The construction sector is the largest steel consuming sector in the Philippines, accounting for almost 70% of the country's total steel consumption on a yearly basis. According to the National Economic and Development Authority (NEDA), Philippines' construction sector expanded at a rate of 4.6% in 2006, which is a vast improvement from the anemic growth rate of 0.9% registered in the previous year. This has led to an increase of 2.11% in steel demand with apparent steel consumption in the country reaching 3.14 million tonnes in 2006 as against 3.07 million tonnes in 2005.
In a Country Report paper presented at the recently concluded ASEAN Steel Conference in Kuala Lumpur, Malaysia, Mr. Wellington Y. Tong, President of the Philippine Iron and Steel Institute, attributed the growth in steel consumption in 2006 to a number of factors. Reconstruction activities in the aftermath of two major typhoons in Philippines as well as the increase in capital expenditures on infrastructure projects implemented by local governments are major factors building up steel consumption in the construction sector. Moreover, the expansion in the shipbuilding industry has enhanced more activities for light and heavy fabricators, which saw an increase of 39% for steel demand in the industry. The sector has taken up 14% of total steel consumption in 2006, as compared to 12% in the previous year.
Steel consumption in Philippines has in fact been on a downward trend since 2002 with an average rate of minus 6.3% from 2002 to 2005. Although demand has picked up in 2006, the major portion of steel consumption was accounted by import. Of the 3.14 million tonnes consumed in 2006, import made up 1.86 million tonnes whilst domestic production accounted for 1.62 million tonnes. Export was recorded at 0.34 million tonnes in 2006, most of which was the export of hot rolled sheet and cold rolled sheet by Global Steel. Philippines also exported around 42,000 tonnes of galvanized sheet in 2006, mainly to India.
With regards to crude steel production, there are a few mills operating semi-finished steel production facilities with EAF technology. The output has remained stagnant at between 400,000 to 500,000 tonnes for many years. However, 2006 saw an increase in output of 19% to 558,000 tonnes. According to Mr. Tong, this was due to the activation by Treasure Steel Corporation and Global Steel Corporation of the former mills of National Steel Corporation. Imports have remained high, at 1.1 million tonnes in 2006, double that of the domestic output.
For long product, there has not been much improvement. Section consumption has declined since 2004 throughout year 2006, resulting in a drop of domestic production. Bar consumption has picked up slightly by 20,000 tonnes from 2005 to reach 1.13 million tonnes in 2006. Philippines is self sufficient in the production of bar. As a result, only 44,000 tonnes of bar were imported in 2006, most of which were from Japan, with some imports from China. There is no domestic production of wire rod. All domestic consumption in 2006 was met by import, mainly from China and Russia.
Global Steel has started its HRC operation since late 2005 with the trial production of a thousand tonnes which increased to 319,499 tonnes in 2006 to replace import. Total import volume has declined sharply in the year by 100,000 tonnes to stay at 385,000 tonnes in 2006. The company also started to export in 2006. Nearly 90,000 tonnes of hot rolled sheet were exported mainly to Vietnam, India, Italy and Turkey.
Cold rolled steel sheet consumption has declined substantially in 2005 but picked up in 2006 at the rate of 7% to stay at 491,000 tonnes. The output has continued to grow, partly to serve the export market. Export of cold rolled sheet surged substantially to 200,000 tonnes in 2006. Major export destinations were Vietnam, Turkey, Indonesia and Malaysia.
Philippine steel industry has been impacted by China's steel export as evidenced by the higher imports of low price steel products from China and lower domestic output in some products. However, the domestic manufacturers are hoping for increased government spending on much-needed infrastructure and housing projects which could have significant impact on increasing steel demand in the country.