Upstream steel industry favored in 2004 IPP

The downstream iron and steel industry will not be entitled to any fiscal and non-fiscal incentives this year to force investors to put their money on the upstream side, a trade official said.

The downstream industry refers to the processing of raw or semi-finished materials for the manufacture of finished products.

The upstream industry, on the other hand, is the primary and intermediate stage for steel products, which serve as raw materials for the downstream industry.

The Board of Investments (BOI) excluded recently the downstream industry in the list of preferred activities under RA 7103, otherwise known as the Philippine Iron and Steel Act.

BOI executive director Elmer Hernandez said enterprises engaged in primary and intermediate steel products still entitled to fiscal and non-fiscal perks under the same law will be included in the proposed 2004 Investments Priority Program (IPP).

Covered by the incentives are primary steel products in the form of refined iron ore, ingots, slabs, or blooms. Also included are intermediate steel products such as plates, hot-rolled or cold-rolled flat products (GI sheets, deep drawing applications, automotive and appliances), tinplates including but not limited to food-grade quality, or bars/rods which are plain surface long products in round or non-round shapes and in straight lengths or coiled.

Modernization of the industry is also included in the incentive scheme like installation of additional line process facilities, partial replacement of an existing production line, and complete replacement of an existing production line.

The BOI said that existing facilities are either totally junked or partially utilized as an adjunct of a new line to the extent that the existing facility cannot independently produce the existing product.

Modernization must result in any or combination of the following: at least 96 percent yield for long products, at least 98 percent yield for flat products, and at least five-percent reduction in electricity usage for firms with melting facilities.