Ceramic tile makers brace for bleak 2nd half

MANILA, Philippines - Reeling from competition brought about by entry of cheap imports, local ceramic tile makers said they do not expect any growth in sales for the rest of the year. Safeguard duties against ceramic imports, which the government had recently implemented, don’t seem to deter entry of cheap imports from China, Ceramic Tile Manufacturers Association, or CTMA, President Edison Co Seteng said in a recent phone interview. Industry estimates showed that imported tiles, which are up to 20% cheaper than locally made products, have cornered 50% of domestic consumption from only 7% nearly about 10 years ago. In 1999, local tile makers accounted for 75% of the market. Rising threat "All we want is fair competition," Mr. Co Seteng said, adding cheap imports continue to eat up the local industry’s market share. Citing industry data, he said ceramic tile imports from January to June this year reached 7.3 million square meters, up 65% from the 4.4 million sq.m. recorded in the first half last year and already 59.5% of total imports of 12.27 million sq.m. last year. Last year’s local production was 19.2 million sq.m. "Despite the growth in consumption, domestic production lagged behind as imports captured the growth in demand," local players said. Mariwasa Siam Ceramics, Inc., one of the last local tile manufacturers standing, said it had increased prices by 7% last month, citing continued increase in energy costs, which comprise 50% of its total cost of production. Demand slowdown Mariwasa President Surasak Kraiwitchaicharoen said that, apart rising cheap imports and fuel costs, the company is also concerned about an expected slowdown in housing and property sector by the second half. The country’s top ceramic tile makers, Mariwasa and Lepanto Ceramics, Inc., saw their combined market share shrink to 59% in 2006 from 76% in 2004 as imports surged to corner a 41% market share, up from only 24% in 2004. Mr. Kraiwitchaicharoen said imports continue to flood the market despite a new four-year safeguard duty on imported ceramic floor and wall tiles implemented early this year. Based on Tariff Commission data, the safeguard duty is P2 per kilogram (kg) on the first year. It will gradually decline until 2011. The safeguard measure began at P5.40/kg in 2002 and was reduced to P2.15/kg last year. Republic Act 8800, or the Safeguard Measures Act of 2000, provides for safeguard measures to aid industries suffering as a result of increased imports. The law also says the effective period of any safeguard measure, including extensions, may not exceed 10 years. — Bernardette S. Sto. Domingo, BusinessWorld