Steely concerns

THE threat of tariff hikes under the incoming Donald Trump 2.0 presidency early next year could benefit some sectors in Malaysia while harming others.

Malaysian steelmakers appear particularly vulnerable to further price pressures.

If market access for China-manufactured products to the United States is restricted, Chinese steelmakers could look to markets elsewhere to offload some of their overcapacity.

It’s a threat that local steel sector players are all too familiar with.

In its latest quarterly announcement, CSC Steel Holdings Bhd reports an 18% drop in earnings to RM6.88mil for the third quarter, primarily due to weaker steel prices.

Over a nine-month period, its earnings are 41% lower year-on-year at RM22.8mil.

According to its filing with Bursa Malaysia, CSC attributes the softer prices to increased competition from lower-priced imports following the expiration of anti-dumping duties.

The end of trade remedy measures in the domestic market, it adds, has intensified competition and exposed local producers to unfair trade practices, creating substantial obstacles.

These challenges include overcapacity, lower utilisation rates and heightened competitive pressures.

Fortunately for CSC and other steel players such as Leon Fuat Bhd, the strong growth in the local economy has allowed them to offset the price pressures by increasing their sales volumes.

The problem is the weak Chinese domestic economy, especially the housing market, means the overcapacity in China’s steel sector will likely persist.

The much-talked-about trillion-dollar fiscal stimulus from Beijing has left many worried that it does not go far enough to revive the struggling Chinese economy.

Many analysts are expecting Trump to use the threat of tariffs as a bargaining tool in negotiating deals with other nations.

The president-elect appears to be on course to slapping tariffs on all imports into the United States, as China, Canada and Mexico learned this week.