Displaying items by tag: Department of Trade and Industry

Philippines: The September 2019 customs duty of US$4.81/t on imported cement is in danger of disrupting a Philippine Competition Commission (PCC) probe. The Philippine Star has reported that the PCC is conducting an investigation into domestic cement producers’ alleged anticompetetiveness following an accusation by a Department of Trade and Industry (DTI) official in 2017 that a ‘cartel’ of producers was maintaining artificially high pricing and spreading of misinformation about the quality of imported products. PCC chair Arsenio Balisacan has noted the danger of ‘having an ongoing investigation and introducing a policy which can influence the outcome of that investigation.’

Napoleon Co, chairman of the Philippine Cement Importers Association (PCIA), has stated that cement traders will keep on importing unless the local cement sector produces more. He said that foreign producers’ Philippine sales were driven not by their lower prices but by the domestic industry’s inability to fulfill the country’s 28Mt/yr demand.

Predictably, the recent investigation by the Tariff Commission in the Philippines on whether to maintain duties on imported cement recommended that the safeguard duty be kept. It even suggested raising the rate to nearly US$6/t from US$4/t at present. The report has been passed to the Department of Trade and Industry (DTI), which will make the final decision on the matter.

Graph 1: Market share of the Philippines cement industry between local producers and traders, 2013 - 2018. Source: Tariff Commission of the Philippines.

As the commission built its argument it released a great snapshot of the local cement industry and it’s well worth a read for anyone who is interested. One key graph here was the speed at which the market share of cement sold by local producers fell compared to importers from 2013 to 2018. As Graph 1 shows above, traders imported 0.29Mt in 2015 and this rose to 4.66Mt 2018. Imports by local producers also grew during this time but at a far slower rate. They were 0.45Mt in 2015, grew to a high of 1.65Mt in 2016 and then stabilised at around 1Mt/yr since then. Seven of the top 10 cement exporters were Vietnamese companies followed by two from China and one from Thailand. However, the local producers were importing clinker on a far larger scale during this period. 16.8Mt of clinker was imported from 2013 to 2018 led by Holcim Philippines with 5.54Mt or a 33% share. In Holcim’s case this was coming from China, Indonesia, Japan, South Korea, Malaysia, Thailand and Vietnam.

Elsewhere, the report established the various production capacity upgrades the local cement producers had invested in or were planning to in the near future. Taiheiyo Cement Philippines, for example, was reported as planning an expansion to its Cebu plant production line from 2022 to 2025. It then looked at kiln capacity utilisation rates, prices and how profits have changed amongst much else. It concluded that the import surge from 2015 to 2018 had depressed prices and decreased the profitability of the local producers. This fitted its definition of ‘serious injury’ as one reason to impose a safeguard duty on imports.

Importers presented a different scenario to the commission during its investigation and afterwards. Phinma, for example, told local press that the commission’s comparison calculation of the costs behind local and imported cement didn’t take into all the costs the importers endured such as a local distribution and handling once in the country. The Philippines Cement Importers Association reiterated the view of its members that they were simply meeting market demand, that local producers had caused their own problems through overcapacity and that profits varied considerably amongst local producers, amongst other arguments. This has been borne out by some of the half-year results amongst the local producers. Eagle Cement, for example, saw its earnings before interest, taxation, depreciation and amortisation (EBITDA) grow by 21% year-on-year to US$80.6m.

With the publication of the commission’s report the DTI has been handed the impetus to hold up or even raise the duty on imported cement. Based on its actions in recent years the ministry seems likely to do so. This presents a contrast to Trinidad & Tobago where importer Rock Hard Cement won a legal battle earlier in August 2019 against competitor and Cemex-subsidiary Trinidad Cement over the classification of imported cement products. These kinds of trade conflicts are likely to proliferate whilst global production capacity outstrips demand but the outcomes may vary.

Philippines: Cement producers say that if the government does not implement a permanent safeguard duty on cement imports they may reconsider investment plans to upgrade their plants. Representatives of Taiheyo Cement, Republic Cement, Holcim and Cemex made the comments at public hearings by the Tariff Commission, according to the Philippine Star newspaper. The commission is conducting an investigation to determine whether the provisional safeguard duty imposed by the Department of Trade and Industry (DTI) on cement imports should be kept.

During the hearings, Cirilo Pestaño II the executive director of the Cement Manufacturers Association of the Philippines (CEMAP), lobbied the government to impose a higher ‘definitive’ safeguard duty. He said that imports of cement rose by 64% year-on-year to 1.74Mt in the first quarter of 2019 from 1.06Mt in the same period in 2018 despite the provisional safeguard measure being in place.

Philippines: Data from the Department of Trade and Industry (DTI) shows that imports of cement rose by 64% year-on-year to 1.74Mt in the first quarter of 2019 despite the introduction of a 4% tariff in January 2019. Imports were 1.06Mt in the same period in 2018, according to the Philippines News Agency. The production capacity utilisation factor of local producers is also reported to have fallen. The DTI says it will continue to monitor the situation.

Philippines: The Department of Trade and Industry (DTI) expects San Miguel Corporation’s acquisition of a majority stake in Holcim Philippines to reduce the price of locally produced cement. Trade Secretary Ramon M Lopez said that he expected operational synergies and economies of scale to ‘hopefully’ bring down prices, according to the BusinessWorld newspaper. He also noted that import duties on imports of cement could also provide a ‘healthy competitive environment.’

San Miguel Corporation agreed to purchase LafargeHolcim’s 85.7% share in Holcim Philippines in early May 2019. The deal is expected to be completed by the end of 2019.

Philippines: Ramon Lopez, the head of the Department of Trade and Industry (DTI), says that there is no need to impose a price cap on cement yet. However, he said that the government might intervene if the price of cement reached around US$4.6/bag, according to the Philippine Star newspaper. The DTI applied a US$4/t tariff on imported cement in mid-January 2019 for a period of 200 days in response to a surge in imports.

Philippines: The Tariff Commission has delayed a public hearing on the formal investigation on the imposition of safeguard measure on cement imports. The meeting was scheduled to take place in early May 2019, according to the Philippine Star newspaper. The commission said it was postponed in order to give it time to visit plants and check its data.

The investigation started in February 2019 to check whether a provisional safeguard duty imposed by the Department of Trade and Industry (DTI) should remain in place. The DTI applied a US$4/t tariff in the form of a cash bond on imported cement in mid-January 2019 for a period of 200 days in response to a surge in imports.

Philippines: Ramon Lopez, the secretary of the Department of Trade and Industry (DTI), says that a suggested retail price (SRP) for cement is not a priority following the introduction of tariffs in imports. He added that prices had barely changed since the safeguard duty started in February 2019, according to the Manila Times newspaper. The Tariff Commission is currently considering whether to add additional tariffs to cement imports. A public hearing is set on for early May 2019 where it may extend the import duties.

Philippines: The Cement Importers Association of the Philippines (CIAP) has defended cement imports from Vietnam. In a statement the association said that all legally imported cement sold in the Philippines met the required standards, according to the BusinessWorld newspaper. It made the comment in response to media reports that ‘substandard’ Vietnam-sourced cement was saturating the market.

CIAP said that the controls imposed by the Department of Trade and Industry (DTI) were tougher for imported cement than for locally produced cement. Local manufacturers are audited once per year compared to checks for every batch of imported cement. The DTI said it was going to impose a provisional tariff on imported cement in early 2019.

Philippines: Department of Trade and Industry (DTI) Undersecretary Ruth Castelo says that the government is considering implementing a suggested retail price (SRP) on cement. However, cement companies have previously resisted sharing information with the government to help it devise a SRP, according to the Philippine Daily Inquirer. The DTI is considering publishing a SRP for cement due to consumer concerns about prices rises following newly introduced tariffs on imports. To do so it will need cement producer costs for labour, raw materials, fuels and logistics.