Misif: Electricity tariff hike will hamper industry recovery

PETALING JAYA: The Malaysian Iron and Steel Industry Federation (Misif) is calling for the government to consider maintaining the rebate and abolish the surcharge for the imbalance cost pass through mechanism, as the additional energy costs will hamper the industry’s recovery, which is just emerging from the doldrums.
It is also hoping the government will maintain the special industrial tariff for the industry over the next three years.
Misif said in a statement today that the net impact of the recent adjustment amounts to an increase of 2.87sen/KWhr or a drastic 8%-16% increase for industrial users.
“Both steelmaking and rolling processes consume more than 650 KWhr per metric tonne of electricity. This latest adjustment will translate to more than RM100 million per annum of additional cost to the industry.”
The Energy Commission cancelled the rebate of 1.52 sen/KWhr and imposed a surcharge of 1.35 sen/KWhr for the commercial sector for the period of July 1 to Dec 31.
Misif said while the iron and steel industry is just about to recover after it battled with cheap imports over the past five years, the surge in natural gas and electricity prices in the second half of 2018, will hamper the recovery effort for both the industry and the Malaysian economy at large.
It pointed out that over the last four years, the natural gas tariff increased eight times, from RM16.07 per MMBtu to RM32.69 per MMBtu, a staggering increase of RM16.62 per MMBtu or 103%.
“The additional gas cost incurred by the iron and steel industry is estimated to be more than RM107 million under the new tariff against the applicable rate in May 2014.”
Besides the extremely challenging business environment, Misif said the industry is also grappling with the rising cost of doing business due to 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, the minimum wage, stringent credit access, levy/rehiring cost of foreign workers cost and mandatory annual health checks for foreign workers, among others.
Citing the iron and steel industry’s contribution of 2.9% to Malaysia’s GDP in 2016, Misif said it has the potential to generate up to 6.5% of GDP, with job creation of up to 225,000 by 2020.