The premise of the Tariff Commission’s decision to end safeguard duties on cement by 22 October was its perception of domestic industry’s positive adjustment to import competition which is a misnomer since local manufacturers are pitted against imports at dumping prices.
Local manufacturers are expected to appeal the TC decision since the onslaught of cheap cement from Vietnam threatens the development of the local industry.
With the infrastructure offensive continuing under President Bongbong Marcos’ administration, demand is expected to reach 66 million metric tons in 2025.
Last year, the country imported 7.107 MMT of cement, of which Vietnam accounted for 6.466 MMT or 91 percent of total imports in both volume and value.
It grew to 61 percent in 2017 from almost nil in 2013.
Vietnam cement is, thus, considered a killer of the expensive expansion and modernization program of the local industry.
Republic Cement, among the country’s key cement makers, has invested P10 billion to modernize its operations but its revenue projections meant to recoup its huge investment have been thrown off by the cheap Vietnamese products.
As much as five percent of its upgraded capacity was idled by dumped cement from Vietnam in 2019, rising to 19 percent in 2020.
Cement imports from Vietnam grew faster than the yearly growth in demand. A chart presented by the Cement Manufacturers Association of the Philippines showed cement imports grew from 2.486 MMT in 2017 to 5.396 MMT in 2020 and 6.466 MMT in 2021.
The cost of energy mainly from coal makes up around 70 percent of cement production cost. With the current Eastern European conflict triggering a surge in fuel prices, the component of energy had dramatically risen.
Republic Cement’s profit slightly improved between 2017 to 2020 because of the company’s improved efficiency from its P10 billion investments.
“But our revenues were still suppressed because of imports at dumped prices,” said Reinier Dizon, Republic Cement’s Vice President for Strategy and Business Development.
“Coal prices have increased astronomically but we cannot pass on the cost. We’re losing revenues; we’re losing volumes,” Dizon said.
The influx of Vietnamese cement ratcheted at the height of the pandemic since Vietnam did not impose lockdowns that kept its cement factories running.
Now that the economy is on the road to recovery, the government is throwing the door open to more cheap imports as it lowers the tariff protection on cement.
TC’s move is premature at the least since it frustrates the recovery momentum of local industries.