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NATURALLY, construction costs will also go up. That, in
a nutshell, is the message of the industry group
Philippine Iron and Steel Institute on the continued
rise in prices of iron and steel products.
It
indicated the market could not do anything about this
situation since local steelmakers have no domestic
source of raw materials but have to import. This has led
to a circumstance where they still have to recover 30
percent of their increased production cost to remain
afloat.
Antonio
Lorenzana, executive vice president of Philippine Steel
Holdings Corp., said the industry is still losing money
even after the players have increased their prices by an
average of 40 percent to 50 percent since January.
This is
because the cost of raw materials went up by 70 percent
to 90 percent in the international market due to strong
demand by emerging economies such as China, Russia,
India and Brazil.
Being
heavily dependent on imported raw materials, the
industry, according to Nelson Chan, vice president of
the Steel Institute, has to pay P48,000 per ton of iron
billets, which is the landed price, while their product
selling price is P47,500 per ton. “And we still have to
manufacture that.”
The
price of iron ore, he said, went up by 75 percent and
coal by 25 percent.
Add to these the rise in oil prices and the expected
increase in the minimum wage and the costs just pile up.
The industry has in its payroll about 8,000 direct
employees. Their truckers and haulers are also asking
for a 10-percent adjustment in their service fees.
Chan
said they are inclined to grant the request of their
haulers, especially since the current contract price
that they have has yet to change since diesel price was
at the P25-per-liter level.
He said
the industry has no choice but to adjust prices upward,
although the actual increase will depend on competition
among the players and the resistance of the market.
Chan
said they are already experiencing resistance from the
market, especially the smaller developers, which are now
putting on hold some of their building and real estate
projects until prices have stabilized.
With
this gloomy situation, Chan said the industry is likely
to go flat this year. It grew 25 percent in 2007.
“Demand will go down because of so many problems that we
have this year.”
Lorenzana said the big developers will probably push
through with their projects. However, he also believes
the industry will have to face the prospect of losing
sales to the smaller developers, and this is happening
already. “Probably half of the projects of the small
companies have been put on hold already.” |
