The Star reported that Malaysian Iron & Steel Industry Federation expects Megasteel Sdn Bhd's petition for a safeguard measure on imported hot rolled coils, if approved, will negatively impact its customers and their clients as well.

Megasteel, the sole producer of HRC in the country and owned by Lion Group, has filed a petition for the imposition of safeguard measures for the imports of certain HRC. This is because the alleged surge in imports of HRC has affected the production and is detrimental to Megasteel.

The Ministry of International Trade and Industry has initiated a safeguard investigation on the petition lodged by Megasteel that saw the request of restrictive and or punitive duties on top of the existing 25% import duty on HRC. A public hearing had been conducted at MITI on June 28th 2011 on the matter.

In the petition, Megasteel has requested the government to impose a safeguard duty rate of 35%, with the rate gradually reduced over a five year period, on the imports of HRC.

Mr Chow Chong Long president of MISIF said that the petition, if approved, would enable Megasteel to raise prices substantially behind the tariff wall with no competition. He added that "This will then compromise Megasteel and its downstream customers' ability to export should other countries initiate anti dumping duties on Malaysian products if the price gap between Malaysia's HRC and steel products widened as a result of significant Megasteel price increase."

He said that "It will also increase the cost to domestic consumers of many products that include electronics, white goods and automotive that will ultimately support the escalation of inflation."

If a company exports a product at a higher price than it sells in its own local market, it is said to be dumping the product. Thus, an anti dumping measure intends to discourage importation and sale of foreign made goods at prices substantially below domestic prices for the same items.

Mr Chow said this would also cause many foreign investors to rethink their existing Malaysian assembly, manufacture and distribution businesses in areas such as electronics, white goods, electronics, automotive, steel pipes amongst many others. He added that "And if Megasteel refuses or is unable to supply the HRC products timely, it will negatively affect certain businesses (given they could not afford to import HRC with high safeguard duty). It, too, will raise the possibility of HRC supply delay and interruption as previously occurred from time to time, including supply rationing."

On a broader picture, Mr Chow said the safeguard duty, if implemented, would trigger other countries to petition Malaysia and World Trade Organisation for equivalent concession. He added that "Indirectly, it may adversely impact on other Malaysian export sectors."

Moreover, Mr Chow said this would also run counter to the government's long established policy in liberalizing trade that included the steel industry.

MITI is expected to announce the development or decision of the safeguard investigation by the end of this month. However, it has the option to extend the investigation for another month.

Mr Chow said following its written submission and the inputs from other interested parties, there were ample grounds for the Government to see the petition's own flaws.