Emerging Cement Industry Cartel

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Cement is a major resource for the country’s construction industry that has been ement is a major resource for the country’s construction industry that has been  the subject of numerous consumer-related issues for over a decade now. Ear lier, construction industry stakeholders and consumer groups questioned cement manufacturers for their onerous pricing scheme when 97 percent of the components of cement are sourced domestically. The uproar of the consumers prevented what could have been the grand design of multinational and local cement manufacturers to unreasonably increase cement prices in a rip-off that was grossly disadvantageous to consumers, and to the government’s Build, Build, Build projects. This was prevented by government’s imposition of price controls on cement and prevented what could have been an uncontrollable increase in the prices of cement.

Early last month, the Filipino people was again caught by surprise when LafargeHolcim, Limited, Europe’s largest cement manufacturer, decided to sell its Philippine subsidiary, Holcim Philippines, Incorporated (HPI), to First Stronghold Cement Industries, Inc., a wholly owned subsidiary of San Miguel Corporation (SMC), to the tune of $2.15 billion in what is described the largest merger and acquisition deal in the country’s cement industry.

LafargeHolcim stated it was divesting its entire 85.73 percent shareholding in HPI, the largest cement maker in the Philippines which operates 4 integrated cement plants and one grinding plant, to complete its exit from what it says is a hyper-competitive business in Southeast Asia, while SMC sees this as expanding its foothold in the country’s cement industry.

SMC reportedly won the auction of HPI over Anhui Conch, the largest cement manufacturer in mainland China, in the final round of the said auction of the country’s largest cement manufacturer.

SMC reportedly owns at least 70 percent of the Pangasinan-based Northern Cement and it has a huge share in the Bulacan-based Eagle Cement. With the current set-up of ownership of the latter, the proposed merger of the SMC and HPI will definitely result to a cartel which will be grossly disadvantageous to the Filipino people based on the assessment of experts from the construction industry.

Both companies reported the deal to the Philippine Stock Exchange in separate disclosures last week but the definitive agreement was not yet submitted to the Philippine Competition (PCC), the government agency tasked to ensure that it does not violate existing competition laws, rules and regulations.

We believe the construction industry stakeholders and consumers groups in Northern Luzon were correct in its recent position that allowing SMC to buyout HPI might result to a cartel in the country’s cement industry, a situation banned by law.  Allowing SMC to monopolize the country’s cement industry will allow it to dictate prices for lack of a healthy supply competition. Aside from people suffering increased cement prices for their homes, people will be at the receiving end if important government projects cannot be built due to insufficient budgets earmarked for the building of roads and other pubic works projects because of increased cement prices.

While the SMC-HPI deal is still pending with the Philippine Competition Commission, the public must urgently call on the competition watchdog to disapprove the agreement because it will be grossly detrimental to the interest of the greater majority of the populace.

Being a Filipino corporation does not guarantee it will uphold the interest of the greater majority of Filipinos. It will still work for the greater interest of the corporation’s shareholders whose primary objective is how their money will earn profit.

Let us bring to the attention of President Rodrigo R. Duterte and the PCC that we are not in favour of the SMC-HPI deal because it will possibly create a monopoly in the country’s cement industry that is detrimental to the country’s economic gains. The expected increase in the cement prices will not be beneficial to the desired growth and will surely stall the country’s projected growth as the implementation of major projects intended to propel economic activities in the countryside will be affected.

Let us also fight to compel the government to impose the needed price control on cement to prevent cement manufacturers from unreasonably increasing their prices to allow our people to benefit from their hard earned money and for government to pursue the implementation of desired public works projects beneficial to the people living in the countryside.

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