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Home For Faster Economic Growth: Build Build Build

Steel makers revving up production

Othel V. CamposbyOthel V. Campos
October 9, 2017, 12:00 am
in For Faster Economic Growth: Build Build Build
Reading Time: 3 mins read
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The steel and cement sectors, two of the major industries that support the construction sector, are motivated to carry out their part in the “Build, Build, Build” program of the government despite the lack of capacity.

Both industries have been registering sales growth, supported by imports, in the recent three years due to the demand from the expanding property sector.

With the accelerated infrastructure program, the steel and cement industries are  anticipating the renewed commitment of the government to support the construction of more public and private infrastructure projects.

Stable prices may define steel and cement products for now, but the lack of domestic capacity may raise prices as the infrastructure program accelerates in the succeeding years.

Cement price, for one, is stable at P175 to P190 per bag, but the steel price is a different story.

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The recent spikes on the global price of semi-processed steel, or billets, and finished steel products have raised prices to around $560 per metric ton. Prices may continue an upward trend as more Chinese mills are forced close shop due to highly-polluting operations. About 800 mills in China have shut down so far.

The government allocated P9 trillion to to fund the ambitious BBB, while the private sector has committed as much as $33 billion worth of financing and investment deals with China and Japan.

Revving up steel output

Even without the BBB, the steel industry plans to plug the shortfall in production to attain self-sufficiency  and penetrate foreign markets in the long run.

“The steel industry has been growing in the last six years. This year we expect about 6 to 7 percent growth over last year. It normally tracks the GDP but in the last 5 years, our record showed that the sector has been growing more than twice the country’s GDP,” said Philippine Iron and Steel Institute president Roberto Cola. 

“But this year, we’re already at the threshold of a high base, it may drop 7 percent since GDP is also expected to maintain sharp growth,” he added.

PISI is the steel industry’s vanguard to safety and compliance to global standards.

Crude steel production, according industry data, rose 11 percent to 1.075 million metric tons in 2016 from 968,022 MT in 2015.

Finished steel production grew 2 percent to 5.791 million MT from 5.683 million MT, while finished steel imports increased 11 percent to 5.497 million MT from 4.917 million MT.

Finished steel exports were flat at 100,000 MT.

Limited capacity

The PISI conceded that the industry was not prepared to take on the challenge but the expansion of dominant local players is expected to partly address the problem in about three years.

“We expect the BBB to endure at least for the next 15 years. Local players will definitely catch up. Despite the country producing a select variety of steel products such as reinforcing bars and angle bars, production of flat steel and other long steel products will soon debut once the ongoing expansion of steel mills ends in 2 to 3 years,” Cola said.

Demand is expected to hit 10 million MT or more in 2017, the body said. Flat steel will comprise about 39 to 40 percent of the expected demand while long steel will account for 60 percent.

Consumption of semi-finished steel or billets grew to 4.223 million MT in 2016, 9 percent higher than 2015’s 3.854 million MT. Local billet production rose 11 percent to 1 million, while imports grew 9 percent to 3.148 million MT.

Billets are the raw materials used to produce flat steel products from hot and cold rolled steel, such as roofing, plates for shipbuilding, tin plates for packaging and wires. Flat products are mostly imported since the domestic steel industry still lacks the capability to produce these products due to huge investments needed to set up. Billets comprise about 90 percent of total importation cost.

About 81 percent of domestic production goes to the construction industry, while the rest is used in fabrication, shipbuilding, manufacturing and flat steel production.

Billet production

PISI noted that instead of exporting scrap metals only to be imported as billets, the local industry must have the necessary capacity to process scrap metals to significantly augment the local supply and reduce importation.

Among the big steel players, the Steel Asia Group plans to expand its billet production by another 500,000 MT to 1 million MT to attain 50 percent self-sufficiency in production for internal consumption.

Cathay Pacific Steel Corp. also operates an electric furnace with the capacity to produce 200,000 MT of billets.

The Philippines has about 20 rebar manufacturers, seven angle bar makers, 12 billet producers and 8 galvanized iron sheet manufacturers.

Tags: “BuildBuildBuild” programcement sectorsFor Faster Economic Growth: Build Build BuildGovernmentsteelSteel makersSteel makers revving up production
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Othel V. Campos

Othel V. Campos

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