THE fallout from the trade war between the United States and China is fast taking a toll on the local exporters of steel and electrical & electronic (E&E) goods to the US.
This week, Pantech Group Holdings Bhd claims to be the first Malaysian casualty from the trade tension and warned its investors of a projected 20% decline in the group’s revenue for the remaining nine months of its financial year ending Feb 28, 2019. Pantech has also blamed the US Department of Commerce’s preliminary affirmative anti-circumvention determination on a countrywide basis (imports of carbon steel butt-weld fittings from Malaysia) for affecting the group’s export of its manufactured fittings to the US.
Judging from this episode, industry observers expect the number of casualties among local exporters of steel and E&E goods to the US to be on the rise in the coming months.
In February this year, local steel players had cried foul over the US’ inclusion of Malaysia among the steel-exporting countries to face potential tariffs. The US had stated that it would only impose trade measures if the raw material came from China. In Malaysia’s case, the raw materials for its flight products, which were exported to the US, came from Japan and South Korea. Malaysia only exported about 96,000 tonnes of steel to the US last year. This small amount of flight steel product exports (of the US’ total steel imports of 30 million tonnes) could hardly cause injury to the US market.
Furthermore, the raw materials used are not from China because Malaysia has also imposed anti-dumping duties on China for their hot-rolled coils. Hence, there is no justification for the US to place Malaysia alongside 11 other countries under Section 232, whereby it plans to impose tariffs of at least 23% on steel products from all countries, or at least 53% on all steel imports from the list of the affected countries.
As for E&E, Malaysia is one of the big component exporters that support China’s electronic components and other related goods, which were then exported as manufactured products destined for the US market. Local E&E companies will also feel the brunt from the US-China trade spat. It is speculated that some Asian E&E exporters are already considering relocating or shifting their operations to Vietnam and Thailand to reduce their exposure to the US tariffs.
Megat Zaharuddin at the helm
TAN Sri Megat Zaharuddin Megat Mohd Nor, the former chairman of Malayan Banking Bhd (Maybank), will assume the “hot post” of the new Federal Land Development Authority (Felda) chairman.
He is taking over the helm of Felda – the country’s most important political cog with as many as 54 parliamentary constituencies dominated by Felda settlers – from Tan Sri Shahrir Abdul Samad, who had tendered his resignation on May 14.
Felda is also the single largest shareholder with a 34% stake in diversified plantation group FGV Holdings Bhd, the world’s largest crude palm oil (CPO) producer, which is currently facing a challenging outlook given the downtrend in CPO prices.
Megat Zaharuddin is seen as an ideal candidate to helm Felda, given his vast knowledge and hands-on experience in the corporate scene. He had built an outstanding career for 31 years with the Royal Dutch Shell Group of Companies, as well as served as Maybank chairman for eight years from 2009 to 2014. His previous chairmanships also include Maxis Communications Bhd (2004 to 2007), the Malaysian Rubber Board (2009 to 2010) and Etiqa Insurance & Takaful (2006 to 2009), among others.
It is believed that Megat Zaharuddin already has a series of tasks cut out for him towards ship-shaping and transforming Felda to scale greater heights after the recent graft scandal probes, dubious investment decisions and public image perceptions.
Megat Zaharuddin will have to navigate Felda through the many different challenges that it faces in light of the low price of CPO. His appointment will, no doubt, bring credibility to a post that has been politicised at the expense of business dynamics.
Resolution at last
THE issue of the restructuring of water supply in Selangor has been a longstanding problem that has yet to be fixed.
Water, Land and Natural Resources Minister Dr Xavier Jayakumar says in a report that the impasse between all parties have been given a deadline of Aug 10 for all disputes to be resolved.
Earlier reports suggest that a RM1.9bil deal has been reached, but that has been denied by the minister. The reported deal is much higher than what the Selangor government had offered previously, and should an agreement be reached between all parties, it will lead to a protracted issue that has plagued the state for some time being resolved.
Settling the water issue in Selangor is crucial. The state is the most industrialised in Peninsular Malaysia and any resolution will only bring benefit to the state, jobs and the country.
The fortunes of a few companies rest with the resolution of the state’s water woes. Gamuda Bhd and Taliworks Corp Bhd are two that will immediately gain from the settlement of the state’s water problems, and that will alleviate the problems both companies have faced of late.
Gamuda has been impacted by the delay or cancellation of some of the mega-projects in the country and a settlement of the water issue in Selangor will bring some respite to the company. It owns 40% in Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd (Splash), the last company to hold out in resolving the water crisis in Selangor.
Likewise, Taliworks is owed over RM600mil in receivables from Splash and a resolution will only help with the cashflow of the company.