Posted on 02 Feb 2015
The Malaysian Iron and Steel Industry Federation (Misif) is urging the Malaysian Government to reduce electricity and natural gas tariffs without further delay in view of the drastic decline in the prices of crude oil, natural gas and thermal coal.
Brent is currently trading below US$50 per barrel and has fallen nearly 55% in the last six months.
Moreover, international natural gas and thermal coal prices have also fallen to below US$3 per million British thermal unit (MMBtu) and US$45 per short ton respectively.
Misif president Datuk Soh Thian Lai said a delay in lowering the electricity and natural gas tariffs would undermine the efforts by the industry to remain competitive in this very challenging time.
Soh also said that the government should have no doubts about reducing the tariffs due to the excellent performance of Tenaga Nasional Bhd financial results in 2014.
He pointed out that it was important to reduce the tariffs to prevent the country from losing her competitive edge in Asean and the global markets because neighbouring countries such as Singapore and Thailand had already lowered their electricity tariffs.
Misif expects the reduction of the electricity and natural gas tariffs to be at least 20%.
“Lowering the tariffs will assist the domestic iron and steel industry tide over the current difficult time as a result of ringgit’s weakening, the impact of basic salary regulation, rising inflationary pressure, recent imposition of online service charge on the online renewal system for foreign workers permit, the forthcoming introduction of the Goods and Services Tax (GST) and most significantly, the influx of cheap steel material imports into Malaysia,” Soh said.
He noted that the flooding of imports in the country mainly from China is a major concern for the Malaysian iron and steel industry as intense competition is resulting in many local steel companies keeping their businesses afloat.
“In 2013, the imports of steel reached a staggering 7 million MT, with China alone making 26% of the imports,” he added.
Malaysia registered an increase by 75% of total imports of steel products over the 2009 to 2013 period. In 2014, total imports are expected to increase by 2.9 % to 7.2 million MT compared to 7 million MT in 2013.
Soh said that the reduction in the tariffs would boost the industry’s competitiveness, continue its regular supply to the domestic market and the penetration of the regional and the global export markets.
“This will contribute to a more favourable trade balance and improvement in the US dollar account for the country,” he said.
