The Grey Chronicles

2009.January.30

Steel Bitter After All Those Years


During its 20th Anniversary on February 1994, NSC adopted —Steel Better at 20— as its slogan. After another 10 years, NSC would be resurrected as GSPI by December 2004. Four years later, in 2008, the same slogan would take a new form: “Steel Bitter in 2008”.

NSC Timeline

NSC Timeline

There is a resounding theory that whenever National Steel Corporation, or its predecessors, are in the hands of a private entity, there is a preponderance of closure. As a corporate entity, is there an emerging pattern for such fate? Is NSC, or the premier steel company of the Philippines, destined to fail? Let history be the judge!


National Shipyards and Steel Corporation, (NASSCO) 1951-1962 [Government-owned]

NASSCO was authorized by RA 1396 to set up pig iron smelting plants with P50 million appropriated for the purpose, and to borrow $62.3 million from the US Eximbank to buy an integrated plant including hot and cold rolling mills and blast furnaces. Unfortunately the money was witheld because of the objections of US Steel Corporation, and thus, in exchange, the Philippines got irreversible concessions: the franchise of RCA and Globe-Mackay to the year AD 2015; third frequency landing rights for Pan American and Northwest Airlines; plus a partnership arrangement with the Government controlling 51 percent ownership, but the relinquishing management to the 49 percent participation of the private sector (Henares, 2006).


Iligan Integrated Steel Mills, Inc. (IISMI) 1962-1974 [Private]

In 1962, NASSCO was completely sold to the Jacinto family. The Macapagal government guaranteed the Eximbank loan of $62.3 million, plus a peso loan of P30 million (Henares, 2006). On September 21, 1972, martial law was declared, and on October 14, Marcos directed the military to take over IISMI (LOI 27). This time Marcos extended the assistance he denied the Jacintos: tariff protection (PD 34, dated October 29). Unfortunately, even though the corporate name included “Integrated”, IISMI was nowhere backward integration.


National Steel Corporation (NSC) 1974-1994 [Government-owned]

To date, the NDC-managed NSC was undoubtedly the glorious years of a national steel endeavor. Compared to NASSCO, a ten-year national steel company, NSC became the premier steel company of the Philippines for twenty long and illustrious years! From a primary capacity of 300,000 metric tons in 1975, NSC expanded its facilities to nearly 2 million metric tons primary capacity by 1994. There were plans for backward integration, but the Philippine government decided to privatize NSC first, then let the new owners deal with integration.


National Steel Corporation [Wing Tiek-NSC] 1994-1996 [Private]

Most people in Iligan, where the plant is sited, knew what happened to this era, but few really knew the real score. An attempt to explain what had happened to Wing Tiek-NSC is part of my master’s thesis, which a draft version appearing here in an installment of previous posts beginning last 15 July 2008.


National Steel Corporation [Hottick-NSC] 1996-2004 [Private]

This era was also discussed in the thesis, which concludes:

“NSC’s foray as a private enterprise from 1995 under Wing Tiek then under Hottick has been a tumultuous phase; its flat steel production was subject to forces that would prove fatal to its corporate existence. NSC liquidation in 2000 brought rippling economic effects to the immediate community, in particular, Iligan City, and in general, the Philippines; as well as changed the legal environment for the Philippine steel industry; and threatened Philippine trade relations, especially with Malaysia.”

Three scenarios were aptly discussed: the radical changes in the Philippine Industry and Manufacturing, the onslaught of the Asian Currency Crisis, and cyclical decline of the Steel Industry as factors that contributed to the closure of NSC, aside from the more obvious yet debilitating corporate finances.


Global Steel Philippines (SPV-AMC), Inc. (GSPI) 2004- [Private]

First, there was the feeling of phoenix rising and hopes afloat:

“The revival of NSC facilities into operative state in 2004 offered new possibilities for the Philippines’ quest to become a new industrialized country by decade’s end; re-opened the question of steel integration—the pursuit for the country’s Integrated Steel Mill; and changed, however minute, the inter-trade of steel products within the ASEAN, AFTA, and WTO communities.”

Four years later, almost to the day when NSC closed in 1999, the mills feel silent!


By the looks of it: there is an apparently obvious cycle here, such that, whenever a fledgling national steel corporate entity is in the hands of the private sector, it falters its promise to prosper. Henares (2006) really comes to mind when he wrote that:

“ . . incentives were withdrawn and the industry sabotaged by those who wanted to take it over and keep it from ever spearheading the country’s industrialization. . . In contrast, the Japanese steel industry under the 1951-55 First Modernization Plan was undertaken by an oligopoly of six producers: Yawata, Fuji, Nippon Steel, Kawasaki, Sumitomo and Kobe steel companies, with full and unwavering government support — with subsidies for raw material, price subsidies for pig iron and steel, import bans on foreign steel, and flexible loan repayments on top of the usual government loans at low interest, and tax incentives.”

Should the national steel company of the Philippines be re-nationalized as Ukraine did with it’s own Kryvorizstal?


Notes:

Henares, Hilarion M. Jr. (2006), “National Steal Corporation,” Give and Take. Book 9. Manila: Philippine Folio, 2006. back to text

Disclaimer : The posts on this site are my own and doesn’t necessarily represent any organization’s positions, strategies or opinions.

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