The local cement industry, now threatened by the influx of cheap dumped cement from other countries mostly from Vietnam, is expected to receive a much-needed breather very soon.
The Department of Trade and Industry (DTI) said that it may release this month an update on their motu proprio investigation on the rising imports of cement into the country which has caused significant injury on local cement manufacturers.
Last October, the DTI issued a notice that it will initiate a motu proprio preliminary safeguard measures investigation on the importation of cement from various countries to determine whether increased imports of cement are causing or threatening to cause serious injury to the domestic industry.
Republic Act 8800 or the Safeguard Measures Act provides that the Secretary of Trade and Industry may, motu proprio or in the absence of a petition, initiate a preliminary safeguard investigation if there is evidence that increased imports of the product under consideration are a substantial cause of, or are threatening to substantially cause, serious injury to the domestic industry.
The DTI, through its import surge monitoring system, has recorded a surge in cement imports of both Portland and blended cement for the period covering 2019 to June 2024 from several countries.
It said that the volume of imported cement increased during the period of investigation (POI) except in 2022. In 2020, cement imports increased by 10 percent, in 2021 by 17 percent, in 2023 by five percent, and from January to June 2024 by 52 percent with imports reaching 3.7 million metric tons. Annualized, the 2024 cement level of imports showed an increase of five percent over the 2023 level, the DTI said.
The department noted that the increase in cement imports during the POI was both sharp and significant.
In 2019, cement imports were at 5.33 million, increasing to 5.88 million in 2020 and 6.89 million in 2021. It declined to 6.69 million in 2022 but rose again in 2023 to 7.01 million in 2023. For 2024, imports were projected by DTI to reach 7.36 million.
From January to June 2024, 93 percent of cement imports came from Vietnam while five percent were sourced from Japan and two percent from Indonesia. Vietnam’s share rose from 79 percent or 4.23 million to 98 percent or 6.87 million in 2023.
The DTI revealed that the volume of imports of cement relative to domestic production increased from 30 percent in 2019 to 35 percent in 2020, 36 percent in 2021, and 41 percent in 2022. In 2023, the share of imports to domestic production increased further to 47 percent and 51 percent in January-June 2024 as local production declined.
It said that the total apparent Philippine market showed a declining trend during the period of investigation except in 2021. The apparent local market for cement, it noted, declined by five percent in 2020 due to a nine percent drop in domestic industry sales and a 10 percent increase in imports.
In 2021, the apparent Philippine market, the report mentioned, recorded its highest growth at 14 percent as imports grew by 17 percent and domestic industry by 12 percent while in 2022, the apparent domestic market declined by 11 percent and further declined by six percent in 2023 as imports increased by five percent while domestic sales dropped by 10 percent.
Also, during the POI, the domestic cement industry’s share exhibited a declining trend from 78 percent in 2019 to 68 percent share in 2023. From January to June 2023, the share of the local industry to the total market was recorded at 66 percent, the DTI added.
The report, likewise, showed that the cement industry’s domestic sales volume declined year-on-year during the POI except in 2021. Sales volume declined by nine percent in 2020 due to the onslaught of the pandemic, increased in 2021 by 12 percent but declined by 14 percent in 2022 and further by 10 percent in 2023. In the first half of 2024, sales volume was less than half compared to the 2023 level, it added.
Meanwhile, sales value followed a similar trend with the sales volume, with sales value declining by 15 percent in 2020, increasing by 10 percent in 2021, but dropping again by three percent in 2022 and further by nine percent in 2023. In the first half of 2024, sales value was less than half compared to the 2023 level, the DTI said.
Adversely affected by increasing imports, the domestic industry’s production volume also saw a significant drop, declining by six percent in 2020, increasing in 2021 by 14 percent, and then going down again by 14 percent in 2022 and by 10 percent in 2023. Production recorded its highest in 2021 and the lowest in 2023, it noted.
The DTI also discovered that the domestic industry’s capacity utilization has also dropped, declining by nine percent in 2020, increasing by three percent in 2021, and then dropping once again by 14 percent in 2022, by 10 percent in 2023, and then by two percent compared to the 2023 level during the first half of 2024.
Further providing proof of the serious injury caused to the domestic industry by rising imports is the decline in profits. Operating profit dropped by 11 percent in 2020, increased 12 percent in 2021 before significantly declining by 69 percent in 2022 and by 137 percent in 2023 to register an operating loss.
There was also evidence of price undercutting with imported products being consistently sold at prices below the domestic selling price of the like product. From January to June 2024, the difference between the landed cost of imports and the ex factory price of domestic producers was recorded at 11.6 percent and in 2023, 24 percent.
The DTI added that there was price depression, meaning domestic producers are forced to reduce their selling prices in order to compete with imported products. During the period of investigation, price depression was recorded at 7.1 percent in 2020, one percent in 2021, and 2.3 percent in 2023.
There was also price suppression, the department said, where imported products prevented domestic producers from increasing their selling price to a level that will allow full recovery of their cost of production.
Based on all these, the DTI noted that there are indications that increased cement imports are the substantial cause of serious injury to the domestic industry and that there is prima facie evidence to conduct the preliminary safeguards investigation.
A thriving domestic cement industry is vital to any country’s economic development. With the Philippines striving for industrialization, we cannot be made to depend on the volatility of imported cement supply. We cannot let a vital industry die.
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