No. 3/September 2016

MSI F O R E W O R D
I am honoured and delighted
to be a part of the MSI team, toserve an institution that not onlyis accountable to a spectrum of
stakeholders but also responsible
for facilitating the iron & steel
industry in moving to the next level.

and support growth of the sector. However, when there is eithera national and/or global economic/financial crisis, demand
shrinks presenting a challenging environment from the sector.
Besides this, with global over capacity and over production
leading to prices plummeting and reaching unbelievably low
levels, even those who were viable previously, find themselves
against a brick wall.

The steel industry has changed
fundamentally over the last few
decades; wheresome large
companies have integrated toachieve economies of scale and to remain resilient whilesome have greatly downsized to focused areas, or shut down
altogether. With this as the background, the road aheadposes a big challenge to the industry and there is a need forthe industry to weather through this difficult period, by being
innovative in turning obstacles into opportunities in order toprevail over time.

This is currently the scenario of the iron & steel sector in
Malaysia. Most companies in this sector face the most difficult
situation of having to compete purely on prices as against
steady if not dwindling demand and increasing energy costs.
This calls for a comprehensive review of the entire industry
and the need to strategise the next stage that could include
among others, re-investment into advanced technology andstrengthening human development to increase productivity, toachieve higher economies of scale, to motivate innovativenessand to look at Blue Ocean Strategy to ensure a sustainable iron& steel industry.

Iron and steel is the mainstay for any country’s economic
development in both the construction and non-construction(industrial) sectors, covering a complex range of products tomeet the varied demands of consumers.

As has been repeatedly mentioned, the only way forward isby encouraging consolidation as this will assist in providing
the industry greater focus to cater for an equitable market size
locally and regionally. It takes two hands to clap, the point is are
the industry players ready for this – a need for mind-set change
and the willingness to start the conversation among the industry
players for mutual benefits.

Steel consumption surges in countries that experience highlevels of growth as the governments invest in infrastructure
projects including transport, factories and housing. As thecountry develops and moves up the value chain, there is morethrust on the industrial sector in the likes of the automotive,
E&E, O&G, and marine sectors contributing to greater demand

Jarrod Lim
Chief Executive Officer
Malaysia Steel Institute

GLOBAL SAFEGUARD MEASURES (IRON & STEEL)
Latest Trend
Introduction
It was clear from the last episode that developing countries are the main users of safeguard (SG) measures - during the period
1.1.1995 to 31.12.2015, where 49 countries initiated 311 SG actions. Of this, six (6) countries or 12.2% were from developed
countries while the remaining 43 countries, accounting for 298 (95.8%) of the SG initiations, were from developing countries.
Having said this, however, only 50% of the initiations (155) resulted in a definitive SG measure. As in anti-dumping actions, thesafeguard measures too target the iron & steel sector the most.
During the period 1995 to September 2016, there were 72 SG initiations for the Iron & Steel sector and out of this, more than half
or 52.8% (38 SG initiations) took place between 2011 and September 2016, indicating a trend of resorting to a higher use of the
SG measure as a trade remedy.
Foreword
TABLE OF 1.2. MSIGlobal Safeguard Measures (Iron & Steel) - Latest Trend
Of Standards Harmonisation In Asean
CONTENTS 3.4. Development
The Need For Consolidation In Malaysia’s Iron And Steel Industry
5.

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Continuation page 1 - Global Safeguard Measures (Iron & Steel) - Latest Trend
As in the previous article, the source of information used in this article is data from WTO notifications, with further research done on
the actual cases as reported by countries. The details for the period January 2011 till September 2016 (herein referred to as 2011
to 2016) are being scrutinized with the aim of identifying the users of safeguard measures and products targeted for the iron andsteel sector during this duration.
Trends in SG Initiations (January 2011 – September 2016)
Who is initiating SG Investigations – Developing or Developed Countries?
Chart 1 below provides the SG initiations from January 2011 to September 2016 as notified by WTO Members – a total of 38.
CHART 1: Safeguard Initiations – Iron & Steel (Jan 2011- September 2016)

It is of interest to note that all of the SG initiations above were by developing countries with no developed countries involved. Basedon this it appears that only the developing countries were resorting to SG as a trade measure in the iron & steel sector in the lastsix (6) years.
How many countries are resorting to SG initiations?
Fourteen (14) different countries initiated SG investigations between Jan 2011 – Sept 2016. Chart 2 below provides the numberof countries that initiated SG investigations each year, indicating some countries had initiated more than once during this period.
CHART 2: Safeguard Initiations – Iron & Steel (Jan 2011- September 2016) – by number of countries

Which countries are initiating the SG investigations?
The following Chart 3 shows the distribution of the 38 SG initiations by country:

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CHART 3: Safeguard Initiations – Iron & Steel (Jan.2011- September 2016) – by Country

Indonesia ranked number one with six (6) SG initiations followed by Malaysia with five (5); Chile, Colombia and India with four(4) each – where Chile and Colombia initiated all four SG investigations in the same year, Chile in 2015 and Colombia in 2013;
Thailand with three (3); Egypt, Morocco, South Africa and Viet Nam two (2) each; and GCC, Jordan, the Philippines and Zambia
one (1) each.
What products were mainly targeted in the Iron & Steel sector by these countries?
Based on the initiations, the coverage can vary from just one tariff line per SG initiation to as high as 27 tariff lines at the 10 digit
HS Code level. At the four (4) HS digit (Heading) level, 24 different HS codes (from Chapter 72 – Iron & Steel and Chapter 73 –Articles of Iron or Steel) were targetted. The 38 initiations by the 14 countries translated to a total of 93 initiations, at the four (4)digit HS Code level. These have been categorised into Flat, Long and Semi-finished products. The details are as follows:
Table 1: Categorisation of Products – Flat, Long & Semi-Finished Products
FLAT Products
Hot Rolled Coils/Plates (alloy & •non-alloy)

Long Products
Bars/Rebars/Wire
Rods/ •
Wire/Mesh (Carbon Steel/Alloy Steel)•Cold Rolled Coils/Sheets (Carbon •Steel)•

Flat Coated Coils/Sheets (Carbon •Steel)

Other Bars: Angles/Shapes/
Sections (Alloy or Non-Alloy
Steel)
Seamless Tubes/Pipes/
Hollow profiles (iron or
steel)•

Flat Stainless Steel Coils/Plates/
Sheets•Semi-Finished Products
Slabs/Blooms/Billets (These are inputs for
Flat and Long Products)

Billets

BloomsSlabs
Detailed breakdown of Initiations by HS Code at
4-Digit Level
Of the 93 initiations at 4-digit level, 51 fell under Flatproducts, 40 initiations under Long products and two (2)under Semi-finished products and their distribution isreflected in Chart 4:

CHART 4: Safeguard Initiations – Flat, Long & SemiFinished Products (Jan 2011- September 2016)– at 4-digit HS Code Level

About 54.8% of the initiations targetted were Flatproducts, 43.0% Long products and 2.2% Semi-finishedproducts.

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Flat Products

Hot Rolled Coils

HR Plates

Coated Coils

Stainless Steel
Coils/Plates

Cold Rolled Coils

A detailed analysis of SG Initiations on Flat products is reflected in Chart 5 below:
CHART 5: Safeguard Initiations – Flat Products (Jan 2011- September 2016) – Breakdown

Hot Rolled products with 31 initiations account for 60.8% of the total 51 initiations under Flat products - the highest targetted under
the flat products; followed by Coated products at 23.5% (12 initiations) with Cold Rolled products and Stainless Steel Products
each accounting for 7.8% (4 initiations each).
Long Products

RebarsWire Rods

Wire mesh

Steel Wire in rolls

Seamless

Pipes
A detailed breakdown of the initiations on Long products is captured in Chart 6 below:
CHART 6: Safeguard Initiations – Long Products (Jan 2011- September 2016) – Breakdown

Of the 40 initiations on Long products, 30 initiations or 75.0% targetted Bars/Rebars/Wire Rods/Wire /Mesh, 8 initiations or
20.0% on other bars covering Angles/Shapes/Sections (all of which are construction related products); and 2 (5.0%) initiations on
Seamless Tubes/Pipes/Hollow profiles.
Flat, Long and Semi-Finished Products – A Comparison
Take a look at Chart 7 below that gives a comprehensive picture of the Flat, Long and Semi-finished products:

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CHART 7: Safeguard Initiations – Flat, Long & Semi-Finished Products (Jan 2011- September 2016) – Overall comparison

In terms of overall product comparison of Flat, Long and Semi-finished products, Hot Rolled (HR) products account for 33.3%
followed by Bars/Rebars/Wire Rods/Wire/Mesh in second place at 32.3%; third in line is Coated Products at 12.9%; fourth Other
Bars – Angles/Shapes/Sections; fifth Cold Rolled (CR) products & Stainless Steel Flat products at 4.3% each; and finally sharing
last place Seamless Tubes/Pipes/Hollow profiles & semi-finished products (slab/blooms/billets) at 2.2% each.
Of the countries that had initiated SG investigations, ten (10) targetted Flat products; ten (10) targetted Long products and six(6) countries targetted both Flat and Long products. Four of the five countries that had initiated both on Flat and Long products
were from the ASEAN region. Only one country had initiated on semi-finished products, also from ASEAN. Five countries fromthe ASEAN region initiated SG investigations on Iron & Steel products, namely Indonesia, Malaysia, the Philippines, Thailand andVietnam.
Conclusion
It is clear that the latest trend in SG initiations for the period January 2011 – September 2016 for the Iron & Steel shows developing
countries as the sole users of SG actions. Five countries from ASEAN itself accounted for slightly more than one-third of thecountries (35.7%) that had resorted to SG measures on Iron & Steel products.
Flat products (upstream) targetted for initiations are inputs to mid-stream and downstream products – and based on the
notifications that this report covers, are products more for the construction sector than the non-construction sector. Similarly theLong products targetted in the initiations are also mainly for the construction sector.
It is to be noted that the ratio of Flat to Long products targetted is at about 54.8% to 43.0% respectively.
Finally, of the five countries that initiated SG investigations on both Flat and Long products, four countries or 80% are from theASEAN region.

DEVELOPMENT OF STANDARDSHARMONISATION IN ASEAN
Role of ASEAN Consultative Committee on Standards and Quality (ACCSQ)
The ASEAN Consultative Committee on Standards and Quality (ACCSQ) was established in 1992, in order to facilitate the removalof Technical Barriers to Trade (TBT) among ASEAN Member States without compromising product quality, efficacy and safety.
The approach in ASEAN is through harmonisation of• national standards with international standards, practices and guides;• mandatory technical requirements; and• conformity in assessment procedures (via Mutual Recognition Agreements).
This is to ensure• the free movement of goods;• the reduction of transaction time and costs by avoiding multiple testing requirements; and• the issue of technical barriers to trade is addressed.
The harmonisation of standards and technical regulations in ASEAN is governed by the ASEAN Policy Guidelines on Standards,
Technical Regulations and Conformity Assessment Procedures which makes reference to ISO/IEC Guide 21, Parts 1 and 2(Regional or national adoption of International Standards and other International Deliverables) as one of the guiding principles.

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(Source: ACCSQ Structures)
Working Group (WG) 1 on Standards and Mutual Recognition Arrangements (MRAs)
This WG 1 will be the main focus of this article where harmonisation of standards is one of its core activities. The following is thescope of WG 1:
i. Monitoring the implementation of the sectoral MRAs in ASEAN.
ii. Establishing an ASEAN Guide to MRAs.
iii. Harmonising national standards to international standards.
iv. Assisting in the promotion of the Good Regulatory Practice (GRP) concept to regulators.
v. Building confidence among regulators in the use of harmonised standards.
vi. Promoting transparency of technical regulations.
vii. Exploring new areas for development of MRAs and standards harmonisation in ASEAN.
viii. Developing a mechanism for cooperation between standards bodies and regulatory agencies; andix. Recommending and proposing activities or issues to ACCSQ, for ASEAN cooperation in relevant international and regionalorganizations such as ISO, IEC, APEC and ASEM.
Harmonisation of standards in ASEAN

Basic Principles of Harmonisation
During this harmonisation exercise, the national standards bodies in ASEAN or similar bodies would need to adopt the International
Standards, based on the requirements of ISO/IEC Guide 21-1 ( Part 1) and Guide 21-2 ( Part 2 ), on Regional or National adoptionof International Standards and other International Deliverables, which are••Part 1: Adoption of International Standards
Part 2: Adoption of International Deliverables other than International Standards, as their national standards.

ASEAN Guidelines for Harmonisation of Standards was prepared by Working Group 1 (WG1) on Standards and Mutual
Recognition Arrangements which defines the roles of the parties involved in the harmonisation process. The purpose of having thisguideline is to ensure that a common and consistent approach to harmonisation of standards is adopted by the product working
groups under the ACCSQ. This document was endorsed by the ACCSQ in 2014.
Achievements of ASEAN via harmonisation of standards
At the initial stage of standards harmonisation, 20 priority products (inclusive of: 18 electrical and electronics products, rubber
condoms and medical gloves) covering 58 International Standards were identified and the harmonisation exercise was started.
The achievements of ASEAN on the harmonisation of standards are as follows:

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i.

Electrical and electronic equipment, rubber gloves and condoms and rubber-based products: Harmonisation of safety andspecification requirements with the relevant international standards such as ISO and IEC standards.
ii. Automotive: Harmonisation of standards/technical requirements based on United Nations Economic Commission for
Europe (UNECE) Regulations.
iii. Foodstuff: Harmonisation of standards on prepared foodstuff products using CODEX standards which focuses on safety
requirements on food additives, food contaminants and food contact materials. In addition, harmonisation of technicalrequirements for food safety through the development and implementation of the ASEAN Common Food Control Systems
which also includes common requirements for labelling of pre-packaged food and food hygiene.
iv. Pharmaceutical: Harmonisation of technical requirements through the development and use of the ASEAN Common
Technical Requirements and ASEAN Common Technical Dossier (covers administrative data, quality, safety and efficacy)
were implemented on 1 January 2009.
v. Medical devices: Harmonisation of technical requirements through the development and use of the ASEAN Common
Submission Dossier Template.
vi. Traditional medicines and health supplements (TMHS): Harmonisation of technical requirements for safety, quality andefficacy and product placement, including Good Manufacturing Practices Guidelines.
vii. Common procedures on legal metrology such as the ASEAN Common Requirements on Pre-packaged Products andCommon Verification Procedures for Non-automatic Weighing Instruments have been completed. Inter-laboratorycomparison programs have also been conducted on mass and volume measurement standards among the ASEAN
Member States.
viii. Notwithstanding the on-going work to facilitate intra-ASEAN trade, ASEAN Member States still maintain the right to adopt
the standards they consider appropriate – for example, for human, animal or plant life or health, for the protection of theenvironment or to meet other consumer interests. Moreover, members are not prevented from taking measures necessary
to ensure their standards are met.
Malaysia’s participation in ACCSQ
STANDARDS MALAYSIA is the National Standards Body in Malaysia and represents Malaysia in international and regional
standards bodies. The principles of Malaysian Standards development are based on Annex 3 of the WTO/TBT Agreement
on Code of good practice for the preparation, adoption and application of standards, ISO Guide 59 on Code of good practicefor standardisation and ISO Guide 21-1 and 21-2 (Adoption of International Standard as national standard). The adoption ofharmonisation principle is also mentioned as part of the Operational policies for standards development. Therefore, with thisapproach, Malaysia is aligned with the programme proposed by the ACCSQ.
Conclusion
This is a good initiative to move forward so that more standards/products will be harmonised moving towards free flow of goods
among ASEAN Member States. Progress has been slow as the issues and concerns that need to be dealt with are delicate andchallenging. As such, the time needed to arrive at a common position / stand is inevitably longer.

THE NEED FOR CONSOLIDATION IN MALAYSIA’SIRON AND STEEL INDUSTRY
There has been a surge in the consolidation of the ironand steel industry around the world in recent years. In
2012, Nippon Steel formally merged with Sumitomo Steel
Industries to become the world’s second biggest iron andsteel producer. Recently, China has been considering
consolidating two major steelmakers where one would belocated in northern China and the other in southern China.
As our Malaysia’s iron and steel industry is still highly
fragmented, the iron and steel industry in Malaysia requiresa systematic change in order to allow growth in a competitivemarket. In the past, many of the steelmakers have been
focussed on the size and volume but have overlooked the
aspect of production efficiency. A slow end market for steel products coupled with the influx of dumping excess offshore steel
products from neighbouring countries, have resulted in many of the local steelmakers having lower rates of rate of productivity, withprofits dipping in tandem. To gain both greater economies of scale and weight in the market, the iron and steel industry needs toconsolidate the country’s fragmented steel plants through mergers and acquisition. The industry consolidation will ultimately resultin bigger and stronger steelmakers. This may enable the steelmakers to improve the position of steel companies, to strengthen the
production capacity, and to respond to the variability of the environment.

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Japan began consolidating their iron and steel industry in the late 1990s. The
process to consolidate Japan’s fragmented steel industry was driven by high debts,
poor profitability and threats from their national carmakers to cut down the numberof steel suppliers. By putting aside the long-standing rivalry and differences, theJapanese steel industry consolidated and there now exists competition among threemajor Japanese blast furnaces steelmakers which are Nippon & Sumitomo Metal,
JFE Holdings, and Kobe Steel. The consolidation and mergers have not only enabled
a reduction in costs but also an increase in product quality. Nippon & Sumitomo has
become Japan’s biggest steel group and the world’s second biggest iron and steel
producer.
In China, efforts from the government to push consolidation of Chinese iron and steel
industry is under way. China is aiming to consolidate into two major steelmakers
where one steelmaker is located in northern China and the other in southern China.
Figure 1: The consolidation effect
The consolidation in northern China apparently is a merger between Hebei Iron & SteelGroup and Shougang Group as Northern China Steel Group, while in southern China,
Shanghai Bao Steel Group and Wuhan Iron & Steel Group will merge as The Southern China Steel Group. If the consolidation is a
success, the northern and southern group will become the world’s second and third biggest iron and steel producers.
Other than creating stronger steelmakers, consolidation offers mergers to gain control
over both the price of raw materials and steel products by increasing the bargaining
power to set price or negotiate better contracts. The current top five in the steel
industry controls only 20% of the global steel production, while the top five producers
of iron ore in the world account for 70% of the world’s iron ore output. Consolidation in
the iron and steel industry may result in a weakened bargaining power over the price ofmaterials but this should not discourage the steel makers.
The local steelmakers must be cognisant of the need to consolidate and merge tomaintain market share and remain competitive. When compared to other sectors, suchas the automotive and piping industry, who, as steel recipients, have a higher rate of
consolidation, the iron & steel industry lags behind and is in an unfavourable position.
The government, on its part, may consider providing financial incentives to encourage
consolidation.

EVENTS AND ACTIVITIES FOR MSI NEWSLETTER
NO.3/2016

1

Export Acceleration Mission On Construction And Related Services To Africa
Date: 01-07 November 2016
Venue: Africa
Contact Details : Nor Azwa Md Razi(T) +603 6207 7110
(E) azwa@matrade.gov.my2

FMM Seminar on Trans-Pacific Partnership Agreement: Business Opportunities & Challenges for Manufacturers
Date: 09 November 2016
Venue: Wisma FMM, Kuala Lumpur
Contact Details : Ms Ida Tan or Ms Jess Chong(T) +603 6286 7200
(E) ida@fmm.org.my

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FMM Factory Management Conference 2016 on “Human Resource, Productivity and Energy Efficiency” FMM
Seminar on Trans-Pacific Partnership Agreement: Business Opportunities & Challenges for Manufacturers
Date: 22 November 2016
Venue: The Royale Chulan Damansara Hotel, Petaling Jaya
Contact Details : Ms Ida Tan or Ms. Kwai Kaun(T) +603 6286 7200
(E) ida@fmm.org.my / kwai_kaun@fmm.org.my

We welcome comments and feedback:T: 03-6208 4652

F: 03-6211 2445

E: admin@malaysiasteelinstitute.com

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