Source: The Edge
The Malaysian Iron and Steel Industry Federation (Misif) has called for a three-year moratorium on natural gas price hikes by maintaining it at RM32.52 per one million British thermal unit (mmbtu) for the local iron and steel players.
In a statement yesterday, Misif asked the government to consider the special tariff following Gas Malaysia Bhd’s announcement on the tariff hike to RM32.69 per mmbtu from RM32.52 per mmbtu on June 13. The tariff is effective from July 1 to Dec 31.
The new rate is inclusive of a 77 sen per mmbtu surcharge under the gas cost pass-through mechanism applied to all tariff categories due to the higher liquefied natural gas price against the reference price in the base tariff during this period.
Misif said since May 2014, Gas Malaysia has made upward revisions from RM16.07 per mmbtu to RM32.69 per mmbtu, and that this eighth hike announced last week could make the local iron and steel industry uncompetitive in the international market.
The increase over the years amounted to RM16.62 per mmbtu or 103%, it said, adding that that is equivalent to more than RM107 million additional costs incurred by the industry.
“The alarming increase over the last four years is too much for the industries to bear especially the iron and steel industry which consume the most natural gas in their process,” Misif said.
Misif said electricity and natural gas are essential utilities for making steel products and represent the second highest production cost component.
The steel industry consumes about two mmbtu per tonne of natural gas for each tonne of steel making/rolling activity.
“The impact from the higher gas cost will reflect on a higher production cost to the industry and would invariably affect the viability and competitiveness of the domestic iron and steel industry,” it added.
It added that the steel industry has been operating under an extremely challenging business environment in the last few years, with the rising cost of doing business attributed to factors such as the implementation of the Employment Insurance Scheme, the ongoing duty drawback mechanism (for the importation of steel raw materials to produce finished goods for export purposes), minimum wage (current levels pending upward review), and stringent credit access, levy/rehiring cost of foreign workers.