Quality of cement imports under question

MANILA — The bulk of the cement imports the Philippines is getting from Vietnam is of inferior quality compared to those produced in other areas of the world.

“In general, the Vietnamese cement industry’s technology remains poor compared with that in other countries in the region and the rest of the world,” said Associate Professor Dinh Trong Thinh of the Academy of Finance, which is part of Vietnam’s Ministry of Finance, in an article published on Nov. 21, 2018 by Vietnam Economic News.

Dinh conceded that exported cement from the country has a low price due to the poorer quality of some of its product.

He also noted that some smaller and medium-sized cement producers use old technology, such as shaft kilns.

Data from the Department of Trade and Industry (DTI) indicate that from January to April 2018, cement imports from Vietnam accounted for 75 percent of total Philippine imports.

Earlier, DTI slapped safeguard measures against cement importation after confirming it had adverse effects on the local cement industry.

It has forwarded the case to the Tariff Commission for a formal investigation on the possibility of instituting permanent safeguard measures.

In July 2016, a consumer group had raised concerns that haphazard handling of imported cement may compromise its quality.

According to reports, National Consumer Affairs Council (NCAC) chairman Jose Paredes Pepito warned that seawater-contaminated cement entered the local market after a ship carrying cement from Vietnam encountered a leak that caused 6,000 metric tons of cement to get wet.

He said the contaminated cement is no longer in accordance with Philippine safety standards.

“Having been contaminated by seawater, the physical and the chemical properties of this cement will not comply with the required standards of cement that is safe to use in construction projects,” Pepito said.

He had warned the repackaged cement might be difficult to distinguish from regular cement sold in stores.

NCAC said the contaminated product is part of a 25,000 metric ton shipment of Halong brand cement unloaded in La Union in March that year.

In addition to issues of quality and corresponding safety concerns, the heavy cement importation has also contributed to the country’s trade deficit, the thinning of foreign reserves, and the increased pressure to diminish the value of the Philippine peso.

The Philippine Statistics Authority reported last February the country’s trade balance deteriorated to a record-high deficit of USD41.44 billion in 2018 as imports rose sharply while exports diminished.

In its report on November last year, the Bangko Sentral ng Pilipinas bared that the Philippines’ dollar reserves fell to an over seven-year low of USD74.77 billion in October from USD74.94 billion at end-September.

The BSP said the October figure was also the lowest since the USD71.88 billion posted in July 2011.

At around the same time, the Philippine peso suffered from a continuing losing streak, closing at P53.8 to USD1 on Sept. 6, 2018, which was the lowest level of the peso since December 2005.

Meanwhile, Dinh also revealed the supply of cheap cement imports from Vietnam may soon dry up.

“When supply exceeds demand in the domestic market, it is necessary for businesses to export product even at a price lower than the domestic price to avoid amassing inventories and earn foreign currency revenues,” he said.

“However, in the long run, exporting cement at such a low price is not sustainable given production costs and the price of similar products in other countries,” he added.

In imposing the safeguards, the DTI noted that relying mainly on imported cement is risky and dangerous “considering changes in global demand and supply conditions.”

Based on DTI’s findings, cement imports surged in the past five years from a measly 3,558 metric tons in 2013 to more than 3,000,000 metric tons in 2017 and reaching almost 5,000,000 metric tons in 2018. By allowing loose cement imports at zero tariff, pure importers’ share of the market grew from only 0.02 percent to 15 percent from 2013 to 2017.

As a result, the local industry experienced a sharp decline in income – earnings before interest and taxes – of 49 percent in 2017.

The DTI noted the local cement industry directly employs some 42,000 workers, with an additional 125,000 jobs contributed through the value chain.

The industry also adds an estimated PHP155 billion or 1 percent of the total GDP of the country.

Trade and Industry Secretary Ramon Lopez said the safeguard measures are meant to encourage local manufacturers to expand their capacities to reduce the country’s dependence on imports.

He also dismissed the claims of pure importers of a possible cement shortage and a corresponding rise in prices, noting that the domestic capacity of 35 million metric tons a year is enough to meet the growing local demand with various capacity expansion projects going operational this year and in the next three to five years. (PR)