Govt probes high financing charges on cement industry, Philippines

Govt probes high financing charges on cement industry, Philippines
Published: 31 July 2007

Trade and Industry Secretary Peter Favila yesterday said he will validate the claim of local cement producers that high financing charges are responsible for the high prices of the construction material.

Favila said he would check the claims of higher charges from banks that extended loans to the big three cement companies—Cemex, Lafarge and Holcim—despite historically low interest rates. The three companies dominate and control the domestic cement market.

“The financing charges are on the high side. Big companies should be able to command prime interest rates [from their creditors] and against a backdrop of a low interest rate regime, the financing charges quoted by the three companies seems very high,” said Favila.

The Department of Trade and Industry earlier asked the three companies to submit production cost inputs to justify the high price of cement.

Island Cement, according to the department’s latest weekly monitoring report covering July 23 to 27, is the most expensive at P183 per 40-kilogram bag. Republic Cement retails at P180, while Excel costs P179. The prices are unchanged from week-ago levels.

Favila said the department and the Board of Investments were reconciling their figures in preparation for a possible Congressional investigation. He said there were indications that Congress wanted to inquire on the high prices of cement in the country.

Favila, meanwhile, said the government was now studying the possibility of putting a triggering mechanism that would either raise or lower tariffs on imported cement as the need arises without waiting for petitions filed with the Tariff Commission.

Consumers have been complaining of tight cement supply in the domestic market.

Earlier, an industry official said prices of cement could go up further given the scarcity in the supply of the commodity.

He said consumers had no choice as traders were not likely to import cement because of unattractive margins even at zero per cent duty.

The industry official added the tight supply of cement came as a surprise as demand for the commodity supposedly would have slowed down with the onset of the rainy season.

The technical committee of the Tariff and Related Matters is set to draw up the parameters for removing the duties on imported cement.