Steel industry faces RM100m additional cost following ICPT adjustment, says Misif

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KUALA LUMPUR (July 4): The Malaysian Iron and Steel Industry Federation (Misif) claims the industry would face an additional cost of RM100 million a year following the latest adjustment to the imbalance cost pass through (ICPT) announced by the Energy Commission last week.

The adjustment for the July to December period sees the removal of a 1.52 sen/kWh tariff rebate for all users in Peninsular Malaysia and a 1.20 sen/kWh tariff rebate for users in Sabah and Labuan.

In addition, a 1.35 sen/kWh surcharge is imposed on non-domestic users.

Misif said the net impact of this adjustment is an increase of 2.87 sen/KWh, or 8-16%, for industrial users.

In a statement today, the federation said both electricity and natural gas are essential utilities in the production process in the iron and steel industry.

"In order to be competitive against imports, and remain competitive in the international market, the industry critically needs competitive energy cost.

"Both steelmaking and rolling processes consume more than 650 kWh per tonne of electricity. This latest adjustment will translate to more than RM100 million per annum of additional cost to the industry," Misif said.

The federation said the industry encountered the worst onslaught of cheap imports for the past five years and is just about to recover with some nascent growth in the horizon filled with challenges.

"But the recent surge in natural gas and electricity price in the second half of 2018 will hamper the recovery effort of the industry and the Malaysian economy at large especially as the last increase of both utilities was just six months ago," Misif said.

It claims that the industry is already operating under an extremely challenging business environment, including rising cost of doing business due to the implementation of the Employment Insurance Scheme, duty drawback mechanism for steel raw material import, and minimum wage.

Misif urged the government not to impede the nascent growth of the industry and prepare it to stay competitive regionally and globally.

"We request the government to retain the rebate, abolish the surcharge for the ICPT, maintain the special industrial tariff for the industry for the next three years as it is one of the major consumers of electricity in the country," it said.