Weak infra weighs on PH cement demand

Philippine cement demand is expected to be flat this year compared with last year, with industry leaders aiming to stabilize consumption at about 34 million tons. Demand through September remained 2% to 3% below the prior year’s level, though a stronger fourth quarter is anticipated to help close the gap. The outlook for the remainder of the year rests largely on the pace of government infrastructure spending, while private construction is projected to stay broadly steady.

Infrastructure spending has weakened, with disbursements dropping 16.9% in August to P70.5 billion as Public Works department projects slowed following a corruption scandal involving flood control programs in 2025. The industry is pinning hopes on the resumption of legitimate public works projects, supported by tighter controls and monitoring, to provide a lift to cement demand in the coming months.

The domestic cement industry operates with 52 million tons of installed production capacity, highlighting a sizable gap between potential output and current demand. Even with demand seen around 34 million tons this year, producers are running well below capacity and continue to adjust production to align with actual market needs. This excess capacity remains a central challenge for manufacturers seeking to maintain profitability.

Safeguard duties on imported cement have contributed to a significant decline in imports, which, Dizon estimated, had dropped by about 30% this year and could reach an annualized 4 million tons.

Producers are contending with elevated production costs, driven largely by energy, which accounts for about 60% to 70% of manufacturers’ cash expenses. A weaker peso has intensified these pressures by making imported fuel and other inputs more expensive, squeezing margins even as demand remains subdued. These cost headwinds add to the strain of operating in a capacity-heavy industry with limited volume growth in the short term.

In response, cement manufacturers are investing in alternative fuels, solar power, and waste heat recovery systems to cut energy consumption and improve efficiency. These initiatives are aimed at lowering operating costs and enhancing resilience against volatile fuel prices and currency movements. Producers are also seeking stronger government support for locally manufactured cement, citing its importance for jobs, domestic investment, and supply chains.

Industry sentiment suggests that market conditions in the fourth quarter should be better than last year, offering some support to full-year volumes. The outlook for 2027 is more constructive, with expectations that pre-election spending will typically lift government infrastructure outlays and, in turn, cement demand. Construction projects often accelerate ahead of a 45-day spending ban imposed in the run-up to elections, shaping the timing of activity.

Cement producers are also monitoring private-sector indicators, with low building permit numbers seen as a reflection of cautious private construction sentiment. Despite these challenges, there are ongoing expansion projects in the industry, although the gestation period for new plants is around four years and additions to capacity may not be immediately visible in operating results. Overall, the near-term picture is one of flat demand constrained by weak infrastructure spending, with potential improvement linked to policy-driven public works and election-related investments.