Peninsular-based cement manufacturers in Malaysia are likely to feel the impact of a new electricity tariff hike, according to a report from Alliance Research. The Special Industrial Tariff (SIT) is set to push up electricity costs by around 19%, a substantial increase given that these costs account for around 20% of total production costs. On top of this Alliance is warning that rising competition from YTL Cement and CIMA, both of which are bringing new capacity onstream in the first half of next year, will make it difficult for producers to pass on their rising costs to consumers.
The electricity tariff in Sarawak will not be affected, leaving Sarawak-based CMS Cement in a stronger position as it faces neither rising costs nor increased competition.
The steel industry will also be impacted by the SIT, bringing pressure on margins at a time of weak steel prices. Electricity costs make up less than 10% of total production costs for the Malaysian steel producers mentioned in the Alliance report, which use electric arc furnace technology.
Edited from various sources by Katherine Guenioui
Read the article online at: https://www.worldcement.com/asia-pacific-rim/03122013/electricity_costs_put_pressure_on_margins_474/