Malaysia Steel Manufacturer   

SUSTAINABILITY AT MASTEEL

SCOPE

The scope of Masteel’s 2019 Sustainability Report covers its parent entity, Malaysia Steel Works (KL) Bhd. MS Express Sdn Bhd, a wholly owned subsidiary is not included in this report because MS Express Sdn Bhd was founded during the financial year ended (“FYE”) 31 December 2018 and data collection is still in progress.

GOVERNANCE

The integration of sustainability principles of Masteel’s daily operations are being guided by Board of Directors which includes innovation in steel-making technology, customers service and sustainable lifecycle of products. The Board recognises the importance, risks and opportunities associated with the identified issues and is committed to ensuring continuous tracking of indicators relevant to each material issue. The governance structure consists of the Board of Directors with the role of policy oversight, the Group Managing Director which heads the sustainable task group whom are responsible for the implementation of respective sustainable goals.

 THE SUSTAINABILITY APPROACH

 Sustainability Governance

Based on our stakeholders’ feedback and our identified priorities, the Sustainability Statement for Masteel is centered on “To advocate steel’s positive role in the community”. As steel is an essential building block of most primary construction infrastructure that makes up contemporary society. We are committed to the production and application of steel in the most cost effective and sustainable manner.

Masteel has adopted the Sustainable Development Goals (“SDG”) to do its part in a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.

Materiality Assessment

A materiality assessment was conducted to determine the material issues most important to Masteel and our stakeholders. A list of economic, environmental, and social material issues relevant to the steel industry was collated based on industry sustainability standards. The issues were prioritised based on importance to the business and key stakeholders. Proxies were used to assess importance for stakeholders, which include government, employees, investors, customers and suppliers. The results were mapped on a Materiality Matrix and approved by the Board of Directors. The higher priority material issues discussed in this report includes Innovation and Technology, Customer Welfare and Lifecycle of Products.

 INNOVATION AND TECHNOLOGY

Adopting best practice innovation and technology is essential to Masteel’s operations, as it supports sustainable manufacturing. This is achieved through the following:-

  • Timely adaptation of cost effective technology;
  • Efficient processes that minimize the use of raw materials, energy, spares and generation of by-products and waste; and
  • Reliable technology that can be augmented and upgraded.

The Industry, Innovation and Infrastructure SDG includes technological progress as the key to finding lasting solutions to economic and environmental challenges. Masteel supports this with energy efficiency initiatives and ongoing improvements in innovation and technology such as:-

  • Improvements in plant capacity to recycle and transform waste steel scrap into prime grade steel;
  • Cost reductions in transforming raw materials to finished products; and
  • Adaptation of 4th Industrial Revolution technologies.

In the past 10 years, Masteel has improved the capacity to convert its feedstock to finished goods by approximately 100% while using the same square footage of space. Product yield has maintained in the upper 5% of the global industry benchmarks for steel producers and energy consumed for the recovery and conversion process has been reduced by approximately 50%.  

Figure 1: Recovery Rate of Raw Material used

The equipment and processes used have continued to improve the recovery rate of metallic raw materials and the company is on track to achieve its final goal by 2022. The rate of improvement from 2017 to 2019 has been approximately 7%.

 Figure 2: Cost Reduction to Semi-Finished Product

Costs associated with the above has correspondingly improved by 3% from 2017 to 2019.

The consequences of not ensuring continuous improvements in innovation and technology will result in excessive waste in the manufacturing process, which include waste of raw materials, energy, consumables and manpower. Indirect effects includes pollution, excessive by products, production of inferior products and adversarial social impacts. This results in high costs of production and inconsistent product quality.

The management is leveraging on its experience obtained since 2017 to enhance its ability to further improved the recovery rate of metallics into new recycled steel. Due to the steep learning curve of the last three years. The management is confident that it will be able to extrapolate its metallic recovery trajectory to achieve intended threshold by 2022. Concurrently, its recovery cost matrix will continue to improve in line with the above mentioned trajectory.

CUSTOMER WELFARE

The company places the highest priority to ensure the welfare of its customers are met and exceeded each and every time. There is zero tolerance for the company’s systems and personnel to not comply with the aforementioned ethos. Customers’ expectations are met and exceeded in terms of product quality, selection and delivery. The business experience must also be perceived by our customers to be of high quality, intuitive and seamless. Further initiatives include making the documentation for customers easier to understand and introducing predictive delivery systems to ensure products are ready for delivery even before customers place physical orders.

A current pilot programme to provide preapproved or enhanced credit limits to customers is also being developed. The practise of customers having to face delivery restrictions and interruptions due to exceeded credit limits will be avoided, as a continuous interactive credit review protocol for customers has been implemented in the credit department.

The initiative to produce more custom-made steel to meet customers’ preferences has been implemented successfully in 2019.

Customer loyalty encompasses the objective of ensuring customer retention for present and future revenue optimisation as the cornerstone value that permeates through all management decisions.

It would be fatal if customer satisfaction is not upheld at all times, as this could result in the loss of sales and diminish the Company’s brand prestige and value that can have far reaching implications on the Company’s financial wellbeing.

Factors that could contribute towards a decline in customer satisfaction include product quality, pricing, service standards, compliance issues with contracts and statutory standards. If not adequately and expediently resolved, these issues could cascade and cause a multiplier effect that affects multiple key stakeholders. On rare occasions, the dual effect of potential loss of revenue and libellous monetary claims could undermine the financial integrity of the Company.

Figure 3: Customer Complaints vs Year

LIFECYCLE OF PRODUCTS

Masteel is utilising a combination of steel scrap and metallics for its recovery process. This is done by diversifying the blend of steel scrap to include a wider variety of scrap that can be used to manufacture the finished product. This enhances the ability of the steel making process to utilise a wider range of recycled material to improve the efficacy of environmental conservation.

Masteel’s steel bar product life cycle begins with the usage of steel scrap as the primary inputs to the process. This eliminates contamination of air, soil and the water table by using electric furnaces to recover, smelt and refine steel scrap and metallics into steel billets and steel bars, which are compliant to international standards and specifications. This includes MS146:2016, ISO 9001 and Australian Concrete Reinforce Standards. The resulting “New Steel” is used to reinforce the strength of concrete in the construction of buildings and infrastructure such as elevated highways, tunnels and dams. The construction process calls for steel bars to be encased in concrete and thus has zero carbon footprint for at least 50 years.

Masteel’s Research and Development (“R&D”) department is constantly developing the metallurgical properties of our products to ensure greater durability. In 2019, the company’s R&D personnel successfully developed a new steel bar together with the relevant quality certification for a foreign country. This break through has resulted in the company gaining access to a new and vibrant market.

Failure to effectively manage continuous improvements in reducing Masteel’s environmental footprint could result in reduced competitiveness and subject the Company’s products to potential foreign trade barriers. To mitigate this risk, management has employed numerous adaptive strategies to ensure the Company’s technological advancements translates to high quality and sustainable products.

SUSTAINABILITY INDUSTRY INITIATIVES

 To realise its sustainable goals in an all encompassing approach, the Company deems it necessary to propagate its concepts beyond the confines of its own corporate entity and thus it has participated as active member of a number of national and regional steel associations to advance its sustainability agendas.

Malaysia Steel Association (“MSA”)

The preeminent national steel association whose members consists of 75% of upstream steel manufacturing in the country. The association’s main objectives is to enhance the competitiveness of its members and to act as a platform for dialogue for the betterment of the steel industry.

Dato’ Sri Tai Hean Leng @ Tek Hean Leng, Managing Director/Chief Executive Officer of Masteel is the founding Board member and Vice President of MSA and concurrently undertakes the role of Honorary Treasurer of MSA.

Malaysia Steel Council (“MSC”)

The MSC is under the auspices of the Ministry of International Trade and Industry (“MITI”) which is chaired by the Minister of MITI. Various steel policies are approved at the MSA biannual meetings.

Dato’ Sri Tai Hean Leng @ Tek Hean Leng is MSA’s representative at MSC.

Malaysia Steel Institute (“MSI”)

MSI is a quasi Government and private sector steel institute that has a multi faceted role to enhance and develop the steel sector of Malaysia.

Dato’ Sri Tai Hean Leng @ Tek Hean Leng is a Government appointee to the Board of MSI.

Malaysian Iron and Steel Industry Federation (“MISIF”)

MISIF being the oldest steel association in Malaysia has a diverse list of members from the upstream to downstream of steel industry. MISIF charter is to promote the interest of its members to the Government and regional steel associations.

Dato’ Sri Tai Hean Leng @ Tek Hean Leng had serve at its council member for a number of years. Masteel has maintained its membership for over two decades.

South East Asia Iron and Steel Institute (“SEAISI”) & ASEAN Iron and Steel Council (“AISC”)

Both the associations’ role is to advocate the development of the ASEAN steel sector through conferences, technology transfer and investment.

Masteel has coordinated with the two associations at appropriate occasions.

CORPORATE SOCIAL RESPONSIBILITY

Masteel initiated a new Corporate Social Responsibility (“CSR”) program in 2018 by providing financial education to youths in universities.

It is to support the effort of Government and Bursa Malaysia Berhad (“Bursa Malaysia”) to improve financial literacy and develop an equity investment culture among Malaysians for their financial well being for the future.

The program serves as an education platform and is an integral part of Masteel’s CSR initiatives from September 2018 to December 2020. 10 seminars have been planned for the program in which four seminars will be conducted in Klang Valley and six seminars in other states throughout Malaysia, respectively.

The main objectives of the program are to:-

  • Improve the level of financial literacy among participants;
  • Enhance financial knowledge for investors protection (avoid scams) purpose;
  • Impart investment knowledge for wealth building purpose; and
  • Teach participants on financial planning to achieve specific financial goals in different stages of life.

The program targets to reach 120 to 150 university students per session.  Each seminar consists of three hours financial education talk. Masteel has engaged the former Vice President of Investor Education Department of Bursa Malaysia, Mr Warren Mak to be the speaker for the 10 seminars. The Company believes that with his 15 years of experience in Bursa Malaysia he will be able to provide useful financial information and valuable investment knowledge to participants.

In 2019, Masteel conducted four sessions of three hours investor education talks in the following universities:-

  • University Teknologi Malaysia (“UTM”), Johor Bahru – 23 March 2019;
  • INTI International University & Colleges (“INTI”), Nilai – 28 June 2019;
  • University Utara Malaysia (“UUM”), Kedah – 20 September 2019; and
  • University of Malaya (“UM”), Kuala Lumpur – 03 December 2019.

The Company is also glad to sponsor free lunch and gift tokens to participants who attend this CSR program.

The Company planned to conduct four more financial literacy seminars in 2020 on a quarterly basis. By providing proper financial education to the public, Masteel wish to contribute to the development of the younger generations through the improvement of their financial wellbeing.

The Company believes that financial education is a very important and effective way to help people to build wealth and contribute to the economic growth of the country.

UTM, Johor Bahru (23 March 2019) INTI, Nilai (28 June 2019)
UUM, Kedah (20 September 2019) UM, Kuala Lumpur (03 December 2019)