The Philippine cement industry is facing a decline in demand due to the end of infrastructure boom, low government spending and increased input costs.
Holcim Philippines Inc., the leading Philippine cement manufacturer, said that the cement industry of the Philippines has been strongly struck by the current financial meltdown as private construction has dipped and government spending on infrastructure declined, as per the news published by tradingmarket.
Holcim closed down one of its kilns in July 2008 as the demand for its products began declining, which consequently resulted in a fall in manufacturing of nearly 1 Million Ton (or 15%) of the total capability of company. The company’s executive told that the demand of cement elevated by 5% to 6% at the starting of the year but government has been expending less than promised on infrastructure.
The prime reason that can be held responsible for the slowdown of the Philippine cement industry is the possible end of infrastructure boom, in particular in the local markets. Also, currently, builders are being extremely cautious in starting new projects, leading to further decline in cement demand.
Further, the industry has been experiencing a flat growth rate since past few months due to the worldwide economic crunch. So people have become more watchful while making investments in the infrastructure.
In addition to the lowering demand, the cement companies are also being struck by the higher input costs, such as gypsum, coal, fuel and logistics. They snatch away a major portion of the profits, thereby making situation grimmer. Consequently, the cement companies are finding it tough to sustain in market.
However, the manufacturers are raising the cost of products, but all in vain as price hike is just not sufficient to combat the higher input costs. Meanwhile, the government is considering bringing the tariffs on the imported cement down. Moreover, this economic chaos is likely to continue in 2009, if the industry would not recover soon.
According to a Research Analyst at RNCOS, “The cement industry of Philippines is going through a difficult phase due to declining demand. The most apt solution to this complicated problem is that with efforts of the country’s cement industry, government should invest in energy and infrastructure.”
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