The Cement Manufacturers Association of the Philippines (Cemap) denies the existence of cartels in the cement industry amid concerns over local products that are priced higher compared to imports.
“Wala po [None],” Cemap President Reinier Dizon said during a Senate committee hearing on Tuesday when asked to clarify about the cartels among local cement makers.
Sen. Cynthia A. Villar said the local cement sector should “correct” the “impression” that there are cartels fixing the price of the cement at a higher price compared to imports, which are mostly from Vietnam. As a result, she explained that buyers are likely to purchase imported cement instead.
Price-fixing by cartels is an anti-competitive practice wherein competing businesses agree to control the prices, which usually result in higher rates for the consumers. It is punishable by administrative fine and imprisonment according to the Philippine Competition Act.
“Are we priced so high? I don’t believe so. Based on the [inflation data] …cement has always been competitive,” Dizon argued, noting that the consumer price index for concrete and cement only showed about 2- percent increase.
While Dizon said he cannot discuss the pricing policy of the cement manufacturers, he told the committee to look at the whole picture when it comes to that aspect.
For example, the Cemap official explained that Vietnam has lower electricity costs, which allows it to sell their products at a lower price tag.
The cement manufacturing sector, he explained, is “energy-intensive” that 70 percent of the production cost is accounted for by fuel and electricity.
In addition, Dizon shared that setting up a facility requires substantial funding. A cement factory with a 1 billion ton capacity will need investment amounting to P5 billion to P10 billion, he said.
Last year, the nine cement manufacturing firms in the Philippines struggled to cope with the impact of the lockdown protocols, Dizon said.
The cement sector had to shut down plants, especially in Luzon, for over two months last year during the onset of the pandemic as it was not tagged as an essential industry. But he explained that the cement plants were able to restore to 100 percent operations as the restrictions eased.
The demand for cement also declined by 10 percent last year, Dizon said.
He noted that cement demand has been growing annually of about 6 percent to 7 percent prior to the pandemic. The local players, he added, were even continually investing in additional capacity.
“Many cement companies, they are publicly listed, they announced declining profitability last year,” he lamented.
Adding fuel to the fire is the continuous importation of cement—90 percent is from Vietnam—in the Philippines, Dizon said.
He said that cement import from Vietnam did not decline last year, reaching about 5 million tons.
This was possible, he explained, because Vietnam was able to operate its cement manufacturing facilities last year as the local factories temporarily closed due to lockdown measures.
Dizon said Vietnam has capacity of 120 million tons but demand is only half of it, resulting in oversupply.
With this, the Cemap official called for the government and private sector to have “patronage” over locally produced cement, noting the domestic sector has enough capacity to supply the country’s demand. “Just to clarify, we’re not saying that the DPWH [Department of Public Works and Highways] or government projects…do not buy local,” he added.
Last month, the Department of Trade and Industry (DTI) announced its anti-dumping investigation on cement imports from Vietnam.
This, after Cemex Philippines, Holcim Philippines Inc. and Republic Cement Builders and Building Materials Inc. filed a complaint claiming that cements from Vietnam are imported at “dumped prices,” which hurts the local industry.
DTI noted that the period of investigation (POI) for dumping is from July 2019 to June 2020. The POI of injury is from 2017 to June 2020.
The Anti-Dumping Act of 1999, or the Republic Act 8752, is in place to protect the local industry from being materially injured by the dumping of articles imported into the country.
“An exporting company is said to be ‘dumping’ when exporters sell their product to an importer in the Philippines at a price lower than its normal value and is causing material injury to a domestic industry producing like product,” DTI said in its web site.