Vol. XXII, No. 124 [ BusinessWorld Online ]
Monday, January 26, 2009 | MANILA, PHILIPPINES
BY JESSICA ANNE D. HERMOSA, Reporter
LOCAL CEMENT manufacturer Holcim Philippines, Inc. may temporarily shut down its kilns in response to an expected weakening of sales, officials last week said.
The firm, which claims to corner roughly a third of the market, is considering halting production for as much as six weeks at a time to cut costs, Holcim Philippines Chief Operating Officer Ian S. Thackwray said.
"I am expecting to have shorter production ... and close kilns for six weeks. There is a chance that we will periodically [shut kilns down]. We are preparing for it," Mr. Thackwray told reporters at the sidelines of a company event last Friday.
A double-digit drop in cement demand will trigger a production halt, Eduardo A. Sahagun, the firm’s head of sales, marketing and distribution told BusinessWorld . He declined to be more specific.
A manufacturing line in Misamis Oriental which ceased operations in 2008, meanwhile, will likely stay closed this year, Mr. Thackwray added.
Holcim Philippines is the country’s leading cement maker in terms of capacity as its four plants are able to produce 34% or 7.238 million tons of the industry’s 21.04 million-ton total, 2007 data from the Cement Manufacturers Association of the Philippines (CeMAP) show.
Workers will be compensated even as production is halted, Mr. Thackwray said.
"It will not result in retrenchment," he said, adding that the kilns can be made to quickly resume operations if needed.
Some 1,400 employees work at Holcim Philippines according to its website.
Holcim Philippines had imposed temporary shutdowns during the 1997 Asian financial crisis, Mr. Sahagun said, with each halt stretching on for up to two months.
"It will depend on how things will be, if we will be deluged by imports and if the second round of the crisis is much more than what we expected," he said.
The economic downturn will cause construction by the private sector to weaken, Mr. Thackwray said.
"Most private construction have been completed while new projects are slowing. Private construction will undoubtedly decline.
"And it still remains to be seen whether the government has the ability to invest [in infrastructure]," he said.
CeMAP President Ernesto M. Ordoñez concurred in a telephone interview yesterday, saying that cement sales are likely to dip as private construction is put on hold amid the economic downturn.
Government infrastructure projects this year may boost demand, but "there is a difference between money allocated and if the money is spent", he said.
"Cement has a shelf life. You are better off not producing if you cannot sell," Mr. Ordoñez explained.
The industry is also concerned that imported cement entering the country at 0% tariff will eat into the demand of local companies, he said.
The 3% tariff slapped on cement from the Association of Southeast Asian Nations (ASEAN) and the 5% tariff on cement imported elsewhere were scrapped in November last year under Executive Order 766 to "ensure the stability of prices and adequacy of the supply of cement for government’s infrastructure programs including low-cost/mass housing projects."
Philippine Cement Workers Council National Coordinator Felix B. Deyta similarly opposed the tariff cut in a separate telephone interview yesterday.
"We fear that, with the tariff elimination, imported cement will flood the market. It will hurt firms’ employment," Mr. Deyta said in Filipino.
The industry employs some 120,000 direct and indirect workers, CeMAP data show.
Mr. Deyta, however, said he was confident firms will respect workers’ rights in case production halts become common in the industry.
Meanwhile, Holcim Philippines said it won’t be increasing cement prices.
"I would expect there would be no upward pressure on prices," Mr. Thackwray said, noting that oil and coal prices have been declining. "I don’t intend to increase prices for now."