Philippines: gearing for growth

Cement producers in the Philippines are gearing for growth, outlining new plant projects to ensure they are prepared to address the demand of anticipated public and private infrastructure spending.

Cement demand in the Philippines has taken off in recent years, largely due to government infrastructure investment as well as industrial and commercial sector activity. Domestic cement consumption in 2016 amounted to just under 26Mt, up 6.6 per cent YoY despite a slowdown in the fourth quarter due to unfavourable weather conditions. The first three months of this year also proved to be challenging, with both Cemex and Holcim Philippines reporting subdued volumes and a dip in financial performance, but going forward confidence remains that demand will pick up in the second half of the year and that the overall outlook for the industry is positive.

While the pace of annual cement demand growth is expected to decelerate from previous years, private building companies are still driving demand at significant levels and President Rodrigo Duterte, who today marks his his first year in office, has recently underlined his commitment to maintaining and expanding investment in Filipino infrastructure. Under its 'Build, Build, Build' programme the Duterte administration said last month that it had allocated PHP847.2bn for infrastructure projects, and in the medium-term intends to spend PHP8- PHP9trn, or roughly US$160bn-180bn, from 2017 to 2022. As a share of GDP, infrastructure spending will rise from 5.3 per cent in 2017 to 7.4 per cent in 2022, not including private sector investments in power, water, and telecommunications.

To improve the ability to supply the market, a number of new plant projects are being undertaken by local players, lifiting capacity from its current level of 34.7Mta. Republic Cement, which is the largest producer in the Philippines with 10.8Mta of capacity, has recently released more information about its US$300m investment programme to increase its production capabilities. The joint venture between CRH and Aboitiz Equity Ventures plans to increase the capacity of its plants at Luzon and Mindanao by 2019 in the first phase of the project, according to the Manila Bulletin. This will then be followed by a second phase that will build new clinker production lines. The cement producer also intends to install several grinding mills to increase its cement production capacity by 3Mta. In addition, it will install improved process technology to increase clinker output from all of its plants in Luzon that it says will be equivalent in capacity terms to a new kiln line investment, the report added.

In the final quarter of last year, Cemex Philippines received delivery of a new kiln for its Luzon plant which forms part of the company's strategic multi-million dollar investment in the country. The project involves the construction of an additional 1.5Mta integrated cement production line to the actual plant’s capacity of 1.9Mta. The new kiln equipment for the expansion to be completed in 2019.

Meanwhile, Holcim Philippines Inc said its production capacity is expected to reach 10Mta by the end of the second quarter of 2017 through upgrades to its plants at Mabini and Norzagaray. Chief Operating Officer, Sapna Sood, said debottlenecking of existing cement facilities would add 2Mta of capacity.

Eagle Cement Corp (ECC), controlled by local entrepreneur Ramon Ang, is set to complete a third production line at its Bulacan plant in 2018. The new line will add 2Mta of capacity, taking the company's total capacity to 7.1Mta. Moreover, Mr Ang is building five new cement plants, each with a capacity of 2Mta, to be established by affiliates ECC and Northern Cement.

Philippine conglomerate DCMI Holdings has also hinted that it is interested in entering the cement sector by constructing a plant on Antique's Semirara Island. DMCI Chair and President, Isidro Consunji, said the plant could initially produce 5000tpd of cement and development plans are currently being undertaken.

The Department of Trade and Industry has lauded the expansion activities being undertaken by manufacturers in support of the Duterte administration’s infrastructure development agenda. “We welcome investments for the stable supply of construction materials in support of the government’s Build Build Build campaign,” Trade Secretary, Ramon Lopez, said. Meanwhile, earlier this month, the Philippines Board of Investments (BOI) said it is seeking investment in the cement sector as it expects demand to reach 40Mta by 2020 due to a peak in government infrastructure spending. At the same time Department of Trade and Industry (TI) Undersecretary for the industry promotions group, Ceferino S Rodolfo, confirmed that two companies are preparing to build new integrated plants. Such investments will help ensure a continued supply of cement for the local construction sector in light of private building activity and the current administration’s spending plans to usher in what Duterte has dubbed the country's "Golden Age of Infrastructure."