A steel industry

Steel is the backbone of modern industry. Almost everything we use is made of steel or has been made with tools and machinery made of steel. Ships, trains, trucks and autos are made largely of steel. Even safety pins and needles are made from steel.

A big reason why we are hardly industrialized today is the failure of our government, through all the post-WW2 administrations, to put up a steel industry. Instead, our notoriously bad politics resulted in Filipino-style “steal” industries that made the elite richer and impoverished the common consumers.

A quick profit was the main objective of our post-WW2 business elite who got it from the government in terms of rent-seeking favors including excessive protection that screws the consumers. An economics professor once observed that what we have is a “beauty parlor” steel industry that imported rolled sheets and just added the curls to make roofing materials.

Our local steel industry never graduated from its humble beginnings. The government didn’t have a vision for the industry and the industry participants were happy making steel bars and running the beauty parlors. Except for Ben Yao.

It wasn’t easy but Ben has devoted his life to developing a local steel industry that will produce as much of the local steel products that our economy needs. Right now, it is all about steel bars. Soon, a plant he has put up in Batangas will produce other products like angles, beams, sheet piles and wire rods.

It is ironic, Ben said, that when he was building his many plants nationwide, they had to buy his steel requirements from Vietnam, which at that time had Filipino engineers who helped them.

Ben built up SteelAsia as today’s market, capacity and technology leader in the Philippine steel industry. SteelAsia can produce three million tons of rebar per year, the largest in Southeast Asia. SteelAsia supplies more than half of the country’s rebar consumption and about 70 percent of our country’s steel bar requirements for infrastructure (high tensile steel).

SteelAsia supplied all 39,000 tons of high strength steel bars needed by the Cebu-Cordova bridge project. The Spanish contractors were so happy with the product, they asked Canada to import 36,000 tons of the same quality steel bars for their subway project.

Only SteelAsia is responding to local demand growth with significant investments in capacity and technology. Its newest plant at Compostela, Cebu, financed by DBP, is fully automated and requires only a few engineers running it. And the plant manager was an experienced OFW from Saudi Arabia who was happy to accept SteelAsia’s offer to work at home.

The example we should have followed is South Korea. Indeed, we could have done it ahead of them because they were still mired in a brutal war in the early 50s.

Unfortunately, we were plagued by clueless politicians more interested in political power and an entrenched economic elite that had no imagination nor inclination to bring the country’s industrialization to where it should be.

After the Korean War (1950-1953), South Korea was in ruins, and its infrastructure was devastated. But they had a government that seriously wanted the country to rise from the ashes of war. They recognized the importance of steel production for reconstruction and economic development.

According to ChatGPT, South Korea implemented a policy known as “Heavy and Chemical Industrialization,” which aimed to build a self-sufficient, heavy industrial base. This included steel production, shipbuilding, and petrochemicals. The government provided financial support, infrastructure development, and incentives for steel production.

The South Korean government directly invested in and owned shares in key steel companies like POSCO (Pohang Iron and Steel Co.), which was established in 1968. POSCO became one of the world’s largest steel producers.

The South Korean government facilitated technology transfers and partnerships with international steel companies and experts to build local expertise and knowledge. Then, the South Korean government encouraged steel exports, contributing to the growth and international competitiveness of South Korean steel companies.

It is more or less the same story in China.

To help its steel industry sell its products, the Chinese government invested heavily in infrastructure, including ports, transportation, and energy. They also initiated mergers and consolidation of state-owned steel companies to create larger and more efficient steel producers. For example, the creation of China Baowu Steel Group, one of the world’s largest steel companies, was facilitated by the government.

In both South Korea and China, the government’s active role in providing financial support, infrastructure development, and regulatory frameworks has been pivotal in establishing and expanding their steel industries. These industries have become major global players, contributing significantly to their respective economies.

In our case, we probably had some good intentions at the start and we were even the second country in the region to put up a steel manufacturing plant in Iligan. But our steel venture was mired in politics and that was too heavy a burden for the business to carry.

Then the ultimate mistake was made to sell National Steel to foreign traders who didn’t have the national interest perspective. Sayang. It is now a junkyard. In its prime, National Steel supported the local economy of Iligan and even made the Iligan branch of Mindanao State University an important training institution for our engineers.

Regionally, we are in catch-up mode, if at all.

According to Chat GPT, Indonesia is one of the largest steel producers in Southeast Asia. The country has both integrated steel mills and mini-mills, producing various steel products.

Thailand also has a well-developed steel industry with several steel mills, producing both long and flat steel products.

Vietnam has made significant investments in steel production to meet its growing infrastructure and construction demands. Vietnam has the most diverse steel industry and is among the largest in ASEAN in terms of production and consumption.

In the absence of a government game plan for steel, SteelAsia is helping to shape the future of the Philippine steel industry. For now, our steel needs are mostly construction related. But Ben sees the profile of our steel needs changing. Bullish on our economy, Ben wants to be ready to meet new demands as our economy progresses.

Boo Chanco’s email address is [email protected]. Follow him on X (formerly known as Twitter) @boochanco