Cement demand in the country is experiencing an uphill climb even amid softer prices as big commercial projects have yet to pick up, according to an industry player.
Manuel Lozano, Aboitiz Equity Ventures (AEV) chief financial officer, said during the Aboitiz Group stockholders meeting Thursday, Nov. 5, 2021. AEV and British firm CRH Holdings gained 99.09 percent ownership of local cement firm Lafarge Republic Inc. (LRI) in 2015 becoming one of the Philippines leading cement producers.
“Demand is up but not at levels the industry is expecting,” said Lozano, adding there has not been construction activities for commercial buildings, high rise, and malls in the past two years. These commercial buildings are a big part of demand for cement, he explained.
Luckily, he said, there are infrastructure projects of the government to sustain demand.
Another factor hounding the cement industry is that prices have been on a bit of a downtrend since the beginning of 2020 while costs of inputs are going up.
In fact, he said, imported cement, which has been prevalent since last year, has shown some signs of a slowdown. He could only surmise that the high cost of inputs plus higher transportation and freight since the beginning this year is pushing up cost of importation.
Coupled with low prices, he said, this should have eroded margins of importers quite significantly.
In terms of supply, Lozano said, there is enough capacity for now both from local producers and imports.
But he warned that if commercial demand will pick up in the next couple of years, there is not enough domestic supply. That is the reason some cement makers were already talking of expansion even before the pandemic.
As mobility restrictions are further eased, he expects construction for high rise buildings, hospitals and more housing projects to pick up speed.
AEV itself, he said, is augmenting its capacities by implementing efficiency measures to its cement plans. This has helped keep its margins afloat, Lozano said.
But they are also preparing for expansion only that they have to see the market improving first because “We are still bullish, we believe demand is there. We expect a turnaround in the long term, but we hope it will be sooner.”
In fact, he said, demand has already picked up in other countries. This would also exert supply pressures on imports, resulting maybe in reduced volume importation overtime, he added.