Gas price revision could impact steel sector in the long-run
KUCHING: The natural gas tariff revision could affect the performance of the steel sector as the tariff revision could mean an overall increase of 23 per cent in natural gas price over the next three years.
The Malaysian Iron and Steel Industry Federation ( MISIF) strongly objected the planned increase natural gas price by Gas Malaysia Bhd (Gas Malaysia).
It viewed, the tariff rebate of RM0.40/MMBtu applicable for the January to June 2017 period which translates to an average effective tariff of RM26.31/MMBtu is just a meagre reduction of 2.74 per cent from the previous average tariff.
“More worrisome is the fact that there would be an overall increase of about 23 per cent over the next three years,” it commented.
“The new average base tariff as announced would effectively mean that come July 2019, the natural gas price would have increased by an astounding 104 per cent over a five year period,” it said.
The association also pointed out that this overall andsteep increase in natural gas price would invariably impose more pressure on production cost and affect the viability and competitiveness of the domestic iron and steel industry.
“The domestic iron and steel industry is still facing intense competition and high influx of imported steel products from all over the world. Malaysia, like the rest of the world, could not avoid the pressure of iron and steel imports from China.
“For the domestic iron and steel industry, 2016 has again been marked by intense competition from cheap imports, particularly from China. The total Malaysian iron and steel imports this year is expected to reach a record 8.60 million MT (7.92 million MT in 2015) with China alone contributing 40 per cent (3.45 million MT) of the imports.
“The increase in natural gas price will continue to adversely affect our competitiveness in the international markets and severely jeopardise our exports of steel products which is also expected to continue with its declining trend (2.34 million MT in 2015 to 2.1 million MT in 2016),” it said.
MISIF also said, the reduction in the average tariff rebate for January to June 2017 offers token relief to the steel industry.