Documents obtained by The STAR show that the cement industry is considering the possibility of further consolidations and operations mergers to achieve economies of scale and lower operating and administrative costs.
The plan was mentioned in the industry’s application for relief from what they claimed was an import surge from Taiwan and Indonesia, a move that could prompt government to impose a 50-percent tariff on imported cement and ultimately, volume restriction on future imports.
Although the so-called Big Four control virtually 80 percent of the market when they first came in, there are still a number of locally-owned cement plants around the country that are not affiliated with any of the four region conglomerates.
Some of these plants have temporarily shut down and although the likelihood of reopening the facilities declined over time, they could still be sold or merge with other cement companies to allow them the scales to compete not only with the big conglomerates but also with imports that would continue to come in even if the government decides to impose a quota.
Although the details of the consolidation are not indicated in the document, the Department of Trade and Industry in its subsequent review of the application, said the industry had listed several courses of action as part of their adjustment plan during the temporary period of relief from the effects of import competition.
According to the application filed by the Philippine Cement Manufacturers Corporation (Philcemcor), local cement companies expected to invest the time and resources that are needed to rationalize their production and streamline operations. These include mothballing of wet process plants and shifting to more cost-efficiency dry process.
According to the document, the temporary import relief would also allow the industry to regain profitability by bringing their new facilities to efficient production levels consistent with their planned operations.
"During this time the industry will undertake studies which would result in planned and coordinated strategies to maximize efficiencies and economies of scale even during downturns by adopting strategies in advance of downturns," the document but it did not say what these "coordinated strategies" are going to be.
The cement industry’s plan would also involve efforts to develop more export markets through the expansion of distribution channels with affiliated companies in the region and other parts of the world.
Already, local cement companies with foreign affiliates have been able to export some of their production to markets in Taiwan, Singapore, Hong Kong and even as far as Africa where their affiliates have strong distribution links.
However, Philcemcor said in the document that the most critical part of the industry’s adjustment plan should government grant it the relief, is the review of the capital expenditure and modernization programs first contemplated when the industry was taken over by the Big Four in 1997 and 1998.
According to the document, most cement companies that were acquired by either La Farge, Cemex, Blue Circle and Holderbank had lined up further expansion in the yearly years of this decade, a plan that would have to be recalibrated based on current estimates and projections for the industry and the region.