From plastics to palm oil: Nine in 10 Malaysian manufacturers face crunch from shortages and high costs  

KUALA LUMPUR, April 9 — Malaysian manufacturers are bracing for disruption.

Nine in 10 manufacturers in the country expect operational hiccups in the coming weeks, with raw material shortages, rising energy costs, and logistics bottlenecks threatening production across sectors, according to the latest survey by the Federation of Malaysian Manufacturing (FMM).

Nearly seven in 10 (69.5 per cent) Malaysian companies foresee shortages within just four weeks.

The situation is exacerbated by the fact that 8.2 per cent of manufacturers hold less than two weeks of critical supplies, leaving them extremely vulnerable.

The raw material shortages cut across nearly every sector, with cascading effects from upstream suppliers to downstream producers, according to the FMM report accompanying the survey.

For instance, essential inputs like naphtha, liquefied petroleum gas (LPG), and sulphur – sourced from West Asia and Europe – are becoming scarcer, confronting industries that rely heavily on these materials, such as plastics fabrication and chemical manufacturing.

The reduction in speciality chemicals needed for electronic products and industrial coatings further illustrates this supply chain fragility, as companies are likely to face increasing delays and longer lead times.

Moreover, the survey found that metals such as aluminium and copper, which are crucial for manufacturing processes, are facing shipment delays and renegotiated spot prices.

The results also highlighted that the food processing sector is experiencing significant disruptions in securing palm-based additives and food-grade packaging materials, while the rubber industry, including manufacturers of gloves and tyres, faces tigh10ed supply lines for critical processing chemicals.

Additionally, 67.3 per cent of companies surveyed expect production disruptions in the upcoming month.

To mitigate these challenges, the FMM report said many companies are actively seeking alternative suppliers from regions such as China, India, and Japan, which may be hampered by numerous obstacles, including lengthy customer qualification requirements, strict regulatory approvals, and higher costs associated with switching to non-contracted suppliers.

The survey was conducted before the announcement of a two-week ceasefire agreement between Iran and the United States yesterday.

As manufacturers brace for disruption, uncertainties loom over how long this truce may hold, and whether the industry can return to normalcy as oil prices remain high and trade distribution continues to falter.

Increasing cost of energy and logistics

According to the FMM survey, 48.6 per cent of manufacturing firms have reported energy cost hikes ranging from 10 to 30 per cent.

A further 33.6 per cent have faced increases of 30 per cent or more, placing substantial pressure on production sectors that are notably energy-in10sive, such as ceramics, glass manufacturing, and heat-intensive food processing.

The trend was also observed in logistics costs, with over 52.7 per cent of companies indicating increased freight and logistics expenses of between 20 and 50 per cent.

These figures reflect a combination of imposed general rate increases by shipping lines, emergency surcharge taxes, and added liabilities stemming from conflict-related disruptions.

On the domestic front, the situation is no better. Roughly 54 per cent of companies note that their haulage operations are being adversely affected due to the exhaustion of diesel subsidy quotas.

Export commitments at risk due to reduced output

The survey also revealed that 48.2 per cent of companies have either reduced their output or suspended product lines altogether in reaction to the prevailing conditions.

Moreover, over half (51.8 per cent) of surveyed firms reported disruptions in their export operations, including shipment delays, renegotiations for pricing initiated by buyers, and outright order cancellations.

The survey also highlighted mounting financial pressures, with 74.5 per cent of companies indicating that they are facing increased working capital constraints.

Notably, 18.2 per cent of respondents stated that these pressures are already influencing their capacity to sustain operations.

Additionally, 74.5 per cent of manufacturers reported production cost increases of at least 10 per cent compared to pre-crisis levels.

Call for government action

In light of the findings, FMM proposed a series of recommendations for government action, encompassing fiscal and tax relief, energy support, raw material supply security, and logistics enhancement. Key proposals include:

1.      Fiscal relief for crisis-related costs

2.      Temporary suspension of import duties

3.      Priority allocation of diesel

4.      Sales tax and import duty relief for reimported export cargo

5.      Temporary tariff stabilisation for industrial electricity and gas pricing

6.      Price surveillance on critical industrial raw materials

The federation noted that without swift government intervention, what began as manageable operational challenges could evolve into structural constraints that could restrain overall production and domestic supply.