Vital industry

If there is one industry that has real potential of becoming self-sufficient in terms of supply, it is the local cement manufacturing industry.

After all, the Philippines is abundant with a key ingredient in the making of cement which is limestone. Demand for construction materials is also on the rise, especially after many projects which have been put on hold during the height of the pandemic are back on track. A strong domestic demand from both the private and public sectors provides the much needed impetus for the local cement manufacturing industry to keep up, expand capacities, improve efficiencies, and produce better products.

However, unabated importation of cheap cement mostly from Vietnam is hurting local manufacturers, especially those which have recently been investing a lot of funds into capacity expansion.

Not even extreme measures resorted to by our government, such as the imposition of safeguard duties as well as anti-dumping duties on imported cement, could stop the deluge of imported cement into the country.

Republic Act 8800 allows the Secretary of Trade and Industry to apply safeguard measure after first establishing that its application will be in the public interest and upon a positive final determination by the Tariff Commission (TC) that a product, in this case cement, is being imported into the country in increased quantities, whether absolute or relative to domestic production, as to be a substantial cause of serious injury or threat to the domestic industry.

In 2019, the Department of Trade and Industry imposed a general safeguard measure on cement imports for a period of three years after the TC found a causal link between increased cement imports and threat of serious injury and impairment to the domestic cement industry.

On the first year of implementation, the DTI imposed a safeguard duty of P250 per metric ton or P10 per 40-kilogram bag of imported cement. By the third year, the safeguard duty was down to  P200 per metric ton or P8 per bag.

Unfortunately, the three-year implementation ends this October. The Cement Manufacturers Association of the Philippines (CeMAP) has filed a petition with the DTI seeking an extension of these safeguard measures against imports of ordinary Portland cement Type 1 and blended cement Type 1P.

The petition was referred by Trade Secretary Ramon Lopez to the TC, which began its formal investigation last February.

As early as last year, cement manufacturers have noted a surge in imports from Vietnam despite the safeguard duties that were in place.

In fact, during the first four months of 2021, Vietnam’s cement exports to the Philippines rose 17 percent year-on-year to 2.51 million tons, making the Philippines its second largest export destination.

CeMAP noted back then that with a huge surplus and lower domestic demand in Vietnam, the Philippines will likely see a more aggressive effort from Vietnam exporters to flood the Philippine market with imported cement.

Prior to the imposition of the safeguard duties in 2019, the DTI had already noted that volume of cement imports increased continuously from 2013 to 2017.  In 2014, imports rose by 70 percent. By 2015, imports increased by 4,401 percent and then by 550 percent in 2016, and 72 percent in 2017.

As a result, the domestic cement industry’s sales revenue went down 12 percent to P11.1 billion in 2017 compared to the previous year while earnings sharply declined by 49 percent.

Unfortunately, the safeguard duties were not enough to prevent the entry of cheap, oftentimes dumped, cement imports.

Data from CeMAP revealed that last year, the Philippines imported 7.11 million metric tons of cement, around 91 percent or 6.47 million tons of which came from Vietnam.

Total imports last year increased by 14 percent year-on-year from 6.25 million tons in 2020 while imports from Vietnam rose 20 percent last year compared to 5.4 million tons in 2020.

The safeguard duties were not enough to protect the local cement industry against “dumped” cement.

Fortunately, we have RA 8752 or the Anti-Dumping Act which provides protection to a domestic industry which is being injured, or is likely to be injured by the dumping of products imported into or sold in the Philippines.

On Dec. 6, 2021, the DTI imposed a provisional four-month anti-dumping duty on imports from Vietnam at the following rates: Type 1 cement, $1.02 to $10.53 per metric ton or 2.7 to 31.9 percent of the export price; and for Type 1P cement, $1.16 to $12.79 per metric ton or 3.8 percent to 29.2 percent of export price.

DTI estimated that these provisional duties added P2.01 to P25.08 per bag of cement to the import cost.

The dumping duty was imposed based on a complained filed by local cement manufacturers that cement imports from Vietnam  are sold here at artificially low or dumped prices, leading to business injuries to local producers.

Based on DTI’s evaluation, nine out of 16 Vietnamese exporters of Type 1 cement, and four out of 12 exporters of Type 1P cement have been dumping these products in the Philippines. Dumping takes place when exporters sell their products to an importing country at a price lower than its normal value when consumed in their home mark

DTI’s investigations also revealed that dumped cement imports from Vietnam accounted for 55 percent of total Philippine imports from July 2019 to Dec. 2020.

The provisional anti-dumping duties are imposed only on specific Vietnamese exporters in the form of cash bonds.

Vietnamese cement exports to the Philippines accounted for 46 percent of Vietnam’s world export volume from 2017-2020.

These continuing surge in imports was happening while Philippine cement producers were investing huge amounts to increase their production capacity by 23 percent to 35.3 million tons at the beginning of 2022. CeMAP was projecting further capacity growth of 55 percent of 54.8 million tons per year by the end of 2025 against a domestic demand by that year of 66 million tons per annum.

The TC is now tasked with determining whether the three-year safeguard duties will be extended and whether the preliminary anti-dumping duties should be made definitive or permanent.

RA 8800 provides that the provisional safeguard duties and measures shall not exceed four years. If extended, the total period which includes the extension may not be beyond 10 years.

Last June 3, the commission held its second day of public hearings on the petition of local cement manufacturers to impose definitive anti-dumping measures against Type 1 and Type 1P cement imported from Vietnam.

After its investigation, the TC, in case of affirmative findings, can recommend the issuance by the DTI Secretary of an order imposing definitive anti-dumping duties.

Local manufacturers have committed to completing their respective projects although prevailing conditions make this task even more challenging, unless enabling support is granted by the TC with the time-bound trade remedies sought.

Fortifying the industry means consumers will benefit from a secure and stable source of local cement, unfettered by variables of world demand and not dependent for supply on availability of excess capacity of exporting countries.

Industry leaders emphasize that the grant of the remedies sought will encourage inflow of fresh capital. This in turn will help catalyze inclusive growth through new jobs, additional revenues for the government, and improvement of the country’s balance of payments.

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