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Hike in gas price will lead to higher glove production cost - association

KUALA LUMPUR, July 14 (Bernama) -- The sudden spike in gas price as announced by Gas Malaysia Bhd (GMB) will make the rubber gloves pricier going forward due to the substantial increase in production cost, said the Malaysian Rubber Glove Manufacturers Association (MARGMA).

Its president Denis Low Jau Foo in a statement today regarded Friday's announcement on the price hike which will take effect tomorrow, as good as no notice.

According to him, in the rubber glove export business, orders are taken two to three months ahead based on prevailing production costs by the foreign buyers.

The sudden new natural gas tariff he said, has forcefully disturbed the market equilibrium, resulting in unanticipated cost increase.

“Malaysian manufacturers must absorb the cost increase in order to honour the estimated RM5 billion of orders taken before the announcement.

“As a result, Malaysia would stand to lose an estimated RM47.2 million foreign revenue resulting from this sudden gas tariff increase over the next three months,” he said.

 Low said if given sufficient time and notice, such increased in cost could have been passed on to the international buyers.

He added that it was not a smart and wise move by GMB, especially when MARGMA has time and again requested for early notice.

The natural gas price hike to RM34.12 per MMBtu from RM32.38 per MMBtu is equivalent to a 5.37 per cent increase for Tariff Category F.

“The increase is too sudden and the quantum is too high with just three days’ notice for the manufacturers over a weekend and to be effective on July 15,  2019. This tariff is higher than the base tariff at RM32.74 per MMBtu as announced in the road map on Dec 28, 2016,” he said.

The natural gas price hike as estimated by MARGMA will lead to an increase in the production cost of US$0.30 to US$0.80 per 1,000 pieces of nitrile glove and about US$0.35 to US$0.85 for latex glove.

Due to the slim profit margin, all manufacturers would have to manage their production costs carefully, depending on the product type and their manufacturing process as well as energy consumption profile in order not to incur losses, he said.

“MARGMA urges the government to look into and capitalise on our natural advantage such as natural gas to spur industrial growth and not just sell off our gas as commodities and benefit others,” added Low.

-- BERNAMA

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