The electrical steel has seen significant growth in the Philippines over the past decade. Electrical steel, also known as silicon steel or silicon iron, is widely used in equipment that handle alternating current electric power such as transformers. It is characterized by low hysteresis and eddy current losses which result in high electrical efficiency. Some key facts about Philippines' electrical steel:
- The country is now one of the top producers of electrical steel in Asia, alongside China, Japan, South Korea and Taiwan. It accounts for over 15% of Asia's total electrical steel output.
- There are four major steel mills in the Philippines that produce electrical steel - Philippine Steelmakers Corporation, Asia Pacific Iron and Steel, Philippine Associated Smelting and Refining Corporation, and Nippon Steel Sumikin BPs-M.
- Electrical steel production in Philippines grew at a CAGR of 8% between 2010-2020. According to estimates, the country's electrical steel output surpassed 2.5 million tons per annum in 2020.
- Growth has been driven by strong domestic demand from the power sector as well as increasing exports, mainly to other ASEAN countries, China, India and the Middle East. Electrical steel finds applications in transformers, motors, generators and other equipment used by power utilities and industries.
- Philippines offers competitive production costs for electrical steel compared to countries like Japan and South Korea. Low labor costs and proximity to growing Asian s have given a boost to its export competitiveness.
Investments And Philippines Electrical Steel
To meet the rising demand, steelmakers in the Philippines have been aggressively investing in capacity expansions and technology upgrades. This includes:
- Philippine Steelmakers announced a $170 million expansion in 2018 to add 500,000 tpy of new electrical steel production capacity, taking its total capacity to 1.2 million tpy.
- Nippon Steel Sumikin BPs-M invested $100 million to modernize its steel plant in 2019. It can now produce high-grade electrical steel used in energy-efficient appliances and automobiles.
- Asia Pacific Iron and Steel completed a $50 million expansion program in 2021 to expand its annual electrical steel production to 800,000 tons from 600,000 tons earlier.
- Philippine Associated Smelting and Refining Corporation is planning a $300 million spend by 2024 to boost capacity to 1.5 million tons per year from 1.2 million tons currently.
These investments validate Philippines' credentials as an emerging leader and reliable supplier of high-quality electrical steel to the global . The expansions will help meet the strong demand outlook for the next 5-7 years.
Opportunities In Renewable Energy Sector
Developments in the renewable energy sector are opening new doors of opportunities for Philippines' electrical steel producers. Some of the key tailwinds are:
- Wind and solar power capacities in the Philippines are expected to increase rapidly driven by supportive government policies and falling technology costs. More transformers, switchgears and synchronous condensers will be needed to integrate these distributed power sources into the grid.
- The shift to clean energy requires upgrading existing grid infrastructures. Next-gen electrical equipment demand electrical steels that enhance efficiency, reduce energy losses and enable bidirectional power flows.
- Off-grid renewable power solutions are being deployed across remote villages and islands in the archipelago nation. This decentralized renewable energy sector relies on efficient inverters, motors and generators containing core electrical steel laminations.
- Adoption of electric vehicles is projected to rise in the coming decade in Philippines, supported by new charging infrastructure rollouts. Growth in EVs will contribute additional demand for electrical steel from motor cores and converter transformers.
With its competitive production base, Philippines is well-poised to capture a significant share of this green growth opportunity through customized high-performance electrical steel grades. Steelmakers are actively working on new product development matching renewables technology requirements.
Short Supply Concerns Persist
While Philippines has emerged as a key supplier, the global demand for electrical steel continues to outstrip supply. Some pain points that still need addressing include:
- Lead times for electrical steel deliveries have lengthened significantly amid tight conditions. Steel shortfall issues particularly impact just-in-time inventory-dependent sectors like automotive, appliances manufacturing.
- The Covid-19 pandemic exacerbated supply chain disruptions in 2020-21. Plant shutdowns and shipping delays made it difficult for producers to service existing customers promptly.
- Capacity additions by steelmakers are still lagging the fast pace of renewable energy infrastructure investments and power grid modernization requirements globally.
- Trade tensions and protectionism have constrained cross-border materials supply including electrical steel shipments in key export s for Philippines producers.
- Volatility in raw material costs, energy prices and freight rates pose threats to steel margins and competitiveness unless passed on judiciously via price hike negotiations with clients.
The Philippines electrical steel sector has expanded appreciably and commands an integral role today, more action is needed at policy level to resolve supply bottlenecks, strengthen trade ties and attract further capacity investments. This will be important to fully leverage its significant growth prospects.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
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