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NZ Steel undercut by dumped Malaysian product, Chinese imports still okay: MBIE

Tuesday 14th August 2018

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BlueScope Steel-owned NZ Steel is being undercut by Malaysian products dumped in the local market, says the Ministry of Business, Innovation and Employment. 

The ministry was asked to investigate fresh claims by the Australian-owned steel maker that Malaysian and Chinese exports of hollow steel sections (HSS) were being dumped in the local market, and that China unfairly subsidises its steel industry, undercutting the local manufacturer. The probe into Chinese steel products is MBIE's third during the past two years at the behest of BlueScope subsidiaries. 

Unlike the two earlier reports, MBIE's provisional findings show steel imports have been dumped in the local market, although just those from Malaysia and not from China. The reports, completed in July, show government officials estimate Malaysian steel is being dumped at an average margin of 11.4 percent below the export price. They recommend the provisional introduction of an anti-dumping duty on those products at the same rate. 

Malaysian imports account for 4.4 percent of the market, which MBIE said was large enough to cause material damage to the applicant, NZ Steel. 

"While the level of imports from Malaysia is small, relative to total imports and to the total New Zealand market, the level of dumping, at 11.4 percent is not insignificant, and is greater than the level of price undercutting of imports from Malaysia established by MBIE," the report said. "The imposition of provisional measures would contribute to removing the injurious effect of the dumping of imports from Malaysia, and could therefore prevent material injury being caused by imports of dumped HSS from Malaysia during the remaining period of the investigation."

Still, NZ Steel's primary goal of restricting access for Chinese product, which accounted for about 71 percent of the hollow steel sections market, didn't gain any traction. MBIE officials said Chinese exporters investigated weren't dumping their products on the New Zealand market, and noted that Malaysian prices were cheaper than those of their China counterparts. A separate report found minimal levels of Chinese government subsidies, matching earlier findings on prior complaints. 

BlueScope yesterday reported an 84 percent increase in earnings from its NZ Steel and Pacific Steel businesses, which delivered a return on invested capital of 31.6 percent, compared to just 20 percent across the group as a whole. 

That might improve further with anti-dumping tariffs on certain Malaysian products. 

"MBIE concludes that there has been a consequent impact on NZ Steel in relation to a number of injury factors arising from the price effects of allegedly dumped imports of HSS from Malaysia," the report said. "These injury factors include a decline in sales volume and sales revenue, a significant decline in profit and return on investments, and a negative effect on cash flow."

The dumped Malaysian imports aren't seen hitting domestic production, with NZ Steel telling government officials it was "steadily increasing the efficiency of its pipe mill" and that it was difficult to figure out a meaningful production capacity. While the government officials could link the dumped products to some of NZ Steel's margin pressure, they couldn't link any adverse impacts to employment and wages. 

BlueScope's Pacific Steel division is set to face industrial action tomorrow, with E Tu union members set to walk off the job from 7am, the union said in a statement. An overtime ban has been in place since Friday and workers voted to take industrial action after five months of talks. 

"Our members have taken a hit in recent years – they’ve taken modest pay rises and worked with the company to cut costs to support the business," E Tu industry coordinator Joe Gallagher said in a statement. "Now it’s bounced back but it isn’t prepared to share the bounty with its workers."


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