Wednesday 20 February 2013

Steel Sector - Anti-dumping duties on wire rods imposed OVERWEIGHT


- The Star reported that Malaysia is to impose anti-dumping duties on steel wire rods from selected companies originating from China, Taiwan, South Korea and Indonesia.

- This follows the completion of a detailed investigation into the importation of wire rods in the country.

- We had highlighted in an earlier report dated 24 October 2012 (Anti-dumping duties on wire rod mooted) that the new regulations could be introduced, effective from tomorrow, 20 February 2013.

- The investigations that were initiated by the International Trade and Industry Ministry (MITI) last June arose from a petition alleging that the imports of wire rods from those countries were priced lower than the domestic market.

- The petition was filed by Amsteel Mills Sdn Bhd, on behalf of the domestic steel wire rod industry

- However, imports originating from Turkey were exempted from this new ruling as the dumping margin is below the 2% threshold as specified by MITI.

- This move comes after the Malaysian government had towards end-1H12 imposed stricter licensing requirements on the importation of eight tariff lines for alloy steel products (HS7225) effective 15 June 2012. 

- We are positive on this latest move. The rising influx of cheap Chinese imports – particular those which are boron-added – has weighed down on regional steel players, including in Malaysia.

- Most importantly, we expect domestic long-steel players to be the big beneficiaries of these antidumping duties, particularly for Ann Joo Resources and Lion Industries. Our channel checks indicate that wire rods account for up to 30% of the total product mix of local integrated producers of long steel. 

- Furthermore, we expect steel prices to get a kick from a resumption of infrastructure spending in China following the finalisation of its new leadership. To be sure, Chinese rebar prices have risen for the third consecutive month, averaging at US$603/tonne in January 2013 against US$573/tonne in November 2012.  

- On the local front, construction steel should pick  up in tandem as the pace of select infrastructure projects gain traction moving into 2H12, notably the Sg.Buloh Kajang MRT and Klang Valley LRT extensions. 

- Our top BUYs for the steel sector are Ann Joo Resources and Lion Industries.     

Source: AmeSecurities

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