CeMAP president Ernesto M. Ordoñez said he is going to submit today (April 20) to the Department of Trade and Industry a breakdown of its production capacities including the idled plants, mothballed, kiln, wet and dry process.

"We welcome it," Ordoñez said. The DTI, however, has no reaction on the issue.

Ordoñez was reacting to a document, which quoted a data from the Tariff Commission that also quoted data from the industry, showing a discrepancy in the industry players’ reported capacity as against operating capacity.

Based on the document, the industry’s reported capacity in 2004 was at 528 million bags of cement but the operating capacity (actual) was at 345 million cement bags while cement demand was placed at 303 million bags.

This figure means that the gap between demand (303 million bags in 2004) and actual operating capacity (345 million bags) is just very small and that is assuming that the demand and capacity are constant.

If the projected 12 percent annual growth in the construction sector is used based on the Medium Term Philippine Development Plan, the shortfall in cement supply in the country is very imminent next year and not in 2010 as earlier projected by the Board of Investments.

Thus, the document calls for an investigation of the real cement production capacity because based on the reported capacity the industry’s utilization rate was only at 57 percent.

But if the computation is based on the operating capacity, the industry’s utilization rate is already at a high of 88 percent and therefore it is almost running out of capacity.

"A clear distinction should be made between reported capacity and what is operational capacity as this possible overstating may further exacerbate the already untenable price of cement today," the document said.

"This will negatively impact the consumers, the construction sector and the government’s Medium Term Development Plan," the document said.

Ordoñez, on the other hand, said the document was inaccurate and the data used did not come from CeMAP.

In fact, he said, total cement sales (plus import sales) last year reached 11.73 million metric tons, reflecting a 4 percent decrease over 2004. Ordoñez also said that its capacity utilization is only at 62 percent.

The CeMAP documents to be submitted to the DTI are also expected to justify its position against the move of the DTI to grant incentives to new cement projects.

It has been the argument of the industry that it has not yet recovered its huge capital infusion to upgrade its operations because the market has not actually expanded thus the industry’s capacity utilization is limited.

And yet, Ordonez said, the cost of electricity, which accounts for 60 percent of its operating cost, and inflation at 7.2 percent, have all gone up. Current cement prices though are at between P150 to P170 per bag from only P70 per bag in 2002.

Opening up the industry to more players is seen to further worsen its situation.

Ordonez argued that government needs to nurture the industry because of its strategic significance to the economy.

An industry’s strategic significance is determined by that industry’s contribution to the economy, as well as the pivotal role it plays in affecting different major sectors in the country.

This can be measured by indicators such as the number of people it affects directly and indirectly, its multiplier effect because of its anchor or catalytic position and its critical role in achieving agro-industrial development, without which the country’s economy would suffer.

If the industry has no domestic presence and there is no assurance that the products can be imported at a reasonable price in the short and long term, then this industry deserves special attention from the government.

An estimated investments of $ 1 billion have been poured by the three global cement plants to gobble up local cement plants.

Among the big three cement players, Lafarge has the biggest capacity with 7.7 million MT with its seven plants, Holcim’s four cement plants have a combined capacity 7.238 million MT and Cemex with 4.6 million MT.