MikeLigalig.com

By Rey Gamboa
The Philippine Star

In early 2001, the local cement industry led by the multinational companies sought government intervention in what it pleaded was necessary protection for its survival. That year, the prices of domestic cement were plummeting below P100 per bag, widely believed to have been caused by the entry of cement from nearby Asian countries.

These cement manufacturers, composed of Cemex, Lafarge and Holcim and considered the biggest three players in the global industry, immediately filed a case before the Tariff Commission against a Taiwanese and Japanese cement company on dumping charges.

The commission eventually handed down its decision that there was no sufficient evidence to support the Big Three’s claims, and therefore was not in favor of instituting anti-dumping measures including the imposition of duties on cement importations.

The cement companies next brought their case, complete with busloads of “affected” employees and their families plus media fanfare, before the Department of Trade and Industry. Here they found favor. The DTI agreed to the re-imposition of relatively hefty duties on every bag of imported cement.

In exchange, the three multinational cement firms solemnly swore to keep prices of cement between P125 to P135 per bag, which they kept during the whole of 2002. In 2003 until today, as many cynics had predicted, prices had started to creep up.

High prices

We are today in an era where cement is at P175 per bag, roughly three times more than its retail price 10 years ago, and almost double compared with what consumers paid for before duties had been re-imposed on cement importations.

This is surprising since construction growth has not exactly been moving at a feverish rate – even taking into account the “boom” that accompanies an election year. And, as our government brandishes, inflation has been consistently tame over the last couple of years.

There are instead rumors of the return of a cartel whose individual members have been sanctioned or indicted in other countries for “price fixing.” Many are raising the question as to whether “price fixing” is happening now in the country.

If we scrutinize prices of cement during the time when the industry was mostly owned by Filipino companies and after, when the Big Three foreign companies bought out the local boys, two distinct patterns seem to emerge.

Before, when the industry was dominated by Phinma and several other smaller family-owned firms, cement pricing was largely dictated by the season – during summer, when people would commence building projects, prices increased; and when the rains came, prices dropped – but always on fairly steady level.

With the multinational cement companies, prices were more or less stable throughout the year, but always on the uptrend year after year. The only period that this was challenged was when imports had been coming in without duties, thereby freely challenging the price structure maintained by the Big Three.

Of course, it could be argued that cement prices are largely a function of world supply and demand. For example, in the aftermath of the Asian financial crisis in 1997-1998, the selling price of cement dropped to one of its lowest levels.

Yet, during the years after the Big Three took over the industry, cement prices seemed unaffected by production oversupply or the absence of construction projects. Certainly, to any keen observer, this would arouse suspicions of “price fixing,” something that the existing industry’s member companies have already been criticized for in other countries.

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