About Iron and Steel

The Philippines sits on vast reserves of minerals, both metallic and non-metallic. Aside from gold and copper,
the country is also rich in iron ore reserves of almost 300 million metric tons. To further promote investments
in the mining of metals, the Philippine government allowed 100 percent foreign ownership of large-scale
mines (subject to certain terms and conditions) in the hope of attracting quality operators and ensuring a steady
output of metals.

The rapid development of the Philippines and continuous growth of the Southeast Asian region has resulted in
higher demand for iron and steel products domestically and regionally. The Philippine economy has been
performing beyond expectations over the past years, growing from 5.1% in 2011 to 6.8% in 2012, and to 7.2%
in 2013. In this unprecedented growth, the construction sector is a major contributor driven by demand for
private residential and office buildings and infrastructure spending by the government, which led to an
upswing in demand for steel products. From 2010 to 2013, the country’s apparent steel consumption (ASC)
increased from 4.1 to 6.6 million metric tons — a consumption growth of 61% in three years.

Philippine-based iron and steel manufacturers have expanded their production capacities in the long products
sector, but still fall short of domestic demand, mainly because of the absence of an integrated steel mill (ISM).
The flat products sector has no local production of hot rolled coils (HRC), hot rolled plates (HRP), and cold
rolled coils (CRC), and all are currently imported. The availability of raw materials (i.e. iron ore) and semi-
processed products (i.e. pig-iron) presents the opportunity for local iron and steel manufacturers to
domestically source their input requirements and, more importantly, the possibility of establishing an ISM.

Investing in the Philippines will provide iron and steel manufacturers better access to other ASEAN-member
countries, which includes the big steel markets of Indonesia, Malaysia, Thailand, and Vietnam. The
establishment of the ASEAN Economic Community (AEC) in 2015 will further facilitate the free flow of
commodities across the region, including iron and steel

Facts and Figures

Steel product lines locally produced
 Semi-finished products: billets
 Finished long products:
o Reinforcing steel bars (all sizes)
 o Angle bars – 80mm and below
o Light sections, channels and shapes
o Steel wires
o Steel purlins
 Finished flat products:
o Hot dipped galvanized sheets
o Zn-Al coated sheets
o Welded black iron pipes and tubes
o Welded galvanized pipes and tubes
o Pre-painted galvanized / Zn-Al coated coils and sheets
o Pre-painted galvanized iron

Apparent Steel Consumption (ASC), 2007-2012*

Particulars 2007 2008 2009 2010 2011 2012

1,744,265 1,554,497 1,941,799 2,219,998 2,311,252 2,543,855
Billets
319,079 250,139 64,286 0 8,759 0
Slabs
Long 2,201,216 2,179,056 2,263,840 2,774,510 3,123,520 3,851,836
Products
Flat 2,101,690 2,032,120 1,646,936 1,748,877 2,517,381 3,180,740
Products
Long and 4,302,906 4,211,176 3,910,776 4,523,387 5,640,901 7,032,576
Flats Total
*In metric tons. | Sources: BOC, DTI, PISI, SEAISI, and industry sources

Trade Performance, 2004-2012*

2004 2005 2006 2007 2008 2009 2010 2011 2012

92 162 346 220 151 74 105 44 0
Exports
2,867 2,721 3,077 3,433 3,018 2,830 3,148 3,922 4,684
Imports
*In ‘000 metric tons. | Source: SEAISI

03
Policies
 IPP 2014-2016
The manufacture of basic iron and steel products, steel grinding balls, long steel products (billets and
reinforcing steel bars), and flat hot/cold-rolled products is among the preferred list of activities in the IPP.
All iron and steel products must be compliant with the applicable Philippine National Standards (PNS).

BPS Product Certification Scheme

The DTI’s Bureau of Product Standards lists certain iron and steel products as among the products for
mandatory certification under mechanical/building and construction materials.
The certification of iron and steel products are guided by the Philippine Standard (PS) Quality and/or Safety
Certification Mark Scheme and the implementing guidelines for the mandatory certification of rerolled steel
bars, deformed steel bars, equal leg steel angle bars, steel wire nails, low carbon steel wires, and BI/GI steel
pipes.
Imports of steel products must undergo the Import Commodity Clearance (ICC) certification scheme, through
which ICCs are issued to importers whose shipments have been found to conform to the requirements of the
relevant Philippine National Standards or acceptable international or foreign standards.

PNS for Iron and Steel Products

There are mandatory Philippine National Standards covering ferroalloys, metals, and steels and equal leg angle
bars.

04
Programs
Industry Development Program
The iron and steel industry technical working group (TWG) conducts meetings to discuss and address industry
concerns and issues. It includes representatives from the BOI, Philippine Iron and Steel Institute, other
government agencies (such as DOST-PCIEERD, BOC, TESDA, and DOE), and other concerned stakeholders.
Among the matters covered by the TWG are the following:
 Implementation of short-term, medium-term and long-term actions that will address the horizontal and
vertical issues of the industry for a more conducive business environment
 Component studies that will provide guidelines in the establishment of an integrated steel mill (ISM)
 Bench scale metallurgical testing of domestic iron ore
 Program to address smuggling, tariff distortion, logistics, infrastructure and power costs
 Revival of existing steel capacities
 PPP projects

AVAO CITY—Mayor Rodrigo Duterte said if elected President, he would vigorously

push for the revitalization of the country’s steel industry as one way of achieving
economic growth.
He said the country has to build factories and industries to generate more jobs for the
people and one way of doing that is to have a vibrant steel industry.
Industrialization is key to real economic growth,• Duterte said in a video outlining
his economic programs as President. “We should realize our dream of having our own
steel industry,” he added.
ADVERTISEMENT

Duterte said only by shifting to industrialization that the government would be able to
provide windows of opportunity to as many job seekers as possible so people would
not be longing anymore to work overseas for better income.
“Steel is needed everywhere. It is the mother of all industries and the backbone of
industrialization and will allow us to build all we need in our country like cars and
weapons,” he said.
The Department of Trade and Industry (DTI) also admitted on its website that
the Philippine iron and steel industry was a critical component in achieving inclusive
economic growth and sustainable development.
The industry provides inputs needed for infrastructure, power generation and
distribution, transportation facilities and vehicles, manufacturing machinery and
equipment—all of which are vital for a country’s long-term growth.
The steel industry’s outputs are utilized by both commercial and industrial enterprises,
such as electronics, appliance manufacturing and shipbuilding, among others, the•
DTI said.
The country’s steel industry players had admitted that the Philippines has no real steel
industry to speak of today.
Roberto Cola, chair of the Southeast Asia Institute of Iron and Steel, said in a speech
during the group’s conference in Manila last year that the Philippine steel industry
continues to rely on imports.
The country’s steel industry was adversely affected by the 2008 financial crisis that
forced many producers of flat steel products to fold up.
In crude steel terms, the Philippines imports around 80 percent of its steel
requirements,• Cola said.
The Philippines is touted to have iron ore reserves of almost 300 million metric tons.
Duterte said one way of revitalizing the steel industry is to correct some of the
country’s laws or come up with a Code of Economics.
By having this code, the country will be ready to open its doors for business and
investments, he said.
The DTI also listed several ways to revitalize the steel industry. Among the
recommendations was to encourage investment in the industry by making it more
attractive for local and foreign investors through ISO accreditation.
Duterte also lamented the bureaucratic red tape that often drives investors away even
as he said Davao City had overcome it when he imposed a 72-hour period for
processing of permits and clearances for businesses.
“We will give investors more than what the other countries are giving them, even
better,” he said. Judy Quiros, Inquirer Mindanao

Source: SEAISI

ASEAN steel consumption continued to grow healthily. Average growth rate of steel
demand from 1998 to 2015 was 8-9% per annum. While the global financial crisis led to a
dip in steel demand in ASEAN in 1999, steel consumption in the region recovered speedily
after that.

The major steel consuming sector in ASEAN is construction, which accounted for around
73.5% of total steel usage, followed by automotive sector, at around 11%.

Steel demand in the construction sector in the Philippines, Singapore and Vietnam
registered a significant share of above 80% while in Indonesia, Malaysia and Thailand, the
share was lower, at around 60%. This is because the latter three countries have strong
manufacturing sectors, such as automotive, electrical appliances, machinery and equipment
etc.
In the case of Philippines and Singapore, where the share of steel usage in construction sector is
above 80%, use of long steel dominates, accounting for 70% or more of total steel used. In
Philippines, where its construction sector accounted for about 85% of total steel usage in 2014, the
share of long steel was 72% while demand for flat steel was only 28%. Similarly, in the case of
Singapore, around 80% of steel demand in the country was used in construction in 2014. Share of
long steel demand was 73% of total steel used in 2014 while flat steel usage was only 27%.

As for Indonesia, Malaysia and Thailand, where there are other significant steel consuming
manufacturing sectors such as automotive, electrical appliances, machinery etc., the share of flat steel
usage is higher, accounting for around 40-50% of total steel demand in the countries mentioned.

Vietnam has the highest share of steel usage in the construction sector, at around 90%. Although the
country does not have significant steel consuming manufacturing industries, the share of long steel
was only 51% while that for flat steel was 49%. This is because many new factories and warehouses
are being constructed in Vietnam, which use mainly flat steel. Additionally, exports of pre-
engineering steel structure are becoming more prominent.

Looking at the steel supply for the second largest steel consuming sector in the region, that is the
automotive sector, it is observed that regional steel producers have difficulties in breaking into the
supply chain set tightly by the foreign owned automotive companies, especially from Japan. Car
makers have strong influence on selecting steel materials, where part makers have to purchase steel
from qualified sources. Although trial for new sources from local steel producers are possible, it
takes time and the process is very long and complicated. The new sources have to compete in quality
and price with the established steel suppliers.

As for home and electrical appliances sector, decision making for steel materials supply is similar to
the automotive sector. Decision making for selecting steel materials is made by end users. Two major
concerns are material quality and price.

For machinery and equipment, Thailand has the potential to grow its steel production capacity to
serve part making in this sector by using its existing production facility for auto parts. However, the
local producers can only produce certain parts while the more sophisticated parts such as engine,
cylinder and track rollers etc. have to be imported.

As for ship building, 80% of steel materials is steel plate and regional steel producers are capable of
supplying but not in adequate quantity. Moreover, some shipyards are owned by Japanese and
Korean companies and they prefer to source the materials from their home suppliers. In addition, the
volume of some of the steel materials used to produce specific parts such as angles might not be
economical for regional steel producers to supply.

Steel supply structure in the ASEAN countries is fragmented. There are not many integrated steel
mills in the region and these mills normally end their product lines with hot rolling facilities or cold
rolling facilities.

In general, overall supply chain in ASEAN steel industry basically starts from processing steel.
Therefore, there is a need to import upstream materials from other countries, such as Japan and
Korea and lately from China, to serve the high end and middle end steel products.

GOVERNMENT would do well to study the steel industry’s potential, in support of its push
for industrialization. A consultant to SteelAsia Manufacturing Corp., Eng Poh Tzan, said he
sees a lack of deep study on the country’s steel industy, which has been heavily dependent
on imports from China. SteelAsia is one of the country’s major steel rebar producers. “I feel
that the Philippines may have not started thinking deeply (about developing its steel
industry),” the Singaporean consultant said in an interview during a media tour of
SteelAsia’s plant in Carcar City. The support, he said, must come first through a macro-
perspective sustainability study of the steel industry, and government must subsequently
consider giving incentives to industry players. At present, the private consultant, said the
Philippines is mainly producing reinforcing steel bars or rebars, and imports steel billets
mainly from China as input materials. According to the Philippine Iron and Steel Institute, 80
percent of the required slabs and billets are imported from China, Russia, and Japan. 2
plants in Cebu The Yao-led SteelAsia produces 80 percent of the rebar requirement in the
country. The company has two plants in Cebu, located in Carcar and in the town of
Compostela, which is slated for operations by 2018. With private-public partnership
infrastructure projects coming online, SteelAsia Chairman and President Benjamin Yao said
in the company website that this will reinforce the demand for construction steel. However,
based on the Philippine Industry Steel Roadmap, the Philippines is not yet a big consumer
of higher value steel products meant for manufacturing industries, a reason the industry
remains underdeveloped. Steel consumption in the country is at 63 kilograms per capita
compared to the world average of 225kg/capita. So far, the focus of the industry is on
downstream construction steel and delivering value to customers, the roadmap reads. That
includes value-adding services such as “cut and bend” where rebars are prepared to exact
specifications. SteelAsia offsite fabrication manager Edwin N. Lu said cut and bend rebars
require less on-site labor, ensure precision and control material wastage. SteelAsia began
offering cut and bend services to their Visayas and Mindanao clients in 2014. During the
campaign period in January this year, then Davao City Mayor and now President Rodrigo
Duterte said he will push for the development of the country’s steel industry, believing that it
is only by shifting to industrialization that the government would be able to provide better
opportunities to Filipinos, who wouldn’t have to work overseas to earn more. “Steel is
needed everywhere. It is the mother of all industries and the backbone of industrialization
and will allow us to build all we need in our country like cars and weapons,” Duterte
previously said. The Department of Trade and Industry (DTI) has several recommendations
for the steel industry, which include implementing measures that would reduce the costs of
importing raw materials and losses of revenue due to unfair competition; reducing electricity
and logistics costs; and making the sector more attractive for local and foreign investors
through ISO accreditation, among other measures. Last week, DTI sent a letter appealing to
President Duterte give his green light to the P7.2-billion rolling steel mill project of Del Pilar
Steel Inc. (DPSI), owned by SteelAsia in Bulacan. Depsite having secured regulatory
approval from the previous administration, DTI said the project has not taken off due to
opposition from Kalikasang Dalisay Para sa Mamamayan ng Plaridel, who claims that the
site is classified as an irrigated agricultural land. DTI believes Duterte’s support will ease out
opposition to the project and will be supportive of his push for industrialization. The Bulacan
plant is envisioned to be the country’s largest rebar-manufacturing facility, with a production
capacity of 1.2 million tons

Read more: http://www.sunstar.com.ph/cebu/business/2016/10/03/ph-steel-industry-has-

untapped-potential-beyond-producing-mainly-rebars
Follow us: @sunstaronline on Twitter | SunStar Philippines on Facebook

n principle I am for free trade. It makes no sense to protect local industries that have failed to be
competitive for decades. Foreign competition encourages domestic industries to become more efficient
and this benefits local consumers.

We have to avoid rent seeking that protects infant industries that never grow up. This is how the
entrenched elite behind these non-competitive local industries use government protectionist policies to
abuse domestic consumers.

But we must stand up against unfair competition from foreign manufacturers. We must not allow them to
threaten the viability of local industries that are showing a lot of promise and are already making
headway.
Dumping is one example of unfair trade. Dumping happens when imports are priced below reasonable
manufacturing cost. China, for instance, subsidizes state owned manufacturers so they can afford to sell
below production cost like what is happening in the steel industry.

President Duterte has said time and again that he wants a strong steel industry to serve as the
cornerstone of our industrialization program. But will his words turn into action in the face of unfair
competition from China?

The local steel industry is now asking President Duterte to stop smuggling and importation of dumped
steel products from China. There has been a surge of rebars imported from China, even if there is
sufficient local manufacturing capacity.

Business ( Article MRec ), pagematch: 1, sectionmatch: 1

Our steel industry is essentially steel rebar manufacturing that is slowly expanding to other products.
Local industry capacity is around four million metric tons a year. In 2015, rebar demand was at 3.3 million
metric tons but growing up until recently, only two percent of consumption was accounted for by imports.

Because the Duterte administration is scaling up the construction of infrastructure projects, the local steel
industry is gearing up to expand. As a nation of over 100 million people and with a vibrant economy, we
have so much pent up demand for steel products used for construction. We have become a very
attractive market. No wonder technical or outright smuggling has surged.

Investors in our local steel manufacturing industry have managed to compete amidst such headwinds in
the past. But the recent flood of foreign products threatens the viability of the industry. Corrupt personnel
in Customs as well as in DTI’s Bureau of Product Standards have been conspiring to work against the
interest of the public.

The local manufacturers are up in arms. They follow local specifications and standards, while the quality
of imports is questionable. The imports are also subsidized by China allowing for unfair pricing. They want
government to act.

It is the duty of government, even in this era of globalization and free trade, to protect local producers who
deserve to be protected. Our leading steel companies have invested in modern facilities and adopted
effective management systems and are competitive in a level playing field.

But Chinese competitors don’t play fair. We are the only major economy in South East Asia that has not
responded to the issue of subsidized Chinese steel imports. If we do nothing, we may just lose what little
we have by way of a steel industry.

In a letter to President Duterte, a manufacturer complains that “this lack of a level playing field is a
dangerous accommodation that could have a severe impact on public safety, self-sufficiency,
industrialization and job creation.”

Worse, a manufacturer that wanted to build the largest and most modern plant in the world was given a
tough time getting government permits. The project has been delayed by two years already, and given
rising demand, a shortage is a possibility.

Chinoy traders in Chinese steel are apparently working with LGU and national officials and even local
Catholic bishops to discourage the investor in that modern plant. If the traders prevail, the country will be
substituting local manufacturing with Chinese importation. Indeed, it is starting to happen.

In April this year, 5,000 tons of rebar entered the country through Subic. The Bureau of Product
Standards quickly gave the shipment “provisional” documents.
Provisional? It is either the shipment meets standards or not. Do the product testing before releasing.
Once the shipment is out of the port, good luck trying to trace where it is!

The steel industry umbrella group, Philippine Iron and Steel Institute, discovered and challenged the
questionable documentation. The industry claims Customs released the questionable products despite
non-compliance with the requirements under the Philippine National Standard for rebar (PNS 49:2002). It
is entirely possible that sub standard rebars are now being sold commercially. Good luck with the next
earthquake.

Last October, another 20,000 tons arrived again through Subic. Shipment was issued import commodity
clearance without being tested, industry sources claim.

It was also discovered the declared freight and insurance was misdeclared at only $1.99 a ton compared
to $18-25 per ton normally for shipments from China to the Philippines. This means government was
short changed in the computation of duties.

Merely importing is easy and lucrative since it does not require any long-term investment. The company
behind the recent Subic importations only has a paid up capital of P100,000. They figured having the
proper connections with bureaucrats is all they need.

But, as the steel industry rightfully claims, allowing this kind of importation comes at the expense of our
country’s development, public safety, the labor force and Philippine industrialists and investors.
Eventually, our country’s manufacturing industries will be supplanted by a one-way flow of Chinese
products into the country.

Actually, if the local steel industry gets really screwed by all the smuggling and questionable importation
from China, we are going to lose more than just the jobs the local steel factories provide. We will lose the
livelihood the industry provides to thousands of other Filipinos.

Scrap metal collectors/dealers and haulers of scrap and finished products depend on the local steel
industry for survival. The local steel industry also provides top paying jobs to highly skilled OFW
engineers who want to go back home and work close to their families.

The local construction industry will also lose a source of rebars whose quality they can depend on.
Indeed, Ayala, Rockwell and other reputable developers source their rebar needs from one of the more
reliable local companies. This same company has done well enough over the last 50 years so that it is
planning to expand to products other than rebars, signaling the growth of the industry that the President
envisions.

I was wondering why the PCCI isn’t raising a fuss about this situation. PCCI claims it is after job creation
but importing rebars creates jobs in China, not here. PCCI should be fighting for and on behalf of local
industry. But PCCI is compromised because the biggest traders are among their leaders.

It is time for President Duterte to make good on his pronounced desire for a local steel industry. Hopefully
his new found love affair with China will not make him turn a blind eye to all these importing or smuggling
of low grade Chinese steel products.

Presidential adviser RJ Jacinto who knows the local steel industry well has his job cut out for him. This
will be his test.
Anti-dumping
In July and again in November last year, we voted in favour of anti-
dumping measures on the imports of certain steel products.
i. With effect from 24.5.92, Iron and Steel industry has been included in the list of `high priority'
industries for automatic approval for foreign equity investment upto 51%. This limit has been
recently increased to 100%.
ii. Price and distribution of steel were deregulated from January 1992. At the same time, it was
ensured that priority continued to be accorded for meeting the requirements of small scale
industries, exporters of engineering goods and North Eastern Region of the country, besides
strategic sectors such as Defence and Railways.
iii. The trade policy has been liberalised and import and export of iron and steel is freely allowed.
There are no quantitative restrictions on import of iron and steel items, covered under Chapter
No. 72 of the ITC(HS) Code. The only mechanism regulating the imports is the tariff
mechanism. Tariffs on various items of iron and steel have drastically come down since 1991-
92 levels and the government is committed to bring them down to the international levels. In
Chapter 72 there are two items viz. 72042110 and 72042910, which fall in the restricted list of
imports.
iv. Iron & Steel are freely importable as per the Extant Policy.
v. Iron & Steel are freely exportable.
vi. Advance Licensing Scheme allows duty free import of raw materials for exports.
vii. The floor price for seconds and defectives continues till date.
viii. Imports of seconds and defectives of steel are allowed only through three designated ports of
Mumbai, Calcutta and Chennai.
ix. Mandatory pre inspection certificate by a reputed international agency for every import
consignment of seconds and defectives.
x. In the union Budget 2007-08 the import duty on seconds and defective has been further reduced
from 20% to 10%

The New Industrial policy opened up the Indian iron and steel industry for private investment by (a)
removing it from the list of industries reserved for public sector and (b) exempting it from compulsory
licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted
up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing
broad directions and assistance to new and existing steel plants, in the liberalized scenario.

Reviving the local steel industry, while challenging, is crucial not only to meet future
demand and requirements but also to help in the government’s thrust of ensuring
inclusive growth.
This industry, experts say, affects a wide range of related sectors, manufacturing
activities and interlinkages, which can generate the much-needed revenue and jobs
across the country given its high multiplier effect of 2.7. This means that every new
investment of P100 million will lead to a higher domestic output of P270 million; an
additional household income of P24 million; and additional 117 new jobs, according
to the proposed iron and steel industry roadmap.
ADVERTISEMENT
Among the sectors that use steel extensively include construction (residential,
commercial, industrial, and institutional); infrastructure; pipe-making; shipbuilding
and repairs; cans/containers; automotive/transport; appliances; fabrication; service
centers; and furnitures/furnishings, among others.
Former National Steel Corp. president Rolando Narciso stressed: “It is among the
vital industries… We got distracted (by the gains made in) overseas Filipino workers’
remittances and the services sector that we forgot the industry.”
The questions now loom: Where is steel industry lacking? What are the missing links?
How can this industry forward? What needs to be addressed and who should
spearhead these changes?
For industry experts, the ultimate target is to have an integrated steel industry, which
the Philippines currently lacks.
This means that by 2030, the country should already have a certain degree of self
sufficiency in both the upstream and downstream sectors—ideally at about 70 percent.
The upstream segment covers iron making and steel making, which produce pig iron,
sponge iron, direct reduced iron, as well as slabs and billets. The mid-stream and
downstream sectors, meanwhile, cover the production of flat products (hot rolling,
cold rolling, tinplating, galvanizing, prepainting, rollforming) and long products (such
as bar mills, rod mills, nails, wires, structural mills).
Based on a comprehensive study by former NSC officials and experts, the steel
industry’s present non-integrated state has limited production capacity of only 21
percent of total demand in 2012. There is a fragmented supply chain, with the biggest
supply chain gaps seen in flat steel, which they claim to be primarily due to the
decline and eventual shutdown of NSC’s Iligan facility, the only plant in the country
which had hot rolling mill and and tinplating lines. Further aggravating the situation
was the shut down of the three cold rolling mill facilities of Steelcorp in 2009.
“As a consequence, there is currently a lot of no-choice importation of hot-rolled
products, cold-rolled products and tinplates… The absence of upstream integrated
steel mill facilities is most obvious—making the industry fully dependent on imported
slabs for flat products and significantly dependent on imported billet for long
products,” they said in a paper on the steel industry.
The move should obviously be geared toward filling these supply chain gaps, and
address the so-called “horizontal binding constraints” that impede the sector from
closing these gaps and pursuing its self-sufficiency goals.
If adequately addressed, these constraints—called “key enablers” by the Men of
Steel—are expected to help Philippine enterprises compete on equal footing with their
Asean counterparts.
These were identified as infrastructure (referring to roadways, bridges, airports,
seaports, farm irrigation systems, among others); the availability, reliability and cost
of electricity; transportation costs; smuggling; investment incentives; access to credit
facilities; soft infrastructure; good governance and foreign trade agreements.
“(These) concerns will definitely need early solutions if Philippine business firms are
expected to survive and thrive under the new economic order. We shouldn’t leave
them with these handicaps as these could be too heavy and cumbersome to carry into
the larger regional business battlefields,” the paper stated

According the Business Inquirer Philippine iron and steel industry is poised to continue its growth. In a
presentation before the Organization for Economic Cooperation and Development in France earlier this
month, the Philippines Board of Investments said that the demand for steel products would
be driven largely by the implementation of big ticket government infrastructure projects,
reconstruction efforts for the typhoon and earthquake affected areas and the housing backlog and
redevelopment of urban centers across the country.
According to the BOI, the projects are expected to translate into increased local production of rebars,
shapes and sections as well as increased importation of billets and coated steel products. Data provided
by the bureau showed that apparent steel consumption grew by 9.2% to 6.58 million tonnes in
2013 from the 6.03 million tonnes recorded the previous year. The increase was attributed to
the continuing growth in real estate developments and higher infrastructure spending by the
government.
Of the total demand for steel, 81% went to the construction industry; 9% were used for light and
heavy fabrication; 5% for shipbuilding;4 % for packaging; and the rest went to cover other
requirements. The BOI said last year, crude steel production grew by 3.8% to 1.31 million tonnes while
finished steel production rose 30% to 4.17 million tonnes. Finished steel imports and exports stood at
3.67 million tonnes and 100,000 MT, respectively. At present, the growth of the steel and iron
industry is hampered largely by the high cost of power, technical smuggling, outdated facilities and
tariff distortions concerning imported steel products.
The BOI is now looking at providing specific incentives to encourage more investors to set up
ironmaking facilities and go into flat products manufacturing. The BOI also noted that the need for strict
enforcement of the Customs laws and technical regulations; increased support for research and
development; and for the review of tariffs to remove the so called distortions.

ANILA – Rafael Hidalgo, vice-president for Corporate Development of Steel Asia Manufacturing
Corporation, easily demonstrates an intimate knowledge of the Philippine steel industry. In a forum on
national industrialization held last week at the University of the Philippines in Quezon City, where he
graduated as an engineer, he exceeded the time allotted him to give a succinct picture of the country’s
steel industry.
His presentation simultaneously impressed and worried. On one hand, his company exhibits real and
tested Filipino capability at modern steel production. On the other hand, its experience reveals the ever
present threat of being hindered by what activist scientists call as “influence-peddlers,” mostly from big
importers and policies on trade liberalization itself.

Undue competition from imports compounded by lack of government support has driven other Filipino-
owned pioneering steel companies in the Philippines to close shop. Of those that remained, Steel Asia is
the largest. Its five steel mills contribute up to two million metric tons of semi-finished steel in a year,
directly giving jobs to three thousand workers and indirectly to at least 15 thousand more. It was the first
to adopt modern technology in their time, when it began operation 50 years ago, Hidalgo said.
It is still ambitious today. It is building three more steel mills, one of which Hidalgo described as the
world’s ‘largest and most modern steel bar rolling mill’ when finished.

With three new mills under construction, Steel Asia is set to more than double its two million metric ton
annual production. But its expansion has been delayed for two and a half years now.
The “funding mafia is very strong,” Hidalgo lamented. He said this “mafia’s” lobbying has resulted in
“sabotaging development of manufacturing projects with red tape.”

From what Hidalgo shared, the “influence-peddlers” serving those who stand to benefit big from importing
other countries’ steel are behind the delays in their new steel mills. He said leaders of an influential
business group are behind the importation and efforts to supplant local steel manufacturing with Chinese
imports.

“Their plan is lucrative especially since it does not require long-term investment. But this
comes at the expense of the country’s development, public safety, the labor force, and Philippine
industrialists and investors,” said Hidalgo.

Despite Steel Asia’s heft, it, too, appears to be at the mercy of what amounts to dumping of imported
steel by other countries, which had developed its industries first, with strong support from their respective
governments.

At the forum, Hidalgo pinpointed some deadweight stunting the growth of Filipino steel. One of the
heaviest is the “not level playing field,” which makes it easier to import steel than manufacture it. Another
example is how locally produced steel are being rigorously tested, yet testing is relaxed for imported
steel. Hidalgo said this allows substandard steel into the market.
Resisting the trend of ‘arrested development’
Construction takes up much of the current demand for Philippine steel. But if change is indeed coming,
for instance through policies for national industrialization, the forum organizers forecast higher rates of
increase in local demand for steel. Which is as should be, they said, considering the country has a wealth
of human and natural resources.

Unfortunately for Steel Asia and for what remained of the ‘industries’ of the Philippines, past and present
economic policies have constricted and stunted rather than grow and boost local industries. No thanks to
neoliberal policies of privatization and liberalization, the country’s manufacturing is now at its lowest (or
smallest), according to Sonny Africa, executive director of Ibon Foundation, during the forum on national
industrialization.
Both Sonny Africa of Ibon, and Ganni Tapang, president of Agham (Advocates for Science and
Technology for the People), said that it makes much more sense now and in the long run to tap these
human and natural resources for Philippine industrialization and development rather than export it raw
and cheap.
Ibon Foundation and patriotic scientists are pushing for the development of the local steel industry, saying
it is a basic industry that has a bearing on the development also of other industries, from construction to
transportation to making machines for agriculture and consumer goods production.

President Duterte has also said as much, calling the steel industry “the mother of industries”.
Developing this industry, they said, could better provide Filipinos with jobs and keep more of the income
and capital at home. It is thus the complete opposite of export orientation and import dependence, the
decades-long thrusts taken by succeeding governments, which resulted to today’s worst joblessness and
poverty, according to Ibon.

They rejected the notion that it is better to import steel just because it seems cheaper.

“A genuinely Filipino iron and steel industry is a vital strategic element for Philippine socioeconomic
development, stability and national security. It can still serve as the backbone of manufacturing and
national industrialization even amid the hyped globalization of the 21st century,” Ibon said in its paper last
July.

#BuildFilipino: Challenge to develop the steel industry

Although the steel industry is a basic industry that requires growing and developing if change is to come,
it has no continuous production chain in the Philippines. “Almost all existing or potential manufacturing
industries are unsupported or not linked to the domestic steel industry,” Hidalgo said.
Viewing the industry from upstream (basic processing of iron ore in steel mills) to midstream (hot rolling
slabs or billets to manufacture steel bars, sections, wire rods, rolled coil and plates, etc.) and downstream
(manufacturing products using steel for parts, from scissors to body of vehicles, ships, infrastructure), it
shows what “mostly we don’t have,” said Hidalgo.

From Steel Asia: ‘We have no integrated steelmaking, no hot rolling, no section, no plates…. ”
So, “Up and down the value chain, there are broken links and reliance on imports,” said Hidalgo. As a
result, he continued, “Our resources are exported and brought back to us as finished goods, and all the
jobs and value added are going to the countries that exported (steel) to us.” The steel company where
Hidalgo works is mainly producing steel rebars for construction.
In a paper issued last July, entitled “Filipino Steel and National Development,” Ibon Foundation said the
country’s steel consumption has more than doubled from 3.5 million tons in 2004 to some 7.6 million tons
in 2013. Most of the steel consumed were imported, reaching 4.1 million tons in 2014, or more than
double the 2.0 million tons imported in 2010. Iron and steel imports were the country’s sixth biggest
imported products amounting to US$1.7 billion in 2015 (after electronics, oil, machines and engines,
vehicles, and plastics). These mainly come from China and Russia, also from Korea, Japan, and Taiwan.
Last year, Hidalgo said, the country consumed 8.56 million metric tons of steel. To produce this much
steel, the country needs a lot more steel factories, a lot more employed workers adding value in every
stage of production. “Importing a big portion of 8.56 million metric tons means giving away job
opportunities and paying dearly for all those value added to other countries instead of to Filipino
industries,” Hidalgo said.
A primer distributed at last week’s forum on national industrialization also said the Philippine steel
industry is competitive with any in the world, and investments in state-of-the-art technology are
guaranteed returns, provided there is a level playing field