THE Malaysian Iron and Steel Industry Federation (MISIF) wants the Government to look into adverse impact from the soon-to-be-implemented “sudden and perpetual increase in electricity tariff” will have on the iron and steel industry which is still in doldrums since the price collapse in April 2022.
To recap, Natural Resources, Environment and Climate Change (NRECC) Minister Nik Nazmi Nik Ahmad had on Dec 16 announced an adjustment to the electricity tariff for Peninsular Malaysia for the period of Jan 1 to June 30, 2023.
The exercise entails medium and high voltage users facing a drastic increase in Imbalance Cost Past-Through (ICPT) surcharge from 3.7 sen/kWh (kilowatt-hour) to 20 sen/kWh. The net impact of this increase will be more than 40% for the industrial users over the next six months.
With both steelmaking and rolling processes consuming up to 650kWh electricity to produce one tonne of steel product, MISIF expects the latest adjustment to translate into more than RM500 mil per annum of additional electricity cost to the industry.
“The steel industry is facing a sharp decline in demand both domestically and internationally. In order to compete with imports and stay competitive in the international market, the iron and steel industry is critically in need of a competitive energy cost,” MISIF pointed out in a media statement.
“MISIF estimates that the steel industry’s annual electricity cost of RM1 bil in 2022 will escalate to more than RM1.5 bil (in 2023).”
Besides the price surge in electricity and natural gas tariffs, the steel industry is facing other challenges in the likes of feed material prices, ie steel scrap, iron ore and coking coal, increase in minimum wages, logistics issues and shortage of labour.
“The iron and steel producers are striving to manage these challenges while containing their costs to enable them to compete with other regional producers,” justified the industrial group. “Therefore, government support and assistance are crucial to assist the iron and steel industry to survive and remain competitive in the international market.”
In order to avoid adding extra burden to the industry which is already in a very precarious situation – and to avoid the industry having to pass on the high electricity cost down to the customers, resulting in high inflation – MISIF has outlined the following proposals to the Government:
- Maintain the current 3.7 sen ICPT surcharge for three months from January-March 2023;
- Increase of 6.3 sen/kWh surcharge for six months, from April to September 2023;
- Increase 10 sen/kWh from October-December 2023;
- Temporary moratorium of 1.6% contribution to the renewable energy for the next six months for the categories of customers affected with the increase in surcharge.
“MISIF hopes to have an engagement session with the NRECC Ministry and relevant agencies to further discuss in detail the iron and steel industry’s concerns in order to find an amicable solution to this critical issue,” the industrial group added. – Dec 24, 2022