Filipino steelmakers are complaining about the importation of Chinese steel products which they believe threaten to kill the local steelmaking industry.
In a letter to Trade and Industry Secretary Gregory Domingo, SteelAsia Manufacturing Corp. president Benjamin O. Yao said that imported steel products are subsidized by the Chinese government and are sold below the price of locally produced steel products to the detriment of the Filipino steelmakers.
Speaking on behalf of the local steelmaking industry, Yao sought the intervention of the government to prevent the collapse of the local steelmaking industry.
In his letter, Yao said the domestic steel industry is discouraged from establishing, expanding and modernizing its steelmaking capacity, because of the imports of Chinese government-subsidized steel products. These, in the end, would make the country fully dependent on imports, he pointed out.
Yao said that because of China’s massive installed steel manufacturing capacity, it can easily overwhelm the Philippine steel industry.
This, in turn, will make the booming real estate and construction sector fully dependent on China’s steel products—a prospect detrimental to the Philippine economy over the long term, Yao stressed.
“We seek intervention as government-subsidized steel products from the People’s Republic of China are being aggressively offered to the Philippines,” Yao said in his letter to Domingo, a copy of which was also sent to Board of Investments chief Undersecretary Adrian Cristobal Jr.
Yao said shipments of Chinese-subsidized products represent an unfair trade practice, pointing out that semi-finished long products called billets, alloyed with boron—which is an unnecessary element—allows the steel to be misclassified as finished products, hence qualifying them for Chinese government subsidies.
He added that billets are also being misdeclared as square bars, which are finished products, to make them qualify for Chinese government subsidies.
Because of this, local steel manufacturers are now ordering Chinese billets instead of investing in world-class, cost-efficient technologies and facilities.
Other countries faced with the threat of Chinese-subsidized steel products have taken action to protect their local steelmaking industry, he said.
“All are fully aware of the havoc these products may wreak on their industries and economies,” he added.
“A deluge of subsidized products is not a distant prospect, but an imminent situation, that can have permanent detrimental effects on the Philippine steel industry and the economy as well,” Yao warned.
Billets, a steelmaking output, are input materials for finished long products including rebars, angle bars and other steel shapes, and wire among others.
In the Philippines, steelmaking involves the recycling of scrap, of which the country has a surplus, while excess products are exported.
The country has a steelmaking capacity of 1.4 million metric tons per year to feed a demand of 2.5 million metric tons per year that is growing rapidly, according to industry data.
The balance of billets are being imported, but excess scrap is exported— a costly exercise for the Philippines, but one that reflects the incongruities of the supply chain of the local steel industry, Yao pointed out.
Responding to the need, the local industry has been building capacity and modernizing its steelmaking capacity and taking advantage of the county’s scrap generation potential.
Apart from SteelAsia, other new production capacities have come on line, including that of steelmaker TKC. More expansions are being planned in anticipation of public-private partnership projects and further countrywide economic development, including SteelAsia’s state-of-the-art 1.2 million metric ton steelmaking facility in Bulacan, a $400-million project.
But the entry of the Chinese-subsidized steel products puts into serious question the feasibility of the SteelAsia’s project, as well as the continued viability of existing capacities, which is feared to result in a rapid regression of the steel industry into full import dependence.
China’s steelmaking capacity stands at 900 million metric tons a year, making it the world’s largest. Its capacity dwarfs that of the United States, which can produce 60 million metric tons per year.
For China to fully supply the Philippines’ billet requirements, it needs to dedicate only one-fourth of one percent of its manufacturing capacity to be misdeclared as square bars or boron-alloyed bars to get subsidy and ship the products here, local industry officials noted.