The Grey Chronicles

2008.July.15

National Steel Corporation: An Introduction


National Steel Corporation was organized on 22 February 1974 from the assets of Iligan Integrated Steel Mills (IISMI) when the later was subsequently foreclosed by the Development Bank of the Philippines (DBP). NSC acquired the cold rolling facilities of Elizalde Steel (ELISCON) in 1978 and its tinning lines three years later. In 1981, the National Development Company (NDC) assumed full ownership of NSC. Two phases of Five-Year Expansion Projects in 1983-1988 and in 1991-1992 brought steel production capacity from 151,000 tons in 1974 to 800,000 tons in 1988 then 1,200,000 tons in 1992. Prior to liquidation, NSC’s manufacturing plant occupied 450 hectares in Iligan City and 11.8 hectares in Pasig City. Installation of a Corex slab-caster in lieu of a Basic Oxygen blast furnace, the purchase of a Continuous Annealing Line or High-Convection Furnaces, as well as Computerization Level 3 (the replacement of the Mainframes, purchase of Computerized Maintenance Management System for Facilities Management and SCADA for Utilities), among several others were planned and considered for the next Five-Year Expansion Projects.

Aside from being the country’s leading producer of billets, the raw materials for rebars and wire rods, NSC was the dominant flat-rolled producer in the Philippines and was the country’s only tinplate producer. Flat products consist of hot-rolled coils, hot-rolled plates, cold-rolled coils, and tinplates.

Snapshot of History from NSC to GSPI (Various Sources; see Appendix D for detailed timeline).

Figure 1: Snapshot of History from NSC to GSPI (Various Sources; see Appendix D for detailed timeline).

In 1992, NSC enjoyed considerable leads in domestic flat-rolled market shares, particularly hot rolled coils (29%), cold rolled coils (72%) and tinplates (53%). By 1999, moreover, market shares slid down to 0%, 22% and 18%, respectively. From a 53% market share of flat steel in 1995, NSC only garnered 10% of the total flats market by 1999. The downtrend started in 1997 primarily attributed to the dumping of cheap imported steel products into the country (NSC, 1997) . Suits filed by NSC before the Tariff Commission against, CIS/Russian hot-rolled coils on 23 September 1998 (Tariff Commission, 2000) was dismissed on 30 August 2000 concluding fair competition from normal imports. The case of Taiwanese CRCs on 28 June 1999 (Tariff Commission, 2001) sacked on 24 April 2001 for lack of merit; and South Korean tinplates on December 1996 (Tariff Commission, 1999) similarly rejected on 18 October 1999 citing excess domestic and shift in demand from Electrolytic Tin Plate sheets to coils.

Three facilities produce the flat products of NSC, namely: hot strip mills, cold strip mills and the electrolytic tinning lines. Refer to Appendix C for a complete list of facilities for flat steel production.

Flat Carbon Steel Production Process Flow (Adapted from the American Iron and Steel Institute)

Figure 2: Flat Carbon Steel Production Process Flow (Adapted from the American Iron and Steel Institute)

The Hot Strip Mills, which process slabs to hot-rolled coils and hot-rolled plates, consisted of Hot Strip Mill No. 1, Hot Strip Mill No. 2 and a Plate Mill. Brazil, Australia, Korea, Mexico, Europe, Russia and China supplied NSC with slabs on a spot market basis, but the Asian crisis in 1997 frustrated NSC’s attempt of a slab supply agreement. Commissioned on 17 July 1993, President Fidel V. Ramos in his speech during the inauguration ceremonies said, the 1.2 million tons per year Hot Strip Mill No. 2 is “the final phase of NSC’s expansion effort and the vital link to the full integration of the steel industry in the Philippines” (NSC News, July 1993) .

By 30 March 1995, Hot Strip Mill No. 2 attained its all-time highest daily production of 5,182 metric tons. Hot Strip Mills annual production slid from 792,767 metric tons in 1996, an increase from the all-time high year production of 644,552 metric tons in 1994, to a meager 91,601 metric tons in 1999. The decrease can be attributed to the fact that only the Hot Strip Mill No. 2 was operational by 1999, while the 500,000 metric tons per year Hot Strip Mill No. 1 was mothballed due to economic reasons, although plans were made to dedicate it to hot rolled plates production and to cater to special steel markets.

The Cold Strip Mills produced coils, sheets and tin-milled black plates from NSC’s Hot Strip Mill-produced or imported hot rolled coils. The hot-rolled coils are reduced in either the 0.250 million tons per year four-stand or 0.600 million tons per year five-stand tandem mills. Finished products at Cold Strip Mill reached its daily peak on 23 November 1994 with 3,448 metric tons. Annual production volume fell more than 75% from 513,002 metric tons in 1995 to 121,514 metric tons by 1999, compared to an all-time high of 415,420 metric tons in 1993. Again, the dumping of cheap imports allegedly caused the production slowdown.

The Iligan-based 150,000 metric tons per year Electrolytic Tinning Line No. 3 produced tinplates from its local Cold Strip Mill production or imported tin-milled black plates from Japan, Korea, Australia and Brazil. Electrolytic Tinning Line No. 3 production output in 1995 of 81,464 metric tons, the highest since 80,506 metric tons was attained in 1992, declined to 26,926 metric tons in 1999. Excess domestic demand was blamed for the downward trend. The Electrolytic Tinning Line No. 2 in Pasig was closed in May 1998 due to economic factors (NSC News Special Bulletin, 20 April 1998) . After the 1983-88 NSC’s Five-Year Expansion Program, Electrolytic Tinning Line No. 1 was decommissioned by 1992 because of technological obsolescence.

The steel industry (Austria, 1998) particularly the basic iron and steelmaking integrated with slabmaking, and flats production, among others, were considered pioneer status in the Foreign Investment Act of 1991 (Republic Act 7042). With this law in place, the Philippine government allowed greater foreign investors’ participation in local steel production facilities. On August 8, 1991, the President Corazon C. Aquino signed into law Republic Act 7103, Iron and Steel Industry Act. RA 7103 called the state to provide the boost in making the industry “the springboard and basis for launching Philippine industrialization” through the full and efficient use of the country’s human and natural resources considering its critical impact on employment, indigenous resources utilization, foreign exchange and balance of payments position.

Privatization plans for NSC began as early as 1990. It was successfully approved by the Philippine government with Malaysia’s Wing Tiek acquiring controlling interests in November 1994. Privatization was pushed by the National Government to limit its financial exposure on the myriad of government-owned and controlled corporations, such as NSC. The next year, NSC retrenched about 500 personnel for the first time since 1974. The reduction was premised on building a leaner organization. Wing Tiek sold its entire 69.2% stake to Hottick in December 1996 while NDC optioned its own 12.5% stake to the latter on February 1997. On 15 October 1997, the Board of the Philippine Economic Zone Authority (PEZA) declared NSC as a Special Economic Zone, pending Presidential Proclamation, with downstream steel products manufacturing and fabrication industries and related sectors as preferred industries (de Lima, 1999).

Prior to privatization, NSC launched its own-version of the Total Quality Management program. NSC’s TQM encompassed the Total Production Management System based on a 5S Program, the Operator-Mechanic-Inspector concept, a series of Corporate Culture seminar-workshops, and Quality Management Systems. The Operator-Mechanic-Inspector concept, dubbed as “1:7 in ‘97” program, was a quest for a leaner structure characterized by a decentralized, autonomous, and accountable organization by reducing superior-to-subordinates ratio by 1997. The Seven Basic Habits and Interaction Management were held for supervisory and managerial positions; while Self-Enrichment Workshops for the rank-and-file. Kaibigan seminar-workshop culminated these various seminars into an all-employees Corporate Culture development. Quality Management Systems included Statistical Process Control and ISO 9000 certification.

By 1995, the Cold Strip Mills and the two Electrolytic Tinning Lines, including the Billet Steelmaking Plant, were ISO 9002:1994-certified. The Hot Strip Mills were in the process of certification prior to NSC closure.

In 1999, amidst proposed backward integration plans, equipment and technological modernization, and employee value-enhancement programs, NSC officially underwent a liquidation plan resulting in the retrenchment of 1,400 employees, while a number opted for earlier retirement.

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, 17 May 2002).

On October 2000, the Securities and Exchange Commission ordered the liquidation of NSC citing that it was unable to make repayments on its debts, which were about $350 million (Lyday, 2002). In his privileged speech during the First Special Session of the Thirteenth Congress of the Senate, Joker P. Arroyo (2005) stated, “National Steel, for the record, was sold to an undercapitalized Malaysian firm which, in turn, borrowed heavily from local sources. The Malaysians left and the government is left holding the bag.” Global Steel Philippines (SPV-AMC), Inc. acquired ownership of NSC’s assets in 2004.

Furthermore, in comparison with other SEASI members, the crude steel production from 1994 to 2000 exhibited a downward trend for the Philippines, in terms of crude steel, HRC and finished production. Steel trade, however, showed that exports were down; while imports reached top marks in 1997 and 1999 (SEAISI, 2004).


Notes:

National Steel Corporation, Annual Report. Iligan City: NSC, various years (1980-1992). Cited as NSC and Annual Report Year. back to text

Tariff Commission (TC, 2000). Anti-Dumping Inv. No. 99-02: “Report on Findings on the Dumping Protest against the Importation of Hot-Rolled Steel Coils/Sheets from Russia,” Manila: Tariff Commission, 30 Aug 2000. back to text

Tariff Commission (TC, 2001). Anti-Dumping Investigation No. 00-02: “Report on Findings on the Anti-Dumping Protest against the Importation of Cold Rolled Coils/Sheets from Taiwan.” Manila: Tariff Commission, 24 April 2001. back to text

Tariff Commission (TC, 1999). Anti-Dumping Case No. 1-2000: “The Matter of Protest against the Importation of Electrolytic Tinplates (ETP) from South Korea,” Manila: Tariff Commission, 18 October 1999. back to text

NSC News (1993), Steeling Our Resolve for Philippines 2000, NSC News Supplement, Makati: Corporate Communications, NSC, July 1993. Transcript of speech delivered by President Fidel V. Ramos, Hot Strip Mill No. 2 Inauguration Ceremonies on 17 July 1993. back to text

NSC News (1998), General Memo, NSC News Special Bulletin. Makati: Corporate Communications, NSC, 20 April 1998. back to text

Austria, Myrna S. (1998). “The Emerging Philippine Investment Environment.” Discussion Paper. Manila: Philippine Institute of Development Studies, Series No. 98-27; July, 1998 back to text

de Lima, Lilia B. (1999). Economic Zones: Creating Employment & Other Opportunities Particularly in the Countryside, Proceedings of the 8th Mindanao Business Conference, 12-14 August 1999, Iligan City, Lanao del Norte. back to text

Lyday, Travis Q. (2002). “The Mineral Industry of the Philippines—2000.” Research Paper. New York: US Geological Survey, 2002, p. 21.3. back to text

Arroyo, Joker P. (2005), “Journal of the First Special Session, Thirteenth Congress,” Manila: Senate of the Philippines, January 5-7, 2005 back to text

South East Asia Iron and Steel Institute (SEAISI) (2004), “Annual and Quarterly Statistics, 1994-2003.”. SEAISI Online. 15 October 2006. back to text


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10 Comments »

  1. Thanks for your info on the NSC. However, it seems to be contradicted by an info from the Wikipedia: “The National Steel Corporation or NSC (1951 – 2004) was a Filipino steel-making company, the largest in Asia. It had headquarters in Suarez, Iligan City, in the Philippines. The company was founded as National Shipyards & Steel Corporation in 1951. It was sold in 1962 to Jacinto & Son, a private Filipino company, and was later renamed Iligan Integrated Steel Mills.” If both the accounts from you and the wikipedia are correct, it would seem that the NSC started as a govt-owned corporation in the 1950s, but was sold to Jacinto and Son in 1962 (and thus became Jacinto Steel) but then, in the 1970s, it was re-acquired by the government, which eventually sold it (under Arroyo’s term) to the Malaysian busnessman, under whose management it went bankrupt again. Does this complete the story? If not, kindly explain the apparent contradiction between your account and that of wikepedia.

    Comment by Floro Quibuyen — 2016.August.9 @ 23:47 | Reply

    • You seemed to have been confused by the existence of NSC. NSC only existed in 1974, although NSC traced its history to as early as 1951. My post was introduced with: “National Steel Corporation was organized on 22 February 1974 from the assets of Iligan Integrated Steel Mills (IISMI) when the later was subsequently foreclosed by the Development Bank of the Philippines (DBP).” Thus, Iligan Integrated Steel Mills (IISMI) foreclosed by the DBP and ceased to exist after 22 February 1974.

      Comment by reyadel — 2017.May.2 @ 13:01 | Reply

  2. I was there in Iligan when President Tabako sold NSC to the Malaysians since the technocrats are convinced 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. Yet the Philippines 2000 of Tabako has privatization of government corporations as a top strategy in making a ‘tiger’ out of Pilipinas. The Ayalas and the Lopez got the water business in the Metro, for starters, and NAPOCOR, the prime jewel of all, got devoured by a pack of vultures named as Independent Power Producers (IPPs) with contracts so sweet (read: onerous), like 70% of power produced is automatically paid by taxpayers even if it ain’t used (or produced). Take a look at your power bill and cry at the many ‘unbundled’ charges you pay. Now back to NSC. Why is it that a a top performing corporation closed shop after five years after privatization. Global industry trends? That’s crap, even if the so-called boutique steel mills in Europe can undersell NSC, the domestic demand for local industrialization can more than make up for it. Alas, the government chose the horribly misnamed’export-driven’ economy. Why? what are exported? Electronics, textiles, shoes. In other words, Multinationals like Fairchild Semiconductor SETTING UP SHOP FOR THE CHEAP LABOR, and export it from here to other markets. Brod, next time you see Mr. Ramos, get a lead pipe or a dos por dos and beat him hard. Ang hindi marunong lumingon sa kaniyang pinanggalingan, ay hindi makakarating sa Philippines 2000. We never got there, Man.

    Comment by Surigaonon Jawa — 2013.August.15 @ 02:07 | Reply

    • Got me thinking that Mr. Tabako has done more harm than good…we are still reaping the fruits of his actions

      Comment by noel — 2013.September.24 @ 00:28 | Reply

  3. if the Lawmakers didn’t bribe by capitalist businessman and they support the anti dumping the NSC still in business..

    Comment by curiousman — 2013.April.30 @ 10:31 | Reply

  4. We need your answer now…..

    Comment by donabelle — 2012.February.23 @ 03:46 | Reply

    • Read the next posts after the Introduction. There is also an Abstract which generally discussed the reasons [PLURAL] why NSC closed. Incidentally, are you a student? Is the thesis, a group thesis? Why am I asking you these: it’s because you used WE as in “we need your answer now ….” and as though you are demanding for an answer this instant. Do your research . . . read the succeeding posts then reply to this if you still have any questions!

      Comment by reyadel — 2012.February.24 @ 09:41 | Reply

  5. Is the

    Nsc steel is operational at present? please reply me in my email adds. and give me some contact numbers name of the marketing head as soon as possible.

    very truly yours,

    rodrigo talledo

    Comment by RODRIGO TALLEDO — 2011.February.10 @ 09:06 | Reply

    • Sorry, but if you have read this post, NSC is no longer operational. NSC ceased to officially exist since 2004. Kindly re-read the post. Please accept my apologies but unfortunately, I cannot give you contacts for I am no longer connected with NSC.

      Comment by reyadel — 2011.February.10 @ 20:02 | Reply

      • HMMF SIR we have a thesis about NSC bankruptcy……So what would be the common reason why does NSC close shop??//////////

        Comment by donabelle — 2012.February.23 @ 03:45 | Reply


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