FMM urges immediate govt action as Mideast conflict threatens Malaysian manufacturing and exports

FMM In The News: THE EDGE MALAYSIA, April 7, 2026

KUALA LUMPUR (April 7): The Federation of Malaysian Manufacturing (FMM) has renewed its call for urgent government action after a survey revealed that the ongoing Middle East conflict could halt Malaysian production and exports within weeks. 

The survey found that nine out of 10 companies are already affected or expect to be within four weeks, as disruptions to key shipping routes like the Strait of Hormuz are causing raw material shortages. 

FMM president Jacob Lee Chor Kok in a statement warned that this is not a problem manufacturers can solve through tighter margins or operational tweaks, as production lines are at risk, export orders are being cancelled, and financial capacity is under severe pressure.

Malaysian manufacturing, which contributes about 23% of gross domestic product, is deeply integrated into global supply chains, with 82.9% of companies sourcing more than 30% of their raw materials from overseas. The immediate threat is not cost, but the physical unavailability of critical inputs — 69.5% of companies expect shortages within four weeks, and 8.2% hold less than two weeks of stock. Key materials such as naphtha, liquefied petroleum gas, specialty chemicals, metals, food-grade materials, and rubber additives are in short supply, affecting nearly every manufacturing sub-sector. 

The FMM said specialty chemicals for electronics, coatings, and surface treatments are running low and taking longer to arrive. Metals like aluminium, steel, and copper are delayed and more expensive. Food manufacturers face shortages of palm additives, dairy, packaging, and preservatives, while the rubber sector struggles with chemicals and oils. It said overall, supply chains are shrinking, and some are already broken.

Companies are seeking alternatives from China, India, Japan, South Korea, and Asean countries, but regulatory approvals, quality checks, and higher costs are slowing the transition, threatening domestic and export production.

Energy and logistics costs are compounding the crisis. Nearly half of manufacturers report energy cost increases of 10-30%, 21.8% increases of between 30% and 50% while 11.8% see rises above 50%. The most severely affected sectors are those with high diesel intensity in their production processes like ceramics, glass, food processing, and marine logistics, where energy forms a substantial share of total operating cost and cannot be substituted or deferred.

Freight and shipping costs have surged, with over half of companies facing 20–50% increases and 18% seeing costs rise more than 50%. Shipping costs are rising due to rate hikes, emergency fuel charges, war risk fees, peak season levies, and congestion surcharges, often added suddenly and outside existing contracts. For exporters with fixed-price deals, these higher freight costs are wiping out their profit margins.

The disruption also affects local transport: 54.1% of companies say diesel quota limits are causing higher costs, delivery delays, and fewer available hauliers.

Nearly half of manufacturers have already cut production or paused product lines, and over half are experiencing export disruptions, including delays, order cancellations, and renegotiated prices. Working capital is under severe strain, with 18% struggling to sustain operations. Production costs have risen by at least 10% for 75% of companies, putting pressure on small and medium enterprises (SMEs) that typically operate on 5-15% margins. Without targeted relief, the financial survival of these companies — and the sector’s ability to trade — is at risk.

The FMM has urged the government to take immediate action, proposing measures across fiscal policy, energy, raw materials, logistics, and crisis governance. Recommendations include tax relief for crisis-related logistics costs, temporary exemptions from import duties on critical inputs from alternative markets, expanded diesel subsidies for fuel-intensive industries, temporary stabilisation of electricity and gas tariffs, and faster approvals for alternative raw material sourcing. On logistics, the FMM calls for deferred port tariff increases, oversight of freight surcharges, and a dedicated Export and Manufacturing Crisis Task Force to coordinate government and industry responses.

“Acting now will stabilise operations and contain further disruption. Delays will result in production stoppages, sustained export losses, and wider impact across the economy,” said Lee.