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Thursday, April 17, 2014

Gas price hike will cost industry RM130m more annually : Misif

Posted on 15 April 2014 - 05:37am

PETALING JAYA: The Malaysian Iron and Steel Industry Federation (Misif) has lambasted the government's decision to allow an increase in gas prices for industries, which it claims will translate to an additional RM130 million in costs for the steel industry annually.

"The steel industry is an energy intensive industry that consumes around 5 to 7 million British thermal unit (MMBtu) natural gas for each metric tonne of steel making/rolling activity. This recent announcement would mean an average 4% increase in the total production cost. This would result in an additional cost of about RM130 million per year to the steel industry. The industry would have difficulties in passing the increase in costs to end-users as the latter might opt to import to maintain their competitiveness," the industry body said in a statement yesterday.

Last Friday, Gas Malaysia announced an average increase of 20% in gas price for the non-power sector in Peninsula Malaysia, from an average price of RM16.07 MMBtu to RM19.32 MMBtu come May 1, 2014, when it is to be implemented.

Misif opined that the government's removal of subsidies should be gradual and spaced out between the subsidised items so that the increased costs could be gradually and moderately absorbed into the steel pricing.

Steel is a vital component to the construction and other strategic industries such as oil and gas, automotive and electrical & electronics. The industry needs a time frame of six to 12 months to factor the increases.

"The double setback of dwindling exports and surge in imports of iron and steel products over the years continues to haunt the industry," Misif said.

Exports declined by a whopping 33% from 3.15 million metric tonne (mt) (2012) to 2.10 million mt (2013) whilst imports jumped by 15% from 6.02 million mt (2012) to 6.92 million mt (2013).

"We again urge the government to conduct a thorough impact assessment study and fully assess the effect of the hike in natural gas, electricity tariffs, fuel, wages, the forthcoming GST, toll rates, etc. on industries and the nation's overall economic well-being first before considering and allowing any price increases. The assessment study should be made public to all stakeholders before any final decision is made," Misif said.

The industry body said it has been working and collaborating closely with the relevant authorities to further develop and promote a vibrant, competitive, efficient and versatile industry, especially through the shared responsibility approach.

The Malaysia Steel Council and the Malaysia Steel Institute have been established by the government to chart and propel the industry to greater heights in the midst of challenging times.

"We regret that such noble initiatives would be rudely negated by untimely and unwarranted price increases. Therefore, we strongly oppose to this price increase of natural gas by Gas Malaysia," Misif said.

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