PETALING JAYA: The Malaysian Rubber Glove Manufacturers Association (Margma) has taken a swipe at Gas Malaysia Bhd for the sudden increase in natural gas price, saying Malaysia stands to lose an estimated RM47.2 million foreign revenue in the next three months.
In a statement issued today, its president Denis Low Jau Foo said Gas Malaysia kept repeating its “bad habit” of making sudden announcements on gas price increases, with the latest coming into effect tomorrow.
“As mentioned repeatedly in the past, in rubber glove export business, orders are taken two to three months ahead based on prevailing production costs by the foreign buyers. The sudden new natural gas tariff has disturbed the market equilibrium forcefully and resulted in unanticipated cost increase.”
Low said Malaysian manufacturers must absorb the cost increase in order to honour the estimated RM5 billion of orders taken before the announcement. “As a result, Malaysia would stand to lose an estimated RM47.2 million foreign revenue resulting from this sudden gas tariff increase over the next three months.”
Margma estimates that the latest natural gas price hike will cause an increase in production cost of US$0.30 to US$0.80 (RM1.23 to RM3.29) per 1,000 pieces of nitrile gloves and US$0.35 to US$0.85 for latex gloves.
“Due to the slim profit margin, all manufacturers will have to manage their production costs carefully, depending on the product type and their manufacturing process and energy consumption profile, in order not to make losses.”
Calling Gas Malaysia’s move as too abrupt and destructive, Low said it will add cost to doing business, where such cost could have been passed on to buyers.
“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.”
The natural gas price increase from RM32.38 to RM34.12 per MMBtu is equivalent to 5.37% for Tariff Category F.
This tariff is higher than the base tariff at RM32.74 per MMBtu as announced in the road map on Dec 28, 2016, said Margma.
The association also questioned the lack of clarity in the Energy Commission’s (ST) role in monitoring the energy sector.
“The ST 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 been given a complete agreement for their review by September 30, 2019.”
Margma said it engaged with Gas Malaysia recently and understands that the gas price will increase tremendously when the deregulation of the gas market starts on Jan 1, 2020.
