SteelAsia offers to revive defunct National Steel

Sofia Tomacruz
SteelAsia offers to revive defunct National Steel
Local steel bar maker SteelAsia wants to ride the infrastructure boom and offers to revive the thrice-privatized National Steel in Iligan City

MANILA, Philippines — To ride the infrastructure boom, SteelAsia Manufacturing Corporation has offered to acquire the mothballed National Steel Corporation (NSC) in Iligan city.

SteelAsia is the largest reinforced steel bar maker in Southeast Asia, while NSC was once the largest steel mill in Asia until it failed to modernize, eventually declared bankruptcy, was privatized thrice, and mothballed again in 2009. 

“We have the expertise and the balance sheet to take over Iligan and re-start our quest for a steel industry that will serve as the backbone of our industrialisation,” said Benjamin Yao, president of SteelAsia in a press release. 

In its proposed acquisition to National Development Co.’s general manager Ma. Lourdes Rebueno, SteelAsia said it will pursue an asset-purchase agreement and will negotiate with all valid claimants, including the government.

Made of steel

SteelAsia hopes to modernize NSC and convert its facilities into a state-of-the-art manufacturing complex. It said in a statement over the weekend that it will use the facility to produce steel products such as plates, beams, billets, slabs, and sheet piles; which, are currently imported. Yao has said the company will ensure that the factory meets environmental standards.

“We see continuing growth in demand in the coming years. That is why we need to expand. The Iligan plant will be a strategic maneuver for us as a company, and as a country as well in terms of industrialization,” said Yao.

If the offer is accepted, NSC will be the 7th steelworks plant in the company’s network.

It operates 6 plants, including company’s faciltites in Davao and Meycauayan. It previously acquried factories in Cebu, Cagayan de Oro, Batangas, and Misamis Oriental that it said it have fully paid for as of 2016.

The company grew exponentially in the last decade as it increased production capacity to 2.7 million tons in 2016 from 450,00 metric tons in 2006. “We are putting up new ones in the next two years to bring up our capacity to 5 million metric tons, which will be 60% of total annual demand,” said Yao.

According to its company website, SteelAsia owns 62% of market share and sits comfortably as market leader. It manufactures nearly one out of every two steel bars in construction and supplies an estimated 80% of infrastructure rebar needs in the country.

SteelAsia was founded in 1965 by Benito Yao and Go Kim Pah (founder of Equitable Bank), whose children currently run the company. Yao took the helm as president in the late 1980’s.

Lost promise

The history of NSC is a storied one.

Once touted as the country’s showpiece of modern industrialisation post-World War 2, it was established in 1952 as a government-initiated project.  implemented by the National Shipyards and Steel Corporation (NASSCO). Operations were carried out in the Electric Arc Furnace and Bar Rolling Mill in Iligan city.

After NASSCO applied for a $62.3 million loan from the United States Export-Import Bank (Eximbank) to fund projects, the latter suggested a tranfer of the facilities’ management to the private sector. The company was sold in 1963 to Iligan Integrated Steel Mills, Inc. of the Jacinto family.

Upon the declaration of Martial Law in 1972, the government confiscated the steel facilities. In 1974, the assets were absorbed by newly incorporated National Steel Corporation, the name by which it is known today.

NSC was later acquired by Wing Tiek of the Malaysian Westmont Group in 1995. But as the Asian Financial Crisis hit in 1997, NSC lost momentum as import prices soared, leaving the company unnable to compete against the dumping of cheap steel products that flooded the market.

In 2000, the government ordered for NSC’s liquidation as the company failed to find a new investor to flush capital into its systems.

NSC was most recently acquired in 2004 by Ispat Industries Ltd of India, a firm owned by the brother of Lakshmi Mittal who is behind ArcelorMittal, the world’s largest steel company. Amid financial and labor issues, the company in Iligan was closed and operations have ceased since.

Next chapter for NSC?

As of December 2016, the city of Iligan said the unpaid real property taxes of NSC since 1999 has reached over P4 billion. 

The local government of Iligan City auctioned off the 400 hundred hectares of land and properties of NSC last December; however, there were no bidders. The city government forfeited the properties. 

Could SteelAsia’s proposal be the next chapter for NSC?

“This will be a major step towards the development of a long overdue local steel industry which will generate new businesses and strengthen existing ones like the automotive industry, shipbuilding and repair, construction, and infrastructure that in turn will boost countryside growth and create more jobs,” said Yao. —

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Sofia Tomacruz

Sofia Tomacruz covers defense and foreign affairs. Follow her on Twitter via @sofiatomacruz.