Gas price hike hurting glove makers
Published on: Tuesday, July 16, 2019

PETALING JAYA: Malaysian Rubber Glove Manufacturers Association (Margma) President Denis Low Jau Foo (pic) has lambasted Gas Malaysia Bhd for the surprise announcement on gas price hike.

Gas Malaysia’s three-day notice last Friday evening for the tariff hike, which will take effect Monday, is as “good as no notice given,” he said in a statement.

Margma has repeatedly stated that in the rubber glove export business, orders were taken two to three months ahead based on the prevailing production cost by the foreign buyers.

He pointed out that the sudden hike in natural gas tariff has disturbed the market equilibrium forcefully and resulted in unanticipated cost increase.

“As a result, Malaysia would stand to lose an estimated RM47.2mil in foreign revenue resulting from this sudden gas tariff increase over the next three months,” explained Low.

The natural gas price hike from RM32.38 to RM34.12 per MMBtu is equivalent to a 5.37pc increase for Tariff Category F.

“The increase is too sudden and the quantum is too high with just three days notice for the manufacturers over a weekend and to be effective on July 15.

“This tariff is higher than the base tariff at RM32.74 per MMBtu as announced in the roadmap on Dec 28, 2016,” he added.

Margma has estimated that the new natural gas price hike would lead to an increase in production cost of 30 US cents to 80 US cents per 1,000 pieces of nitrile glove and about 35 US cents to 85 US cents for latex glove.

“Due to the slim profit margin, all manufacturers will have to manage their production cost carefully, depending on the product type and their manufacturing process and energy consumption profile in order not to make losses,” said Low.

Margma has advised its members to inform their customers immediately about the sudden increase in natural gas tariff, which impacted the production cost substantially.

“As the production cost has inevitably increased, it is only logical that buyers will become acutely aware that our rubber gloves will now be more costly, going forward, while having the luxury of not having to absorb the higher cost for the next two to three months, as orders are always locked in at least two or three months ahead,” he said.

Low noted that the gas price hike does not benefit the industry.

“This action by Gas Malaysia is too abrupt and destructive and is adding cost to doing business, when such cost could have been passed on to buyers.

“It does not benefit the nation and for the next two to three months, it is the buyers that are gaining on what could have been extra revenue for the nation.”

He said if given sufficient time and notice, such increased cost could have been passed on to the international buyers.

“It is not smart and wise at all especially when Margma has time and again requested Gas Malaysia to give us early notice.

“Gas Malaysia has done a disservice not just to the rubber glove industry but also to Malaysia when the government is busy reviving our economy,” he said.

On another note, there seems to be a lack in clarity by the Energy Commission in its role to monitor the energy sector.

“The Energy Commission is shoving the new Third Party Access policy down the throats of natural gas users and Gas Malaysia.

“It is absurd that while the new policy is not properly explained, industry players are expected to sign new Gas Supply Agreements without even being given a complete agreement for their review by Sept 30,” Low said.

Margma had engaged with Gas Malaysia recently and understand that the gas price will increase tremendously when the deregulation of the gas market happens on Jan 1, 2020, reports the Star.

When cost and competitive elements are involved, Energy Commission needs to understand that industries need to be informed, be engaged and to deliberate jointly on the best applicable and winning solutions.



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