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The Philippine Iron & Steel

Industy

Mr. Reynaldo D. Lignes

Iron & Steel Sectoral Champion

Board of Investments

05 June 2014

OECD, Paris France

Presentation Outline

I. Introduction

II. Key Economic Trends in 2013

III. Iron & Steel Industry Performance

IV. Economic and Steel outlook in 2014

V. Salient Features of the Industry Roadmap and Industry Support Measures

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Introduction

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THE PHILIPPINE BOARD OF INVESTMENTS Your Window to Infinite Opportunities in the Philippines.

The Board of Investments (BOI), as the national investment promotion

agency of the government, reflects the country’s keen interest in keeping

its doors open to investors – both foreign and domestic.

BOI’s efforts are based on the government’s set goals of encouraging more

economic activities that will take the country to a higher level of global

competitiveness, and opening more opportunities that will generate more

gainful employment for the people.

The BOI also handles industry development that includes Iron and Steel

and many other industries.

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•Due diligence assistance • Information support

• Visit program development & investment briefing

• Business matching

•Business registration facilitation • Networking with IPUs and other government

agencies on pre-operational business

requirements

• Fast tracking with registration procedures

• Assistance with local government requirements

•Aftercare service • Presence of government network to quickly

respond to concerns

• Regular supervision & monitoring .

THE PHILIPPINE BOARD OF INVESTMENTS

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Philippines: Key Economic Trends in 2013

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0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP

Stable and Resilient Economic Growth

GDP (2012) 6.8%

GDP (2013) 7.2%

Headline Inflation (2012) 3.2%

Headline Inflation (2013) 3.0%

Source: National Statistical Coordination Board & National Statistics Office

TOTAL BOI & PEZA APPROVED INVESTMENTS

(in US$ Billion)

Steady Investment Flows

10.4%

2013 TOP SECTORS (% of Total Investments)

1. Electricity, Gas, Steam & Air Conditioning

2. Real Estate Activities

3. Manufacturing

4. Transportation & Storage

5. Accommodation & Food Service Activities

2013 TOP SOURCES (% of Total Foreign Investments)

1. British Virgin Islands

2. U.S.A.

3. Japan

4. Netherlands

5. Singapore

US$ 15.17B US$ 15.92B

US$ 17.48B

US$ 5.05B

US$ 6.69B

Total Investments Foreign Investments

US$ 6.31B

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Philippine Iron & Steel Industry

Performance

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The Philippine Iron & Steel Industry Structure

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Electric Furnace

Steel Making Scrap

Bars (Deformed/Plain)

Shapes/Section

Construction

Manufacturing

Machineries Ingots Billets

Rolling

Construction

Fabrication

LONG PRODUCTS

Imported Wire Rods

Nails

Wires

Fasteners

HR Plates

Hot Rolled Coils

Pipes/Tubes

Construction/Fabrication

Stockist/Hardware

Imported Slabs Hot Rolling

Shipbuilding

Pipes

Imported Hot Rolled Prod FLAT PRODUCTS

Imported HRC

Cold Rolling

Cold Rolled Coils

Tin Mill Blackplate

Imported CRC/TMBP

Fabrication

Galvanizing GI/PPGI Sheets

Construction/Fabrication

Appliance

Stockist/Hardware

Tinning Line

Imported Tinplate

Can Making Food Cans

Containers

Imported Billets

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Apparent steel consumption reached 6.58 million MT in 2013, growing by 9.2% compared to 6.03 million MT in 2012.

.

2.5 2.5

3.4

4.54.2

3.03.3

3.03.3

3.73.5

3.1 3.1 3.13.4 3.3

3.5

4.1

5.3

6.0

6.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

millio

n m

etr

ic to

ns

Apparent Steel Consumption ((1993-2013) In Million Metric Tons

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Key Developments in 2013

STEEL DEMAND

• Continuing growth of real estate developments

• Reconstruction of typhoon and earthquake affected areas

• Increased government infrastructure spending

STEEL SUPPLY

• Significant rise of imports for billets, wire rods, rebars, pipes and tubes

• Significant rise of local production for rebars, pipes and tubes

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Comparative Steel Demand

81%

9%

5%4%

1%

2013 2012

Construction

Light &

Heavy

Fabrication

Ship building Packaging

Others

Light &

Heavy

Fabrication

Construction

Packaging Others

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In Metric Tons Yr-Yr

2013 2012 Change

CRUDE STEEL PRODUCTION 1,307,849 1,259,627 3.8%

FINISHED STEEL PRODUCTION 4,169,969 3,216,265 30%

FINISHED STEEL IMPORT 3,675,527 3,383,117 8.6%

FINISHED STEEL EXPORT 100,000 -

APPARENT STEEL CONSUMPTION Adjusted for double counting

6,588,473 6,036,116 9.2%

Summary of Key Steel Statistics

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In Metric Tons Yr-Yr

2013 2012 Change

BILLETS

Production 1,307,849 1,259,627 3.8%

Import 1,681,666 1,285,733 31%

Export - -

Apparent Consumption 2,989,515 2,545,360 17%

SLABS

Production - -

Import -

Export - -

Apparent Consumption - -

Apparent Consumption:

SEMI-FINISHED STEEL

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Apparent Steel Consumption:

In Metric Tons Yr-Yr

2013 2012 Change

LONG PRODUCTS

Production1&2 3,019,969 2,653,000 14%

Import 1,321,826 763,971 73%

Export - -

Apparent Consumption 4,341,795 3,416,971 27%

FLAT PRODUCTS

Production1 0 0 -

Import 2,346,678 2,619,145 (10%)

Export 100,000 0

Apparent Consumption 2,246,678 2,619,145 (10%)

Total Long & Flat Products 6,588,473 6,036,116 9.2%

Sources: Bureau of Customs (BOC), Department of Trade and Industry (DTI) and Industry Sources

1 Covers hot rolled products only in order to avoid double counting

2 Excludes bar products converted from wire rods

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In Metric Tons Yr-Yr

2013 2012 Change

LONG PRODUCTS 3,239,969 2,853,000 14%

Bars1 2,744,065 2,392,000 15%

Shapes and Sections1 275,904 261,000 6%

Wires 220,000 220,000 0%

FLAT PRODUCTS 680,000 563,265 21%

Hot Rolled Coils - -

Cold Rolled Coils - -

GI/Pre-painted/Zn-Al Coated Sheets 380,000 464,265 (18%)

Pipes and Tubes 300,000 99,000 200%

Source: Industry Sources

Breakdown of Finished Steel Production in MT (2013 vs. 2012)

1 Includes bar products converted from wire rods

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Breakdown of Finished Steel Imports in MT (2013 vs. 2012)

In Metric Tons Yr-Yr

2013 2012 Change

Long Products 1,327,707 776,297 71%

Wire Rods 647,712 336,923 92%

Bars 250,511 93,822 167%

Shapes and Sections 304,024 270,311 12%

Sheet Piles 51,234 32,297 59%

Wires 65,667 25,481 158%

Rails 2,678 2,578 4%

Others (Alloy & Stainless Steels) 5,881 14,885 (60%)

Flat Products 2,409,852 2,555,449 (6%)

Plates 510,759 559,474 (9%)

Hot Rolled Coils/Sheets 505,391 528,451 (4%)

Cold Rolled Coils/Sheets 372,537 488,762 (24%)

GI Sheets/ Pre-painted/Zn-Al 551,981 530,953 4%

Tinplates/TFS* 216,332 222,196 (3%)

Pipes and Tubes 165,599 129,511 28%

Others (Alloy & Stainless Steels) 87,253 96,102 (9%)

Sources: Bureau of Customs (BOC), Department of Trade and Industry (DTI) and Industry Sources

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In Metric Tons Yr-Yr 2013 2012 Change

Bars / Sections - -

Wires - -

Hot Rolled Coils/Sheets - -

Cold Rolled Coils/Sheets - -

GI Sheets/ Pre-painted/Zn-Al - -

Pipes and Tubes 100,000 -

TOTAL 100,000 -

Source: National Statistics Office and Industry Sources

Breakdown of Finished Steel Exports in MT (2013 vs. 2012)

Philippines: Economic and Steel outlook in

2014

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Government forecast is for GDP to grow 6.6% in 2014

However, there are downside risks arising from:

1. Power shortage

2. Political distractions due to corruption

The challenge to the Philippines:

1. Good governance

2. Continue infrastructure development

3. Increase FDIs.

Philippine Economic Outlook for 2014

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Steel demand to benefit from:

• Implementation of big-ticket government infrastructure

• Reconstruction of typhoon and earthquake affected areas

• Housing backlog and re-development of urban centers

The steel supply situation in 2014:

• Increased local production of rebars, shapes and sections

• Increased importation of billets, CRC and coated steel products (GI, Zn-Al & PPGI)

Steel Outlook for 2014

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Salient Features of the Philippine

Iron & Steel Industry Roadmap

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Vision, Goals & Targets

• By 2030, the Philippine Iron & Steel industry sees itself as a globally competitive provider of quality steel products for domestic users

• ASC of 20 Million MT by 2030, translating to 130 kg per capita (from 50 kg per capita in 2013)

• 70% Local Production share of Finished Goods by 2030 (from 50% in 2013)

• Secured and competitively-priced raw material requirements for steel-making by 2015

Vision

Goals

Targets

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Industry Profile/Situationer

BOI-registered Investments amounting to Php 42.3 Billion as of 2013

Every new investment of P100 million leads to ...

• a higher domestic output of Php 260 million

• an additional HH income of Php 24 million

• And additional 117 new regular jobs

* Based on raw data from (a) 2009 Annual Survey of Philippine Business and Industry; and (b) Center for Research & Communication (UA&P) estimates of updated Input-Output tables for 2008

Industry Profile/Situationer

PRODUCT/ SERVICE

COVERAGE

Flat Steel Products: Hot rolled coils/sheets/plates, & cold rolled coil/sheets, tinplate, galvanized & pre-painted galvanized steel, pipes and tubes Long Steel Products: Billets, deformed & plain bars, small shapes & sections

MAJOR PLAYERS

Flat Steel Products: AC Steel, Chuayuco, Galvaphil, Goodyear Pipe, IPI, Mayer, Puyat Steel, Philmetal, Sonic, Super, Union Galva Long Steel Products: Capasco/Cameco, Capitol, Lunar Steel Group, Elegant Steel, Pag-asa Steelworks, Inc., Steel Asia Mfg. Corp., Stronghold , SKK, Treasure Steel Works Inactive Global Steel Philippines (SPV-AMC), Steel Corp, Sacramento Steel

INDUSTRY ASSOCIATION/S

Philippine Galvanizers and Coaters Association ( Flat Downstream Coated Products) Philippine Iron & Steel Institute (Flat & Long Products, Suppliers & Traders) Philippine Steelmaker’s Association (Long Products)

LINKAGES

Upstream: Sintered Iron Ore (Philippine Sinter Corporation) Potentially: Mining sector Downstream: Construction (Public & Private), Fabrication, Shipbuilding, Automotive, Can-making

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Geographical Location (Flats)

Super Industrial Pipe, IPI Cainta

Sacramento Steel (Inactive) Phividec, CDO

Global Steel (Inactive) Iligan City

Puyat, Steelcorp, Batangas

Tower, Goodyear Pipe, Mayer, NCR

AC Steel, Galvaphil, Cebu Chuayuco, Sonic, Philmetal, Union Galva, Cavite

Geographical Location (Longs)

Capasco/Cameco, Cainta, Taguig & Novaliches

Elegant Steel Phividec, CDO

Treasure Steel, Iligan City

Stronghold, SKK, Pampanga

Steel Asia Mfg. Corp., Bulacan, Batangas

Pag-asa Steelworks, Inc., NCR

Steel Asia Mfg. Corp, Cebu

Steel Asia Mfg. Corp., Bulacan, Batangas

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Supply Chain Gaps • Flat sector

• Basic iron making

Key Constraints • High cost of power

• Technical smuggling

• Outdated facilities

• Tariff distortions

Policy Response/Support Measures Incentives to encourage iron making facilities and flat

products mfg

Incentives to modernize and rehabilitate facilities

Strictly enforce customs laws and technical regulations

Discourage export of iron ore and scrap iron

Support R&D for product development

Review tariffs to remove distortions

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Current Initiatives

Commissioning of the comprehensive feasibility study on the ISM project, to start before 2015.

Support “key enabler” action items for horizontal issues in common with other sectors such as infrastructure, power, transport, smuggling, etc.

Prepare the domestic steel industry for the 2015 ASEAN market integration.

I. Preferred Activities

Regular List:

Agriculture/ Agri-business and Fishery

Creative Industries/Knowledge-Based

Services

Shipbuilding

Mass Housing

Iron and Steel Energy

Infrastructure

Research and Development

Green Projects

Motor Vehicles

Strategic Projects

Hospital /Medical Services

Disaster Prevention, Mitigation and Recovery

Projects

II. Export Activities

III. Mandatory List

Manufacture of export products

Services exports

Activities in support of exporters

IV. ARMM List

Investment Priorities Plan 2013

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Thank You

Contact Details

Reynaldo D. Lignes

Iron & Steel Champion

Industrial Policy Service

Board of Investments

896-9288

rdlignes@boi.gov.ph