Lion Corp Bhd has urged local steel industry players to cut down on cheap imports and start buying locally produced flat steel in order to help turn around an ailing industry.
The company said this is in line with the in-depth study of the local flat steel industry by the Boston Consulting Group (BCG).
BCG was hired by the Ministry of International Trade and Industry (MITI) to do the study as part of MITI’s efforts to resolve a long-standing dispute between Lion Corp and downstream players who, without access to cheap imports, would need to source their materials from Lion Corp at a higher domestic price.
Lion Corp’s subsidiary, Megasteel Sdn Bhd, is the country’s sole producer of hot-rolled coil (HRC). On BCG’s study, Lion Corp executive chairman Tan Sri William Cheng Heng Jem said they pointed out some improvements and that the containment of cheap imports will save the industry.
“We just hope that there is a will on the authorities’ side to arrest these cheap imports,” said Cheng during a media briefing in Kuala Lumpur yesterday. The domestic price for steel could not be compared to imported steel from China because of subsidies provided by the Chinese government to “dump” excess steel at lower prices, said Cheng.
Local downstream players have claimed Megasteel’s products are of inferior quality in order to justify their preference for imported steel.
Malaysia’s total consumption for flat products including HRC and cold-rolled coils (CRC), coated steel, plates, pipes, and tubes, is four million tonnes per year, three million tonnes of which is currently imported from China at reduced costs.
“Local producers can supply 80%, or 2.4 million tonnes of what these manufacturers are importing,” said Megasteel marketing director Lai Chin Yang. Lai said downstream flat steel manufacturers are also suffering from under-utilisation due to “rampant imports and leakages”.
“If we can reduce the imports by 70%, everybody will have full capacity, leading to a reduction in costs, and you can get out of this vicious circle, for the whole industry. Everybody will benefit, both upsteam and downstream,” said Lion Corp executive director Tan Sri Albert Cheng Yong Kim.
Megasteel has also rebuked allegations of inferior quality by industry players by confirming it has received orders from Proton Holdings Bhd for four car parts, replacing the current imported parts used by the national car maker.
“Why would Proton use our parts if they are of inferior quality?” said Albert Cheng.
BCG has also suggested a turnaround time frame of 24 to 36 months for Lion Corp, after the company continued to sink deeper into the red. For its third-quarter ended March 31, 2012, the company posted a loss of RM225.93 million, compared to RM33.3 million previously.
“If we can get back to the 2007 levels of 200,000 tonnes per month, we can turn around. Now we are at 80,000 tonnes per month,” said Cheng.
Part of its plans is to increase capacity is to source local iron ore, which it will feed into its soon-to-be-completed RM3 billion blast furnace.
The blast furnace, the first of its kind in Malaysia, will begin operations in 18 months, said Albert Cheng.
“The key test is if we are able to achieve 200,000 tonnes per month. If we are able to achieve that we are confident we can turn around,” he said.