Traders earning ‘immoral margins’ from cement imports — Philcemcor

Cement importers and middlemen are earning as much as P45 per bag off consumers and the local cement industry wants the government to get a bite of this bonanza through a provisional tariff increase to shield local producers from unfair competition and further injury.

"Import surge does not benefit the consumer, only the exporters, importers and middlemen. Neighboring countries dump their excess cement here at P92 per bag as against P134 for local cement ex-plant, but these imports are sold to consumers at only P2-P5 below local cement prices," the Philippine Cement Manufacturers Corp. (Philcemcor) said.

The proposed increase in tariff should not lead to higher prices because it should eat only into the "immoral margins" of importers and middlemen, including certain members of the Philippine Constructors Association (PCA), said Philcemcor which is seeking the tariff cover under the Safeguard Measures Act.

"A P2 discount per bag for consumer, when traders make P45, is not a good price at which to kill the industry. It is also not a good price to let thousands of Filipinos go jobless while protecting the jobs of foreign workers," Philcemcor said.

The industry also cited a Center for Research and Communications study indicating that cement accounts for only 5 to 10 percent of construction costs, small compared to the 12 percent for a contractor’s fee. Clearly, it said, cement is not a major cost factor to consumers.

According to Philcemcor, the importers have virtually no investments here and yet threaten to kill a strategic industry the way imports wiped out the tire industry.

Importers started with only a 1.5-percent market share in 1998. They now have 22 percent and are growing faster than ever. Recent figures pegged their market share at 24 percent last month. By the end of this year. Philcemcor expects imports to continue its judgment unless the sought safety net is deployed.

"Clearly, only the interest of exporters, importers and middlemen, including some PCA members, are served by the unimpeded entry of imported cement. Public interest dictates that the Philippines keep a strategic industry from collapse because we don’t want massive economic dislocation and to be dependent on imported cement which will surely become exorbitant upon the demise of local competition," the industry said.

Back in the mid-1990s, the Philippines depended on imports that were priced $100 per ton (now equivalent to over P200 per bag). Local cement manufacturers then expanded their capacity through dollar-denominated loans that became oppressive in the aftermath of the 1997 Asian crisis.

The industry then invited foreign investors to be strategic partners to stay afloat. More than $2 billion in new investments were brought in, making the industry one of the most modern in the world.

The surge in imports then forced the industry to lay off workers and operate at only half is production capacity. Its ancillary industries such as engineering and spare parts businesses and the hauling and transportation sectors are also being dragged down. They have openly supported the imposition of a provisional tariff rate increase until the government has decided whether imports should remain unfettered as they are now or not.

Consumer interest and the interests of every other sector in the Philippines, is best served by a stable local cement industry because of the resulting steady supply and prices and quality assurance, the industry said, "Public interest is much more broad than the P2 discounts this issue has come down to," the industry added.