Cement Production

Introduction

The cement sector covers the manufacture of clinker, portland cement, pozzolan cement and other types of

cement. Portland cement is a mixture of around 96% clinker and 4% gypsum, while pozzolan cement is a

mixture of around 77% clinker, 3% gypsum and 20% pozzolan.

The demand for Portland is about 73% while pozzolan is around 27%. Other types of cement, e.g.,

hydraulic cement are produced per specification of customer. Pozzolan, although cheaper than Portland and

has been in the market since the early eighties, has not gained significant popularity to be considered as a

substitute product for Portland.

Market Opportunity

Increase in consumption

increased of 19.04% on cement consumption from the period 2001 to 2009

increased cement production from 11,378,329 MT in 2001 to 14,865,000 MT in 2009

increased in total sales from 11,345,232 MT in 2001 to 14,468,000 MT in 2009

10.5% growth in the construction sector and its 1.6% contribution to GDP in 2010

Government PPP Program/ Priority Infrastructure Projects (2011 - 2015)

Construction of two (2) new airports in Southern Palawan and Bohol with international standards

involving a total runway of 75m x 4,300m and other airport facilities such as terminal buildings for

passenger and cargo, apron, taxiway, etc. New terminal buildings and control towers will also be

constructed for the expansion of Kalibo and Legazpi domestic airports

Construction of twenty eight (28) new power plants (RE and fossil-fuel-fired) all over the country.

New dams for new hydro power generation projects in Western Visayas and Northern Mindanao

will be built, and new wind farms will be constructed for the six (6) wind power projects mostly in

Northern Luzon

Construction of eight (8) new roads, highways and expressways in Metro Manila, Southern Tagalog

and Central Luzon with total length of about 211.80 kilometers

US $ 500 –M JICA Loan for Road Projects

The loan will fund the National Government’s Road Upgrading and Preservation Projects (RUPP) to

be undertaken by the Department of Public Works and Highways (DPWH).

Involves civil works for pavement improvements of 1,400 kilometers of arterial national highways

and repairs of national roads throughout the Philippines.

Real Estate Development Projects

Housing

- cement is widely used in the construction of mass housing projects such as the medium and

high-rise condominiums in Metro Manila and subdivisions outside the metropolis.

- government projection for total housing needs until 2016 is 5.8 million units. Demand is not

only for construction of new housing units but also on expansion, upgrading or repair of

dwelling units.

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Commercial/Office Buildings

- planned commercial and office building projects expected within the next 5 to 10 years

- country in need of more commercial spaces due to rise in number of BPO companies setting-up

shop in the Philippines

Supply and Demand Forecast

demand forecast is projected by an average of 12% growth rate of construction industry based on the

actual demand (consumption) of 14.5 million MT or 362 million bags of cement by the end of 2009

the supply forecast is based on the total kiln capacity of 19.8 million MT or 495 million bags as of

2009

supply-demand forecast (2009-2015), as follows;

Supply Demand Surplus (Deficit)

In million MT

2009 19.80 14.50 5.30

2010 19.80 16.20 3.60

2011 21.20 18.10 3.10

2012 21.20 20.30 0.90

2013 21.20 22.80 (1.60)

2014 21.20 25.50 (4.30)

2015 21.20 28.50 (7.30)

Philippine Advantage

Natural Resources

Philippines has an abundant supply of cement raw materials such as limestone, shale/sandstone,

siliceous sand, lime, diorite, calcite and gypsum

the availability of limestone for cement production is estimated by Mines and Geosciences Bureau

(MGB) at around 4 billion metric tons

the expected life of limestone for cement production is around 260 years

limestone deposits in the Philippines for cement industry, as follows;

Region Estimated Deposit

(Million MT)

Region Estimated Deposit

(Million MT)

I 1,082 VI 80

II 21 VII 529

III 333 X 81

IV 499 XI 56

V 688 XII 507

Total 3,876

Technology that supports the industry

installation of electrostatic precipitators (EP) for pollution control

co-processing of alternative fuels which provide a solution in terms of reducing fossil fuel dependency

as well as a contribution towards the lowering of GHG emissions

the use of blended cement for durability (increase strength of cement), performance in severe

ambiance, sustainable construction and economics. Blended cement is a mixture of Portland cement

clinker, gypsum and pozzolan and since the production of blended cement requires less clinker (less

limestone or CACO3), it emits lesser CO2 therefore, more environmental friendly

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Human resources

Availability

- graduates of around 500,000 per year

- 50,940 graduates of various Engineering courses with a projection of 51,525 in 2011

- around 2 million skilled workers

Quality

- competitive labor force in terms of technical skills

- world-class English language proficiency with capability for some Asian languages

- easily trainable / fast learning curve

- long tradition of excellence in the professions

- strong work ethics and customer orientation

Price Competitiveness

Philippine cement price is lower than in four Asian countries, as shown below;

Prices (in Peso)

per bag of 40 Kgs.

Country

Philippines Indonesia Brunei India Japan

Php 185.00 Php 222.00 Php 233.00 Php 252.00 Php 411.00

Ideal locations

the sites of existing and proposed cement plants are regions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12

the project must locate in an area where there is available power and accessibility to the source of

raw materials and port facility

the abundance of raw materials, availability of skilled manpower and the existence of a growing

domestic market make the Philippines a suitable site to base a cement manufacturing operation

Infrastructure support

on power supply, the country’s installed capacity is currently at 16,359 MW (total for Luzon,

Visayas and Mindanao as of 2010) and will be doubled by 2030. Additional capacity of

approximately 2,000MW and 3,500MW are expected by 2015 and 2020, respectively.

nationwide road network projects linking the ports to production areas, markets and logistics

terminals

Industry Status

Industry players

there are 17 integrated plants operating in the country, 10 of which are located in Luzon, 3 are in

Visayas and 4 in Mindanao

the Cement Manufacturers Association of the Philippines, Inc. (CEMAP) represents the cement

producers in the Philippines

list of existing cement manufacturers in the country ;

Name of Firm Plant Locations Production

Share

1. Holcim Philippines, Inc. La Union, Bulacan, Lugait & Davao 25%

2. Lafarge Cement Services Phil. Cos. Bulacan, Teresa, Batangas & Iligan 38%

3. Cemex Companies Teresa and Cebu 23%

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4. Northern Cement Corporation La Union 5%

5. Goodfound Cement Corporation Camalig, Albay 2%

6. Pacific Cement Philippines, Inc. Surigao 2%

7. Taiheiyo Cement Philippines, Inc. San Fernando, Cebu 5%

8. Eagle Cement San Ildefonso, Bulacan

Volume of imports

the volume and value of imported clinker and cement products in 2010 increased by 240% from

2009

cement clinker comprises of 64% of the total value of importation followed by portland cement with

16%, the remaining 20% includes white cement, coloured cement, aluminous cement, other

hydraulic cement and clinker used in the manufacture of white cement

past importations of cement clinker and various types of cement:

Year Volume (in MT) FOB Value (in US$)

2008 48,523 3,678,526

2009 69,645 5,527,673

2010 236,678 17,920,866

Source: National Statistics Office (NSO)

Volume of exports

in 2010, cement clinker comprises 45% of the total value of clinker and cement product export of

the country

past exports of cement clinker and various types of cement:

Year Volume (in MT) FOB Value (in US$)

2008 767,218 33,378,628

2009 310,083 13,150,444

2010 375,215 13,359,092 Source: National Statistics Office (NSO)

Government Support and Incentives

Board of Investments

The manufacture of cement is listed in the Investments Priorities Plan (IPP). This covers the

manufacture of cement whether or not integrated with quarrying. New finishing mills may be

considered for registration.

In the 2011 IPP, the manufacture of cement may be registered under Strategic Projects since it

significantly contributes to the country’s economic development.

Policies / Law on Mining / Quarrying of Non-Metallic Minerals

Republic Act No. 7942 otherwise known as “Philippine Mining Act of 1995” institutes a new

system of mineral resources exploration, development, utilization and conservation.

All mineral resources in public and private lands within the territory and exclusive economic zone

of the Republic of the Philippines are owned by the State. For large-scale quarry operations

involving cement raw materials, a qualified person and the government may enter into a mineral

agreement.

Incentives

Under Book I of the Omnibus Investments Code, BOI-registered enterprises are given a number of

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incentives in the form of tax exemptions and concessions. These are:

1. Fiscal Incentives

o Income Tax Holiday (ITH)

- 6 years-new projects with pioneer status

- 6 years-new or expansion projects in less developed areas/ 30 poorest province

- 4 years-new projects with non-pioneer status

- 3 years-expansion/ modernization projects

o duty exemption on imported capital equipment, spare parts and accessories

o exemption on wharfage dues, export tax, duty, impost and fees

o tax credits (for export producers only) on raw materials and supplies

o additional deduction for labor expense

o additional deduction for necessary and major infrastructure works

2. Non-Fiscal Incentives

o employment of foreign nationals

o simplification of customs procedures

o tax and duty-free importation of consigned equipment for a period of 10 years

o privilege to operate bonded manufacturing warehouse

Cost of Doing Business

Salaries and Wages

Monthly Salary Range

Engineers – US$ 833 to US$ 854

Skilled workers & Admin Staff – US$ 438 to US$ 625

Other workers – US$ 438 to US$ 458

Taxes

30% corporate tax

importations of capital equipment for the cement plant may be exempted from custom duties but

are subject to twelve percent (12%) value added tax (VAT)

Administrative Fees and Charges

Based on DAO 2005-08

Filing/Renewal Fee of Mining Permits (Based on DAO 2005-08)

a. Application for EP and MA – P 60.00/ha

b. Application for FTAA - P 60.00/ha

Clearance Fee – P 5,000.00/application

Registration Fee

a. For EP – P 5,000.00/permit

b. For MA – P20,000.00/contract

c. For FTAA – P50,000.00/contract

Occupation Fee (for EP, MA, FTAA) For mineral reservation areas - P100.00/ha.

Evaluation of Feasibility Study Report/ Environmental Protection and Enhancement Program

(EPEP) – P 20,000.00/study report/EPEP

Application for Certificate of Environmental Management and Community Relations Record –

P 5,000.00/application

Filing for Application of Mineral Processing Permit

a. Projects with investments above P 500 million – P 50,000.00/application

b. Projects with investments of P 250 million to P 500 million – P20,000.00/application

c. Projects with investments below P 250 million – P 10,000.00/application

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Application of Environmental Clearance Certificate – EMB Processing Fee - P 6,000.00

Contacts

1.) Board of Investments

Industry and Investment Building

385 Sen. Gil J. Puyat Avenue, Makati City

Trunkline: (632) 897-6682, 890-9308 / Webpage: www.boi.gov.ph

2.) Mines and Geosciences Bureau (MGB)

MGB Compound, North Avenue, Diliman, Quezon City

Tel. No.(632) 928-8642 or (632) 920-9120 / Webpage: www.webmaster@mgb.gov.ph

3.) Cement Manufacturers Association of the Philippines (CEMAP)

01 Corporal Cruz St. corner E. Rodriguez, Jr. Avenue, Bagong Ilog, Pasig City

Tel. No.(632)671-7585 to 86 / Webpage: www.cmentinfo@cemap.org.ph