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 Governments 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.

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 In million MT 2009 2010 2011 2012 2013 2014 2015 19.80 19.80 21.20 21.20 21.20 21.20 21.20 Demand 14.50 16.20 18.10 20.30 22.80 25.50 28.50 Surplus (Deficit) 5.30 3.60 3.10 0.90 (1.60) (4.30) (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 I II III IV V Estimated Deposit (Million MT) 1,082 21 333 499 688 Total Region VI VII X XI XII Estimated Deposit (Million MT) 80 529 81 56 507 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

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 Brunei Php 233.00

Philippines Php 185.00

Indonesia Php 222.00

India Php 252.00

Japan 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 countrys 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 1. Holcim Philippines, Inc. 2. Lafarge Cement Services Phil. Cos. 3. Cemex Companies Plant Locations La Union, Bulacan, Lugait & Davao Bulacan, Teresa, Batangas & Iligan Teresa and Cebu Production Share 25% 38% 23%

4. Northern Cement Corporation 5. Goodfound Cement Corporation 6. Pacific Cement Philippines, Inc. 7. Taiheiyo Cement Philippines, Inc. 8. Eagle Cement

La Union Camalig, Albay Surigao San Fernando, Cebu San Ildefonso, Bulacan

5% 2% 2% 5%

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 2008 2009 2010 Volume (in MT) 48,523 69,645 236,678 FOB Value (in US$) 3,678,526 5,527,673 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 2008 2009 2010 Volume (in MT) 767,218 310,083 375,215 FOB Value (in US$) 33,378,628 13,150,444 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 countrys 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

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 duty exemption on imported capital equipment, spare parts and accessories exemption on wharfage dues, export tax, duty, impost and fees tax credits (for export producers only) on raw materials and supplies additional deduction for labor expense additional deduction for necessary and major infrastructure works

o o o o o

2. Non-Fiscal Incentives o o o o employment of foreign nationals simplification of customs procedures tax and duty-free importation of consigned equipment for a period of 10 years 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

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