While Malaysia may not see much of an impact from the United States’ move to go ahead with steel and aluminium import tariffs, the move is likely to trigger a surge in steel prices.
US President Donald Trump signed off on the implementation of 25% tariff on steel imports and 10% for aluminium last week, fanning an outburst from industry players and critics from across the world and within the US alike.
Maintaining his earlier stance, Malaysian Iron and Steel Industry Federation (Misif) president Datuk Soh Thian Lai said that the impact on Malaysia will be minimal given the relatively small volume of steel exports.
Malaysian steel exports, which stood at about 96,000 tonnes, accounted for only 0.2-0.3% of the total US steel imports for 2017 of between 34 million and 37 million tonnes.
Soh said Malaysia will still be able to find an alternate market to the US to export this 96,000 tonnes.
“Most probably steel prices in US will increase fast enough in the near term and importers will still be able to import even with the 25% duty,” he added.
In line with that, scrap prices are likely to see a rise, given that consumption of the material will become more domestic centric, hence limiting exports.
“Scrap prices will increase because now the US could use more scrap internally instead of exporting. The US in actual fact is a net exporter of scrap, and with this trade act imposed, this could raise steel prices not only in the US but also countries importing scrap from them especially Malaysia and Asean countries,” he explained.
Majority of Malaysia’s scrap, which could not be quantified, he said, is imported, with the US being one of the major importers.
On the next course of action, Soh said Misif has written of its grouses to the US embassy and the Ministry of International Trade and Industry (Miti).
“We will follow up with US Embassy and Miti on this. Since the US has allowed an exemption on Canada and Mexico. We will ask the government to bring this up to the US, for Malaysia to be exempted,” he added.
Echoing Soh’s sentiment on surging steel prices, Barnabas Gan, economist at OCBC Bank, said while trade barriers will spike steel and aluminium prices, it could also result in job casualties for the steel and aluminium-consuming industries of the US.
“Eventually, we note that the trade tariffs without exemptions will likely do more harm than good, both to the US economy as well as impeding global growth and trade activities. Even in the absence of trade retaliation, the tariffs would threaten many jobs in the US pertaining to aerospace, automobile, manufacturing and construction industries, while benefiting steel and aluminum makers,” he noted.
Consumers would then face higher inflationary pressures, and thus adversely affect consumer spending and overall disposable income levels. Moreover, the bleaker outlook for the said industries could worsen investor confidence, and thus dissuade investment spending into the US,” he added.
Meanwhile, Ambank Research said that the move could potentially reduce US steel imports by 13.3 million tonnes and Malaysia on its end could see a reduction of between 48,000 and 49,000 tonnes. Similar to Gan, the research house said the tariffs could have a knock-on effect on steel-consuming industries.
In line with this development, AmBank noted that the US dollar is expected to weaken, working to strengthen the ringgit and heighten fears of possible trade war.
The share price of Tatt Giap Group Bhd which exports steel products to the US, fell 3.33% to close at 14.5 sen on Friday, along with Mycron Steel Bhd, which fell 1.15% to 43 sen.
Steel counters which saw gains at market close on Friday were Ann Joo Resources Bhd Resources, up 0.29% to RM3.47; Malaysia Steel Works (KL) Bhd, 1.05% to 96.5 sen; CSC Steel Holdings Bhd, 2.88% to RM1.43; and Atta Global Group Bhd, 0.55% to 92 sen.
Leon Fuat Bhd was unchanged at 79.5 sen.
