Prices expected to increase

> Latest gas tariff hike too soon, too sudden, quantum too high, says Margma

PETALING JAYA: Rubber glove producers are expected to increase product prices next year in a move to alleviate the cost of manufacturing following the latest increase in natural gas tariff, said the Malaysian Rubber Glove Manufacturers Association (Margma).

Margma estimates that this round of increase will mean an additional cost of 40 cents to 70 cents per 1,000 pieces of nitrile gloves and 30 cents to 50 cents for latex gloves. Each manufacturer will have to adjust its pricing depending on product type and manufacturing costs.

Margma president Denis Low Jau Foo said in a statement yesterday that the 17% increase in the price of natural gas beginning Jan 1, 2016 comes too soon and too suddenly, with just 10 days’ notice, and the quantum is too high.

It pointed out that it was only six months ago that Gas Malaysia increased the tariff by 10.27%, on July 1, 2015.

“Whist we understand the move, we are concerned that the announced quantum is too high, too sudden and a burden to us now. The 10 days’ notice is too short and makes it difficult for manufacturers to manage the sudden increase in production costs as the selling prices for orders were already fixed months ahead,” said Low.

Low said while the rubber glove business is still robust with companies reporting good profits recently, buyers are actually getting lower and lower price offers.

“The buyers are requesting lower prices every time there is an upward movement in the US dollar and a downward movement in commodity prices. This is resulting in profit margins being squeezed and may eventually hurt the rubber glove industry and the Malaysian economy in general,” he added.

Meanwhile, HLIB Research in a separate report yesterday said any revision in the natural gas tariff will impact rubber glove manufacturers as, on average, it constitutes about 10% of total cost production.

“The final impact of the hike will actually depend on how soon rubber glove manufacturers are able to pass it to their end clients, which in our opinion, likely to be about three month lag,” its analyst Nick Foo Mun Pang said.

Having anticipated the latest round of tariff increase, Foo has a neutral stance on the rubber products sector.

Gas Malaysia said on Tuesday the average gas tariff has been increased by 17.11% to RM25.53 per million British Thermal Units from RM21.80. However, there will be no change to gas prices for residential users.