Chen (left) presenting a memento to Deputy Chief Minister cum Industrial Development Minister Datuk Dr Joachim Gunsalam after the meeting. Also present were the ministry’s Permanent Secretary Thomas Logijin and Political Secretary to the Chief Minister, Dr Roland Chia.
KOTA KINABALU: The Sabah Scrap Metals Recycle Association (SSMRA) strongly objects to the ban on export of scrap iron from Sabah to Peninsular Malaysia and implementation of the RM200 Export Tax.
Its president, Edwin Chen, said the reason given for the ban is due to insufficient supply of raw materials to the local steel mill, but stressed that this is not true.
“Based on our internal statistics from previous trading, Sabah scrap iron dealers can produce 15,000 tonnes per month on average. So if the local steel mill’s consumption per month is 8,000 tonnes, this means there is a surplus of 7,000 tonnes of scrap iron per month in the market.
“If this huge surplus cannot be sold to other mills in Malaysia, scrap dealers will be facing financial problems and if scrap iron supply in Sabah is not enough, Unimekar can still buy from Peninsular Malaysia or overseas,” said Chen.
He pointed out that scrap dealers are not allowed to sell to Unimekar directly, they can only sell through an appointed agent and that cuts into their profit as well as cause delay of transportation of the raw material to the mill.
“All transportation of scrap iron to the mill can only be arranged by the agent, scrap dealers cannot send their scrap iron by their own trucks or even other genuine transportation companies.
“This will cause a delay in delivery of scrap iron to the steel mill as the agent cannot cope with the high volume of transportation for all the scrap dealers at the same time,” Chen lamented.
The association claimed that some scrap dealers cannot accept the price, the delivery method and the payment term offered by the agent.
Logistic problems especially from the east coast occur due to long distance and the agent’s mode of transport is slow and not efficient, he added.
“Scrap iron price may fluctuate vigorously as it is a type of commodity. If the scrap iron cannot be sent to the steel mill within a specific period of time, scrap dealers may face a huge loss due to sudden price drop.
“In order to protect themselves, our members have to use a barge and send the scrap iron to Peninsular Malaysia in a quantity of 3,000 to 4,000 tonnes and the cost of transportation is almost the same as using lorry to send to Kota Kinabalu.
“The local steel mill does not practice purchasing in a huge quantity at the moment. As from the above, it is clear that there is a discrepancy between scrap iron dealers and steel mill. Therefore, we strongly object to the ban of export from Sabah to Peninsular Malaysia. We urge our government to withdraw this ban immediately,” said Chen.
On the issue of the RM200 export tax, Chen pointed out that the Malaysia government has already imposed a 15 per cent duty on exports of ferrous scrap (scrap iron) on March 2021.
This duty helped all the steel mills in Malaysia to minimize the shortage of scrap iron and eventually reduce the price of scrap iron.
“Therefore there is totally no reason for the people of Sabah to bear any double tax as it is a grave consequence,” he stressed.
According to Chen, the Covid-19 pandemic has resulted in an economic crisis and the recycling industry is not spared from the negative effect.
“Some of the people, especially the B40 who are only relying on collecting recyclable items for a living are suffering because they are earning less. Scrap dealers are also facing heavy business pressure and cash flow.
“The export tax will definitely burden our industry and people of Sabah in this critical time,” Chen said.
He added that the scrap metals recycle industry is a vital industry in Malaysia, where scrap dealers help the local government to assort the scrap and reduce the ‘rubbish’ in landfills.
“We directly sustain and protect the environment in the country and some of our members have been contributing towards recycling for the past 20 to 30 years. In fact, most of the governments in the world would help and subsidise the recycling industry in order to maintain a better green future,” he said.
Chen said that if the RM200 export tax is implemented, it takes up about 15 per cent to 20 per cent of scrap iron cost price.
“And as scrap dealers in Sabah cannot sell to other steel mills in Malaysia, this will create a monopoly phenomenon in our recycling industry, eventually all our dealers will suffer,” he said.
Chen said that people in Sabah will be at the losing end because end users cannot sell their scrap at a good and competitive price.
The only beneficiary from this tax is the local steel mill, he said, adding, “since the above stated shows that Export Tax will not benefit the people in Sabah, we strongly urge our government to withdraw it immediately and completely,” he said.
Chen also expressed hope that the local steel mill can give consideration to SSMRA’s feedback on the issue, namely to be able to sell the raw material directly to the mill.
“We do not want to sell via the agent as it will affect our profit margin. We also urge that the transportation of scrap iron be open for all scrap companies and genuine transportation companies.
“We seek a proper Sales & Purchase agreement between buyer and seller to safeguard both parties’ benefit and also suggest that the mill allow barge purchase of minimum 2,000 tonnes and above from East Coast dealers i.e Sandakan, Lahad Datu, Tawau,” he said.
The steel mill, he added, needs to accept already processed or cut into half hazardous scrap iron like absorber, fire extinguishers, excavator cylinders and the mill also needs to buy cast iron from scrap dealers.
Chen stated that the reason the mill cannot buy enough raw material is not due to the shortage of it, it is mainly because of the discrepancy between SSMRA dealers and the mill.
“Any shortage of scrap can easily be solved by Unimekar and scrap dealers working out a deal together. There is no need for state government intervention. If the state government still insist on taxing any surplus scrap iron which we need to export, the state government must know that the money will eventually come from our local rakyat selling the scrap. Any tax on recycling of scrap iron is never justified.
“SSMRA reaffirms its stand on the opposition of the RM200 export tax. We hope that the state government will understand that the RM200 export tax will eventually be borne by the rakyat,” he said.
Chen also expressed the association’s appreciation to the state government for organising a meeting with the local steel mill on Monday to iron out issues.