Malaysia Steel Works (KL) Bhd (Masteel) has signed an agreement with Gas Malaysia Sdn Bhd for the latter to supply natural gas to its plant in Bukit Rajah, Klang, over the next five years.
“This will reduce production costs and allow Masteel to save a total of RM21mil for the five-year period,” Masteel's CEO and MD Tai Hean Leng said, adding that the natural gas supply would start to come in soon.
The company expected the savings to be reflected in its current financial year results, he said.
In the light of rising fuel prices, Tai said Masteel's move several years ago to switch to natural gas for its source of energy was a strategic and cost-saving initiative.
He explained that energy was an essential element in every facet of steel making, from the melting of scrap iron to the various stages of processing and casting. Due to this, energy makes up a considerable portion of any steel maker’s operation cost.
“We have started implementing our cost-efficiency development plans earlier this year by upgrading the existing machinery in our production facilities to use natural gas, which is lower in cost compared with liquefied petroleum gas (LPG),” he said.
He also said having access to natural gas would reduce Masteel's dependency on electricity in its steel making process and enables the company to supplement its operations with alternative sources of energy.
The company has also invested RM8.5mil in Supersonic Lancing System (SLS) technology from Danieli & C SpA of Italy to improve its efficiency. Danieli is among the world's top three largest designers and suppliers of equipment and plants for the metals industry.
Tai said investing in the SLS technology would allow Masteel to reduce the production cost by 5%, while increasing its production capacity by 10%.
“The company will achieve substantial savings from the new technology,” he said, adding that the SLS technology would be fully utilised in Masteel's plant in Bukit Raja.
“By substituting electrical energy with chemical energy, the SLS technology has been proven to reduce the time required to melt raw materials, hence increasing the output and quality of steel billets produced while reducing the overall conversion cost,” he said.
Also, with the SLS technology, the company hopes to mitigate the impact from a potential electricity tariff increase, as proposed by Tenaga National Bhd, and ensure its production cost remains competitive.
Masteel is confident its Bukit Raja plant would be fully operating on SLS technology by the first quarter of 2006.