Tuesday, May 03, 2016

Malaysia: The Transhipment Hub for Chinese Steel Products

Over the past few 6-7 years, China has been flooding the international market with heavily-subsidized steel. This has led to a continuous drop in steel prices as well as a steady rise in the quantity of steel exported by China. See the graph below.

Graph showing Chinese steel exports rising while prices declining. Source: U.S. Steel

As a result, many steel mills from South Africa to Great Britain to North America suffered enormous losses and had to close down. With each closure, a large pool of steel mill workers was laid off. To protect its steel industry, the US government has imposed duties on certain types of steel products to prevent the dumping activities. According to an article published in Huffington Post, the Chinese producers are circumventing this restriction by routing their steel export thru neighboring countries, including Malaysia.

Many people do not see the problem in heavily-subsidized Chinese steel exports. The argument put forward for welcoming this cheap steel is either they are good for local industries (think cheap house prices) or that the local producers are simply inefficient. The low prices quoted are not a reflection of the efficiency or inefficiency of the producers, but the deliberate measures taken by the Chinese government to ensure the continued operation of its large loss-making steel mills which employ million of workers. 

Finally, we may not care much about this problem befallen onto steel mills & steel mill workers in faraway places but when the problem hit home, we must do something. Since January this year, Megasteel - our largest integrated steel mill - has laid off or retrenched about 589 workers (here). Sadly, one of them happens to be my customer.

I hope that our government will look into the complaint of dumping activities by Chinese steel producers as well as putting a stop to the use of our ports as transshipment hubs for the export of Chinese steel products to other countries. Remember the old saying: Don't do unto others what you wouldn't have them do unto you.

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