PETALING JAYA: The United States government has initiated two anti-dumping investigations on Malaysian producers, following allegations that the country is selling ferrosilicon and dioctyl terephthalate below cost to undercut American manufacturers.
In the case of ferrosilicon, the government has also been indirectly implicated, as it is alleged to have put in place numerous subsidy programmes to encourage the production and the export of ferrosilicon.
Ferrosilicon is a type of ferroalloy and is used for removing oxygen during the steelmaking process.
Meanwhile, dioctyl terephthalate is a general purpose plasticiser and is used in extrusion, injection moulding, calendaring, slush moulding and coating.
The investigation by the US Department of Commerce and the US International Trade Commission, especially for ferrosilicon, highlights the need to reform subsidies in Malaysia across a whole range of sectors, said economist Geoffrey Williams.
“This is because when the market distortions are exposed, they can lead to penalties outside of the control of businesses, regulators and the government in Malaysia,” he told StarBiz.
Williams called the anti-dumping investigation a “healthy expression of the rule of law” that is normal in a competitive market.
Former Deputy International Trade and Industry Minister Ong Kian Ming said it was “not surprising” that such investigations are being requested by domestic players in countries like the United States where the fear of dumping is a genuine concern.
This is considering the global oversupply of iron and steel products, especially those which are used in the construction sector.
“In such cases, the Investment, Trade and Industry Ministry (Miti) will usually observe the process and the outcome closely although it is usually not possible for Miti to ‘interfere’ or even provide inputs to the investigation being undertaken by the relevant US authorities,” said Ong.
Trade lawyer Lim Koon Huan at Skrine & Co said an anti-dumping investigation by the United States would typically take six to nine months to be completed.
“The United States will only issue a notice announcing an anti-dumping investigation after the completion of preliminary checks.
“The fact that the United States has issued two notices (on ferrosilicon and dioctyl terephthalate) means that there is a prima facie case for the allegations.
“But they could be dismissed if the local manufacturers’ arguments are acceptable to the United States,” she explained.
However, if the allegations are found to be true, anti-dumping duties can be imposed on Malaysian manufacturers of ferrosilicon and dioctyl terephthalate, Lim added.
Williams said the anti-dumping duties will have to be paid, if imposed.
“But at the same time Malaysia’s competitiveness in semiconductors and metals is improving because of geopolitical tensions, especially with Russia.
“So, although there may be cost implications, the buoyant market is still strong.
“The best option for the government might be to review these issues as part of a wider market reform agenda to seek a positive outcome for everyone rather than a trade dispute,” he said.
An industry observer noted that Miti can assist the local manufacturers of ferrosilicon and dioctyl terephthalate in “preparing the case” to be submitted to the US Department of Commerce and the US International Trade Commission.
“On its part, Miti can also submit its representation to the US government to prove that Malaysian producers of ferrosilicon and dioctyl terephthalate have not caused damage to the US economy by selling their products at the current prices.”
On the other hand, Ong suggested that Miti should seek feedback and possible alignment from the steel players in Malaysia on the validity of such complaints and collect the necessary information to check on the veracity of such complaints.
“In addition, the local iron and steel players can also undertake their own request for Miti to investigate possible anti-dumping activities into Malaysia from players in the region which they suspect are selling certain iron and steel products at below cost.
“For this to take place, certain conditions have to be fulfilled including the agreement of domestic producers producing at least 50% of the product in question,” said Ong, who is also the board member of the Malaysian Investment Development Authority (Mida).
On March 26, Eastman Chemical Company filed a petition before the US Department of Commerce and the US International Trade Commission to initiate anti-dumping duties investigations on dioctyl terephthalate imported from Malaysia, Taiwan, Turkiye and Poland.
The petitioner alleged that the dioctyl terephthalate from the four countries were sold in the US at less than fair value.
It is also alleged that the volume of the dioctyl terephthalate has increased by 224% since 2020 to 23,180 tonnes in 2022.
Eastman has requested for anti-dumping duties of 59.33% to be imposed on dioctyl terephthalate imported from Malaysia.
Separately, on March 28, the US Department of Commerce and the US International Trade Commission commenced anti-dumping and countervailing investigations on ferrosilicon imported from Malaysia, Brazil, Kazakhstan and Russia.
The anti-dumping and countervailing protection measures were filed on behalf of petitioners CC Metals and Alloys, LLC and Ferroglobe USA, Inc.
The two companies are the only producers of ferrosilicon in the US.
The petitioners alleged that the ferrosilicon from these four countries are being, or are likely to be, sold at less than fair value in the US.
It is alleged that these imports, which grew by 21% since 2021 to 144,158 tonnes in 2023, are causing, or threatening to cause, material injury to the US ferrosilicon industry.
The relative dumping margin for imports of the subject merchandise from Malaysia is currently calculated to be 162.59%.
In an earlier note issued by S&P Global, it was mentioned that spot prices of ferrosilicon were likely to rise if the petition is accepted, quoting market sources.
“An overseas producer source said if the petition results in an investigation being launched, he would raise his ferrosilicon prices to US$1.50 per pound ex-warehouse in the US.”
S&P Global also pointed out that Malaysia is a relatively new producer of ferrosilicon, with its plants only around 10 years old.
“They have access to some of the lowest-cost hydroelectric power in the world, according to market participants, and are major suppliers of ferrosilicon to Asian, European and US steel mills,” it said.
