00:10Hello and good evening. I'm Melissa Idris. Welcome to Consider This. This is the show
00:15where we want you to consider and then we consider what you know of the news of the day.
00:19From industrial components to food packaging, plastics are embedded in our everyday life.
00:26But as global supply chains come under strain, shortages in petrochemical inputs could ripple
00:33across the economy and eventually spill over into consumer products and our everyday household items.
00:40Now, just how prepared are we for the downstream impacts of supply disruptions?
00:46Joining me on the show to discuss this further, I have Sisi Chia, who's the president of the
00:52Malaysian Plastics Manufacturers Association. He's also the Managing Director of Sihau Global,
00:58which is a manufacturer and marketer of plastic pallets.
01:02Mr Chia, thank you so much for joining me on the show today.
01:06To start our conversation, maybe you can briefly begin our conversation today by describing some of the inputs
01:14that are needed as part of the plastic supply chain. I'm quite curious to know how dependent we are
01:22on imported inputs to create plastics that we clearly need for everyday products.
01:29Yeah, thank you. It's a very important question. I think most people do not know that plastics come from crude
01:39oil.
01:39Yeah, and actually in Malaysia, plastics are produced from two main feedstocks.
01:45Number one is the LNG, which is what we are doing in Tungganu, where Petronas with this offshore LNG production
01:55is being fed onshore and fed into a few plants that make polymers, plastics.
02:03So that is one of the feedstocks that we have, and that is completely domestic.
02:11And that one, in terms of costs, I don't think that is being impacted by the war in the Middle
02:20East.
02:21The other feedstocks that we have for making plastic is actually crude oil.
02:27It's actually nafta, which can be imported from the Middle East mostly, or it can be also refined by refining
02:39crude oil.
02:40We can import and refine crude oil, which is what Petronas is doing in the Penggarang facility.
02:48So whether it is nafta or crude oil for the production of plastics, we are very heavily dependent on imports
02:59of nafta and crude oil from the Middle East.
03:02And therefore, Malaysia, we are impacted by the war.
03:08Okay. Can you tell me, Mr. Chair, what you've observed since the war on Iran began?
03:16At what point did you and your members start noticing signs in the supply?
03:23Has there been disruption that you've noticed?
03:27Well, very quickly, I mean, I think after a week, one, two weeks after the war broke out,
03:34I mean, there are some producers in ASEAN region has declared a false major.
03:40Basically, what I've heard is that plastic polymer producers typically hold about two weeks or a bit more of a
03:50nafta inventory.
03:52So when the supplies is interrupted because of the war, you know, a few of them started to declare false
04:01major.
04:01And that's why we realized that, you know, there will be a huge impact on the supplies and the price
04:09and therefore the price of the plastic raw material to the market.
04:15Right. Yeah. So how much how much have prices moved since the war began?
04:20Well, the prices was around $930 per tonne for PE and PP before the war.
04:32Now the market price is for PP locally is selling for $1,750 for PP and for PE is probably
04:44selling at $1,650.
04:47So it has gone up by 80% to 100%.
04:51Oh my gosh, that's double.
04:54Certain grades, certain grades are going at above $2,000 per tonne.
05:00So yeah.
05:02Okay.
05:02Big impact.
05:03Right. So talk to me about that impact.
05:06Which industries are most exposed?
05:09So you talked about how there's some domestic production, but the NAFTA is from the Middle East.
05:16That input is from the Middle East, the feed stocks, you said.
05:21Which industries are most dependent on those inputs?
05:25If we talk about the downstream impact of these disruptions, can you give me some examples of where they might
05:31be most obvious?
05:33Well, plastics is actually an enabler to many industries.
05:39But the biggest sector that is used consuming plastics would be the packaging.
05:45Plastics are about 45% of total plastic productions goes for packaging.
05:51So you have industrial packaging and consumer packaging.
05:54So plastics are being used for packaging of consumer products like beverages,
06:04food, your daycare products, your detergents, your shampoos and all those things.
06:12So that will be the biggest sector that will be impacted by the shortage and the price increase of plastic
06:19raw materials.
06:20This second one will be E&E, electrical electronics industry.
06:25They use a lot of plastics as well, plastic components.
06:30And then you have the alternative, also a lot of plastic components.
06:37Construction, construction materials, the pipes and the trunkings.
06:44Those, yeah, they will also consume plastic products.
06:48So many industries.
06:50That's everything, that's every industry.
06:52Yes.
06:52Yes.
06:53Correct.
06:54Yes.
06:55Okay.
06:57All right.
06:57So my next question is, are the, are substitutes available?
07:03So we're clearly very dependent on plastic and some of the key inputs are in areas that are affected by
07:10the war.
07:11So are inputs like NAFTA able to be substituted with something domestically or produced elsewhere outside of the Middle East?
07:22Unfortunately, plastic production is very dependent on NAFTA supplies.
07:27I, you can use a natural gas, but the, you cannot simply have it have NAFTA supplied by a natural
07:38gas.
07:39That's a, suddenly, you know, because the facility in Congano that is built with feedstock, LNG as a feedstock, you
07:48cannot change that.
07:49Suddenly you cannot just switch on and switch off to a different material.
07:52Yeah.
07:54Therefore, there's no short and quick fix for this.
07:59Yeah.
07:59And that's why I would say that the alternative for Malaysian plastic manufacturers is to import those raw materials.
08:08And, uh, and that's why, uh, about a month into the war, uh, we have a lot of members inquiries
08:16and, uh, we have encouraged our members to source from overseas, uh, basically to import these raw materials.
08:22Uh, it can be imported from the U S U S is a big producer of polymers.
08:27And we can also import from China.
08:31All right.
08:31We can also import from China.
08:33All right.
08:34So, so that, those are the, uh, what we have encouraged our members, you know, to, to source from these
08:39two countries.
08:39Right.
08:40Can I ask you how closely, um, suppliers are, how closely you and your members are coordinating with the government
08:47on this?
08:48I mean, clearly the supply productions will have such a ripple effect across the economy.
08:53Are you, um, engaging or is the government engaging with you and your members?
08:58What kind of, um, stakeholder consultation process is happening at the moment?
09:04Well, we have, uh, written to MITI, the Ministry of International Trade Industry, and we have written to the prime
09:11minister to get them to, to help us.
09:15Because, uh, uh, when there is a shortage of polymer is going to impact many industry downstream industries.
09:22And so we have, the first thing we have asked the government to do is to, uh, uh, temporarily exempt
09:29the, uh, members from, uh,
09:32paying import duty, uh, 10% import duty for the importation of plastic, uh, raw materials for at least, uh,
09:41six months.
09:42And to also temporarily, uh, do away with SST.
09:47Uh, there's a 5% SST on, uh, uh, the importation of raw materials as well.
09:53So by, uh, uh, removing this, uh, food, uh, the duties and the SST, we are then, uh, able to
10:02import, uh, raw material at a lower price.
10:06Because now you have materials that go down in price by 80 to 100%, a 10% on, on this
10:14is very significant.
10:15Yeah.
10:1610% or 5% on, uh, doubling the price of, uh, raw materials is very significant.
10:24Uh, Mr. Chair, is it just that prices have gone up, um, or is there a clear shortage in supply?
10:32Meaning that there's no supply to be, to be had.
10:36That, that there's just not enough NAFTA to go around, um, and fulfill demand around the world.
10:41Yeah, there's certainly, uh, you know, uh, a shortage of supply, a shortage in supplies of NAFTA.
10:49Shortage in supply in the, uh, plastic raw material as a result of the shortage in supply of NAFTA.
10:59So, uh, yeah, supply, uh, availability of raw material is one thing.
11:04And because of the shortage, it results in a huge jump in price.
11:09Okay.
11:10I'm just wondering whether, whether there is a, there's going to be limited supply
11:14or there's going to be, um, less packaging available and therefore businesses will have to cut down,
11:22um, reduce their, their own production.
11:24What is the impact to, um, to the economy, to everyday, um, users?
11:31Are, are we expecting the, this cost to be passed on to the end consumer?
11:38Yeah, the cost is definitely passing to the, uh, to the downstream manufacturers,
11:44whether it's a food company or E and E companies or, uh, uh, uh, automotive company.
11:51Whether they choose to pass on to the end consumer, that is, uh, is up to them.
11:57But I think for our members, uh, there's no other way but to pass on this cost to their customers
12:03because, uh, the price increases us too much for us to bear.
12:07So you mentioned, um, you know, uh, promote, uh, uh, recommending or asking the government
12:14for an exemption on import tax and SST.
12:18Uh, is there anything else policymakers should be thinking about, particularly since you've
12:23raised the red flag over some of these constraints?
12:27Um, what would you like policymakers to understand about this industry particularly
12:32and the impact of the war?
12:34I would say generally, uh, we will appeal to, we appeal to the government to, uh, remove
12:41the import duty for, uh, plastic raw materials completely because, uh, uh, uh, uh,
12:49Malaysia, our plastic products are not protected.
12:53It's a very open market.
12:54There's no import duty on any, uh, or most of the plastic products that has come to Malaysia.
12:59So we have a lot of Chinese, uh, manufacturers that are exporting their plastic, whether it's
13:05semi-finished or a finished, uh, plastic products into Malaysia.
13:09But there is a, uh, a 10% protection for raw material producers, which I think is not fair.
13:16Uh, we have to have a very, uh, uh, uh, we have to have a very open economy.
13:23We, we, we see that, uh, open economy, uh, without import duty for plastic raw products.
13:38So we have to be more competitive internationally.
13:43So we are, we have written to Miti to appeal for the complete removal, permanent removal of, uh, import duty.
13:51And, uh, we hope they can decide in our favor.
13:54Thank you so much for joining me on the show.
13:56That was Sisi Chia from the Malaysian Plastics.
13:59Miti's Manufacturers Association.
14:01We're going to take a quick break here and consider this.
14:04We'll be back with more on this topic.
14:05Stay tuned.
14:06We'll be back.
14:09Bye-bye.
14:09Bye-bye.
14:10Bye-bye.
14:10Bye-bye.
14:13Bye-bye.
14:16Bye-bye.
14:17Bye-bye.
14:17Bye-bye.
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