The Malaysian Iron and Steel Industry Federation (MISIF) has called the government to review the decision to sharply increase electricity tariffs for steelmakers. According to the decision, Imbalance Cost Pass Through (ICPT) surcharge will increase from 3.7 sen/Kwh to 20 sen/Kwh.
MISIF noted that the sudden increase in electricity tariff imposed to the steel industry, which is still in doldrums since the price collapse in April 2022 and is facing a sharp decline in demand both domestically and internationally, has created concerns over the industry. Besides the increase in electricity and natural gas prices, the steel industry is facing a few of other challenges like the surge in scrap, iron ore and coking coal prices, increase in minimum wages, logistics issues and shortage of labor.
According to the MISIF’s statement, the steel Industry is critically in need of a competitive energy cost in order to stay competitive in the international market. Both steelmaking and rolling processes consume up to 650 kWh electricity to produce one tonne of steel product. This latest adjustment will translate to more than annual MYR 500 million ($113.03 million) of additional electricity cost to the industry. MISIF estimates that the steel industry’s annual electricity cost of MYR 1 billion ($226.06 million) in 2022 will be escalated to more than MYR 1.5 billion ($339.08 million) in 2023.
MISIF is appealing to the government to consider maintaining the current 3.7 sen/kW ICPT surcharge for three months, from January-March 2023; increasing the surcharge by 6.3 sen/kWh, from April to September 2023 and then by 10 sen/kWh from October-December 2023.