With a number of previously stalled infrastructure projects kick-started under the administration of President Rodrigo Duterte, the demand for construction materials has reached new heights. Driven by the Build, Build, Build (BBB) programme, the wholesale price of construction materials reached a five-year high during the last quarter of 2017. According to data from the Philippine Statistics Authority (PSA), the construction materials wholesale price index (CMWPI) in the National Capital Region rose by 4.7% year-on-year (y-o-y) in November 2017, the highest annual growth rate since March 2012 when the index grew by 5.2%. As a variant of the general wholesale price index, the CMWPI measures changes in the average wholesale price of 108 construction materials used in various government projects. The five-year high in November 2017 was quickly surpassed in January 2018, when y-o-y growth reached 5.7%. In terms of contribution, concrete products ranked highest on the index as of November 2017 (43.87%), followed by reinforcing steel (12.13%), and fuels and lubricants (9.09%) UPWARD TREND: Despite the rising cost of materials, high levels of demand are driving the construction pipeline forward. In the first quarter of 2018, 44 of 75 planned priority infrastructure projects under the BBB programme were already under construction, with another 15 big-ticket projects in the pre-construction stage. As of January 2018 the primary contributors to CMWPI growth were the cost of fuels, which increased by 19.8%; structural steel, up 7.3%; concrete products (5.2%); hardware (4.1%); and sand and gravel (2.3%). At the same time, plywood, GI sheet, tile works, electrical works, and plumbing fixtures and accessories all had an annual increase within the 1-2% range.
While prices have risen for the majority of raw materials, some have experienced slower inflation in comparison to the previous year, with reinforcing steel increasing by 3%; doors, jambs and steel casement up 2.9%; and painting works up 0.8%. The cement index, meanwhile, decreased by 3.4%. According to the PSA, the indices for asphalt, machinery and equipment rental registered zero growth in January 2018.
President Duterte’s endeavours to address infrastructure gaps across the nation have revitalised the domestic construction materials industry, and a number of local and international firms are making considerable investments. According to local press reports in October 2017, SteelAsia Manufacturing, the owner of the largest steel billet and rebar fabrication plant in the country, partnered with two investors from Italy and Japan to invest P52bn ($1bn) in three new mini steel mills. Adding to the six existing plants the firm operates across the archipelago, SteelAsia’s new mills will have a capacity of 2m tonnes annually.
Portal Steels, meanwhile, has spent P322.7m ($6.4m) to scale up annual steel billet and rebar production to 48,000 tonnes and 22,800 tonnes, respectively. Commercial operations were scheduled to begin in December 2017, but updates were not available at the time of press. Approved by the Board of Investments (BOI) in the third quarter of 2017, half of the billet production will be used for commercial sales in support of other rolling mill operations inside and outside the country, while the other half will be used internally for integrated rolling mill operations. The rebar production will cater to local demand. According to the BOI, raw materials such as scrap metals will be sourced locally.
Despite cement prices being at a four-year low, ranging from P170 ($3.36) to P180 ($3.56) per bag, the cement industry grew by around 6% in the first half of 2017. Even with heightened competition, Eagle Cement, which operates the largest cement manufacturing plant in the Philippines, saw its net income increase by 13% and net sales rise by 12% y-o-y in the first six months of 2017, on the back of higher sales of both bagged and bulk cement. Eagle Cement is expanding its capacity with a third production line in Bulacan, expected in 2018, which will take capacity to 7.1m tonnes per year.
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