BY Chris Prasad
A government proposal to introduce safeguard measures on the import of steel products is meeting opposition from several quarters within the construction industry, most notably the Master Builders Association Malaysia (MBAM).
MBAM argues that without the free flow of imports, the price of local steel bars could become “uncontrollable”, alluding to the fact that this form of protectionism will reduce competitive pricing in the market.
The association’s president, Mathew Tee, warned that the price of steel bars has increased from about RM1,500 per tonne in January this year to RM2,500 per tonne currently, which approximately 66 per cent increase over six months.
“MBAM believes that the sudden rise of steel price over such a short period is not justifiable, even with greater demand from China,” Tee said.
He added that a comparison of steel prices with neighbouring countries further proves that the sudden hike in pricing is unprecedented and unwarranted.
As an example, he pointed out that, in Singapore, NatSteel is selling at around RM1,700 per tonne and steel bars in Malaysia are currently the highest priced among Asean countries.
Also, Tee said steel mills in Malaysia have the added advantage of subsidy on electricity tarrifs, which means they shouldn’t be charging higher prices than others in the region.
MBAM’s comments come in the wake of a recently issued notice of initiation of investigation by the government to determine if safeguard measures are required for several categories of steel products currently being imported into the country.
The investigation, which was petitioned by the Malaysian Steel Association, aims to ascertain whether increased steel imports into Malaysia are having a negative impact on the industry, thus requiring safeguard measures to limit further imports.
Instead, Tee suggests that the government look at long-term solutions to the issue, as local producers shouldn’t be further protected if they are unable to compete despite the numerous protective measures that are already in place.
He said the financial health of the steel industry has already suffered from inefficient production, fuelled by the government’s support of high-cost local capacity and market interventions such as quotas, subsidies and tariffs.
MBAM believes that safeguard measures could negatively impact other industries, particularly the construction industry, stifling growth which is targeted to be at 8.4 per cent this year.
While MBAM is not against profit making by steel millers, Tee said they shouldn’t engage in in the kind of “excessive profiteering” that can jeopardise other industries and the economy as a whole.