Philippine cement manufacturers face stiff competition with their counterparts in Indonesia and Vietnam that both provide support for the power requirements of factories, according to Republic Cement.
In a news statement issued on Thursday, Republic Cement’s Vice President for Strategy and Business Development Reinier Dizon said local manufacturers do not enjoy the advantages of imports, for instance from Indonesia which has abundant coal resources or from Vietnam where their electricity cost is subsidized, based on the Philippines’s cement industry roadmap by LEK Consulting.
Dizon emphasized that based on the benchmark Newcastle Index, the price of coal—a major fuel for cement production—is “hovering around $400 per ton freight on board (FOB) as opposed to around $100 per ton about a year ago and $200 per ton at the start of 2022.”
This emerged, Dizon said, after Republic Cement, along with other local cement manufacturers, pressed the Tariff Commission to extend the three-year safeguard measures against imported cement, amid unabated imports threatening the recovery of the local industry from the effects of the pandemic, the additional challenge of spike in fuel and energy prices, brought by the ongoing conflict between Ukraine and Russia, and the global supply chain crisis.
While Republic Cement has invested in waste to energy projects, which also addresses the waste problem of communities hosting their plants, as well as planning for renewable sources of energy like solar power in its adjustment plants, Dizon said that these cannot fully make up for their fuel and electricity requirements.
Despite the roadblocks, Dizon highlighted that Republic Cement is pushing through with its adjustment plans to be sustainable and to continuously meet the growing demand in the country. This now leads to the local cement manufacturers pushing for the extension of safeguard measures against cement imports.
“The whole point of extending the safeguard measures is to give us time to invest. For us to be able to invest and reinvest, we also need to improve our profitability,” Dizon said, adding that while imports’ trend continue to increase, their sales volume is on the decline which makes investing complicated.
He disclosed that Republic Cement’s gross profits in 2017 was down by 37 percent compared to 2016; and down by 17 percent in 2018 compared to the previous year. Dizon attributed the 29.6 percent increase in gross profits in 2020 to the P10 billion they invested to “improve competitiveness,” which is part of their adjustment plans.
Meanwhile, Dizon added that their sales volume also declined in 2019 and 2020.
In a hearing held Wednesday, the local cement industry leaders argued before the Tariff Commission, explaining why the safeguard measures should be extended.
The commission’s three-year imposed safeguard duty per 40 kilogram/bag of imported cement is set to expire in October this year.
Under the Republic Act No. 8800 or the Safeguard Measures Act, “an extension of the measure may be requested by the petitioner if the action continues to be necessary to prevent or remedy the serious injury and there is evidence that the domestic industry is making positive adjustments to import competition.”
In a statement last week, the local cement manufacturing industry denounced the continued dumping of cement imports from Vietnam, saying it has resulted in material injury to domestic manufacturers.
Dizon said in his testimony last week that his company’s volume of sales as well as pricing, have been severely affected by cement imports from Vietnam.
Dizon emphasized that the local cement industry’s recovery rests on the extension of the safeguard measure.
“Approximately 70 percent of the cast production cost of cement is accounted for by both fuel and power cost, the latter also related to coal. The local industry is on the recovery as the economy recently opened up but this can be compromised if the safeguard measure is not extended,” said Dizon as he testified during the hearing.
Aside from Republic Cement, witnesses from other local cement firms like Cemex Holdings Philippines and Holcim Philippines also testified and confirmed the necessity for Safeguards extension. They collectively said that this would give them time to complete their adjustment plans.
Meanwhile, representatives from Indonesia and Thailand opposed the extension of the safeguard measures. However, they negotiated that if the commission rules against them, cement imports from their respective countries should be exempted as they each account for less than 3 percent of the total imports in the Philippines, as evidenced in the World Trade Organization (WTO) Agreement on Safeguards.