PETALING JAYA: Glovemakers are raising prices as costs rise due to the gas tariff hike, while steel manufacturers want special tariff arrangements and a freeze on natural gas prices.
The Malaysian Rubber Glove Manufacturers Association (Margma) said rising costs for the industry included the higher gas tariff, increased cost of packaging materials and chemicals and annual incremental cost relating to wages, new government policies and the weaker US dollar.
Its president Denis Low said the steep rise in the gas tariff translated to an additional cost of about US$0.60 to US$1.00 for every 1,000 pieces of gloves, depending on the glove type.
“Margma can understand the gradual subsidy removal by the Government as part of its subsidy-rationalisation programme, but still, a 22.9% increase is rather steep, as we need to be mindful of competition from our neighbours,” he said in a statement.
Low said the escalating cost of packaging material was mainly due to a lack of recyclable material, and the shortage is expected to continue in the months ahead, thus pushing up the price of boxes.
The price of boxes has moved up three times so far this year, resulting in a 32% price increase, he said.
On the US dollar, Low said they expect the currency to continue to weaken against the ringgit as oil prices soar.
He added that the chemical cost had also gradually increased, contributing to a higher cost of production, apart from the annual incremental cost of wages, as well as the government-imposed Employee Insurance Scheme and the impending revision of the minimum wage policy.
However, he still expects a record year for glove manufacturers in line with strong global demand for medical and surgical gloves, and all manufacturers running at optimum capacities and an oversold position.
The industry expects to gain RM16.2bil in revenue this year, having achieved RM7.95bil in the first six months.
Meanwhile, the Malaysia Iron and Steel Industry Federation (Misif) is seeking special tariff arrangements and a moratorium to maintain natural gas prices at the rate of RM26.31 per million British thermal units (mmBtu) for at least two years.
It said the recent gas tariff hike would mean an additional cost of about RM200mil per year for the industry, which is gradually picking up after a five-year slump,
“Electricity and natural gas are essential utilities for making steel products and represent the second-highest production cost component.
“The increase in the natural gas price and the consequent effect on higher production cost would invariably affect the viability and competitiveness of the domestic iron and steel industry,” it said in a statement.
It has been announced that the increase in the effective tariff rate would be at an average of RM4.47/mmBtu or 16% for the non-power sector in Peninsular Malaysia between Jan 1, 2018 and June 30, 2018.
Over the last four years, the natural gas tariff has increased six times.
“This is extremely difficult for any industry to endure, what more for energy-consuming manufacturing entities in the iron and steel industry,” Misif said.
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