TNB's Green Electricity Tariff programme provides additional support to plastic packaging players.
PETALING JAYA: The softening cost of input resin, easing of labour shortage and the move towards higher-margin products by industry players, will cushion the impact of a global economic slowdown towards sales volume in the plastic packaging sector.
Kenanga Research said the global economic slowdown and increasing competition from European manufacturers will likely result in weaker sales volumes for the export-dependent sector, over the immediate term.
“We see European manufacturers gradually making a comeback in a more significant way on the heels of the sharp drop in their gas prices, giving Malaysian manufacturers a run for their money,” the research house said in a report.
While the mild winter in Europe saw Europe’s benchmark Dutch Title Transfer Facility (TTF) gas futures price come off by more than 80% to below £40 (RM192) per megawatt hour (MWh) from the recent peak of above £300 (RM1,440) per MWh, domestic producers can be reassured that consensus still maintains Dutch TTF gas futures price to average at £50 to £60 (RM240 to RM288) per MWh in 2023.
“On the other hand, Malaysian producers have to contend with rising energy costs following a hike in electricity tariff in January 2023. We believe this is manageable as typically electricity only makes up 4% to 6% of total production cost of plastic packaging players,” said Kenanga Research.
Tenaga Nasional Bhd
’s Green Electricity Tariff programme provides additional support to plastic packaging players by offering an exemption to an imbalance cost pass-through surcharge of 20 sen per kilowatt hour (kWh) via a subscription charge of 3.7 sen per kWh, which will result in an effective savings of 16.3 sen per kWh.
“However, this offer to buy renewable energy is capped at 30% of total electricity consumption, subject to the availability of quota and only valid for six months ending June 31 2023 for now. “We understand that Thong Guan Industries Bhd, BP Plastics Holding Bhd and Scientex Bhd have signed up for the programme,” said Kenanga Research.
The research house projected local plastic packaging players to grow at a faster rate than the global plastic packaging market, which is expected to record a compounded annual growth rate of 3.5% from 2022 to 2027.
“We believe local players could grow at a faster pace during the period as they gain market share from overseas manufacturers that are losing competitiveness due to the rising production cost.
“Plastic packaging players under our coverage have put in place fairly aggressive expansion plans to take advantage of the situation.”
Kenanga Research noted local plastic packaging companies are positioning themselves for higher margin products like premium stretch films and premium blown film packaging, which can mitigate the effects of an economic slowdown.
