Gov’t, players need to act now on steel industry plan

(Conclusion)

Trade Undersecretary Adrian S. Cristobal Jr. said various constraints, particularly concerning power supply and costs, were making it harder for the local steel industry to venture into upstream activities.

“At this stage, with the power cost still high, it’s not realistic to start an upstream steel production. But maybe in the future, (we can do that). That’s why the steel industry roadmap is very important. (Industry players) have to get organized and get their consensus on what direction they want to take so that we can prepare for that,” Cristobal said.

Fortunately, he says, the country has an “excellent” opportunity to regain its footing in this sector, as the Philippines’ strong growth story provides an impetus for more foreign investors to take stock of the country and the possible business opportunities here.

“With the revived emphasis on manufacturing operations, there should be no more indifference nor apathy for this vital industry. The prevailing positive circumstances (from the confluence of developments here and abroad that are favorable to the Philippines) do not come about very often in a nation’s history. It will be such a pity to let this “golden period” (some call it the economic “sweet spot”) come and go,” experts said.

Specific measures

The proposed iron and steel roadmap provides specific measures that should be implemented between now and 2028.

Short term measures (2014-2018) are targeted to strengthen existing operations, plug local supply chain gaps, enhance overall competitiveness, lay the groundwork for future strategic plans.

These will include the revival of the Presidential Iron and Steel Committee (PISC) to become the central body for the steel industry; authorization of the state-run National Development Co. (NDC) to jumpstart vital projects; enforcement of the “buy local” policy; amendment of the Iron and Steel Industry Act of 1991 (Republic Act No. 7103) to attune it to present situation, and the commissioning of a comprehensive feasibility study for upstream integrated steel manufacturing projects.

Over the medium term (2019-2023), the measures should be able to provide stability of supply of competitively priced raw material inputs to satisfy rising demand; develop symbiotic relationships with mining sector; move up the technical ladder, the plan showed.

The proposals include operating an integrated steel manufacturing facility; revising investment incentives to ensure greater stability and improved efficiencies; tightening the linkages between the steel industry and the mining sector; and exploring steel industry tie-ups within the Asean market, as importer of input materials and/or exporter of semi-finished or finished products.

Limited incentives

Incentives, former National Steel Corp. president Rolando Narciso cautioned, must be time-bound or limited as otherwise, these subsidies would only “encourage inefficiencies and breed infants forever.”

From 2024 to 2028, the target should be to move into higher value products, and go for exports of steel products and/or steel-using end products. This would mean raising the capacities of the integrated steel facilities to support the expected 20-million ton steel requirement by 2030.

There are proposals calling for government intervention, but this, according to Narciso, can be pursued only if the private sector remains hesitant to pour in the necessary investments to boost the steel industry. The reopening of the mothballed Iligan steel facility of National Steel Corp. is being considered. However, this alone will not solve the problems plaguing the industry.

Narciso stressed that more than just crafting the roadmap, the government must also commission an “honest to goodness” feasibility study, which can be started by NDC, with contributions from the Department of Trade and Industry, Department of Science and Technology, National Economic and Development Authority, state think tank Philippine Institute of Development Studies, Department of Energy, Department of Finance and Department of Transportation and Communication.

Industry direction

The key is to carry out the recommendations that will arise from the feasibility study and stick to these unless new developments will warrant certain changes.

Given the inherent complexities of this matter, and the magnitude of the stakes involved, it is “not advisable to rely on conventional wisdom, personal opinions, outdated beliefs, parochial positions, fragmented studies or piecemeal conclusions. Macro and micro economic policies must be brought to bear on the issues at hand until final decisions are made at the highest possible levels of government and/or private sector investor-firms, depending on how we want to pursue the steel industry roadmap.”

It is indeed a long road ahead for the steel industry. But the key is to start now and strike while the iron is hot, experts say, as the sector is on crucial crossroads. At this point, decisions have to be made on what directions to take and how fast the country wants its steel industry to grow.

To echo the words of local steel industry experts: “If we are caught napping, the steel industry will not only suffer the consequences of another missed opportunity. It could possibly hinder other sectors’ development and growth, thus adversely affecting the country’s aspirations for inclusive growth and alleviation of poverty.”