Steel produced by induction furnace mills is a pressing issue for the Philippine Iron & Steel Institute, Kallanish notes. The lack of quality controls over these mills is a concern as well as their rising number in the country. 

The issue is a regional one in ASEAN and comes about after the decommissioning of induction furnace facilities in China. These mills are mostly older equipment which were shut down when the Chinese government imposed strict environmental controls. The Chinese operators have since moved their mills to the Philippines and elsewhere in ASEAN.

“They receive permits at the regional levels. We hear of reports that these mills then sell directly to end-users without any test or sampling of their [bar] products,” Ronald Magsajo, Philippine Iron & Steel Institute (PISI) president, tells Kallanish. These mills produce rebar and angle bar.

A number of these scrap-based mills are thought to be operating and producing below environmental and product quality standards. It may be dangerous when local steel industry standards are not adhered to. In addition to the numerous mills already operating in the country, more are coming, Magsajo says. “Our intel is incomplete on these and we do not have confirmed names,” he adds.

“That's the problem of using induction furnace material. Quality is not assured,” a Manila trader observes. He notes there are 15 induction furnace mills and eight others are under construction across the country. The mills are “inland mills”, so they use the limited scrap in the area. Production capacities are not large and some could be operating at rates of up to 1,500 tonnes/month.

As these mills do not operate with pollution control devices or they under-specify their products, their steel pricing is affected. Induction furnace steel is usually cheaper than EAF mills. There are allegations that some may not comply with payment of the 12% VAT. “It happens all the time in third world countries. So, one has to be more perceptive in comparing cost structures,” a Philippine EAF mill operator says.