[SMM Hot Topic] "Fivefold Trade Deficit! The Philippine Steel Industry Trapped in an 'Import Black Hole,' When Will Domestic Capacity Break Through?" — Detailed Analysis of ASEAN Steel Industry Development: The Philippines Chapter

[SMM Hot Topic] "Fivefold Trade Deficit! The Philippine Steel Industry Trapped in an 'Import Black Hole,' When Will Domestic Capacity Break Through?" — Detailed Analysis of ASEAN Steel Industry Development: Philippines Chapter The fourth-largest economy among ASEAN countries — the emerging Philippines According to the latest 2024 economic performance data of the ASEAN Six, the Philippines, as the fourth-largest economy in ASEAN, achieved a real economic growth of 5.6% in 2024, accelerating by 0.1 percentage points compared to the previous year, with a GDP of approximately $462.3 billion. With a population of nearly 113 million, the per capita GDP is around $4,095. The Philippines relies on China for nearly 80% of its steel imports. A detailed analysis of its steel industry is as follows. SMM compiled data from the World Steel Association (WSA), showing that the Philippines' average annual crude steel production over the past eight years was around 1.5 million mt. In 2024, the crude steel production reached 1.9 million mt, an increase of 48,000 mt YoY, with a growth rate of 2.6%. In the WSA's annual rankings of major steel-producing countries, the Philippines consistently ranks low, often between 47-49. Data Source: WSA, SMM The Philippine steel market has abundant raw materials and large-scale demand, but its steel capacity is insufficient, lacking advanced equipment and technology, making it difficult to meet domestic development needs. The steelmaking industry is dominated by major companies such as SteelAsia (capacity 500,000 mt), Stronghold Steel (capacity 500,000 mt), and Treasure Steelworks (capacity 500,000 mt). These companies hold significant positions in the Philippine steel market, continuously enhancing their competitiveness by introducing advanced technologies and expanding capacity. However, according to WSA surveys, the capacity utilization rate of the Philippine steel industry remains low, primarily due to issues related to the reliability, efficiency, and cost of steel mill production. Based on previous forecast data, the Philippines' steel capacity in 2022 was 4 million mt, but the actual production that year was only 1.6 million mt, indicating a capacity utilization rate of less than 40%, supporting this conclusion. Data Source: SMM According to the World Metal Guide, as of the end of 2024, Philippine steel manufacturers are continuously developing and advancing steel expansion projects, with many projects underway for several years expected to be completed by 2025. Among them, the Panhua Integrated Steel Plant project is divided into three phases, potentially increasing capacity to 10 million mt/year. Notably, according to the president of the Philippine Iron and Steel Institute at the 2024 Kallanish Asia Steel Markets event in Ho Chi Minh City, Vietnam, the Philippines currently has only 2-3 electric arc furnaces, most of which are induction furnaces, and no blast furnaces. Data Source: DTI, World Metal Guide, SMM According to the Philippine Iron and Steel Institute's official website, the country's main steel products include: Semi-finished products: steel billets; Finished long products: rebar, angle steel, light sections, channels and sections, steel wire, steel purlins; Finished flat products: hot-dip galvanized sheets, zinc-aluminum coated sheets, welded black iron pipes, welded galvanized pipes, pre-painted galvanized/zinc-aluminum coils and sheets, pre-painted galvanized iron. Based on industry reports and publicly available data, SMM estimates the classification and approximate proportions of domestically produced steel products in the Philippines. Driven by domestic infrastructure construction and real estate demand, Philippine steel production is primarily focused on construction steel, with finished long products (rebar, wire rod, sections) accounting for the largest share at approximately 78%; followed by flat products (galvanized and coated coils), accounting for about 15%. However, high-end flat products such as automotive steel still rely on imports. Other products like special steel and steel billets account for about 7%. Data Source: DTI, SMM The Philippines' average annual steel consumption is 10 million mt, with the construction industry remaining the dominant sector According to WSA statistics, the Philippines' apparent steel (finished steel) consumption in 2023 was 9.445 million mt, down 7.4% YoY. According to the president of the Philippine Iron and Steel Institute, steel demand in the Philippines continues to grow, driven by the government's ambitious plans to increase infrastructure spending. The share of the infrastructure sector in the country's GDP has significantly increased, from 3-4% five years ago to 5.5-6% in 2023. The Philippines' annual steel consumption is 10 million mt, with rebar accounting for about 55% and flat steel about 45%. The country heavily relies on imports to meet its steel demand. Data Source: WSA, SMM The construction industry remains the most important steel-consuming sector in the Philippines, accounting for nearly 80% of the country's total steel usage, followed by the metal products industry, which accounts for 15%. The Philippine government has been vigorously promoting the "Build Build Build" program, aligning seamlessly with China's Belt and Road Initiative. With stable and continuous private and government investment in infrastructure, the construction industry is developing rapidly, with consistently low costs, making it one of the fastest-growing construction markets among ASEAN member states. Data Source: PSA, BOC, SMM From the perspective of imports, the Philippines' average annual steel imports total 7.2 million mt, with China being its largest source According to data from the Philippine Statistics Authority and Customs Bureau, in 2023, the Philippines' total steel imports were approximately 7.1024 million mt, with an import value of $4.6907 billion. In 2024, the import value reached $5.1976 billion, up 10.8% YoY, with the total steel imports roughly estimated at 7.3-7.5 million mt. Data Source: PSA, BOC, SMM As mentioned earlier, due to the lack of blast furnaces in Philippine steel mills and reliance on electric arc furnaces, the production process is relatively outdated. Therefore, the Philippines cannot independently produce products like HRC and relies heavily on imports for further processing into required products such as galvanized coils. In recent years, the main imported steel products include rebar, billets, HRC, galvanized sheets, cold-rolled coils, and sections. According to Philippine Statistics Authority data, in the 2023 steel import breakdown, the largest source country was China (excluding Hong Kong and Macau), with a total import volume of 4.68 million mt (including 115,000 mt from Taiwan), far ahead and ranking first. The second-largest source was Indonesia, with a total import volume of 690,000 mt, followed by Japan, with 460,000 mt. Malaysia and Kazakhstan ranked fourth and fifth, with 260,000 mt and 210,000 mt, respectively. Data Source: PSA, BOC, SMM From the perspective of exports, the Philippines' annual steel exports are less than 70,000 mt, with North America as the main export market According to data from the Philippine Statistics Authority and Customs Bureau, in 2023, the Philippines' total steel exports were 80,000 mt, with an export value of $142.7 million. In 2024, the export value reached $146.87 million, up 2.9% YoY, with the total steel exports roughly estimated at 87,000 mt. Data Source: PSA, BOC, SMM The Philippines' total annual steel exports are less than 70,000 mt, remaining at a low level. The main export products are also low-value-added items such as steel billets, rebar, and wire rod. Due to insufficient domestic steel capacity, the Philippines still needs to import large quantities of high-value-added steel (e.g., cold-rolled sheets, high-end pipes), making exports primarily basic products. According to Philippine Statistics Authority data, in the 2023 steel export breakdown, the largest export destination was Canada, with a total export volume of 36,000 mt, ranking first. The second-largest destination was the US, with a total export volume of 27,000 mt, followed by Japan, with only 4,600 mt. Saudi Arabia and Vietnam ranked fourth and fifth, with 3,800 mt and 3,600 mt, respectively. China (excluding Macau) ranked sixth, with less than 3,000 mt, including 1,100 mt exported to Hong Kong and 370 mt to Taiwan. Data Source: PSA, BOC, SMM Summary: Domestic steel demand in the Philippines far exceeds supply, with high-value-added steel heavily reliant on imports in the medium and long term The Philippines' current annual apparent steel demand is nearly 10 million mt, with an average annual crude steel production of only 1.5 million mt. The average annual steel imports total 7.2 million mt, while steel exports are only 70,000 mt, with domestic demand far exceeding supply. Moreover, countries such as Vietnam, the EU, and the US are increasing anti-dumping measures against Chinese steel exports, while the Philippines has implemented almost no such measures in recent years. Due to the low level of domestic steel production technology, the country still relies heavily on importing semi-finished steel to meet its steel demand. Therefore, some steel-exporting countries can effectively avoid anti-dumping duties by transshipping through third countries, such as Malaysia, Sri Lanka, the Philippines, Singapore, Taiwan, Thailand, Hong Kong, Dubai, etc. Goods are re-shipped in bonded zones in these third countries, with new certificates of origin issued, and then exported to the destination port under the third country's name. This allows the destination country to clear customs using the third country's full set of documents (B/L, certificate of origin, commercial invoice, packing list, etc.), thereby avoiding related anti-dumping duties. Currently, the Philippines' trade and economic development are highly dependent on its shipping industry, making it the world's fourth-largest shipping nation after China, South Korea, and Japan. Therefore, the Philippines is expected to become a popular destination for transshipment in the future. At the same time, as a developing economy with a favorable demographic structure, the Philippines' steel demand is expected to continue growing. According to the "Philippine Construction Industry Roadmap (2020-2030)," the total output value of the Philippine construction industry was 2.5 trillion Philippine pesos in 2020 and is expected to reach 23 trillion Philippine pesos by 2030. Combined with national policies such as "Ambisyon Natin 2040" and the "Build Build Build" program, but considering the increasingly severe global trade protection measures in recent years, it is conservatively estimated that by 2035, the Philippines' apparent steel consumption may reach approximately 23-25.5 million mt.

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[SMM Hot Topic] "Fivefold Trade Deficit! The Philippine Steel Industry Trapped in an 'Import Black Hole,' When Will Domestic Capacity Break Through?" — Detailed Analysis of ASEAN Steel Industry Development: The Philippines Chapter

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