Local cement industry pleads gov’t to buy local

Published May 17, 2021, 7:00 AM

by Bernie Cahiles-Magkilat

The plea to prioritize local produce over imports has gone louder as another domestic manufacturing industry has called on government to prioritize local cement procurement amid declining profitability.

Local cement players are asking the government and the private sector to patronize and support domestic cement rather than imported ones stating their profitability has suffered since the pandemic and the influx of cement imports, particularly from Vietnam.

Cement is the second domestic industry in this pandemic period to come out pleading for government support. The first was local manufacturing firms that repurposed their factories into assembly lines for personal protective equipment (PPEs) to supply government requirement during this pandemic only to be left with underutilized capacities.

“We’re crying out to both government and to the private sector — Department of Public Works and Highways, namely, to patronize locally produced cement,” said Reinier Dizon, president of the Cement Manufacturers Association of the Philippines (CeMAP), at the joint hearing of the Senate committees on economic affairs, and trade, commerce and entrepreneurship.

Dizon made this appeal as he stressed that local cement manufacturers have enough capacity and there is no need for importation. He, however, qualified that he was not saying that DPWH is not buying local cement, but rather a general appeal to both government projects and the private sector to patronize local produce.

According to Dizon, the cement industry has been bogged down by the pandemic and the influx of imports. He said that during the first Enhanced Community Quarantine (ECQ) last year, they were not allowed to operate for a total of two and a half months, especially for plants located in Luzon. This time, however, despite the ECQ and MECQ status, the industry has been considered as essential and operating now at 100 percent.

The pandemic has also resulted in slower cement consumption. He said that cement demand in the country shrunk by 10 percent. Pre-COVID, Dizon said, the local cement industry had been growing at 6-7 percent annually in the past 10 years.

Despite this situation, the domestic market is flooded with imported cement.

He estimated more or less 5 million metric tons of cement from Vietnam entered the Philippines last year. Despite the decline in local cement demand last year, he said, there has been no indication of a slowdown in the surge of cement importation from Vietnam, which accounts for 90 percent of the country’s total cement imports.

According to Dizon, Vietnam has estimated installed production capacity of 120 million tons but their domestic cement demand is only half of that. Thus, resulting in a 50 percent excess capacity that they can use to dump cement to other countries, particularly the Philippines.

“It’s just a little bit difficult for us because were asked to stop. But they were still continuing to export to the Philippines,” he said. 

In terms of pricing, Dizon denied reports that they are way far expensive than the imported cement. “I don’t believe so,” he said stressing their prices are comparable with the imported ones.

Adjusted to inflation even for the past 10 years, Dizon said their prices have always been competitive against imports.

But he surmised that Vietnam might have a different cost structure probably due to the country’s lower electricity cost.

He explained that aside from being a capital intensive industry, cement production is also power intensive with electricity accounting for 70 percent of cost. The Philippines has the highest electricity rate in the region, second only to Japan.

“We are all for level playing field, but we just want a healthy and fair competition,” he added.

In a comment, Senator Cynthia Villar, whose son is DPWH Secretary Mark Villar, said she was not speaking for the government agency, but for her family-owned business as they are big user of cement. The Villar Group is a leading conglomerate in the country with interests in various property developments, retail, and banking. Villar said that based on what she has gathered, the price is the problem in the local cement industry.

Villar said imported cement is still cheaper despite the safeguard duty imposed on the imported product. As such, consumers are buying the cheaper imported product.

“I don’t think companies will import cement if they can buy cheaper here in the Philippines, that is not logical,” she added pointing out that local cement firms cannot blame consumers if they buy the cheaper-priced imported cement if the local product is not competitive. She added that the only thing the Senate can give to the domestic industry is tariff protection, just like what they did to rice.

But Dizon insisted their prices are competitive with that of Vietnam stressing “It is very comparable.” In fact, he cited a Philippine Statistics Authority data showing that the consumer price index of concrete and cement has been lower than inflation or just an increase of 2 percent. “So, our locally produced cement is very affordable,” he said. 

This prompted Sen. Imee Marcos, Senate committee chair on economic affairs, to request for data on the local cement firms’ price structure as opposed to the imported.

“As Senator Villar has stated, we are all for buying local all the time but we have to be competitive,” she said.

Both Villar and Marcos cited complaints that the cement industry is a cartel given such scenarios of simultaneous hikes and reduction in prices, and shortage in supply.

Dizon vehemently denied such allegation stressing that the 9 cement manufacturers are engaged in a rather healthy competitive environment. They also positioned for the growing construction and infrastructure activities in the country, he said. The government has huge budgetary allocation for its Build Build Build infrastructure program.

Meantime, consumer group Laban Konsyumer Inc. president Victorio Mario Dimagiba said that imported cement is actually cheaper by 15 percent versus the local produce.

“We are opposed to the tariff protection in forms of safeguard or dumping duties that are tacked on to the cost of the cement and the consumers pay for them in the end,” he said.

The Department of Trade and Industry has imposed safeguard duty on imported cement since 2019 to curb the surge in importation. The DTI is also mulling for the imposition of dumping duty on imported cement from Vietnam.