CHAPTER I INTRODUCTION 1.1 Overview of Cement Production in Philippines
Cement, like other homogeneous products such as sugar and flour, is often cited as a market likely to have a cartel. Historically, the Philippine cement industry thrived under a powerful government-sanctioned cartel that captured Filipino consumers and industry users including the government. Many of the cement firms had direct government participation through guarantees, loans, and equity. The economic slump in the early 1970s resulted in large losses and chronic oversupply prompting cement firms to push for government regulation of the industry. They believed that by government regulation, the industry could prevent cutthroat competition. As the government also had financial interests in the sector, it immediately responded by creating the Philippine Cement Industry Authority (PCIA) as an attached agency of the Department of Trade and Industry under Presidential Decree 94 in 1973. The PCIA was tasked to allocate a llocate supply, control prices pri ces and regulate entry in the industry. In the absence of information, the PCIA had to coordinate closely with the industry association, which is currently known as Philippine Cement Manufacturers Corporation (Philcemcor). The PCIA and the Philcemcor worked closely together in regulating the industry to the point where PCIA delegated the setting of production quotas to Philcemcor. Collusion in the industry took place through the firms’ informal agreement to set production
quotas and to assign geographic markets among themselves (Lamberte et al. 1992). Philcemcor held regular monthly meetings to set production quotas. It also arranged the geographical division of the markets that restricted Luzon plants to sell only in the Luzon area and the Visayas/Mindanao plants
to confine their sales in those locations (SGV Consulting 1992). This practice divided the country into regional markets served by a dominant player, thus, eliminating competition from taking place in the industry. By regulating prices and outputs, prices were no longer the product of competition among rival producers but more of the outcome of negotiations between the government and a small number of producers. In 1987, the PCIA was abolished through Executive Order 133, but the price control function was transferred to the Department of Trade and Industry. The price control was momentarily lifted in February 1989 and reemployed in July 1989. Prices were finally deregulated in November 1991 through DTI Administrative Order 10. Moreover, reforms to end territorial arrangements of cement companies and lift DTI approval for establishing or expanding cement plants were carried out through DTI Administrative Order 5 issued in 1990. The Development Bank of the Philippines (DBP) transferred cement industry financial assets to the Asset Privatization Trust (APT). Most of the firms negotiated the settlement of their debts under the “direct debt buy out” scheme with the APT. APT also bidded out all the cement
companies foreclosed by DBP (OECC 1991). The acquisitions of local cement companies were witnessed by four large foreign firms: Lafarge, Holderbank, Cemex, and Blue Circle. These firms (together with Heidelberger) account for about 60 percent of the annual 100 million metric tons (MT) of the global cement trade. Following the entry of foreign players, consumer groups and industry observers raised concerns on their possible domination of the market and the creation of a cartel. The cement price increases since 1999 baffled many, considering that these price hikes were carried out amid excess supply and weak demand due to the slowdown in construction activity. These price increases immediately following the entry of foreign players prompted industry analysts to believe that a cement cartel was at work.
The cement industry focuses on economies of scale. Due to its capital intensive nature, only a few number of firms control the market in different regions. This limits rivalry. In contrast, cement products are not differentiated, this creates an avenue for intense competition between existing firms (Noche & Elhasia, 2013). The Cement Manufactures Association of the Philippines (CeMaP) projected a consistent growth in demand for cement from 2011-2016. This projected growth is seen as the public sector gains momentum for nationwide infrastructure projects and as the private sector is motivated to augment its own construction spending because of improved investment ratings
Figure 1. Total Sales and Demand Consumption of Cement in ‘000 MT,2003-2012
Figure 1 shows the increasing demand of cement over the period of 2003 to 2012. According to CeMaP (2012), the increasing demand of cement works hand in hand with the industry’s ongoing capacity expansion brought by the country’s economic progress . The accelerating
figure of cement demand (ongoing capacity expansion) and the fierce competition in the local and global market justify the need to assess productivity and TE performance of the Philippine cement industry.
1.2 Description of Cement Manufacturing Process
Figure 1.1 Process Flow for Cement Manufacturing
The major process steps in the production of cement include: 1.2.1. Quarrying
The most common raw materials used for cement production are limestone, chalk and clay. The major component of the raw materials, the limestone or chalk, is usually extracted from a quarry adjacent to or very close to the plant. Limestone provides the required calcium oxide and some of the other oxides, while clay, shale and other materials provide most of the silicon, aluminum and iron oxides required for the manufacture of holcim cement. The limestone is extracted from open-face quarries. The raw materials are selected, crushed, ground, and proportioned so that the resulting mixture has the desired fineness and chemical composition for delivery to the pyro processing systems .It is often necessary to raise the content of silicon oxides or iron oxides by adding quartz sand and iron ore, respectively. The quarried material is reduced in size by processing through a series of
crushers. Normally primary size reduction is accomplished by a jaw or gyratory crusher, and followed by secondary size reduction with a roller or hammer mill. 1.2.2. Crushing: The crusher is responsible for the primary size reduction of the quarried
materials. 1.2.3. Pre-Blending: The crushed materials pass through an on-line analyzer to determine
the pile composition. 1.2.4. Raw Grinding and Blending: A belt conveyor transports the pre-blended piles into individual bins, where a weighing feeder proportions the materials according to the type of clinker to be produced. The materials are then ground into the desired fineness. 1.2.5. Burning and Clinker Cooling: The homogenized raw mix is fed into the pre-heater,
which is a heat exchange equipment composed of a series of cyclones wherein heat transfer between the raw mix feed and the counter current hot gases from the kiln takes place. Calcination partially takes place in the pre-heater and continues in the kiln, where the raw meal is turned into a semi-molten state with cementitious properties. At a kiln temperature of 1350-1400°C, the materials turn into solid nodules known as clinker and are discharged into the clinker cooler, where quenching air brings the clinker temperature down to 100 °C. 1.2.6. Finish Grinding: From the clinker silo, clinker is transferred to the clinker bin. It
passes through the weighing feeder, which regulates its flow in proportion with the additive materials. At this stage, gypsum is added to the clinker and then fed to the finished grinding mills. Either the mixture of clinker and gypsum for Type-1 cement or the mixture of clinker, gypsum and pozzolan material for Type-P cement is pulverized in a closed circuit system in the finish mills to the desired fineness. Cement is now piped to cement silos.
1.3 Raw Material and Kiln Preparation
After primary and secondary size reduction, the raw materials are further reduced in size by grinding. The grinding differs with the pyro processing process used. In dry processing, the materials are ground into a flowable powder in horizontal ball mills or in vertical roller mills. In a ball (or tube) mill, steel-alloy balls (or tubes) are responsible for decreasing the size of the raw material pieces in a rotating cylinder, referred to as a rotary mill. Rollers on a round table fulfill this task of comminution in a roller mill. Utilizing waste heat from the kiln exhaust, clinker cooler hood, or auxiliary heat from a stand-alone air heater before pyro processing may further dry the raw materials. The moisture content in the kiln feed of the dry kiln is typically around 0.5% (0 - 0.7%). When raw materials are very humid, as found in some countries and regions, wet processing can be preferable. In the wet process, raw materials are ground with the addition of water in a ball or tube mill to produce slurry typically containing 36% water (range of 24-48%). Various degrees of wet processing exist, e.g. semi-wet (moisture content of 17-22%) to reduce the fuels consumption in the kiln. 1.4. Waste Generation/Emission (concentrate in air) waste characteristics
The production of cement involves the consumption of large quantities of raw materials, energy, and heat. Cement production also results in the release of a significant amount of gaseous emissions. The manufacturing process is very complex, involving a large number of materials (with varying material properties), pyroprocessing techniques (e.g., wet and dry kiln, preheating, recirculation), and fuel sources (e.g., coal, fuel oil, natural gas, tires, hazardous wastes, petroleum coke). The cement manufacturing industry is under close scrutiny these days because of the large volumes of CO2 emitted. Actually this industrial sector is thought to represent 5 – 7% of the total CO2 anthropogenic emissions. Concern over the impact of anthropogenic carbon emissions on the global climate has increased in recent years due to growth in global warming awareness. In addition
to the generation of CO2 the cement manufacturing process produces millions of tons of the waste product cement kiln dust each year contributing to respiratory and pollution health risks. The cement industry has made significant progress in reducing CO2 emissions through improvements in process and efficiency, but further improvements are limited because CO2 production is inherent to the basic process of calcinating limestone. The main environmental issues associated with cement production are consumption of raw materials and energy use as well as emissions to air. The key polluting substances emitted to air are dust, carbon oxides, nitrogen oxides (NOx) and sulphur dioxide (SO2). Carbon oxides, polychlorinated dibenzo-p-dioxins and dibenzofurans, total organic carbon, metals, hydrogen chloride and hydrogen fluoride are emitted as well. The type and quantity of air pollution depend on different parameters, e.g. inputs (the raw materials and fuels used) and the type of process applied. Air Emissions
In cement and lime manufacturing air emissions are generated by the usage and storage of intermediate and finishing materials, and by the procedure of kiln systems, clinker coolers, and mills. In cement manufacturing several types of kilns are currently being used. Preheater – precalciner (PHP), preheater (PH), long-dry (LD), semidry, semi-wet, and wet process kilns are among them. In terms of environmental performance PHP kilns are generally favored. While shaft kilns, which are generally only economically viable for small plants are still in operation and with the renewal of installations are being phased out. 1.4.1. Nitrogen Oxides:
Nitrogen oxide (NOX) emissions are generated in the high temperature combustion process of the cement kiln
1.4.2. Sulfur Dioxides:
Sulfur dioxide (SO2) emissions in cement manufacturing are primarily associated with the content of volatile or reactive sulfur in the raw materials and in fuels 1.4.3. Greenhouse gases:
Combustion of fuel and de-carbonation of limestone produces greenhouse gas emissions especially CO2 1.4.4. Fuels:
Pulverized coal mainly black coal and lignite are the most commonly used fuel in the cement industry but petroleum coke (pet – coke) is preferred because it is more economical. Both generate higher emissions of greenhouse gases (GHG) than fuel oil and natural gas (~ 65 percent higher emissions than with gas). Main problem with high sulfur contents in the fuel is that it buildup on the rings in the kiln
