A document obtained from the Philippine Tariff Commission showed that the industry’s reported capacity in 2004 was at a higher 528 million bags of cement but the operating capacity (actual) was at 345 million cement bags while cement demand was placed at 303 million bags. This figure showed that the gap between demand (303 million bags in 2004) and actual operating capacity (345 million bags) is just very small and that is assuming that the demand and capacity are constant. But if the projected 12 per cent annual growth in the construction sector is used, the shortfall in cement supply is very imminent next year.
The document has urged the government to investigate the real figure because based on the reported capacity the industry’s utilisation rate was only at 57 per cent. But if the computation is based on the operating capacity, the industry’s utilisation rate is at a high of 88 per cent.
"A clear distinction should be made between reported capacity and what is operational capacity as this possible overstating may further exacerbate the already untenable price of cement today," the document said. "This will negatively impact the consumers, the construction sector and the government’s Medium Term Development Plan," the document said.
The document further said that the massive kiln closures made by members of the Cement Manufacturers Association of the Philippines (CeMAP) resulted in permanent displacement of some 7Mta or 183 million bags of capacity. In fact, the 2004 volume of cement sales of 12Mt or 303 million bags also does not match the 265 million cement bags sold as claimed by CeMAP .
The document expressed disbelief that despite the kiln closures, existing cement producers, which have reportedly "excess capacity," have made further cement acquisitions. For instance, the document said that Union Cement acquired both Limay Grinding and Lucky Cement, which operate finish mill plants in Bataan and Batangas, respectively despite their excess capacity. Meanwhile, local cement prices skyrocketed from P70 per bag in 2003 to P160 per bag today.
What happened were pure acquisitions of existing plants by global players such as Cemex, Lafarge and Holcim. What remains now are two small cement plants, the Northern Cement and Pacific Cement in Surigao. The industry has also enjoyed government protection against imports with the imposition of safeguard measures a couple of years back.
An estimated investments of US$1 billion have been poured by the three global cement plants to gobble up local cement plants. Among the big three cement players, Lafarge has the biggest capacity with 7.7 million MT with its seven plants, Holcim’s four cement plants have a combined capacity 7.238Mt and Cemex with 4.6Mt. (Abstracted from Manila Bulletin).