KUALA LUMPUR (Dec 26): The impending increase in electricity tariff for industrial users from March 1 to June 30 next year will see their cost increase by 17.3% or RM148 million to RM1 billion, says the Malaysian Iron and Steel Industry Federation (Misif).

This is based on the overall annual electricity cost of RM855 million borne by the iron and steel industry between January and June this year, it added.

The local iron and steel players voiced concerns over the proposed rate increase, especially coming at a time when steel prices have dropped tremendously, both domestically and internationally.

"The iron and steel industry encountered the worst onslaught of cheap imports for the last five years. Just barely recovering from the doldrums for the last two years, the international steel price took another plunge recently while the iron and steel business community are battling with slowdown business environment aggravated by the sentiments of the US-China trade war, as well as intensifying competition from other regional producers and dominant foreign players at home," said Misif in a statement today.

The iron and steel producers also warned that the industry would have difficulties in passing the full exorbitant increase in costs to end-users as the latter might opt towards import to maintain their competitiveness.

"Misif is of concern that the plight and trepidations of the industry have hardly been taken into consideration seriously inspite of the numerous engagements with the Energy Commission, Tenaga Nasional Bhd (TNB) and the relevant ministries such as the international trade and industry ministry and the energy, science, technology, environment and climate change ministry," it said.

"Producers are striving to manage these challenges while containing their costs to enable them to compete competitively with other regional producers. But any perpetual increases in electricity cost hampers any recovery effort by the industry," it added.

On Dec 14, TNB announced that it will raise the imbalance cost pass-through (ICPT) surcharge for non-household users from March 1 to June 30 next year, to help offset rising costs. The ICPT surcharge will increase to 2.55 sen per kWh from the current 1.35 sen per kWh.

"Misif notes with grave concern of the perpetual increase in electricity tariff imposed to the industry. Being an energy intensive industry, electricity is an essential utility besides natural gas and represents the second highest production cost component after the raw material for the industry," said the federation.

It noted that in just a short span of four years since 2014, the average "on and off peak" electricity rate and maximum demand price have gone up by about 18% and 12%, respectively.

"While major steel mills’ main concern is more of survival with margins subjected to the vagaries of internationally trade commodities, TNB earnings, on the other hand, are more stable and resilient, and margins which should have been susceptible to fluctuating fuel prices seemed to be protected through the ICPT to end users.

"To-date, TNB has been making steady cumulative profits of RM37.66 billion since 2014, while major steel mills are striving as continuing concern in quest of recovery," Misif pointed out.

Deeming the ICPT as an "opaque and bias system", Misif is "strongly advocating the halt in continuous increase in electricity prices and call for the abolishment of such system which it said seems to favour only utility companies.

"TNB should have earnestly look into how to balance between generating electricity and an effective tariff structure that lend support towards the growth and well-being of the industry," it added.