The Cement & Concrete Association of Malaysia (C&CA) wants the government to review the ceiling prices for cement following the approval of the electricity tariff hike which could cost the industry an additional RM64 million annually. It said the current ceiling price no longer reflects the market situation in Malaysia and a revision is “long overdue and well justified”. The ceiling price, which averages at about RM198 per metric tonne in Peninsular Malaysia was last revised in 1995.
The C&CA representing 14 companies, in a statement on May 26, said while it understood the rationale behind the electricity tariff increase it was “disappointed and worried” by the quantum. “Under the new tariff structure, the industry is faced with a 14% increase in electricity rates, a result of a 12% increase and a reduction in the discount under the special industrial tariff from 10% to 8%,” it added.
The C&CA said the rise comes on the back of a 30% increase in production cost between 1995 and 2005, which was particularly felt over the last couple of years due to a major rise in the price of coal and a 15% increase in logistic costs due to higher diesel prices. It said because cement was a regulated commodity under the Control of Supplies Act and Price Control Act, the industry could not pass down the costs to consumers.
“Over the years, the cement industry has taken steps and has invested additional capital to improve the reliability and productivity of its plants, which has helped in the reduction of fuel and power consumption to mitigate the increases in production costs,” it said.
“However, with the series of major cost increases of the last couple of years, the cement industry has exhausted all avenues of cost mitigation and it is no longer feasible to expect the industry to absorb the impact of the electricity tariff increase,” it added.
The C&CA said the revised 1995 ceiling price was now lower than the domestic selling prices of most of the countries in the region and return on investment has reached a level where it was no longer attractive for necessary new investments.