Glove Industry Gets Hit with an Unexpected Gas Price Increase. Again.

Gas Malaysia Berhad announced a surprise increase in natural gas prices, with only a three-day notice. The natural gas price hike increased from RM 32.38 to RM 34.12 per MMBtu, equivalent to a 5.4% increase for Tariff Category F, which is the tariff category glove manufacturers are subject to. This tariff is higher than the base tariff at RM 32.74 per MMBtu as announced in the road map in December 2016.

MARGMA, which the industry trade body, estimates that this natural gas price hike will lead to an increase in production cost of US $0.30 – US $0.80 / 1,000 pieces of single-use Nitrile Examination gloves. MARGMA further noted that the impact of this sudden, and unforecasted price increase, would be over RM 47.2 million in lost foreign revenue to the Government of Malaysia.

It should be noted that over the past five years, the price of natural gas in Malaysia has more than doubled in cost through multiple “resets,” with almost all increases coming with little or no advance notice to allow for manufacturers to appropriately adjust their cost structures and market pricing with customers.