Local manufacturers hit by low supply of raw materials from China

Association is also not optimistic about the export of products to China due to the slowdown caused by the Covid-19 outbreak


LOCAL manufacturers who rely on components from China face production interruptions as the latter battles the Covid-19 outbreak, gets assembly lines back on track and opens up cities previously under lockdown.

Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said the initial feedback from members indicated a low supply of raw materials from China including wire mesh, printed circuit boards, moulded and metal press parts, steel rings and steel balls for bearings.

“Imports of these raw materials from China are affected as certain cities are currently under lockdown and production has been stopped,” he told The Malaysian Reserve recently.

China is Malaysia’s largest trading partner for 10 consecutive years, with trade growing by 8.1% valued at RM313.8 billion in 2018.

Soh said due to the close link between Malaysia and China’s global supply chain, export-oriented manufacturers that rely heavily on Chinese demand and those that import raw materials from the country may be significantly affected.

Reports suggested that Chinese workers were struggling to return to work due to the outbreak, which has affected the world’s second-largest economy. A few cities are on lockdown and many assembly lines have yet to return to normal as the deadly flu virus continues to cause heightened worries.

Worker shortages, transport disruption, a lack of medical supplies and heavy-handed local officials were making life difficult for businesses, according to the Chinese government last Tuesday.

iPhone production is also in limbo after the mobile supplier and manufacturer Hon Hai Precision Industry Co Ltd or Foxconn Technology Group had only about 10% or about 16,000 of its workforce returning to work on Feb 11, according to Reuters.

Soh is also not optimistic about the export of products to China.

“Exports affected include pressure leaf filter machine, components for automotive, motorcycle and electronic products, bearings, hygiene products, steel products, parts for equipment,” he said.

According to InvestPenang, a prolonged shutdown of manufacturing facilities due to the pandemic could affect the global supply chain.

“Wuhan, also known as ‘Chicago of the East’, is an 11-million population capital city of the Hubei Province in Central China.

“It has a GDP of US$224 billion (RM928 billion) and 230 Fortune Global 500 firms have presence there,” InvestPenang director Datuk Seri Lee Kah Choon said.

The Hubei Province is also a transportation, manufacturing, financial and commercial hub, besides being a base for a number of giant automotive and oil and gas companies.

FMM urged Putrajaya to intensify the promotion of buy made-in-Malaysia products to boost a robust and sustained domestic market demand.

This will allow Malaysian manufactured products to strengthen the capacity and capability of the domestic manufacturing industry; which in turn enhances efforts to build brand integrity in export markets later on.

“We also hope that the government can conclude a Regional Comprehensive Partnership Agreement and implement free trade agreements which have been signed such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“Such a move could provide better market access for Malaysian exporters,” FMM’s Soh said.

He said many small and medium enterprises have been affected by the worsening global economic environment, particularly from the contraction in export markets previously.

Malaysia’s total trade in 2019 contracted by 2.5% from RM1.88 trillion in 2018 to RM1.84 trillion.