INDUSTRY PROFILE

CEMENT
(As of 21 May 2009)

I. Coverage/Features

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. This may be attributed to the fact
that compared to portland, pozzolan has a lower compressive strength as specified by the
Philippine Standard (Table 1):

Table1. Compressive Strengths of Cement

PNS STANDARD
Type of Cement Strength (Kg./sq. cm.) Curing Time (Days)
Portland (Type I) 281 28
Pozzolan (Type P) 211 28

II. Current Status

To date, there are currently 15 cement manufacturing plants operating in the country, 9 of which
are located in Luzon, 2 are in Visayas and 4 are in Mindanao. Cement producers in the Philippines
are represented by the Cement Manufacturers Association of the Philippines (CEMAP), Inc.

a. Industry Performance vs. Demand for Cement

Shown in Table 2 is the historical supply/demand for cement for the period 2000 to 2007.

Table2. Historical Demand-Supply Situation

2000 - 2007
(In Million Bags)*

Retail Price of Portland

Imports Exports
Local Apparent Cement in Metro Manila,
(Cement & (Cement & % Inc./Dec.
Year Production Demand ending December
Clinker) Clinker)
(per 40-kg bag) **
2000 299.0 37.6 33.6 303.0 P126
2001 284.5 58.4 46.6 296.3 P127 0.80
2002 334.9 16.1 37.2 313.8 P95 (25)
2003 326.7 2.23 41.4 287.5 P120 26
2004 326.4 0.318 38.1 288.6 P147 23
2005 309.2 2.9 63.4 248.7 P158 7.5
2006 301.0 6.7 55.2 252.5 P170 7.6
2007 326.2 7.6 48.7 285.1 P175 2.9
* 1 bag is equivalent to 40 kilos.
** Source: Construction Industry Authority of the Phils. (CIAP) and Department of Trade and Industry
Price Monitoring Unit (BTRCP-PMU)

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b. Demand Supply Forecast

The demand forecast as shown in Table 3, is projected by the average of 12% growth rate of
construction industry per Medium-Term Philippine Development Plan (MTPDP) 2004 2010.
The supply forecast on the other hand, is based on existing/operating fifteen (15) cement
plants with an estimated annual capacity of around 408 million bags of 40 kg. /bag (16.327
million MT) as of end of 2007.

Table3. Supply Demand Forecast (2008-2015)

(In million bags)

Year Supply Demand** Surplus (Deficit)

2008 408* 319 89
2009 408* 357 51
2010*** 426.2 400 26.2
2011 426.2 448 (21.8)
2012**** 454.4 502 (47.6)
2013 454.4 562 (107.6)
2014 454.4 629 (174.6)
2015 454.4 704 (249.6)
Note:
* Based on Cement Industry Kiln Capacity (Dry Type only since Wet Type kilns are no longer in operation)
** Demand is projected by average of 12% growth rate of construction industry per MTPDP 2004-2010
***By 2009, Eagle Cement Corp. will commence operation thus adding 18.2 million bags of supply in 2010 based on
its registered capacity.
****South Western Corp. will start operation in 2011 and will give additional 28.2 million bags of supply in 2012.

III. Competitive Advantage

a. Raw Materials

The Philippines has an abundant supply of cement raw materials such as limestone,
shale/sandstone, siliceous sand, lime, diorite, calcite, and probably gypsum. The availability of
limestone for cement production, per record of the Mines and Geosciences Bureau (MGB) is
estimated in l992 at around 4 billion metric tons (Table 4). The expected life is around 260 years.

Table4. Limestone Deposits in the Philippines

(For the Cement Industry)

Estimated Deposit Estimated Deposit

Region Region
(Million MT) (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

b. Preferred Location

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.

c. Cement Export

The export of cement and clinker for the period 1986-2007 is shown in Table 5.

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 Table5. Cement and Clinker Export
YEAR (000 bags) (000 MT) Clinker (000 MT)
1986 2,618 104.7
1987 964 38.6
1988-1992 - - -
1993 507 20.3 15.6
1994 107 4.3 -
1995-1997 - - -
1998 2,929 117 -
1999 17,275 691 311
2000 33,575 1,343
2001 46,600 1,864 -
2002 25,866 1,035 264
2003 24,511 980 675
2004 20,489 820 703.3
2005 26,350 1,054 1,482.4
2006 18,114 725 1,482
2007 8,914 357 1,593

d. Cement Production and Sales

The total production capacity of the cement industry, as shown below, is pegged at 22,173,000 at
present. However, only 59.60% of said capacity is being utilized for market demand. The data also
shows that domestic production of cement products has variably increased annually, reaching its
peak in 1997. Domestic sales have almost been consistent from 2002 to 2008, ranging from 11M
to 13M metric tons per year (MTPY). The export performance, on the other hand, experienced an
all-time low from 1988 to 1998, pitching at zero value. Over time, the total demand for cement
products markedly increased, while import performance had its peak in 2000 and 2001, hitting 2M
MTPY mark.
Table6. Philippine Cement Production and Sales (in metric tons)
SALES
TOTAL TOTAL %
YEAR PRODUCTION Domestic Exports SALES IMPORTS DEMAND Change
1986 3,282,594 3,127,895 104,700 3,232,595 0 3,127,895
1987 3,987,497 3,969,058 38,542 4,007,600 165,000 4,134,058 32.20%
1988 4,090,959 4,212,182 0 4,212,182 0 4,212,182 1.90%
1989 5,873,389 5,884,228 0 5,884,228 454,064 6,338,292 50.50%
1990 6,208,174 6,143,705 0 6,143,705 923,913 7,067,618 11.50%
1991 6,500,909 6,518,276 0 6,518,276 0 6,518,276 -7.80%
1992 6,666,946 6,604,364 0 6,604,364 681,627 7,285,991 11.80%
1993 7,961,406 8,003,256 0 8,003,256 0 8,003,256 9.80%
1994 9,570,798 9,596,449 0 9,596,449 9,669 9,606,118 20.00%
1995 10,553,725 10,609,088 0 10,609,088 480,417 11,089,505 15.40%
1996 12,429,101 12,273,251 0 12,273,251 679,612 12,952,863 16.80%
1997 14,680,757 14,888,398 0 14,888,398 351,779 15,240,177 17.70%
1998 12,887,858 12,714,316 0 12,714,316 180,171 12,894,487 -15.40%
1999 12,557,524 11,869,364 639,066 12,508,430 474,430 12,343,794 -4.30%
2000 11,959,015 10,478,270 1,342,928 11,821,198 1,579,027 12,057,297 -2.30%
2001 11,378,329 9,481,246 1,863,986 11,345,232 2,233,180 11,714,426 -2.80%
2002 13,396,618 12,263,386 1,034,641 13,298,027 337,600 12,600,986 7.60%
2003 13,066,831 12,109,992 980,433 13,090,425 9,700 12,119,692 -3.80%
2004 13,056,920 12,171,208 819,574 12,990,782 12,705 12,183,913 0.50%
2005 12,367,614 11,468,626 1,053,984 12,522,610 116,302 11,584,928 -4.90%
2006 12,070,822 11,470,291 724,551 12,194,842 243,695 11,713,986 1.10%
2007 13,047,583 12,709,330 356,571 13,065,901 302,003 13,011,333 11.10%
2008 13,369,261 13,103,715 1,570,312 14,674,027 113,301 13,217,016 1.60%
Source: Cement Manufacturers Association of the Philippines (CEMAP), Inc.

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e. Government Support

Under Part I, II. Mandatory Inclusions, R.A. 7942 (Exploration, Mining, Quarrying, and
Processing of Minerals) of the 2007 Investments Priorities Plan (IPP), cement manufacturing
is included, provided it is integrated with quarrying, which incentives shall be limited to those
provided under E.O. 226, otherwise known as the Omnibus Investments Code of 1987.

However, in the 2008 Investments Priorities Plan, cement manufacturing was excluded in the
mandatory inclusions, but under the preferred activities for ARMM, the cement manufacturing
industry is listed, provided that the plant is located in the ARMM region and can produce at least
1.0 million MTPY capacity (clinker based). Even if the cement industry is excluded in the
mandatory inclusions, under Part III. Specific Guidelines, I. Preferred Activities, cement-related
projects and/or activities can still be prioritized if the Strategic Activities guidelines are followed
and satisfied.

Since the 1998 IPP, cement manufacturing is listed under the priority areas of activities in the
Autonomous Region of Muslim Mindanao (ARMM). The ARMM List covers priority activities, which
have been independently identified by the Regional Board of Investments of the ARMM (RBOI-
ARMM) in accordance with E.O. 458. The RBOI-ARMM can grant registration and administer
incentives to activities in the IPP, provided these are located in ARMM and subject to General and
Specific Guidelines.

BOI/SPD/OID