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Costlier oleochemical exports

KUALA LUMPUR: Oleochemical exports will be more costlier following the natural gas’ price hike effective yesterday, said Malaysian Oleochemical Manufacturers’ Group (MOMG) chairman Tan Kean Hua. 

Effective May 1 2014, those using natural gas of more than two million standard cu ft per day (mmscfd) pay RM19.65 per million metric British thermal unit (mmBtu). This is about 20 per cent more than RM16.45 mmBtu previously.

“There has been and will be inflationary pressure on oleochemical exports. Just like feedstock price increases in the last six months, we had no choice but to pass on the cost increases to clients,” he said in a telephone interview yesterday. 

The main feedstocks for oleochemical manufacturers are crude palm oil and crude palm kernel oil, whose prices have risen by about 15 per cent since November 2013. These feedstocks on average make up between 80 and 90 per cent of oleochemical pricing. 

The oleochemical industry consumes quite a fair bit of natural gas compared with other manufacturers as they use it for fuel and as a component for their products. Tan estimates that this year, MOMG members’ annual gas bill would rise by about RM350 million. Their natural gas and electricity bills represent more than 50 per cent of their total production cost.

 Asked if the natural gas price hike would have a negative impact on MOMG members’ earnings, Tan replied, “we’re a cost-plus business and oleochemicals are a necessity. It is present in household cleaning products, toiletries, cosmetics, industrial and pharmaceutical items we use everyday”, he said. 

“Our members have over the years made concerted efforts in using energy-efficient equipments. Some are considering putting up co-generation units in the near term. We’re in the business of making renewable chemicals. It’s only logical for us to incorporate energy-saving methods and more affordable components in walking the talk of sustainable development,” he added.

MOMG members churn out 25 per cent of the world’s 10.8 million tonnes of oleochemical demand. There are 18 local oleochemical firms with a combined annual capacity of 2.7 million tonnes.

In the first three months of this year, the Malaysian Palm Oil Board data showed the country exported RM2.78 billion worth of oleochemicals, 25 per cent more than a year ago.

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