Cathay Pacific Haitong: Strong supply and demand for cement in the Philippines, and the impact on imports is obvious

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the Philippine cement production is about 30 million tons, with a per capita output of less than 300 kg, and there is still potential for improvement. Since 2017, the share of imported cement in demand has continued to increase, and the import volume has reached 7.55 million tons in 2024, accounting for 22%. Impacted by imported cement at low prices, the US dollar price of cement in the Philippines began to decline in 2022 (from the level of 80 US dollars/ton to 60 US dollars/ton). Profits in the Philippine cement industry declined significantly, and the industry lost money starting in 2023.

Cathay Pacific Haitong's main views are as follows:

The Philippines is a populous country with a relatively rapid economic development. The Philippines is a large country with more than 7,000 islands and a population of over 100 million people. In recent years, the macroeconomic development of the Philippines has been relatively stable, and the annual economic growth rate has basically remained around 6%. The inflation rate remained moderate. The Philippine peso performed strongly against the US dollar, with large labor exports and large remittance receipts, represented by Filipino domestic workers.

Cement supply and demand are strong, and import shocks are clearly characteristic. The domestic competition pattern is 4 big and 2 small, and the control power of local foundations has increased.

The Philippine cement production is about 30 million tons, and the per capita output is less than 300 kg, and there is still potential for improvement; since 2017, the share of imported cement in demand has continued to increase, and in 2024, the import volume has reached 7.55 million tons, accounting for 22%.

Philippine cement shows a supply pattern of 4 major (Republic, Holcim, Eagle, CHP) and 2 small (Taiheiyo, Northern), with a total production capacity of 42.765 million tons (mostly grinding). The bank observed that local consortium ABOITIZ and CRH joined forces to acquire Lafarge Philippine assets in 2015. After the local consortium Consunji acquired Cemex Philippine Cement Asset CHP in 2024, the top 6 cement companies currently have 4 Philippine foundation backgrounds, and the local consortium's control over the Philippine cement industry has increased.

Prices and profits will decline significantly after 2022, and cost reductions in protective tariffs and technical reforms are expected to raise profit levels.

Impacted by imported cement at low prices, the US dollar price of cement in the Philippines began to decline in 2022 (from the level of 80 US dollars/ton to 60 US dollars/ton). Profits in the Philippine cement industry declined significantly, and the industry lost money starting in 2023.

The Philippines will restart protective tariffs on imported cement in 2026, and the bank believes that the price is expected to rise; the bank believes that the price of more than 60 US dollars/ton is not low. Even if the price does not increase, companies with technical ability can expect to make considerable profits by reducing technical costs and improving efficiency.

Risk warning: risk of import shock, risk of rising costs.