Mycron Steel Bhd will agree to continue buying 50% of its raw material needs from Megasteel Sdn Bhd and the other half from abroad provided its three conditions are met.
International Trade and Industry Minister Datuk Seri Mustapa Mohamed had reportedly told Mycron in a meeting earlier this month that the government would still require it to procure hot rolled coils from Megasteel, the country's sole producer of the material, and import the rest, which is the current practice.
The decision is said to have been a blow to local cold rolled coil makers as most steel players are in the red, while industry utilisation rates remain depressed at a paltry 31%.
HRC is the raw material for making CRC, which can either be scrap-based or iron ore-based. The latter is of higher quality and used for various applications in the automotive, petroleum, palm oil, and electronic and electrical industries.
Mycron chairman and major shareholder Tunku Datuk Yaacob Tunku Abdullah said after the company's AGM that it had agreed “in principle” with the ministry based on three conditions consistency of product quality from Megasteel; a rollback of duty-exemption on imported CRC, essentially making it more expensive; and an independent audit to ensure that Megasteel does not enjoy any transfer pricing advantage between its upstream and downstream operations. He said that “If those three conditions are fulfilled, we are comfortable with the 50:50 purchase policy.”
Although the final decision rests with the minister, Yaacob said he was optimistic Mycron's conditions would be met.
