The State of the Philippine Steel Industry: An initial Look Today

photo credit

Two Wednesdays ago, I attended the regular board meeting of the Philippine Iron and Steel Institute (PISI) in lieu of our president who was then out of town. Our president has been a long time officer of the board representing the Flat Steel Sector and in times that he is not available, he would send our vice president for manufacturing, or me to pitch in for him in such meetings or in other PISI activities, forums, etc. That  help us get first hand updates of what’s going on in our world of steel from steel gurus and businessmen.

The PISI is an umbrella organization of all steel stakeholders, namely, suppliers, traders/importers, manufacturers, etc. Its membership cuts across various steel industry associations and individual companies. Its objective is to promote, enhance, and protect the interest of its members as well as the steel industry as a whole. Incidentally, the current president, was my close colleague during our years at National Steel Corporation in Iligan City.

A hot topic discussed (which is actually a regular item in all meetings) is the hottest subject which hogged the headlines recently- smuggling. For many years, smuggling or technical smuggling specifically, has always been identified as the menace in the industry. In recent years, it has become rampant to alarming levels. Like other business sectors such as oil, agri- products ( like meat, poultry, and rice), etc.,  the Institute had been expressing outcry and consistently decried the unabated rampant smuggling, most common of which are under declaration or misdeclaration. For 2012 alone, estimated loss due to smuggling reached P1 billion. It has been common that people are already immune to it  and that any news about it is not news anymore. When will that day come when we all can say,” it’s time to play hardball”.

Another main feature of the meeting is the report on imported steel price. From scrap to billets, slabs, hot-rolled and cold rolled coils, plates, tin plates, GI, PPGI, figures from traditional sources namely, China, Taiwan, Japan, Russia, it was reported that  last month’s prices generally went down compared to the previous month. April prices for  (figures are in US dollars per MT) scrap bulk sea cargo was at 375, containerized ex Taiwan at 395, HRC ex Taiwan was 580 and ex China is 560, 0.6mm CRC at 600 and 0.17mm CRC iwa at 700, 0.33m GI at 840 and PPGI at 950. Interestingly, while prices are going down and analysts say demand will be depressed, China increased its steel output by 9.1% this first quarter, year on year. For Jan-March 2013 alone, total China output is now pegged at 192 Million MT.

Next month, SEASI or Southeast East Asia Steel Institute will hold its annual international conference. Every country member presents their respective country report. During the board meeting, a tentative PISI country report was presented for comments, validation, etc. I noted some highlights; first on the  GDP  report where, from the 6.6% GDP growth registered in 2012, in the Industrial sector, it was Construction which registered the highest growth of 14.4% while Manufacturing stood at only 5.4%. In the Services sector, transport was highest at 9.1%. Another notable highlight was in our GI/PPGI/Aluzinc/EGI sector. For 2012, total 2012 importation reached over 530,000MT, around 35%   increase from the previous year level indicated by the updated data from the Bureau of Imports (BIS). This is because, most, if not all galvanizing plants are not anymore producing or are not anymore operating and merely imports these coated products mostly from China. The reason is pure business economics. It is now cheaper to buy imported GI products than buy CRC raw materials  and process or convert them to GI. Sadly,manufacturing of galvanized steel is one sector which has not only declined but is tilting on the verge of extinction.

The Journey Continues: Tale of Steel Companies, Part 2

Fast forward. Four months from now, my 2nd and current company, Union Galvasteel Corporation (UGC) will celebrate in style its 50th year of existence. Center of celebration will be at the place where it all started in 1963, at Poro Plant at Poro Point in San Fernando City, La Union. As the company celebrates its golden years, it is likewise excitedly looking ahead for the next 50 years and perhaps beyond.

Fifty years ago, the company, then named Bacnotan Steel Corporation (BSC), a division of Bacnotan Cement Industries, started with its old, sheet to sheet galvanizing operation producing GI sheets for roofing products. Five years later, another similar type of galvanizing operations was opened in Davao City. It was only in 1990 when it opened up in Calamba City, Laguna which would then become until now as its main plant. It started to expand and modernize with the construction of its coil by coil color coating line in 1993 and the commissioning of its continuous galvanizing line in 1997. The Asian financial crisis took its toll and nearly brought down the company to bankruptcy. But with a bamboo like tenacity and resiliency, brought about by overall restructuring of its operations and strategies, it survived the storm and started to expand more, both in reach and products lines. Today, it has the country’s biggest supply chain and distribution network in the industry with 26 roll forming plants, warehouses, and sales offices strategically located throughout the country from north to south. “Sa Tibay at Ganda, Panalo Ka” has become an institutionalized tagline of the company.

I joined UGC in the latter part of 1996 at the worst time when the financial crisis was hitting the company, the industry and the country real hard. All through these years, I did my fair share, practically in all aspects of the business, from operations, technical/quality assurance, marketing, human resource, training, finance, etc. Externally, I have broadened my scope of knowledge and understanding of the industry, not just locally but regionally as well, through active involvement and regular liaisons with steel industry associations and leaders, government agencies, customers, competition, suppliers, environmental groups, consumer advocates, etc. I even wrote a technical paper about how the company survived the crisis, which I presented at the SEASI International Conference in Kuala Lumpur, Malaysia in November 2002. Indeed, an enriching experience.

Emma A., a dear colleague from NSC who is now happily settled in Canada, once asked us to write about our life after steel. This is what I wrote; “Fortunately or unfortunately, my life is STILL WITH STEEL.

It seems like I have taken my steel career in full circle. But not quite.

The Journey Continues: Tale of Steel Companies, Part 1

Two significant events will happen in the next few months to the only two companies that I have been connected (read: employed) throughout my professional career. These events definitely define my “steel journey.”

Photo credit: www.cityofwaterfalls-iligancity.com

Eight months from now, the moribund National Steel Corporation (NSC), then the largest steel company in the Philippines, would have been 40 years. It was established as a forerunner of the National Shipyard Corporation in the 1950’s and later on the IISMI or Iligan Integrated Steel Mill Inc. in the 60’s. All the main plants were located in Iligan City in northern Mindanao. Active and loyal “alumni” based in Manila are organizing a grand reunion on its anniversary month, February next year for all its ex-employees from Iligan Plant, Pasig Plant and Makati-Home Office many of whom are already settled abroad. This will surely be big event to enjoy and reconnect. There will be lots of hugs and kisses and embraces and lots of reminiscing, something which will make everybody’s hearts sink. Once upon a past era, these were the “steel trailblazers” who aspired and dreamed of “building the Country”.

I joined NSC as an engineering management trainee (we were then called Industrial Engineers) barely a month after college graduation. I am proud I belonged to this group, which former president Rolly Narciso described in his tribute as “among the best technical and managerial mind of NSC”. When I left 18 years later, already a developed professional, the NSC ship was already sinking and it was only a matter before this steel giant finally closed down 5years later. In that span, many left the company and the city for good. Notably, many migrated abroad to Canada, the U.S, Australia, New Zealand. the Middle East countries and the neighboring ASEAN countries. Such exodus can be aptly described as “the great brain drain”. Still, quite a number, including me, moved to the big city, Manila while some remained and cast their luck with the lamentable Malaysian and later on Indian owners who likewise closed shop without even taking off, weighed down by lack of capital, technological obsolescence, loss of market and overall mismanagement. What happened to the Iligan plant, its once thriving employees’ community called “Steeltown” and perhaps the lives of its people is reflected in the movie and now Broadway and Manila musical, Full Monty.

What a sad ending to a glorious past!

Steel Connecting in China Part 2

At the Green Resort Restaurant, Ningbo, China

Aug. 08, 2012

The day before, we flew to Ningbo City but our flight returned to Xiamen due to typhoon Haiku ( I think this was typhoon Gener coming from the Philippines). While Manila and northern Luzon was battered by continuous rains and flooding, China's central eastern parts were likewise smarting from floods and strong winds.

We spent the morning waiting for confirmation of the flight and later decided to go to downtown Xiamen. We took lunch at Robinson’s Mall, Xiamen. Together with SM, I felt some measure of pride that such purely Philippine mall brands are conquering China. We know of course that they are owned by the family of Henry Sy and John Gokongwei who, like most Chinese Filipino taipans, they originally came from this place, Fujian or Amoy as we used to know. It was hot outside but my hosts told me we have to cool down over a bottle of beer. Shortly after we returned to the hotel, the airline bus picked us up. Our flight was confirmed to leave and we are finally flying out.

At Ningbo Sino Coalition Industrial Company Ltd

It was still wet and windy when we landed at Ningbo international Airport. It seemed like we were the only passengers at the airport. It was early evening, 6pm. but the place was already dark. There were still some flood waters at both sides of the streets. The expressway was lonely and dark. Save for one or two trucks and a couple of cars, the highway was all ours.

The airport to the hotel took us 45 minutes. Downtown Ningbo, I was told, was still 30 min. away. Some streets were still flooded and cars have to find shallow areas to pass through. The hotel was a star hotel, rated a "Green Hotel" but there were no other guests in the lobby and some services were not available because of the typhoon. We took dinner outside and later ventured to the streets. We still felt the strong winds battering the tress, the place looked desolate. Few cars were out on the streets, establishments were closed, buildings were dark, and there were no people roaming around. I didn't mind the "cold reception". I looked forward to the next day. I learned that the typhoon had already passed earlier in the morning .

At Zhejiang Southeast Metal Sheet Co. Ltd., Hangzhou, China

Aug. 09, 2012

We woke up to a sunny morning. Now the people were out on the streets. We learned some employees of te plant we visited were starnded in tier houses the day before due to floods.

After the meeting and tour, we were treated to lunch at a “Green Resort Restaurant”. It seems China is serious with their green campaign. Our hotel was rated as “Green Hotel”. It was indeed a hearty lunch of vegetable, fish, and meat and the typical "kampai" of beer.

After lunch, we drove to our final itinerary, Hangzhou. Running mostly at 140 kph. in a busy expressway of cars and trucks), it took us only 2 hours to reach our destination. Ningbo and Hangzhou are two major cities, and as expected, trade and business is flourishing.

Hangzhou is a tourist city. Their top tourist attraction, Western Lake, is considered as one of Chinese jewels. Hangzhou is bigger than Xiamen and just around 2 hours. car ride to Shanghai. I learned it is the favorite city of many Chinese  “rich and famous”. I was told that here, Ferraris, Lamborghinis, and other top luxurious cars are a common sight.

Many construction and expansion activities were visibly going on. In the areas in the vicinity of the plant, new communities are being built, new industrial zones are underway. The developments are fast that every quarter, when my host from Taiwan comes and visits the place every quarter, new structures come into place.

From the plant, our hotel, the luxurious 5 star Jinma Hotel, was 40 min. away. Downtown Hangzhou was  another 30 min. away. We just didn't have the time to explore and experience the beauty of the city. 

Aug. 10, 2012

We took the 7:40 a.m. one hour return flight back to Xiamen. Domestic terminal was fully packed with people. There were just so many Chinese locals travelling to and fro. Airport security was, or had been,  strict but firm and consistent. Everyone goes on a personal body search, front and back. Baggages are opened for unknown objects. They simply don't take chances as far as security is concerned. But I must say that they are efficient.

My flight to Manila was in the late afternoon so I still had enough time to go back to Robinson's mall to buy some pasalubong. After a lunch of noodles, David, my Xiamen host took me back to the airport. I spent the whole afternoon waiting for my afternoon flight.

We finally took off past 6, almost an hour delayed. This PAL flight was full; 90% were Chinese visitors. Upon landing at NAIA Terminal 3, we again spent 40 min. inside the plane. When we disembarked, we were surprised to learn we were not going through the tube, but had to take the stairway and the bus. At the customs area, there was another long wait we had to endure as all baggages of Xiamen Chinese passengers were opened. Finally, after going out, the last long wait was for the taxi. It was already past 10 pm. There was a long line of passengers but there were no taxis. This is already the 2nd time  that has happened to me. The first was in May with my family coming in from Cebu. The airport authorities just don't care whether there are transport available for late evening arrivals at Terminal 3. If you are the passenger, tired and weary or if you are the tourist, excited to visit Manila, that would not be fun at all.

After a long day, I arrived home past 11 p.m. It was however, still a fruitful, educational and productive trip.

Steel Connecting in China, Part 1

My steel journey continues.......

My recent trip to China last August 6 – 10  took me  to four (4) major cities and three (3) provinces from Southern to Central Eastern regions of Mainland China. With Xiamen in the Fujian province as my starting take-off point, I visited the following  (1) Guangdong Hanjiang Steel Plate Co. Ltd. located in Chaozhou City, Guangdong province south of Xiamen, (2) Sino Coalition Ningbo Steel Production Co. Ltd. in Ningbo City and (3) Zhejiang Southeast Metalsheet Co. Ltd. in Hangzhou City, both in the central eastern area of Zhejiang province, not far from Shanghai.

 The objective of my trip was to conduct technical meetings and evaluate the potential of these three (3) companies as suppliers of G.I. products in terms of their technical capabilities to meet specifications.

      This is my 3rd visit to China. The first 2 visits though took me only to Xiamen. And everytime I set foot in this beautiful city, I'm always met with something new about the place.

 When we first visited Xiamen in 6 years ago, in September 2006, construction was in frenzy; both within and outside the city. Steel demand was at its peak as China was preparing for the 2008 Beijing Olympics. There was only one SM Mall then, the first SM venture in China. When I came back last year, everything seemed in place. Buildings were completed and those construction outside the city were now converted to vibrant communities. There were now 2 SM malls. The first Robinson's Galleria was also completed with another one under construction. There was one notable sight though that did not escape me; the city became more green with full grown tress even in downtown Xiamen.

Taken from my hotel window, Swan Hotel

Aug. 06, 2012

I arrived Xiamen by PAL direct from Manila (2hrs. and 20 min.) at a little past 10 in the morning and was met by our Chinese traders who arranged my trip.. We drove directly to Guangdong Hanjiang Steel Plate Co. Ltd. It was raining all week in Manila when I left and so sunny Xiamen was a welcome relief.

It was a 3 ½ hour ride (30 min. for lunch stop over in a roadside rest and eating area) of long stretches of expressway, passing by three tunnels (cut from mountains) as long as 2 kms., bridges and viaducts up to 8 kms. long. It was indeed a rural setting and  only a few cars and trucks joined us in our trip. This is a glimpse of how China built its transportation infrastructure, interchange linkup on all communities to the highway. Road signs are everywhere in Chinese and English, just like in the US interstates, directional signs, safety signs, distances, speed limits per lane, etc. I could only wish those managing our expressways back home could at least learn some basic lessons on road management. This is the least we, or I who takes the South Luzon expressway everyday, could ask. After all, we pay high toll rates.

We finally reached our destination at around 2:30pm. That 3 hour actual travel time running at the average speed of 120 kph (reaching 140 kph), the distance we covered  must be around 350 kms, almost a back and forth distance from Calamba to La Union.

We spent around 2 hours in the plant covering our technical meeting and brief plant tour. Immediately after that , we drove back to Xiamen, arriving there at around 7:30 p.m. We checked in at Swan Hotel, a spanky hotel with a scenic view  along a river and a lake. At a private dinner later in the hotel, we were joined by a major principal of the trading firm. He is a Taiwanese businessman who used to work in major steel companies in Taiwan, BHP and Ton Yi.  We talked on developments in the steel industry, local and international and he went on retracing his days at BHP and Ton Yi. Quite proficient in english, he has now shifted to agriculture and put up a “mushroom” plantation and processing plant which
he hopes to export soon. “Mushroom he says is better than steel”.

Talking about the Taiwan connection, many companies, big and small in Xiamen and Fujian province for that matter, are owned by Taiwanese businessmen. Taiwan food products are also sold in many grocery stores. In the past, there were no direct flights from Taiwan to mainland China.  Taiwanese who visit Mainland China have to make make a transient stopover in Hongkong before proceeding to Mainland. Now, there are many direct  flights from Kaoshioung  to Xiamen, Hangzhou, and I suppose Shanghai and Beijing too.

Xiamen is beautiful at night. Bright, dancing lights in various colors, the place was vibrant  with many people going out to dine, wine and be entertained. The luxurious cars plying around, BMW, Mercedes, European, Japanese and American cars,  could attest the affluence of the city. Traffic is moving, despite the many cars.

During the day, you could sense the freshness of the city. It is clean and  green with trees and plants everywhere at the center and  at the side parking streets. There is practically no open space in the city as open spaces are planted with plants and trees. That is also true even outside the city. The long expressways were filled with trees and plants not only on both sides but also at the center separating both directions of the highway. No wonder, it is considered as the most livable city in China.

Remembering World Trade Center, now Ground Zero, 25 years ago

It was 25 years ago that I visited this site; Ground Zero they now call. That time, it was the exact opposite of being ground zero. It was then an imposing twin tower skyscraper, symbol of America's might and reach. Inside the buildings was a picture of life, with all the hustle and bustle of corporate America. It was after all the World trade Center. Atop was a wide vista and horizon catching anybody in awe.

I came to America early March 1986, exactly one week after the historic EDSA People Power 1. The euphoria of this bloodless coup has reached the U.S. that everywhere we go, we seemed to be openly welcomed and looked up to. They were then hungry for our first hand report we brought from Manila. We were a group of 13 engineers sent by our company, National Steel Corporation, to the U.S. for a 2-month training on the operation and process control of the Blaw-Knox 5stand Cold Rolling Mill we bought from Bethlehem Steel Corporation. The venue was at Bethlehem's plant in Burns Harbor, Indiana.

Towards the end of our training, I made a whirlwind weekend rendezvous with my cousins based in New Jersey. Then came the tour of New York, one of the highlights of my stay in the U.S.

We had a boat cruise (was it Hudson River?), passing by another landmark, the Statue of Liberty at Staten Island while Manhattan and New York's skyline looming all along our cruise. We queued at Chinatown for a lunch of delectable steamed bass and adobong kangkong, strolled along 5th Avenue and St.Patrick Cathedral, relaxing at the Rockefeller Center and finally the must see must go places in New York, the Empire State Tower and the World Trade Center Twin Tower.

Lining up at the entrance was a thrill already, the same feeling I felt the first time I reached a skyscraper weeks ago in Chicago, the Sears Tower. The brief orientation further excited me and the ride in the express elevator to to top ( imagine reaching the first stop at the 90+ floor in 70 minutes) was an adventure. And finally, the view from the top. It was just exhilarating.

So how could I imagine the towers toppled, crushed to the ground by such treacherous terrorist attack of Al-Queda. There was no Al-Queda then. that time, Osama bin Laden was just a mujaheedin in Afghanistan fighting the Russian invaders and of all ironies, a cause supported by the U.S. itself. It was to me the worst attack in American history, far worst than Pearl Harbor which was in far away Hawaii, far from the US mainland. But this one, notwithstanding the thousands who perished, was struck right at the heart of the U.S. Suddenly, the world's mightiest superpower became vulnerable.

Years after 9/11, I got hold of the book, Men of Steel, which described and related how the twin towers came into being, the determination of the Koch family who built it. As my professional life revolved around steel, I was astounded by the sheer genius of the men who designed and built it, the steel structures fabricated and used, etc. Thousands of tons of steel, special steels, special design, simply magnificent. It was built not to fail. Sadly, it did, caused by an unimaginable element to affect the building. Any metallurgist or steel engineer know it: Heat.Heat caused by fire from the premium hi grade jet fuel of the airplanes used to ram the building.

  

As the Americans and the world commemorates the 10th anniversary of the bombing, now known as 9/11, I sympathize and empathize with all the freedom and peace loving people in the world praying that such acts would be the last. 25 years ago, my visit to this place was just plain enjoyment.

My Soccer Story: Part 3

My other local soccer hero now is Ismael C. Batiles whom we call Mike. He is now the interim Vice President of the Philippine Football Federation. He said he volunteered to head a committee on good governance and transparency. The issue on financial irregularity, nothwithstanding ineffective and poor leadership were the issues why they voted for a no-confidence vote and ousted the incumbent president.

I've known Mike for more than 30 years and he belongs to a circle closest to me. He was and still is, also a steel journey man. Fresh from graduating from Western Institute of Technology with the degree in Chemical Engineering in 1978, he came to Iligan as one of the scholars of National Steel Corporation (NSC) who would pursue the newly opened Metallurgical Engineering course at Mindanao State University-Iligan Institute of Technology. We would be classmates then, studying on a part time basis and they, as full time students. After that, he would pay back NSC and would stay with the company for almost 20 years. We would be together under Technical Division, Quality Assurance, he specializing in billet steel making and I with Cold and Hot rolling. From Process Metallurgist, he would moved on to become billet line supervisor and Sr. Supervisor, QA Head, and Billet Plant Manager. He was one of NSC's topnotch technical men as far as billet steel making is concerned. When the Malaysian firm Wing Tiek and later Hottic took over NSC, he was transferred to the Purchasing Division, a move which caught his surprise. When he asked why, because as he said he is a technical man, he was told by top management that they the only qualification they are looking for this position (who will be handling millions of foreign purchases) is a person with proven integrity. And without doubt, he suit that qualification. This is his trademark and reputation which friends and colleagues at NSC have known him for: competence and integrity.

We used to play a lot of basketball but I'm not sure if he plays soccer, but he sure know the game. Sometime in 1988, as president of our Supervisors Association (ISSAI), he and his board appointed me as chairman of the sports committee and that year, we launched a highly successful football tournament, featuring elementary schools within Iligan City proper. In coordination with NSC's Marketing Division, each team was sponsored by a galvanizing company who were customers of NSC. To my mind, it was the first and the last football tourney of its kind held in Iligan City.

When NSC closed shop in 1999, Mike pursued his scrap export business. He has toured the world, Europe, US and Asian countries looking for scrap to feed NSC's billet shop. with this technical and commercial background, in a short time, his scrap business was a thriving business. With trained assistants and procedures and policies in place, he longed for action. so he joined the fledging Bacnotan Steel Industries Inc.owned by the Phinma group in Calaca Batangas. It was a new billet steel making and rebar roling plant but early on, it was beset by both technical and financial burdens until it finally closed sometime in 2000 at the height of the Asian crisis.

Mike went back to Iligan and finally settled and based himself in nearby Cagayan de Oro. This is where he strated to become involved in football until this year when he was elected president of Cagayan de Oro Football Club. He loves football and he wants to be involved and make a difference in promoting this beautiful game.

They could just go on with their happy lives and forget the politics in football. Both are financially stable and living happy married lives. But football is their passion, in their blood. And so, when the controversy over the leadership of PFF will be settled soon which obviously will be in their favor, there is no doubt Philippine football will be on the right track. And like before all these years, starting when I was a kid kicking balls on the sidelines of the goals, I will just be on the sidelines, cheering, and continue wishing that someday, my long cherished dream will come true: to see live a World Cup Finals.