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Cement manufacturers blame economy on price flaps

BAGUIO CITY (July 28) — Mounting costs of producing a bag of cement, inflation and the reformed value added tax (VAT) were blamed for the all-time high price of cement n the country today. On top of these, however, manufacturers also put the blame on a failing national economy that fails to absorb the prevailing market forces for cement.

The price of cement and other basic necessities and prime commodities took center stage today as local price coordinating councils in the Cordillera and several local government units and implementing agencies gathered in a regional forum at the Venus Park Hotel here.

Spearheaded by the Department of Trade and Industry (DTI), the forum invited an official of the Philippine Cement Manufacturers’ Association of the Philippines (PMAP), Vicente Castillo, who traced the prevailing P170 price of a bag of Portland cement to the high cost of power, the fluctuating peso-dollar exchange rates and the 2% value added tax.

In the Cordillera and neighboring regions, the price of cement could go up to P205 per bag, depending on the availability of the commodity and the distance from the plants in the Ilocos Region.

On top of the increasing cost to manufacture, Castillo said, around 30% of production costs represent power costs, which he said increased by 16 to 20 % from last year.

Castillo said the price increase of cement range up to 6% per year only. Computing Castillo presented that the cost to manufacture increased by 9.6% but the price per bag increased only by 4% and the VAT is 2%.

He also debunked the notion that manufacturers are getting large profits, saying that the return on investment is only up to 10%. In the last three years the return on equity of manufacturers, according to Castillo, was only 5%. ROE must be 20% if half of the ROEs equity, according to Castillo.

“Cement is not making too high profits,” Castillo said.

Other factors in the high cement price are technical smuggling and the quality control measures that manufacturers and the government agreed on. He revealed that Japan and China are providing subsidized cement products.

“For us to compete with global market we have to maintain our product quality.” He said a 7-day and another 28-day test had to be imposed on local manufacturers.

In Northern Luzon, there are only two cement companies with a national annual production capacity of 18 million tons. Castillo laments, however that the demand is only for 11 million tons or only 65% of the capacity as he observes that the local construction boom in the past years has started to dwindle.

“People are no longer building (concrete) homes,” he told the media in an interview. He said that even as the government dangled an investment incentive for new plants, weak earnings in the industry does not attract prospective investors.

Meanwhile, in the Cordillera, the DTI reportedly apprehended at least four cement dealers and charged an undisclosed retailer for over-pricing. Assistant Regional Dir. Marites Damian disclosed that after the apprehension, P175 suggested retail price for a bag of cement has prevailed over the unregulated P195 before apprehensions. # Lyn V. Ramo for NORDIS

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