Steel self-sufficiency a concern in ‘BBB’ program
The current administration’s “Build, Build, Build” (BBB) program envisions a Philippines with proper infrastructure to enhance economic capability. With billions of dollars poured in this program, the country is expected to consume an increased volume of iron and steel in the coming years.
At the First Quarter Mining Lecture Series held by the Department of Science and Technology’s Philippine Council for Industry, Energy and Emerging Technology Research and Development (DOST-PCIEERD) on March 27 in Manila, various government officials, stakeholders, researchers, scientists and engineers discussed how the country can produce iron and steel, and supply the demand by creating a road map that could empower and strengthen the sector.
According to the Board of Investments (BOI), the apparent steel consumption of the country in 2018 is about 10.55 million tons with an ASP forecast of 20 million tons in 2030. While the country’s program is very promising, the program can help local investors in iron and steel production if more iron and steel from local supply can be added instead of importing them mostly from China.
On another note, the Philippines’s steel demand is composed of five essential output products. Eighty-one percent of this demand is dedicated to construction, 9 percent for light and heavy fabrication, 5 percent for ship building, 4 percent for packaging, and 1 percent for other uses.
Vulnerability of steel importation
The BOI’s mission for the Philippine Iron and Steel Roadmap is “to contribute to the country’s sustainable development by manufacturing world-class products for industry and society.” Its vision is that by 2030 “the Philippine iron and steel industry sees itself as a majority producer of quality steel products for domestic users.”
According to DOST-PCIEERD’s Director Eric Paringit, the Philippines is dependent on importation of iron and steel, and have a very high demand, hence, “the industry is very volatile or very unstable.”
Paringit told the BusinessMirror that whatever happens to the world market, “we are vulnerable to external forces or events that could happen, so we want to stabilize the market by making sure that we have a local industry that could support the development goals we have for the country.”
He said there is no doubt that we have more raw resources or materials than what we need, but “the basic, intermediate and end processing of the steel industry is absent in the country.”
He explained that compared to its neighbors, the Philippines is “the only country that has no direct iron and steel processing plant.”
Paringit said he wishes to establish a concrete plan to put up steel plant in the next five years. The government’s former steel producer, the National Steel Corp. was then privatized, but with today’s pool of human skills and resource, “it’s not a matter of ‘if,’ it’s a matter of when we are going to put this up because we really need to propel,” Paringit explained.
Partial local steel production
In the research by Dr. Agustin Fudolig, deputy executive director of the Metals Industry Research and Development Center, and Engr. Juancho Pablo Calvez, chief metallurgist of Mines and Geosciences Bureau, titled, “Technical and Economic Feasibility Study to Determine the Most Suitable Ironmaking Technology for Value Adding of Philippine Magnetite Resources,” they saw a great potential in the country in terms of local steel production.
In an interview with the BusinessMirror, Fudolig explained that the only problem is economics.
“The problem is that some sectors are wary about the production volume in China because it is so huge that they are now exporting and we are buying from them,” Fudolig said. “It’s going to be a comparison between importing it or producing it.”
At the moment, Fudolig said importing steel is easier because the local industry could not compete anymore. However, he does not eliminate the fact that we have to be self-sufficient, which supported Paringit’s statement.
“Partial self-sufficiency is important,” Fudolig told the BusinessMirror. “If we put up iron and steel manufacturing, we will have partial self sufficiency, which is important because if our source at present suddenly stops selling to us, we still have a local source.”
He added that the country does not necessarily need to produce 100 percent, but could potentially produce 30 percent to 50 percent of the requirements and then import the rest.
Considering the 1 million tons per year consumption as used in Fudolig’s study, with respect to the country’s raw material deposits of magnetite, which is about 2 billion tons, he said “your steel-production plant would last a hundred years.”
A plant would need 1.7 million tons of raw magnetite to produce 1 million tons of steel. “In terms of sustainability, I am confident we can achieve this,” Fudolig added.
The demand for power will definitely grow. According to the BOI, the country’s ASP will be 20 million tons by 2030. But if the country aims to decrease steel importation and increase local production, the country must also have a stable and cheaper power source.
Paringit explained that “based on the premise that you need something like 10 percent or 20 percent of the requirements to put up a steel processing plant, you would really need a stable and cheap source of power.”
He added that one cannot melt steel if there is no enough power source. “What’s being argued is if we need another source of energy to also power the steel industry,” he said.
This is where nuclear energy comes in. The existing but unused Bataan Nuclear Power Plant (BNPP) has been a subject of debate over decades because of alleged impacts to the environment.
But Dr. Carlo Arcilla, director of the Philippine Nuclear Research Institute, a nuclear power plant like BNPP has zero carbon emission and that a solution to nuclear waste disposal can be put in Philippine islands in the West Philippine Sea.
“The cost of nuclear power is at least half of the normal price, but it will depend on how much is in the mix of source of power,” Arcilla told the BusinessMirror. “With a nuclear power plant, we can have uninterrupted power for 18 months.”
Arcilla noted that nuclear power can be added to the normal power source in the country, such as coal. “So the whole average will be brought down, and that’s what’s definitely important.”
Fudolig in his study estimated a P5.50 per kilowatt hour price of electricity used for steel processing plants. Other studies also showed that it can be further reduced to P3.50 per kilowatt hour if electricity would come from Leyte’s geothermal plant. “Sensitivity in power cost would improve the return of investment of plants.”
If nuclear power will be added in the power pipeline, Fudolig told the BusinessMirror that “nuclear power can help in reducing the cost more from P3.50 to, say, P1.50 or P2 per kilowatt hour.”
Arcilla gave assurance that if BNPP is reopened it will be safe.
Of course, there are concerns on the issue of reopening BNPP. For Paringit, the country needs to rebuild competency and human resources to operate it.
“We are supporting the capacity building efforts and the R&D toward ensuring that we will be able to operate it safely, sustainably and reliably,” he said.