The fall of industrial giant, the story

5/7/2014

HASHTAGS MINDANAO

By Cha Monforte

The fall of industrial giant, the story

There was a fall of industrial giant, the competitive description of Iligan City before. There was that fall as when the National Steel Corporation went bankrupt and shutdown operations in November 1999. So other industries supplying NSC and its downstream industries closed shop, too, like dominoes falling, on the first wave of disadvantageous trade liberalization in the early 2000s sending the city’s economy into turmoil.

The NSC, we recall, was once known as the largest steelmaking plant in Southeast Asia and the pride of Philippine industry. The NSC was resuscitated in 2004 with the entry of Malaysian investors but they shortly sold their controlling interests. A rich Indian family won the bid but they aggressively trampled the rights of our workers, who then staged wildcat strike against them. By 2010, NSC’s plant halted operations until these days. End of the story.

Why NSC collapsed? A former NSC employee has his simple view: NSC went bankrupt after the bar slab steels were eliminated in the production chain. He said it was caused by a national policy. NSC then was the receiver of Mindanao’s all steel scraps which it recycled to be good, non-substandard steels for domestic consumption. One product out of one policy. That was all he could recollect long years after he was laid out from work. He didn’t know about the nitty-gritty of steel markets and tariffs affecting NSC steel products- hot-rolled coils, hot-rolled plates, cold-rolled coils, and tinplates, etc.

It was in the late 1990s that the Asian financial crisis came and so the peso depreciated to unprecedented levels. “With many of NSC’s loans and supply of raw materials paid in dollars, the steel company just could not cope with servicing its debts,” said one memo explainer. “Trade liberalization and the cheap steel imports was also among the major factors that contributed to NSC’s demise. Competition was so stiff because of the dumping of cheap steel products from such countries as Russia and Korea,” labor unions said.

“In fact, NSC was not the only victim in the dumping of cheap imports to the country. The cement industry also raised a howl when imported cement from Taiwan, Indonesia and other countries flooded the market supposedly through illegal means, eating up a large percentage of the local manufacturers’ sales. The two cement plants in Iligan- the Iligan Cement Corp. and the Mindanao Portland Cement Corp., as well as the Alsons Cement Corp. in neighboring Lugait, Misamis Oriental, felt the blow,” labor unions recollected. A few other companies servicing the NSC, as well as smaller business firms in the downstream industry, were forced to close shop, too.

When NSC closed shop, the scrap iron business lost P1.4-billion and the Refractories Corp. of the Philippines lost 30% of its market. Mabuhay Vinyl Corp., supplier of NSC’s chemicals, was severely hit, and the National Power Corp. lost P720M in sales yearly, Philippine Star reported in May 2002.

But who were the actors then before the curtains fall in the great NSC show? NSC’s woes started with privatization. It was El President El Tabako who pushed for the NSC’s privatization for thinking out loud that the government “ain’t supposed to run a steel company, and that it’s better handled by the private sector – despite the fact that at that time, 1994, NSC belonged to the top ten corporations in the Philippines,” said a heckler in the net. That belonged to the Philippines 2000, tiger economy battlecries of El Tabako.

For wanting to limit the government’s financial exposure on State-owned corporations, so Malaysia’s Wing Tiek acquired controlling interests of NSC in November 1994 and shortly it retrenched more than 500 workers for the first time since NSC’s establishment in 1974. But being not steel maker, Wing Tiek sold its sold its entire 69.2% stake to Hottick in December 1996 while the government through the National Development Corp. optioned its own 12.5% stake to the latter on February 1997.

But the latter was of the same mold of the first buyer, a steel trader, not a steel maker. Hottick sold NSC again in 2004, and in the bidding the Global Infrastructure Holdings Ltd. owned by Mittal family, Indian nationals, won. So NSC, next called as Global Steel, resumed operations, after four years of closing shop while the NSC’s selling had been going on. But the resumption of operation took only five years as in February 2010 the Global Steel employees made a strike completely paralyzing the plant operations.

“The Indian company is flagrantly violating Philippine Labor and economic laws since it took over in year 2004 on the pretext of alleged liquidity problems and profitability issues by the abusive Indian investors in collaboration with the corrupt government officials,” the striking Global Steel workers charged. The once NSC never did recover- until now.

The DTI recently bared a draft of the road map for the iron and steel industry showing that by 2030 the country should be a globally competitive provider of quality steel products for domestic users. What road map to boost when it gives a far distant year for us to become competitive? We were once the No. 1 quality steel provider in Asia, and now we look for 2030 to recover? This is impossible as the curtain for 2015 Asean Integration is beginning to be raised! Just last year the country steel consumption reached six million metric tons, and about 50 percent of that was met by local production when in the past we took all.

The simple view of the former NSC employee is revealing that our national leaders profit from the status quo of allowing steel imports to supply 50 percent of our domestic steel requirements- to bloat their personal pockets. (@chamonforte, @ruralurbanews)

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