Global Steel admits having problems

MANILA, Philippines - Indian firm Global Steel Philippines Inc (GSPI) yesterday admitted they have been having problems with their operations for years and the lifting of the seven percent tariff on steel has endangered their already precarious operations.

“Our existence is in danger,” Global Steel managing director Lalit K. Sehgal told reporters in an interview. However, he stressed they have not recommended the closing of the Philippine operations to the head office.

Sehgal said they have power availability problems after failing to pay their electricity bills some years back. He said their debt is now being restructured because they are questioning the interest rates that were imposed to them.

When asked how they are able to produce hot rolled coils (HRC) and cold rolled coils (CRC) given their power problems, Sehgal said they are not operating regularly.

Sehgal said they are operating at a loss ever since the global financial crisis has reduced the demand for steel. He noted that the domestic demand is currently at 7,000 to 8,000 tons per month only. In order to break even or to not incur losses, Sehgal said they should sell 60,000 to 70,000 tons per month.

The last time they were able to break even was at 2007. “We have already incurred huge losses from 2008 till the present,” Sehgal said.

In spite of the financial and operational problems of the company, Sehgal announced that their capital expenditure for the year is $25 million. Five months into the year, he said they have only spent $4 million to $5 million.

The government will conduct a full audit on Global Steel before the reimposition of the seven percent steel tariff. Trade Undersecretary Zenaida C. Maglaya said that a full audit on the financials and operations of Global Steel must be made before the safeguards against imported steel will be returned.

Maglaya said Global Steel has been complaining, claiming that they are in commercial operations and are even exporting. However, she said the firm must prove this.

She said Global Steel must prove that they can operate and sustain their operations and maybe even have orders for at least six months before we recommend that the tariff be implemented again.

Aside from commercial operations, Maglaya said Global Steel must prove that they are able to pay their outstanding financial liabilities. Maglaya said the government has implemented a zero tariff in order to ensure a reliable supply of steel for sheetmakers.