Free Trade Area agreement on steel industry. Furthermore, despite the termination of Megasteel's safeguard measures, the Government had indicated that it was still open to other options to help Megasteel and other flat-steel producers with their plight.
In another development, Lion Group's intention to liquidate its steel assets in Malaysia to foreign parties could likely be put on hold. This could be overshadowed by a series of negative events relating to Europe's sovereign debt crisis and a downgrade in US' country rating by Standard & Poor's.
OSK Research in its latest steel sector update that "While we continue to think Lion Group would be keen to part with its controlling stake in its respective steel units, negotiations may be time consuming. Buyers may take their time and hold out for a better deal, given the weak economic backdrop."
According to Lion Group's website, the major companies under its steel division in Malaysia include Megasteel, Amsteel Mills Sdn Bhd, Antara Steel Mills Sdn Bhd, Bright Steel Sdn Bhd, Lion Blast Furnace Sdn Bhd, Lion DRI Sdn Bhd, Lion Plate Mills Sdn Bhd, Lion Steelworks Sdn Bhd and Secomex Manufacturing (M) Sdn Bhd.
OSK Research, in its report, described Perwaja Holdings Bhd as a possible front runner to be awarded an iron ore mining concession by the Terengganu government. There are still no detailed information on the size and concession period but the location for the iron ore mine is highly speculated to be in Bukit Besi.
According to sources, the sprawling 2,400 hectares Bukit Besi is estimated to hold in excess 50 million tonnes of iron ore reserves. The research unit pointed out that the two major shareholders of Perwaja, Mr Tan Sri Abu Sahid Mohamed of Maju Holdings Sdn Bhd and Mr Tan Sri Pheng Yin Huah of Kim Kee Holdings Sdn Bhd, had strong political backing at the federal and state levels, which would stand the company in good stead at securing a mining concession.
(Sourced from www.thestar.com.my)
