Megasteel’s HRC sales improve after Malaysian steel policy restructure

Malaysian steel producer Megasteel Sdn Bhd is seeing better hot rolled coil sales just three months into a move by the government to end duty exemptions on 18 grades of the product to curb low-priced imports.

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Megasteel, a unit of Lion Corp and the country’s sole producer of HRC, is selling more of the flat steel product in the domestic market than previously, industry sources said.

The improved business could possibly turn the loss-making company’s fortune around.

Lai Chin Yang, marketing director of Lion Corp’s steel division, acknowledged that that Megasteel’s HRC business has seen marked improvement, but stopped short of giving any figures.

“The sales of HRC produced by Megasteel had improved progressively over the last few months since the government’s announcement to disallow duty exemption on the 18 grades of HRC,” he told Steel First.

“We are also optimistic that in line with the progressive measures being undertaken by the various government agencies, the entire value chain of flat products is expected to benefit too,” he added.

Since February 1, imports of all 18 commercial grades of HRC have been subjected to full import duties of 20% as part of Malaysia’s restructuring of its national steel policy.

This followed a government-sponsored review of the industry, which came against a backdrop of rising unease about a surge of low-priced steel imports, mainly from China, which affected local steel production.

Before the policy restructure, Megasteel had been operating at below half of its 3.2 million-tpy capacity, despite its monopoly.

It had contended that its operations had been hit by dumping from overseas producers who allegedly exploited loopholes in the import regulations.

For the July-December 2012 period, the first half of its financial year, its parent company Lion Corp reported operating losses of 127 million ringgit ($41.8 million) in its steel division, compared with a loss of 99 million ringgit ($32.6 million) a year earlier, according to a February filing to the country’s stock exchange.

At the end of December 2012, the group had short-term debt commitments of 2.35 billion ringgit ($774 million), while its long-term borrowings amounted to 476 million ringgit ($157 million).

The company had said in February that it expected the operating environment of its steel division to improve in the coming quarters, following the government’s decision to implement proposals from the study of the steel industry, which was conducted by the Boston Consulting Group.

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