According to idea’s industry trends, one of the many publications of the Institute for Development and Econometric Analysis, Inc. (IDEA), it revealed that per United Nations Conference on Trade and Development (UNCTAD) report in 2009, the steel industry is experiencing the worst slump in demand since the 1974-1975 oil crisis. The report estimated that demand slumped by around 15% in 2009. Increase in domestic demand for iron and steel, as shown by the trend in growth rate of the volume of net sales index (VoNSI), peaked in 2006 with 125.7% and posted its lowest in August 2007 at 49.2% which may be partly due to the extremely high record of the previous year.
The negative effect of the economic slowdown on demand growth was represented by the consecutive contraction from mid?2008 until the start of third quarter of 2009. Meanwhile, local steel manufacturers are anticipating the recovery of both domestic and global steel demand after slumping due to the economic downturn. Philippine producer Global Steel Philippines, Inc. (formerly National Steel Corporation, which reopened after being closed for almost four years and with the entry of new group of investors) is confident that the worst is over and recovery is on its way. Since steel products are used as primary inputs in several sectors, including Construction, Transportation, Manufacturing, and Communication and Storage, demand is dependent on the health of these forward linkages. Housing and government projects, for one, are expected to boost Construction.
The early efforts of the country to develop the domestic steel industry saw little success; with insufficient domestic production, the country has had to rely heavily on steel imports. The recovering economy, however, posts bright prospects for local manufacturers. GSPI is expanding production with its US $100 million investment; by the start of 2010, GSPI expects monthly production to reach one million metric tons. Insufficient domestic production caused the country to seek imports. As of October 2009, iron and steel ranked as the 5th largest imported commodity with 2.73% share in total imports. Local manufacturers claimed that the imported steel products started to flood the domestic market in 2003. There was indeed an increase in demand for steel in 2003 and because the country still did not have enough production, the market resorted to importing. Annual iron and steel imports skyrocketed in 2008, reaching US $1.59 billion in value.
As of November 2009, total imports recorded a decline of around 40% from the previous year. Local steel manufacturers are seeking protection and regulation from the government to control the influx of foreign supplies. Major suppliers of the country are China, Taiwan, Japan, Ukraine, Russia and Hong Kong. Additional tariff on steel angle bars was implemented during the last quarter of 2009 in response to the challenge to the local steel industry brought by the upsurge in imports.
The steel industry of the country is not yet fully developed—an argument often cited for implementing tariff protection. Local steel producers are counting on government regulation and protection to sustain domestic production and to prevent foreign countries from controlling the Philippine steel industry, according to IDEA’s published report.
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