Pantech a victim of US’ anti-dumping duties
KUCHING: Pantech Group Bhd (Pantech) has become a victim to US and China’s trade spat as it has been subjected to US’ 182.9 per cent anti-dumping tax for its steel fittings from China.
In an announcement on Thursday, Pantech said, the US Department of Commerce (DoC) issued a preliminary affirmative anticircumvention determination concerning carbon steel butt-weld fittings from Malaysia.
The US DoC has preliminarily determined that Malaysian companies, including Panteh, are circumventing the anti-dumping duty order on butt-weld fittings from China.
As a result, carbon steel buttweld finttings having an inside diametre of less than 14 inches exported by Pantech Steel Industries Sdn Bhd (PSI) to US are subjected to a 182.9 per cent anti-dumping tax, based on the duty rate in effect on carbon steel-butt fittings in China.
The US DoC’s decision, for now, is still in its preliminary stage and Pantech and PSI are taking legal counsel in the US concerning the matter.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) deemed that Pantech has been made an “innocent victim” of this anti-dumping duties.
It explained, “As Pantech manufactures its own carbon pipe fittings and by no means is circumventing around these duties, they are currently taking legal steps to reverse the duties imposed on them citing that their products are ‘Made in Malaysia’ and not China.”
Currently, it noted that Pantech has suspended all shipments of carbon steel butt weld fittings to the US.
“We are negative on this given that 70 per cent of Pantech’s manufactured carbon butt weld fittings are exported to the US (circa RM120 million to RM150 million in revenue per annum) which would subsequently hurt bottom line.
“We decide to account for the worst by reducing FY19 to FY20E manufacturing utilisation rates for carbon welded butt fittings to 40 to 60 per cent (from 90 per cent previously) to cater for nil US exports (till mid 2020) leading to a 15 to 11 per cent reduction to our estimates,” the research team said.
Overall, Kenanga Research downgraded its valuations of the stock in light of the uncertainties arising over the anti-dumping duties with expectations that it could persist for a year (until mid2020) before being alleviated.
It downgraded its rating of Pantech to ‘market perform’ from ‘outperform’. It explained, “While we are expecting its share price to succumb to short-term selling pressures, we believe our market perform rating is fair given better oil and gas activities amidst the healthier oil prices on higher maintenance works, which indirectly benefit Pantech and on-going RM40 million capital expenditure (capex) expansion, which would boost its carbon steel production capacity and warehousing facilities to be reflected in FY20E earnings.”