Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2

2010

CALABARZON REGION CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010 By Engr. Randolph L. Discipulo, EM, MBA Email: [email protected] Mines and Geosciences Bureau Region IV-A CALABARZON

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

TABLE OF CONTENTS Page Introduction Macroeconomic Indicators Influencing the Aggregates Market The Rock Aggregates Industry Historical Background Nature of Aggregates, Sources and Geologic Reserve Estimates Classification, Products Specifications and Quality Standards For Aggregates Mining/Quarrying and Processing Transportation and Market Distribution Patterns Economic Hauling Distances Construction Industry Situationer Past Performance Future Outlook Government Medium-Term Infrastructure Program Private Sector Construction Development Trends Housing and Real Property development Trends Interest Rate Trends Market Segmentation Demand and Supply Situational Analysis Demand Forecasts Supply Situation Demand-Supply Gap Price Trends Market Competition ANNEXES

2 2 5 6 8 12 18 19 20 21 23 25 29 31 32 35 38 41 42 46 41

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

INTRODUCTION

Rock aggregates, together with cement and asphalt are the chief ingredients of concrete and bituminous mixes which in turn, are the basic or preferred construction materials or structural components used by present-day Civil Engineers and Architects. As such, the economic history of the Rock Aggregates industry, in hindsight is nothing but a mirror image of the rise and fall of the construction industry. Unless a paradigm shift in 21st century construction materials technology occurs, the business cycle of the rock aggregates industry will continue to parallel that of its market. As we enter the 2nd decade of the 21st century, mankind proceeds in earnest to build more megacities and superhighways to provide shelter and medium of transport for its teeming population. In the Philippines, with an burgeoning population of more than 88.5 million as of the latest census of 2007 with an average annual growth rate of around 2.04% since the onset of the 21st century, the inherent need for housing and infrastructure will be every tremendous indeed. However, this huge apparent demand for rock aggregates and other construction materials would only be fully translated into tangible or real demand if most proposed construction projects materialize or are actually implemented. In the hierarchy of the basic needs of man, shelter ranks only third below food and clothing. Common sense will tell us that people will contemplate on building houses or acquiring real estate properties only after the primary priorities are already adequately addressed, that is, when their savings and disposable incomes far exceed their expected expenditures for subsistence and well-being. In other words, the market for rock aggregates becomes bullish only in times of economic prosperity measured in macroeconomic terms as the Gross Domestic Product (GDP) or the Gross National Product (GNP).

MACROECONOMIC INDICATORS THAT CONSTRUCTION AND AGGREGATES MARKET

INFLUENCE

THE

The country posted robust gains in Gross Domestic Product (GDP) during the Ramos presidency, averaging 5% growth rates annually in the middle part of the 1990s after the economy rebounded from the destabilizing and recessionary impacts of the series of coup attempts to topple the Cory Aquino Government in the late ‘80’s and the power outages in the early ‘90’s. The Philippines’ aspiration to attain NIC-hood (Newly Industrialized Country status) before the end of the century, however, was temporarily derailed in the aftermath of the July 1997 Asian Financial Crisis which wreaked havoc among the once vibrant “Asian Tiger Economies”. As a result, GDP barely surpassed zero growth for 1998 at a measly and lackluster 0.57%.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Nonetheless, during the early part of the Estrada Administration the economy bounced back on track to recovery at the turn of the 20th century with a modest 3.38% and a remarkable 5.08 % growth rates in 1999 and 2000 respectively. The tumult brought about by EDSA II and EDSA III, however, unfavourably impacted on the economy and the GDP growth rate again dropped to a low of only 1.85% in 2001. The Macapagal-Arroyo Regime that followed was marked by apparently sustained prosperity exhibiting GDP growth rates averaging 5.5% over the first 7 years throughout her two-term stewardship. This achievement could be attributed to the favourable economic fundamentals her brilliant economic managers were able to put in place and the proven resiliency of the Filipino people in overcoming the most seemingly insurmountable adversities such as natural calamities of catastrophic proportions, tumultuous political conflicts and debilitating financial disasters despite all odds stacked up against their favor. Very impressive GDP growth rates were recorded during the periods from 2002 thru 2007 with unprecedentedly high levels of 6.36% posted in 2004 and 7.1% achieved in 2007. Then, in mid-2006, the Global Economic Disaster struck. The U.S. housing bubble from 2004 thru 2006 and the resulting wave of housing mortgage defaults led to a long string of bankruptcies and collapse of several erstwhile formidable financial institutions loaded with toxic assets (high-risk mortgage products portfolios). The domino-effect reverberated throughout the rest of the financial world and of course the Philippines was no exception. A sharp reversal of the economic uptrend was noted right after the 7.1% peak registered in 2007 with GDP growth rates dropping to 3.84% in 2008 and a slight to almost stagnant growth of 0.9% in 2009. The Philippine economy was only able to hurdle a technical recession due to the government’s fiscal stimulus package and by being buoyed up by remittances from overseas workers who sent additional amounts to their families affected by a series of devastating tropical storms such as “Ondoy” and “Pepeng” that ravaged the country in late 2009.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The 2nd decade of the 21st century, however, promises to be very auspicious for the economy in general as predicted by the very optimistic forecasts of the National Development Authority (NEDA), the Asian Development Bank (ADB) and the International Monetary Fund (IMF) which are all in agreement that the impacts of the Global Financial Crisis have bottomed out and economic recovery is underway. They also mentioned that the peaceful and smooth political transition after the May 2010 elections was a positive development. For the first five (5) years of the decade, the International Monetary Fund (IMF) forecast an average Gross Domestic Product (GDP) growth rate of 3.92% annually based on conservative estimates or the most pessimistic scenario. This will augur well for the construction industry and consequently, bolster its upstream satellite industries notably the Cement Manufacturing and Rock Aggregates Production sectors. According to CEMAP (Cement Manufacturers Association of the Philippines) research, construction materials such as portland cement and rock aggregates exhibit a Demand Elasticity of 1.25 with respect of Gross Domestic Product (GDP), i.e. for every 1% growth in GDP a corresponding expansion rate of around 1.25% in demand for construction materials is noted. Based on these and other assumptions used in the accompanying study there would be a shortage and ever widening market demand-supply gap in the next few years if the raw construction materials industries remain at current capacity. The NCR (METRO MANILA) construction market accounts for 18.34% share of total national cement and rock aggregates consumption/demand. Metro-Manila rock aggregates needs are serviced or supplied by producers in CALABARZON and Central Luzon (Region III) but because of proximity, Rizal Province cater to around 90% to 95% of Metro Manila’s requirements since Rizal producers are well within the economic hauling distance of 20 kms. Outside of this radius, transportation costs becomes prohibitive wiping out profit margins unless the buyers or consumers shoulder the additional transportation costs as in the case of the other CALABARZON and Central Luzon suppliers which usually penetrate the Metro Manila market during periods of 4

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

shortages. Montalban (Rodriguez) and San Mateo producers corner around 52.33% of Rizal Province’s total rock aggregate plant production capacity. Most of the major government and private infrastructure projects in Metro Manila area are heavily dependent on these plants for their aggregates requirements. According to NEDA, unless a paradigm shift in economic policy and priorities is introduced by the incoming Aquino Administration, infrastructure development in transport will be geared towards reducing transport costs with the expansion of the Nautical Highway System. Infrastructure projects will also be directed to projects that will decongest Metro Manila such as the Northrail, Southrail and SLEX/STAR/SCTEX/NLEX/Skyway expansions. At the same time, road traffic in Manila will be decongested through the final linkage of the MRT/LRT commuter loop, LRT Line 1 north Extension, MRT 3 capacity expansion, LRT Line 2 East extension, LRT Line 1 south extension, Tarlac-La Union Expressway, Manila-Cavite Toll expressway extension, Circumferential Road-6, Daanghari-SLEX Link road, Diosdado Macapagal International airport expansion and the Grand Central Station Project in EDSA. Infrastructure projects will also support the development of the 8 priority tourist destinations and the affirmative action for peace and development in Mindanao and other impoverished areas. NEDA also identified housing as the other sector that has a very high multiplier effect on the economy and so housing will also be given high priority status to hasten the pace of economic growth. The private sector will be tapped to participate in socialized housing finance and construction through the abolition of interest-rate subsidies and replacement with amortization-based upfront subsidy. The government will also work to liquefy the P42 billion non-performing loans of NHMFC. . The Rock Aggregates Industry Historical Background The production of construction aggregates is a postwar innovation in the Philippine Construction industry which developed rapidly in the later part of the 1960’s. Popularly known as gravel and sand, this product was, prior to the second world war, supplied by individuals and outfits that produced screened natural sand and gravel from the riverbeds. More exacting and rigid engineering specification of the postwar reconstruction period created the demand for crushed aggregates in adequate quantities. As awareness of the importance of processed aggregates increased, the demand for this product grew so rapidly in the late 1960’s, a supply and demand gap developed. The government took measures to cope with the demand through the Board of Investments (BOI). The BOI included rock aggregates processing in the First and Second Investment Priority Plan in the later years of the ‘60’s. In Region IV, the pioneers in the crushed aggregates industry were Philrock (now SIRR, Inc.) in 1955, Concrete Aggregates Inc. (now Lafarge-Batong Angono Aggregates Corp. or BAAC) in 1959 and RIZCON (now Monterock, Inc.) in 1962. All three firms and their crushing plant facilities still exist today (although all are now controlled by new owners and investors after a series of corporate takeovers/mergers), indicative of the 5

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

profitability of the aggregates industry. Today there are more than 30 firms engaged in the production of crushed aggregates in the Region and hundreds more producing salandra or unprocessed sand and gravel.

Nature of Aggregates, Sources and Geologic Reserve Estimates The terms “concrete aggregates”, “rock aggregates”, “construction aggregates” or simply “aggregates” refer to the matrix or principal structure of portland cement concrete or bituminous asphalt mixes, consisting or relatively inert fine and coarse materials. Colloquially, aggregates are known as “sand and gravel”. In theory, nearly all minerals found in the earth’s crust and other similar inert materials such as air-cooled blast furnace slags may be used as aggregates. However, fragments of igneous rocks, more notably basalt and andesite are generally preferred as concrete aggregate materials in this country due mainly to their high strength and abundance in the Philippine geologic environment. These materials are mixed with water and portland or pozzolan cement in the proper proportions to form a hard high strength, solid mass when set called concrete or blended with petroleum asphalt, the resulting mix when laid and compacted to proper density becomes a tough, flexible road surface or pavement for modern vehicular traffic. Commercially, there are two kinds of aggregates depending on their sourcing; these are: a. Mountain quarry or bedrock aggregates; b. Riverbed or terrace gravel aggregates. Mountain quarry aggregates are those extracted from large masses of igneous rock formations; while the second type are those excavated or taken from alluvial or terrace gravel deposits in beds of rivers, streams, creeks and lakes or floodplains. Strictly speaking, however, these types are really identical since the alluvium are merely detrital sediments derived from the disintegration or weathering of the parent igneous rocks. Petrologically, all aggregates in this country are predominantly fragments of either basalt or andesite which occurs in abundance in almost all provinces of the Southern Tagalog Region. In some areas such as Romblon Island, crushed marble are used as aggregates since it is the only common rock type found in great quantities in that locality. The only reason why there are many quarry operations in certain provinces such as Rizal and almost nil in provinces like Aurora is the proximity between sources and markets. Rizal, with its strategic location to Metro Manila where construction activities surpass levels in all other growth centers put together, is of course, the logical major supplier of aggregates. Based on geologic reports of MGB Region IV-A known aggregates resources are distributed as follows:

a.) Rizal b.) Laguna c.) Quezon

-

937,059, 000 cu. m. 114, 778, 000 cu. m. 5, 280, 000 cu. m. 6

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

d.) Cavite e.) Batangas

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125,631,000 cu. m. 11, 396, 400 cu. m.

Although, as previously mentioned, igneous rocks suitable for aggregates such as basalt and andesite can be found in abundance in all localities, the low mineral reserve estimates in certain provinces is not necessarily indicative of scarcity of sources of aggregate materials, but rather, the utter lack of exploration activities in places where there appears to be no sizeable or significant markets existing at this point in time. Market viability, and not source availability, therefore, dictates or determines the pace and level of aggregates exploration and commercial production operations in a particular locality. In Metro Manila (NCR) there are no existing aggregates quarries and there was never any since the postwar era except in Marikina which closed down 20 years ago to give way to real estate development. Theoretically speaking, the bedrock underneath the soil of Metro Manila could be quarried for aggregates but that would mean displacing residential and commercial properties to gain access for the operations. Considering the dense population and sky-high real estate values in NCR, such business decision is regarded as totally absurd. 7

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Classification, Product Specifications and Quality Standards for Aggregates Aggregates are generally grouped according to size and to type of processing applied. According to size, aggregates are classified either as “coarse” or “fine”. Those retained in the ¼ inch or No. 4 sieve are considered coarse and all others passing through referred to as fine. Coarse aggregates are used primarily to give bulk to the concrete. The density of the resulting mix is increased by using aggregates in two or more sizes. Fine aggregates are used to assist in the workability of the mixture. Fine aggregates also assist the cement paste in holding the coarse aggregate particles in suspension. Based on the method of production employed, aggregates are classified into three (3) types: a.)

Salandra Aggregates - consists of riverbed aggregates processed through manual methods using crude improvised screens locally called salandra or bistay, or those sold on an “as is, where is” basis without undergoing any mechanical processing at the source such as crushing operations. Those sold “as is” are usually processed by construction laborers or masons using similarly crude improvised screens at the aggregates’ final destination, i.e. the construction jobsite.

b.)

Processed Riverbed Aggregates - riverbed gravel materials are extracted by dragline excavators, backhoe excavators or wheel loaders and fed to a crushing- screening plant to produce clean aggregates of various sizes which are relatively free of silt and clay. The resulting products both contain angular particles produced by crushing and rounded particles which underwent screening and bypassed the crushing process.

c.)

Crushed “Mountain Quarry” aggregates - Raw materials for this type of aggregates are massive rock formations quarried either by means of drilling and blasting or mechanical rock breaking methods using backhoes with rammer/hydraulic hammer attachments and fed into crushing plants. Since all materials are quarried from solid rock this product type consists of 100% crushed, angular fragments.

While the production process involved in salandra aggregates is very simple and low-cost, certain disadvantages have reduced the acceptability of this product type. Deleterious materials such as clay and silt usually coat the surface of these rock particles resulting in a weaker bond between cement and aggregates, also, the round to subrounded 8

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

shapes common among salandra aggregates make for weaker binding surface. For this reason, salandra aggregates are seldom used where high strength concrete is specified. Laboratory testing and actual experience have established that rock aggregates which are angular in shape produce a higher strength in the concrete mix. This is attributed to the more binding surface present resulting in a higher coefficient of friction. Because of today’s more rigid building code, contractors and structural designers have been increasingly strict on the quality of raw materials used. The results of these changes have led to a shift from salandra to crushed aggregates. With the advantageous properties inherent to crushed aggregates, it has within a short time gained preference by the construction industry. Figure 1. Size Classification/Grading of Aggregates

Lastly, aggregates are graded according to size specifications and sold in the following commercial forms with their recommended applications/ uses: a.) G- 1, G- 2 - materials passing through a 1 ½ or 2 ½ inch mesh screen and retained on a ¾ inch mesh screen. These sizes or grades are primarily used in paving of concrete roads, in preparing surface for asphalting or in general concrete construction works. They are also blended with ¾ inch gravel to form well- graded high quality concrete mixtures. Other uses include massive foundations, granular bedding/filler, and for asphalt concrete mix with coarser design specifications. b.) ¾ inch - materials passing a ¾ mesh screen and retained on the 1/2 “ or 3/8” screen. These are used primarily for thin reinforced concrete walls and slabs and bituminous asphalt mixes for road paving. They are the basic size for structural concrete mixes, pre-stress or pre-cast concrete products. c.) 3/8 inch - materials passing through a 1/2” or 3/8” mesh screen and retained on a ¼” or 3/16” mesh screen. This product is primarily used in the manufacture of concrete products such as pipes and wear surfacing for built- up roofings. Also used for high-strength concrete mixes applied in densely reinforced structures, pre-stress/pre-cast products, for asphalt wearing and surface courses. d.) Washed Sand (S- 1) - Those materials passing through a ¼” or 3/6” mesh screen. Generally used as a vital ingredient in all concrete and asphalt mixes. Crushed sand are also used as structural beddings, pavement seal coats and fairways sand caps. 9

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

e.) Armor Rock - Boulders or large size gravel materials weighing from 1 to 3 metric tons per piece used as breakwater, pier or reclamation filling materials. f.) Base Course Materials/Selected Barrows - Admixtures of gravel, sand, silt, clay and other soil debris used as road base filling materials. Base courses serve as roadway foundations on which the final asphalt/bituminous concrete pavement is laid. Other physical and/ or chemical requirements for aggregates are that materials should be inert, that is, they should not react chemically with the alkalis of the cement and water mix, and that they should conform with the standards set by the American Society for Testing Materials (Tentative Specification for Concrete Aggregates, ASTM Designation C33- 54T), and the DPWH. Materials with an abrasion loss not exceeding 50% are considered acceptable. Some designers involved in heavy load construction projects sometimes specify a minimum strength of 5,000 psi for materials to be used. A complete quality test for aggregates also includes tests for soundness (the ability to resist weathering), mortar- making properties, and test for presence of organic impurities, soft particles, and lightweight constituents. The following table presents the ASTM Standards for good quality rock aggregates: Table No. 1 American Society For Testing Materials (ASTM) Specifications for Concrete Aggregates (ASTM: C33- 54T) 1. Limits for Deleterious Substances ITEM Maximum Content, % by Weight of Total ___________________________________________________Sample____________ a.) Fine aggregates Clay Lumps 1.0 Materials fines than No. 2 sieve 3.0 Concrete subject to abrasion All other concrete 5.0 Saturated- surface- dry material, Coarse than No. 50 sieve, Floating on a liquid having a sp. gr. of 2.0 0.5 b.) Coarse Aggregates Clay Lumps 0.25 Soft Particles 5.0 Chert (soundness test: 5 cycles) 1.0 Material finer than No. 200 sieve 1.0 Saturated- surface- dry material Floating on a liquid having a Specific gravity of 2.0 1.0

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

2. Abrasion – coarse aggregates tested for abrasion should not have a loss exceeding 50 percent. 3. Soundness a) Fine Aggregates – after being subject to 5 cycle of soundness test, fine aggregates should not show a loss of weight exceeding 10% when Sodium Sulfate is used or 15% when Magnesium Sulfate is used. b) Course Aggregates – after being subjected to cycles of soundness test, should not show a loss of weight greater than 12% when Sodium Sulfate is used or 18% when Magnesium Sulfate is used. 4. Compressive and Flexural Strength – specifications varies depending upon usage, thus: a) Roadworks – 2,500 pounds per square inch (psi). although when the strength should be attained within a minimal time period as in the case of busy roads, a concrete of 4,000 psi is used to attain 2,500 psi within 7 days. b) High rise building – normally 3,000 psi, although for special designs, 4,000 to 5,000 psi is required. c) Residential buildings – 2,500 to 3,000 psi depending on architectural and structural design. d) Bridges – not less than 3,000 psi. e) Curbs and side walks – generally specified at 2,500 psi although lower strength is also acceptable. f) Piles and other pre-cast/pre-stressed structural products - at least 5,000 psi. 5. Mortar–making properties – should pass ASTM-C-87 (Standard method of test for structural strength of fine aggregates using constant water-cement ratio mortar.)

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Mining/Quarrying and Processing The mining and processing methods for aggregates depend on the product type produced thus: a) Salandra aggregates – consist of riverbed aggregates processed through the salandra method. This method simply involves the manual gathering, screening and grading or sorting of riverbed gravel materials using crude improvised scooping screens locally called salandra or bistay. Also included in this category are aggregates extracted or quarried mechanically using heavy equipment but are never processed mechanically at the source and instead screened manually by masons using crude improvised screens at the construction jobsite. These materials are sold on a small scale retail basis and accounts for a small percentage share of the total aggregates market. b)

Processed Riverbed Quarry aggregates - raw materials are excavated or extracted using heavy equipment such as dragline excavators, power shovels, bulldozers, backhoe excavators and wheel loaders. The pit-run materials are then hauled to the plant site and dumped at the plant site raw material stockpile area. These raw materials are then fed by a wheel loader into a Rock Crushing and Screening Plant through a grizzly topped feed hopper. From the feed hopper, the materials drop down to a reciprocating feeder which conveys them to a double-deck scalping screen with 2 ¾ “ and 1 ½ “ openings. The oversize or +2 ¾ “ materials are crushed by a Primary Jaw Crusher set at 2 ¾ “. The Jaw crusher output join the plus 1 ½ “ to minus 2 ¾ “ materials from the undersize output of the top deck of the double-deck screen and all are then fed to a Secondary Hydrocone Crusher set at 1 ½ “ discharge openings. The product of the secondary crusher together with the undersize of the lower deck of the double-deck screen or minus 1 ½ “ materials are all passed through a triple-deck vibrating screen with ¾ “, ½ “ and ¼ “ openings thus effecting size classification or grading. The minus ¼ “ materials are discharged into a screw sand classifier and washed clean of any unwanted clay and silt. The clay and silt waste materials are finally discharged into a settling pond. The desired product sizes or grades are conveyed by stacking conveyors to their respective stockpiles ready for truck-loading by the buyers. Truck loading is done using wheel loaders. Water requirements for screening-washing operations are provided by a water pump. . The resulting products both contain angular particles produced by crushing and rounded particles which underwent screening and bypassed the crushing process.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Figure 2. Typical Flowchart of a Riverbed Quarry Aggregates Processing Plant

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

c) Crushed “Mountain Quarry” aggregates – Raw material for this type of aggregates are massive consolidated rock deposits or formations quarried either by means of drilling and blasting or mechanical rock breaking methods using backhoes with rammer/hydraulic hammer attachments. Rarely as in the Wawa, Montalban (now Rodriguez) locality, mountain quarry aggregates are produced manually using picks and crowbars for quarrying and sledge hammers for crushing. People who work these areas are locally called “durugistas”. Employing a hillside open cut approach, the quarrying operation begins with stripping of the overburden. To expose the basalt rock resource and make it available for extraction, the topsoil and other weathered overburden materials are stripped or scraped and transported to the waste material stockpile which will later be used as backfill materials for rehabilitation of mined-out areas. To reduce the basalt rock to be extracted into smaller fragments that could be easily fed into the crushing plant, drilling and blasting are done. Blastholes, measuring 89 mm (3.5”) in diameter and 11 m (35 ft) in depth, are bored using crawler-mounted hydraulic tophammer or pneumatic drill rigs. Blasting is done to break the materials from the pit bench using twenty to twenty-five (20 – 25) kg of dry ANFO per hole. Controlled blasting is resorted to through the use of non-electric delay detonators to minimize ground vibration, flyrocks, and excessive sound wave generation. The blasted rock is then loosened using a bulldozer with ripper attachment. The broken materials are loaded onto off-road dump trucks by backhoe excavators and then hauled and unloaded into the crusher feed hopper for primary crushing. The processing operation involves primary crushing, scalping, secondary crushing, screening/sorting, tertiary crushing, and stockpiling of finished products. Wet process is used to upgrade the quality of aggregates and to eliminate dust generation. Primary Crushing: From the quarry area, the basalt boulders with a maximum size of 0.80 m are initially fed to a jaw crusher for size reduction to 0.25 m maximum and then conveyed and dumped to a surge pile. Scalping: From the surge pile, the materials are discharged, through a vibrating feeder, to a tunnel conveyor for delivery to a scalping screen (vibrating screen) with screen opening of 2.75 in. The oversized materials are conveyed to the secondary crushing stage, while the undersize, after passing through a splitter to produce the base course or the sub-base course product, go to the stockpile. Secondary Crushing: The oversized materials from the vibrating screen are fed to a gyratory crusher for secondary crushing and then discharged to a main conveyor for delivery to the multi-layered vibrating screens. Screening/Sorting: Equipped with high-pressure water spray bars and consisting of four (4) decks of different wire screens, the multi-layered vibrating screens control, screen, 14

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

and separate different sizes of aggregates. The sand in the pulp is fed to a spiral classifier to separate the clean and higher quality of sand from the water. The overflow (water) of the spiral classifier is discharged to the settling ponds, where the clear water is recycled to the Plants, while the fine materials are recovered and mixed with base coarse materials. Tertiary Crushing: The oversized materials from the multi-layered vibrating screens are fed to a cone crusher, for tertiary crushing to further reduce their sizes, from which the materials are conveyed back to the vibrating screens. Stockpiling of Finished Products: Finally, the undersized materials from the multi-layered vibrating screens are conveyed directly, via a stacker conveyor, to the different finished product stockpiles consisting of G-1, ¾”, 3/8”, S-1, base course, and sub-base course, ready for distribution.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

1

4

3

2

55

6

Figure 4. Typical Controlled Blasting Sequence Using Millisecond Delays for Basalt Aggregate Quarries Near Populated Areas

Figure 5. Typical Flowchart of a Mountain Quarry Aggregates Processing Plant

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Transportation and Market Distribution Patterns The common product distribution practice in the industry is to sell aggregates on an ex-plant or pick-up at the source basis whereby the buyers provide the trucks and shoulder the hauling costs. Some of the bigger crushing plants have branched out into varying stages of forward integration e.g., Pacific Concrete Products and Concrete Aggregates Inc. (now BAAC) are engaged in both cement and asphalt mixing; Millex, Solid Integrated Construction, Inc. and Cavite Ideal Construction and Dev’t. Corp. (CavDeal) operate cement batching plants. These integrated firms consume anywhere from 25 to 93 percent of their production depending on the size of the market and the degree of integration. For instance, Concrete Aggregates Inc. (BAAC) the firm in the industry with the highest degree of integration, consumes more than 75% of the output of their crushing plants to service the needs of their batching plants and pre-cast concrete products operations such as the manufacture of hollow blocks and reinforced, prestressed concrete members. Fully integrated firms with concrete and asphalt batching operations usually offer delivery operations using Ready-Mix transit mixers and company owned trucks. Deliveries are mostly done with the finished products, i.e., mixed concrete or asphalt bituminous mixes and seldom with pure aggregates. The surplus production of aggregates are usually sold on an ex-plant or pick-up at the source basis as in non-integrated firms. Most contractors and manufacturers of concrete products have fleets of hauling equipment to meet their delivery needs. However, gravel and sand dealers and truckers shoulder the bulk of the transport operations. NCR gets the lion’s share of deliveries originating from the both CALABARZON and Region III due to the huge concentration of government infrastructure and private building construction projects in Metro-Manila and fringes. Transportation of aggregates by sea using barges have lately been a preferred alternative by producers in Central Luzon notably in Bataan due to lower costs as compared to trucking by land to Metro-Manila. The only drawback or disadvantages of this mode of transport are the cost and inefficiency of double-handling at ports. Other medium to high density urban centers in the CALABARZON region such as Antipolo, Batangas, San Pablo, Calamba, Tagaytay, Lipa and Lucena Cities, Los Banos, Sta. Rosa and some areas in Cavite such as the Imus-Dasmarinas and NaicTernate-Trece Martires corridors have lately been gaining a marked growth in market demand. Likewise in Central Luzon, phenomenal growth in market share is also being registered as the Subic and Clark areas. In effect, intra-regional traffic of aggregates have been gradually expanding in CALABARZON and Central Luzon, a sharp departure from the trend in the ‘40s through the ‘70s. In those days Metro Manila cornered more than 90% of the production of both Regions III and IV. Nowadays, deliveries of aggregates into NCR from the quarries of the two Regions are down to less than 60% of total output. Nevertheless, Metro Manila, which has no economic quarry mineral resource of its own, continues to be totally dependent on the two Regions for its rock aggregate needs. 18

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Economic Hauling Distances Transportation costs greatly influence the profitability of aggregates firms such that it is very noticeable that majority of existing crushing plants tend to converge near or within economic hauling distance from Metro-Manila and other urbanized areas or major government infrastructure project sites. As observed from current industry practices hauling distances from source to markets ranges from 0 (quarry/crushing plant located right beside construction site) to as far as 120 km. as exemplified by white sand (from lahar) sourced from Pampanga, Tarlac and Zambales as well as armor rock quarried from Bataan and Quezon finding their way at various Metro Manila infrastructure project jobsites. On the average, however, hauling distances ranges from 20 to 50 kilometers for most producers in the CALABARZON area. Beyond this range, profit margins become less attractive since aside from the added fuel and operating costs per extra kilometer the trucks can only manage to make fewer return trips per day due to the longer distance. On top of that, the horrendous traffic jams in Metro Manila and even in some CALABARZON high urban growth areas such as Antipolo City, Rizal, Santa Rosa-Calamba corridor in Laguna and Imus-Dasmarinas in Cavite, consume too much travel time, return trips are close to impossible for certain days of the week.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

CONSTRUCTION INDUSTRY SITUATIONER Past Performance The construction industry has traditionally assumed a leading role in national development. Its ups and downs generally mirror the boom and bust cycles of the Philippine economy. After suffering from constricted demand in the early years of the 1990s, the construction industry experienced a boom in 1994 with a 10.6 percent increase in demand. Growth rates somewhat tapered off in 1995 with real demand expanding by only a mere 1.6 percent, However, the industry rebounded in 1996 surging to a hefty 15.9% growth, posting its second best record for the decade. 1997 was again a good year for the construction sector as growth rates was sustained, registering an almost identical expansion in volume at 14.6% despite the Asian Financial Crisis that hit the Asian Region in July 1997 which devastated all of the so called Asian Tiger economies such as Thailand, Korea, Taiwan, Malaysia and Indonesia. Construction activities in these countries ground to a halt due to massive capital flight and sky high interest rates. However, the effects of the Asian Financial Crisis finally caught up with the local industry as construction volume fell by -5.36% in 1998 and again by -0.30% in 1999. The industry recovered with a vengeance in 2000 recording an unprecedented 27% growth rate, its best ever performance for the last two decades. The following table shows the local construction industry’s past performance after the beginning of the new millennium (CY 2000), as lifted from the latest statistics released by the National Statistical Coordination Board (NSCB):

Table No. 2 GROSS VALUE OF CONSTRUCTION, 2001 TO 2009 (In billion pesos at constant 1985 prices) Industry Sector Government Private Total

2001 48.1 48.9 97.0

2002 42.9 53.5 96.3

2003 38.0 57.1 95.1

2004 34.5 59.9 94.4

2005 28.3 59.2 87.5

2006 37.1 57.0 94.1

2007 47.9 64.4 112.4

2008 47.8 69.8 117.6

2009 52.5 76.6 129.2

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The construction industry have remained more or less steady for the period 2001 up to 2006. Then, curiously enough, construction activity actually leaped by a hefty 19.45% in growth in 2007, expanded by a modest 4.63% in 2008 and again by an impressive 9.8% in 2009. It appears as if the industry is inured to the effects of the Global Economic Crisis that hit the U.S. financial institutions in February 2007 which devastated the rest of the world’s economies in the months that followed until the massive bail-out rescue package initiated by the Obama Administration in the U.S in 2008 thru 2009. At this point in time, it is too early to presume that the Philippine Construction Industry was resilient enough to have withstood the onslaught of the Global Financial Storm because the updated macroeconomic indicators are not yet available. The NEDA and National Statistical Coordination Board (NSCB)) have yet to release the final and complete economic statistics and figures for the 2nd Quarter of the current year, 2010. Their latest press release was that the GDP grew by more than 7% for the 1st quarter of 2010 while the construction sector registered a growth rate of 4.4%. This development, however, they attributed mostly to election spending rather than tangible or productive economic output. Future Outlook The 2nd decade of the 21st century, however, promises to be very auspicious for the economy in general as predicted by the very optimistic forecasts of the National Development Authority (NEDA), the Asian Development Bank (ADB) and the International Monetary Fund (IMF) which are all in agreement that the impacts of the Global Economic Storm have already subsided and full economic recovery is underway. They also mentioned that the peaceful and smooth political transition after the May 2010 elections was a plus factor.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

For the first five (5) years of the decade, the International Monetary Fund (IMF) forecast an average Gross Domestic Product (GDP) growth rate of 3.92% annually based on conservative estimates or the most pessimistic scenario. This will augur well for the construction industry and consequently, bolster its upstream satellite industries notably the Cement Manufacturing and Rock Aggregates Production sectors. According to CEMAP (Cement Manufacturers Association of the Philippines) research, construction materials such as portland cement and rock aggregates exhibit a Demand Elasticity of 1.25 with respect of Gross Domestic Product (GDP), i.e. for every 1% growth in GDP a corresponding expansion rate of around 1.25% in demand for construction materials is noted. Based on these and other assumptions used in the accompanying study there would be a shortage and ever widening market demand-supply gap in the next few years if the raw construction materials industries remain at current capacity. The favourable NEDA and IMF forecasts will be very auspicious for the Construction Industry and other sectors as well since the impacts of a robust economy most likely, will be sweeping and will cut across the board. In other words, all sectors of the economy are expected to expand in consonance or in unison with the general trend as measured in terms of the GDP. Furthermore, the aforementioned economic fundamentals which are already set in place will provide the boost and favourable climate for the industry to take off and these are the following: 1. Massive government spending on key infrastructure projects programmed for the medium term. 2. Increased private sector participation in infrastructure development through new build-operate-transfer (BOT) schemes under the recently amended BOT Law. 3. Surge in real properly development 4. Plummeting interest rates.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Government Medium Term Infrastructure Program The construction industry is expected to largely benefit from the acceleration of public infrastructure and private construction works. The National Government is aggressively pursuing the implementation of several key infrastructure programs to dovetail the projected growth in the economy. These include new Light Rail Transit (LRT) lines, international airport expansion projects at NAIA, Clark and in Mindanao, the Batangas seaport development and rehabilitation/expansion and linkage of the North and South Lines of the Philippine National Railway (PNR). For road networks, the major projects are the expanded Metro Manila skyway, the linking of the South and North Luzon Expressways; the North Luzon Expressway extensions to Clark, Subic up to La Union, the Tarlac-La Union Expressway, Manila-Cavite Toll expressway extension, Circumferential Road-6, Daanghari-SLEX Link road, and the Grand Central Station Project in EDSA. Other government infrastructure project proposals for Metro-Manila and surrounding areas programmed for the next 5 to 10 years are the following: 1. Laiban Dam project – estimated project cost is P 48.1Billion 2. 300 MLD Water Supply Treatment project – P 5.6Billion 3. Kamanava and Valenzuela-Meycauayan Drainage project – P 6.1Billion 4. Metro-Manila Interchange Phase IV project – P 4.9 Billion 5. EDSA North Transit project – P 30.3Billion 6. LRT Line 6 project – P 43.8Billion 7. Arterial Road Bypass project – P 3.4Billion 8. Metro-Manila Flood Mitigation project – P 3.2Billion 9. MRT Line 2 Phase II – P 10Billion The National Economic Development Authority (NEDA) have proposed a Comprehensive and Integrated Infrastructure Program (CIIP) public investment budget of P 2,006.26 Billion for infrastructure development for the next five (5) years (2010-2014) for the entire country and this figure is broken down as shown by the following chart:

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

In support of the Luzon Urban Beltway Super Region Strategy, NEDA have allocated NCR and CALABARZON Regions’ share of the abovementioned CIIP as shown in the following table: Table No. 3 INFRASTRUCTURE INVESTMENT TARGET BY SUB-SECTOR, 2010-2012 (In million Pesos) SUB-SECTOR TRANSPORTATION National Roads and Bridges

Ports Airports Railways Service/LTO WATER RESOURCES Water Supply Irrigation Flood Control COMMUNICATION Telecommunications Postal Communication

2010 2,716.31 1,532.52 349.79 55.00 775.80 3.20

2011 3,162.11 2,697.81 150.70 176.20 129.40 8.00

2012 3,195.57 2,829.80 80.57 263.70

314.22 224.13 90.09

1,121.94 32.98 389.36 380.30

819.70 58.50 658.10 103.10

2,255.86 410.78 1,271.59 513.49

19.36 6.66 12.70

18.92 7.72 11.20

21.71 5.83 15.88

59.99 20.21 39.78

21.50

TOTAL 9,073.99 7,060.13 581.06 494.9 905.20 32.70

POWER AND ENERGY 1,791.08 3,506.61 4,613.68 9,911.37 Power Generation 1,548.70 3,309.61 4,376.80 9,235.11 Rural Electrification 242.38 197.00 236.88 676.26 ________________________________________________________________________ TOTAL

7,840.97

7,809.58

5,650.66

21,301.21

Of course the above Medium-Term Philippine Infrastructure Development Plan prepared by NEDA will still be subjected to approval by the incoming Congress and Aquino Government. To date no paradigm shifts in economic policy and priorities have been announced by the newly installed government, so the above budget proposals would most likely materialize.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Private Sector Construction Development Trends

The growth of the construction industry, however, is expected to be privatesector led. Projects are expected to move faster as private investors take on a greater interest in infrastructure works under the new BOT concepts which allows them greater participation in the financing, construction, operation and maintenance of public infrastructure. One of the biggest infrastructure project proposals under the new BOT schemes is the recent unsolicited BOT proposal of San Miguel Corp. Chair Ramon Ang to build the Laiban Dam in Tanay, Rizal (project cost estimated at P 48.1Billion) tentatively scheduled to start construction immediately upon approval by the government agencies/institutions concerned.. With the new BOT schemes, the government can now focus on initiating the building of the necessary infrastructure without being unduly constrained by budgetary and funding requirements. Private building construction is also expected to be on an upswing trend in Metro Manila as demand for residential, commercial and office space soar in keeping pace with unrestrained population growth and unabated migration patterns in the megapolis. The following table presents the NSCB statistics on the growth of Private Building Construction Projects/Activities from 2000 to 2007.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

YEAR 2000 2001 2002 2003 2004 2005 2006 2007

Table No. 4 FLOOR AREA OF PRIVATE BUILDING CONSTRUCTION 2000-2007 ( in thousand sq. m.) RESIDENTIAL GROWTH NONGROWTH (sq. m.) RATE (%) RESIDENTIAL RATE (%) 4,989 5,115 5,901 18.28 4,566 (10.73) 7,080 19.98 5,090 11.48 7,968 12.54 5,032 (1.01) 8,543 7.22 5,747 14.21 10,559 23.60 6,229 8.39 9,105 (13.77) 6,600 5.96 7,737 (15.02) 7,029 6.50

With the prices of prime land assuming prohibitive proportions new buildings are now designed to be taller to cover land cost. Skyscrapers from 40 to 80 stories in height that house corporate offices are now becoming a common sight. In the residential condominium sector, 14 high-rise buildings (9 in Makati, 1 in Ortigas, 3 in Fort Bonifacio and 1 in Quezon City) and countless medium-rise condo-apartments in the business centers of Quezon City, Mandaluyong, Paranaque, Manila, Taguig and other municipalities of NCR have already started construction. Nine (9) more new skyscrapers are scheduled to be erected in Metro-Manila in the next five (5) years. Not too far behind are, of course, those ubiquitous supermalls, shopping and leisure centers that follow high density urban development. The SM Group alone has lined up 9 supermalls for construction within the next 5 years. In addition, as show cases of the Philippines in the 21st century, World Class high-tech “global villages” or “intelligent cities” such as those in Fort Bonifacio and the Manila Bay Reclamation sites of the Public Estates Authority (PEA) are already out of the drawing boards and high-rise gantry cranes have been sprouting out all over these properties in fits of construction frenzy. Table No. 5 List of High-Rise Building Projects in Metro-Manila (2010-2015)

Skyscrapers Currently Under Construction in Metro-Manila Name

The Gramercy Residences

City

Makati

Height (m)

Storeys

302

68

Exp. Completion

2012

Notes

construction at 11 floors above ground as of 01 Nov. 2009

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The Knightsbridge Residences

Makati

250

68

2013

Federal Land Tower

Taguig

250

66

2012

GA Sky Suites

Quezon City

220

44

2012

One Rockwell West Tower

Makati

202

55

2010

The Beacon - Arnaiz Tower

Makati

197

50

2012

Foundation works on-going

The Infinity Fort Bonifacio

Taguig

>180

48

2010

topped-off last October 2009

The Residences at Greenbelt - Manila Tower

Makati

171

48

2010

One Rockwell East Tower

Makati

165

45

2010

The Beacon - Roces Tower

Makati

158

44

2010

Bellagio Golfview Residences Tower 3

Taguig

156

39

2010

East of Galleria

Pasig

45

2010

The Columns Legazpi Village

Makati

41

2010

146

Topped-off July 2009

Tower 1 topped-off mid 2009, Tower 2 topped-off October 2009.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Grand Soho Makati

Makati

41

2010

topped-off November 2008

Approved Projects but not yet started Name

Pagcor Tower

City

Height (m)

Manila 665

Exp. Completion

Storeys

Notes

Part of the On-going construction of the Pagcor E-City

Undefined 2012

Planned / Proposed Skyscraper Projects Name

City

Height (m)

Storeys

Exp. Completion

One Galleon Place

Pasig

>384

75

2015

The Stratford Residences

Makati

312

76

2014

Discovery Primea

Makati

Shangri-la at the Fort, Manila

Taguig

New Philippine Stock Exchange Building

Taguig

Aspire Tower @ Nuvo City

Quezon City

250

242

[8]

Notes

68

2011

demolition of existing stucture (Gilarmi Apartments) complete, excavation underway

66

2012

excavation works complete as of February 2009

44

2015

50+

2012

the first of several similar towers

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Lopez Center Tower

Makati

50+

2015

reportedly designed into 2 shorter towers

Edades Tower

Makati

53

2013

located at Rockwell area

One Central

Makati

50

2012

excavation works to start on April 2009

Park Terraces

Makati

187

49 each of the 3 towers

Zuellig Building

Makati

155

33

2012

mobilization for excavation ongoing as of November 2009

Housing and Real Property Development Trends As Metro Manila becomes increasingly over-crowded and congested, the pattern of rapid urban development has been spilling over to Region IV (Southern Tagalog), notably the CALABARZON provinces since the late 70’s. Based on the 2007 NSO census the Region is now the most populous in the country with 11.7 million or 13.26% of the nation’s total population of 88.5 million while NCR (Metro-Manila) is a close second at 11.5 million. Metro-Manila, on the other hand, has the highest population density of 18,650 persons per square kilometer as compared to the rest of the Philippines which has an average population density of only 260 persons per square kilometer. Population growth rates for Metro Manila is 2.11% annually while the national average is 2.04% for the period 2000 thru 2007. However, as regards economic performance, CALABARZON still ranks a far second to Metro Manila in terms of Gross Regional Domestic Product (GRDP) share (Php 803.6 Billion as against P 2,747.4 Billion for NCR) among the 17 regions in the country and this output is projected by NEDA to increase at an average annual growth rate of 4.3% over the next five (5) years (2010-2014). Population pressures (high birth rates plus migration patterns) and sustained economic prosperity will most likely induce a construction boom. For Southern Tagalog 29

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

alone, the Housing and Urban Development Coordinating Council (HUDCC) estimates an average annual demand for housing units for CY 2009 at 108,782 homes. This figure is broken down as follows: Table No. 6 REGIONAL HOUSING NEEDS BY PROVINCE, 2010-2014

PROVINCE Aurora Batangas Cavite Laguna Marinduque Mindoro Occ. Mindoro Or. Palawan Quezon Rizal Romblon Southern Tagalog

ANNUAL NEED (2009) 1,676 14,080 18,385 20,404 1,285 3,252 5,147 7,249 13,568 21,527 2,209 108,782

TOTAL HOUSING NEED (2010-2014) 8,380 70,400 91,925 102,020 6,425 16,260 25,735 36,245 67,840 107,635 11,045 543,910

% SHARE 1.54 12.94 16.90 18.76 1.18 2.99 4.73 6.66 12.47 19.79 2.03 100.00

Rizal, Laguna and Cavite have the biggest demand for housing units in CALABARZON due to their proximity to Metro Manila. Closely following are the other two remaining CALABARZON provinces, namely Batangas and Quezon. CALABARZON also has the highest hectarage or total area of approved land-use conversions from agricultural to non-agricultural (15.9% as compared to the national percentage of only 1.11%). A huge part of these land-use converted properties are being planned to become suburban housing subdivisions. For NCR, the HUDCC estimates are as follows: Annual Need for 2009: 82,182 housing units Total Housing Need (2010-2015) : 496,928 houses According to the HUDCC, two thirds of the housing need comes from new requirements (natural population increase due to birth rates plus net migration) while the remaining one third are the cumulative backlog from previous years that were not adequately addressed.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Interest Rate Trends

As a final note, the icing on the cake of the Construction Industry’s foretold rosy future, at least in the medium term, is shrinking interest rates. As of June 2010, the shortterm risk- free interest yields on Treasury Bills are already down to less than 4.3% after hovering at double digit figures for almost two decades prior to 2001 and there seems to be no indications that the slump have bottomed out. The long-term benchmark Treasury Bonds with maturity periods of 20 years, on the other hand, have coupon interest rates of only 8.75% and yield rates of only 8.729%. This development is very conducive to a fast track resurgence of housing and infrastructure construction project loan applications, or any other business or industrial venture loan portfolios for that matter, in view of the relatively cheap cost of financing and availability of adequate liquidity at easy credit terms.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

MARKET SEGMENTATION The market for sand and gravel or rock aggregates could be classified or dissected into several layers of market segmentation hierarchies. On the top level are the industry sector-consumers of the product and these are the following: Industry Sector

Aggregates Product Users

1. Construction Industry

aggregates used as chief components of cement and asphalt concrete, filling materials for roads and foundation, railroad ballast.

2. Metallurgic/Chemical Industries

sand used as casting material for foundry operations, glass manufacturing

3. Filtration System

aggregates used as filtering medium for water treatment facilities, septic leaching system

4. Other Industries

used as abrasives as in sandpaper, sandblasting material for de-rusting/ cleaning ship hulls at dry-dock facilities.

Since more or less 99% share of the aggregates market continues to be cornered by the Construction Industry, only this market segment is discussed in detail in this study as consumption by other industries only pale by comparison. The Construction Industry, in turn, could be segregated into sub layers of market segments classified either by institution, by geographical target markets and so on. Examples of sub-segments are listed below as follows: 1.0 By Institution 1.1 Private Building Construction 1.1.1 Residential 1..1.1 Luxury villages for the upper crust (Class A) of society 1..1.2 Middle Class (B-C) Subdivisions 1..1.3 Low-cost housing projects for low-income earners (Class D-E) 1..2 Non-residential 1..2.1 High-rise (skyscrapers) 1..2.2 Medium-rise 1..2.3 Low-rise 32

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

1.2 Public Works and Infrastructure 1.2.1 Local Government Projects 1.2.1.1 Vertical Construction Projects 1.2.1.2 Horizontal Construction Projects 2.0

By Geography 2.1 By Region 2.1.1 NCR (Metro Manila) 2.1.2 Region IV (Southern Tagalog) 2.2.2.1 CALABARZON or Mainland Provinces 2.2.2.2 MIMAROPA or Island Provinces 2.1.3 Region III (Central Luzon)

3.0

Intermediate Markets 3.1 Sand & Gravel/Construction Supply dealers 3.2 Concrete Batching Plants 3.3 Asphalt Batching Plants 3.4 Concrete Product Manufacturers (Hollow Blocks, Concrete pipes, precast/pre-stressed structural members)

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

FIGURE 6. COMMODITY FLOW CHART AND MARKET SEGMENTATION

AGGREGATE PRODUCERS

HAULERS AND SAND AND GRAVEL DEALERS

BATCHING PLANTS AND CONCRETE PRODUCTS MANUFACTURERS

CONSTRUCTION FIRMS, CONTRACTORS

GOVERNMENT

LOCAL

NATIONAL

PRIVATE

RESIDENTIAL

NON-RESIDENTIAL

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

DEMAND AND SUPPLY SITUATIONAL ANALYSIS

Demand Forecasts Accurate production statistics on aggregates are not readily available because the monitoring agencies concerned (Mines and Geosciences Bureau and DTI) due to their budgetary and manpower constraints cannot cope with the sheer number of small-scale sand & gravel and quarry operators. Only the large-scale mines, quarries, cement plants and aggregates crushing plant operations which are relatively few in number are effectively and adequately monitored and supervised. For this reason, in this study, demand for rock aggregates was projected by correlating it with the demand for cement and petroleum asphalt. The demand trends of aggregates closely parallel that of cement and asphalt since all three commodities are the basic components of concrete and bituminous mixes which are, in turn, the chief building materials used by the construction industry. The following table presents the historical statistics on the consumption of cement and asphalt for the past ten (10) years as gathered from the Cement Manufacturers Association of the Philippines (CEMAP) and the Department of Energy.

Table No. 7 Consumption of Cement and Asphalt, 2000-2009 (in thousands)

YEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

CEMENT (40kg. Bags) 301,425 292,850 315,025 303,000 304,600 282,625 292,850 325,275 330,425 361,600

ASPHALT (Barrels) 509 519 602 467 494 324 409 578 553 590

Note: The above figures were rounded to the nearest thousand

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The projected national consumption of aggregates may now be derived using the above statistics as baseline data and applying the following assumptions: A. For Cement: 1. Based on CEMAP research, cement exhibits a demand elasticity of 1.25 with respect to Gross Domestic Product (GDP) i.e. for every 1% growth in GDP, a corresponding growth rate of around 1.25% in cement demand is noted. Cement demand is therefore projected in this study by applying the said elasticity factor on the IMF forecast of GDP growth rates from CY 2010 up to 2014. 2. Concrete mixes contain an average of 0.146 cu. meters of aggregates for every bag of cement used [based on “Studies on Philippine Industries No. 9”, 1975, by the Philippine Development Corporation of the Philippines (PDCP)] B. For Asphalt 1. The dominant player or consumer in the asphalt market is the Government. Asphalt demand therefore behaves in response to Government policy as indicated in the above table where it is noticeable that an abrupt and significant jump in consumption occurs at three (3) year intervals, more specifically every election year or the year preceding one and then reverts back to more or less the same old quantities. In this study therefore, asphalt demand is projected to jump by 10% (a favourite number of Government planners) every election year and then slide back to original levels during the midterm periods. 2.

For every barrel of Petroleum Asphalt, 1.514 cubic meters of aggregates are consumed for bituminous mixes (based on the same PDCP Industry Study).

The national demand for rock aggregates for the next 5 years is therefore derived using the above assumptions as shown in the following table:

YEAR

2010 2011 2012 2013 2014

Table No. 8 Projected National Demand for Rock Aggregate, 2000 to 2004 (All figures in thousands) Derived Asphalt TOTAL Estimated Cement Derived Aggregate Demand NATIONAL GDP Demand Aggregate Demand (Barrels) AGGREGATE Growth (bags) Demand (cu. m.) DEMAND Rate (cu. m.) (Cu. m.) 3.2% 3.8% 4.0% 4.2% 4.4%

378,776 397,715 447,600 471,099 497,009

55,301 58,066 65,350 68,780 72,563

600 550 600 550 600

908 833 908 833 908

56,208 58,899 66,258 69,613 73,472 36

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The next table presents the latest NSO Statistics on the Gross Value Added in Construction By Region and/or By Selected Provinces: Table No.9 GROSS VALUE ADDED IN CONSTRUCTION, 2008 (in million pesos; at current prices) REGION/PROVINCE NCR (Metro Manila) Region III CALABARZON Breakdown Calabarzon: CAVITE LAGUNA BATANGAS RIZAL QUEZON

TOTAL PHILIPPINES

GROSS VALUE ADDED 63,499 38,547 42,250

% SHARE TO TOTAL 18.34% 11.13% 12.20%

10,576 13,851 7,249 6,926 3,649

3.05% 4.00% 2.09% 2.00% 1.05%

346,295

100%

Using the information extracted from the preceding tables and assuming there will be no marked shifts in market share patterns for the next 5 years, the geographic distribution of market demand for rock aggregates can be projected as follows: Table No. 10 PROJECTED DEMAND FOR ROCK AGGREGATES IN SELECTED REGIONS/PROVINCES, 2010 TO 2014 (all figures in thousand cu. m.) REGION/ PROVINCE NCR (Metro Manila) Region III CALABARZON Breakdown: CAVITE LAGUNA BATANGAS RIZAL QUEZON

2010 10,309

2011 10,802

2012 12,152

2013 12,767

2014 13,475

6,256 6,857

6,555 7,186

7,375 8,083

7,748 8,493

8,177 8,964

1,714 2,248 1,175 1,124 590

1,796 2,356 1,231 1,178 618

2,021 2,650 1,385 1,325 696

2,123 2,785 1,455 1,392 731

2,241 2,939 1,536 1,469 771

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

SUPPLY SITUATION The following table is a listing of existing rock aggregates crushing plants CALABARZON and their respective rated production capacities: Table No. 11 LIST OF OPERATING AGGREGATES CRUSHING PLANTS IN CALABARZON

BATANGAS

1. New Sea & Land Dev. Corp. 2. REMMAN Enterprises, Inc Total Batangas (3.84% of total Region IV capacity)

LOCATION

Tongoy, Balayan, Batangas Lucsuhin, Calatagan, Bats.

RATED CAPACITY (Metric Tons per Hour) 100 200 300

CAVITE 1. Cavite Ideal Const. Corp. Total Cavite (1.92% of total Region IV capacity) LAGUNA 1. CAPCOR/SBAC 2. J.L Aggre Corp. (JLAC) 3. ZW & S Agg. Total Laguna (7.68% of total Region IV capacity)

Ternate, Cavite

150 150

Magdalena, Laguna Magdalena, Laguna Sta. Cruz, Laguna

QUEZON 1. RGC Aggregates Corp.. Sariaya Quezon 2. Ugat Aggregates Corp. Sariaya, Quezon 3. Greenrock Const. Sariaya, Quezon 4. La Canada Aggregates Corp. Sariaya, Quezon 5. First Ridge Concrete Sariaya, Quezon 6. GLOBOROCK Sariaya, Quezon 7. Moon Rock Aggregates Corp. Sariaya, Quezon 8. ELECTA Ind. Aggregates Dolores, Quezon Resources 9. Laguna Rock Aggregates Corp. Tiaong, Quezon Total Quezon (20.49% of total Region IV capacity)

250 250 100 600

300 100 150 100 250 250 100 250 100 1,600

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

RIZAL A. Montalban (Rodriguez) and San Mateo – (52.33% of Total Rizal Capacity) 1. Monte Rock Corp. 2. Pacific Concrete Products 3. SIRRI 4. Solid Integrated Const., Inc. 5. Vulcan Ind. & Mining Corp. 6. Viba Aggregates, Inc. 7. Millex (Montalban Operation) 8. Blue Rock Agg. Inc. 9. Oxford Mines Inc. 10. RMR Aggregates Corp. SUB TOTAL

San Mateo, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal Rodriguez, Rizal San Mateo, Rizal

250 250 150 150 700 100 350 200 350 200 2,700

B. Other Rizal Plants – (47.67% of Total Rizal Capacity) 1. Batong Angono Agg. Corp. 2. A.C. Equities Corp. 3. Island Agg. Corp. 4. Gozon Dev’t. Corp. 5. Rapid City Realty 6. Hardrock 7. Project Agg. and Realty Inc. 8. La Conception Const. & Devt.Corp. Sub Total Total, Rizal (66.07% of total Region IV capacity) Total Region IV

Angono, Rizal Taytay, Rizal Antipolo, Rizal Antipolo, Rizal Antipolo, Rizal Antipolo, Rizal Antipolo, Rizal Antipolo, Rizal

500 300 150 300 260 500 250 200 2,460

5,160 7,810

The total combined rated capacity of all the above listed crushing plants is estimated at 7,810 tons per hour. Assuming a bulk density of 2 tons/cu.m. for crushed basalt and that all plants operate at an average of 10 hours per day, 300 days a year at peak capacity, the total annual production rate is projected at 11, 715,500 cu. meters in the CALABARZON area. Aside from CALABARZON, the other source of aggregates that supply the Metro Manila area is Region III (Central Luzon), notably the Lahar areas of Pampanga, Tarlac and Zambales, the chief sources of feldsphatic white sand extensively used by builders for concrete surface finishing plaster. 39

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Table below presents a listing of existing aggregates crushing plants in region III and their respective rated capacities. Table 12 LIST OF EXISTING AGGREGATES CRUSHING PLANTS IN REGION III

NAME OF FIRM

1. Orient Structural Const. Devt. Inc. 2. Villamar Connst. Inc. (San Rafael, Bulacan) 3. Villamar Const. Inc. (Bustos, Bulacan) 4. Rocky Mountain Inc. 5. Anamel Builders Inc. 6. Anamel Builders Inc. (Bayanihan) 7. We Enterprises 8. Rockmix Inc. 9. Timbol Trading 10. Rodelyn Builders 11. Aramark Enterprises 12. Primerock 13. 310 Const. Specialists, Inc. 14. Betonval Ready Concrete Inc. 15. Pacific Concrete Products Inc. 16. Consolidated Aggregates Inc. 17. Luzon Aggregates Inc. 18. Artman Inc. 19. Robust Aggregates Inc. 20. Central Luzon Aggregates 21. Cadmang Mining & Agg. Inc 22. Manuel S. Cruz (MSC) Agg. Total Region III

LOCATION

RATED CAPACITY (TPH)

Mariveles, Bataan

120

San Rafael, Bulacan

300

Bustos, Bulacan

200

Subic, Zambales Pambuan, Gapan, Nueva Ecija Bayanihan, Gapan, Nueva Ecija

120 120 120

Angat, Bulacan Pilar, Bataan Peñarada, Nueva Ecija Balanga, Bataan Angat, Bulacan Marungko, Angat, Bulacan Angat, Bulacan San Rafael, Bulacan Angat, Bulacan Angat, Bulacan Angat, Bulacan Bataan Bataan San Antonio, Zambales Masinloc, Zambales Marilao, Bulacan

100 200 100 120 150 150 100 300 250 100 600 500 1,000 100 100 100 4,950

Applying the same procedures and assumptions used for CALABARZON, the peak production capacity of Region III crushing plants is thus projected at 7,425,000 cubic meters per year. As regards Salandra sand and gravel (unprocessed aggregates) producers, their total production capacity was estimated using indirect methods due to lack of reliable 40

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

production statistics available. There are so many salandra or small scale sand and gravel producers that monitoring all their activities and production output accurately is close to impossible considering the budgetary and manpower capabilities of Government agencies concerned such as the Mines and Geosciences Bureau. Furthermore, it goes without saying or it is of common knowledge that most small scale producers and even some big firms, usually understate their production output in the reports submitted to Government agencies in order to evade taxes. Using demand projections and forecasts based on statistics on cement and asphalt sales, the following consumption levels for rock aggregates were estimated for the following geographic markets: NCR (Metro Manila) Region III Region IV Total

-

10,468,000 cu. m. 6,353,000 cu. m. 6,964,000 cu. m. 23,422,000 cu. m.

On the supply side, the total production output was estimated using the peak or full capacity assumptions as in the preceding discussion; thus: NCR (Metro Manila)

-

Region III (Central Luzon) Region IV (CALABARZON) Total

-

0 (there are no quarries/plants in NCR) 7,425,000 cu. m. 11,715,000 cu. m. 19,140,000 cu. m.

DEMAND-SUPPLY GAP TABLE 13 PROJECTED DEMAND-SUPPLY SITUATION (2010-2014) (in cubic meters, assuming no new plants enter the market)

YEAR 2010 2011 2012 2013 2014

DEMAND 23,422,000 24,543,000 27,610,000 29,008,000 30,616,000

SUPPLY 19,140,000 19,140,000 19,140,000 19,140,000 19,140,000

DEMAND-SUPPLY GAP 4,322,000 5,443,000 8,510,000 9,908,000 11,476,000

A supply shortage estimated at 4,322,000 cu.m. is forecasted for this year alone and is expected to widen in the next 4 years unless new business players come into the picture to fill in the demand-supply gap. The disparity between demand and available production volumes amounting to about 4,322,000 cu. meters could, theoretically, be plugged by Salandra or small scale quarries because of their vast numbers (according to the Mines and Geosciences Bureau 41

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

there are more than 200 salandra-type small-scale sand & gravel operations/quarries in CALABARZON alone). It could be surmised that small scale quarries are the rock aggregates market equalizers. During periods of shortages, they fill the gap between demand and supply while during times of glut they are the first to shut down operations, behaving like mushrooms in changing weather. Either way, through these small-time producers, market equilibrium is attained in the short run. Small scale operations, due to their low capital investment requirements can be quickly organized when the market is bullish as well as dissolved or dismantled during slumps. They are very flexible that in so short a time, they can adjust their production capacity effortlessly by simply hiring more laborers and/or acquiring/renting additional mobile quarry equipment. Moreover, since small scale outfits are either sole proprietorships or informal business organizations with very minimal workforce, they can easily close down operations in case of business downturns without the usual hassles experienced by big companies from concerned Government agencies and labor unions. When a turnaround in the economy happens, they merely rehire employees, renegotiate equipment leases, renew Government permits or licenses and they’re instantly back in business, resuming operations as fast as they had pulled out from the market. For small scale producers, exit from or re-entry back into the market is apparently frictionless. Nevertheless, salandra sand & gravel producers are not perceived as serious market threats by crushing plant companies because these small-time aggregates producers are just market niche players who cater exclusively to the low-end markets (composed mostly of low-cost housing project proponents and small time contractors who are not too keen on quality) using low price marketing strategies to outflank the competition. In the long run, however, as each and every consumer becomes increasingly discriminating or quality-conscious, these small bit players would be eventually eased out of the playing field.

PRICE TRENDS Historically, a seller’s market has long been existing as price of rock aggregates have been steadily and continuously escalating for the past three (3) decades or so. During the past ten (10) years (1999-2009), wholesale prices of sand, stone and gravel in Metro-Manila have skyrocketed to unprecedented levels with sustained increments averaging 5% annually. This trend is in sharp contrast to price patterns exhibited by other associated construction material commodities such as cement and asphalt. The domestic cement market have been somewhat volatile, characterized by yearly and even seasonal fluctuations in its price movements. Asphalt prices, on the other hand have always been generally stable.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The table below presents the Wholesale Price index of selected Construction Materials in Metro Manila using 1985 as base year, as compiled by the National Statistical Coordination Board (NSCB) and the Department of Trade and Industry (DTI). Table No. 14 Wholesale Price Index of Selected Construction Material Commodities in Metro Manila, 1999 to 2009 (1985=100) Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Sand, Stone and Gravel (P/cu.m.) 373.5 389.9 403.2 426.3 438.4 451.7 541.4 595.6 620.2 662.7 680.7

Cement (P/bag) 171.7 199.3 199.3 223.2 205.7 240.3 266.6 294.4 306.7 322.4 339.5

Asphalt (P/barrel) 163 175.3 223.0 222.2 266.4 296.9 333.3 403.0 486.2 587.1 630.3

PRICE TRENDS OF PRIMARY CONSTRUCTION MATERIALS IN METRO-MANILA

The apparently wide disparity in the patterns of price movements of these very closely associated commodities could be attributed to the following factors: 43

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

1. The Government allows and even encourages importation of cement from neighboring Asian Regional Markets such as Japan, Indonesia, Singapore, Thailand, Korea, Taiwan and China during periods of shortages but strictly regulates exports sales during surpluses. 2. Rock aggregates are non-perishable commodities and therefore can be stored or stockpiled indefinitely during periods of glut in the market unlike cement and asphalt which have shelf lives of only three (3) to six (6) months and therefore they need to be disposed of quickly. Cement dealers usually resort to major discounts or massive price cuts to perk up sales during periods of low demand and avoid spoilage or stale inventories. 3. Government road and airport runway projects are the overwhelmingly predominant consumers in the asphalt market and no major changes in the pace or levels of its regular annual infrastructure development programs were implemented by Government except, noticeably, during election campaign seasons. The only reason for asphalt price hikes for the periods covered is the fact that as asphalts are petroleum-based by-products and not because of surges in demand. It is common knowledge that the prices of petroleum have skyrocketed in the world market due to the huge demand created by the massive industrialization in China and India in the early to middle part of the decade and later exacerbated by the current Global Financial Crisis that began in 2007. The next table presents a historical review of the actual or list prices of the various sizes or grades of aggregates as charged or offered by Concrete Aggregates, Inc. (now Lafarge-BAAC, located in Angono, Rizal) which is acknowledged by many as the Industry Leader in the rock aggregates business. Table No. 15 Ex-plant (pick-up at source) List Prices of Concrete Aggregates, Inc., 2000 to 2009 (PhP per cu. m.) YEAR

Aggregate Sizes G-1

3/4

3/8

S1

BC

2009

330

470

450

360

340

2008

280

420

400

310

290

2007

265

400

290

270

250

2006

250

380

280

200

250

2005

230

380

260

175

215

2004

225

310

225

125

190

2003

225

310

210

125

190

2002

225

310

210

125

190

2001

185

270

170

85

150

2000

185

270

170

85

150

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

For the rest of the industry in the CALABARZON area, the 2010 list prices of the various sizes of aggregates are shown below for comparison: Table No. 16 Average Ex-Plant List Prices of Aggregates in Major Localities in CALABARZON 2010 (PhP/cu. m.) Size

Rodriguez and San Mateo, Rizal

Antipolo, Rizal

Laguna

Quezon

Cavite

G-1

340

382.00

320.00

310.00

350.00

¾” 3/8” S1

450 400 350

490.00 445.00 395.00

400.00 380.00 320.00

400.00 375.00 390.00

480.00 430.00 370.00

The price discrepancy from one locality to another could be traced to the following factors: 1. Variance in the intensity and magnitude of market demand in one locality to another;

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

2. Variance in the taxes/fees levied by local Government Units and right-of-way fees or royalties charged by property owners. Conformable with the usual business practice here in the Philippines, all additional costs are always passed on to the consumer; 3. Intensity of competition - In some localities, competition is set against a backdrop of an aggressive laissez-faire free market system while in others apparently cartelized oligopolies; 4. Product positioning- Mountain quarry aggregates extracted from unweathered basalt deposits with no or minimal fractures or fissures are generally perceived by knowledgeable buyers/users such as top-caliber contractors, structural engineers and architects to be of better quality than salandra or riverbed aggregates, hence are preferred or specified in their structural designs and thereby command higher market prices. As indicated on the above table, Quezon and Laguna prices are much lower simply because their crushing plants process riverbed raw materials only and not blasted mountain rock. Their production costs, however, are much lower due to zero blasting expenses so their gross margins per cubic meter are practically the same as the rest of the industry; 5. Hauling distances from sources to target markets- Distant or remote crushing plants usually offer much lower prices in order to attract more buyers.

MARKET COMPETITION As previously noted, 100% crushed mountain quarry aggregates are favored by top-notch contractors, builders, civil and structural engineers than salandra and crushed riverbed aggregates because of quality considerations. As regards only the companies that all produce crushed mountain quarry aggregates extracted from more or less the same type of rock raw material, market competitive strategies being adopted are no longer product quality-based. The general market perception of most buyers and end-users is that all blasted and crushed mountain quarry aggregates, whichever the source, are generic products and therefore there are no significant differences in the quality of the product being offered for sale by one company from those produced by other competitors in the market. The two major factors, therefore, that buyers consider in choosing which company to patronize are reduced to the following: 1. Price – Obviously, the company that charge lower prices get the lion’s share of the market; 2. Hauling Distance – The companies whose plants or sales outlets are nearest to or have the shortest route to the construction sites or ultimate end-user destinations are most preferred by truckers and traders/dealers of aggregates, obviously due to the prohibitive cost of fuel and petroleum products. In the Rizal area where a large majority of mountain quarry aggregates suppliers are based, choosing a strategic location is the key to success in the aggregates business because truckers/haulers will always prefer aggregates plants or sales outlets that are very visible (easy to find directions), accessible (good roads) and of course, having the shortest hauling distance to the final destination (to save on fuel costs obviously). Note that Rodriguez and San Mateo, Rizal-based crushing plants charge lower prices than those of Antipolo City, thus the marketing strategy they adopted to attract buyers. 46

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

The following maps show the locations of the competing aggregates crushing plants and quarries in Rizal and Quezon:

VIBA AGGREGATES

SIRRI

R MR

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

ANNEX – I

Assessment, Classification and Test Results of the Basalt Mineral Resource Found in Rizal Province The mineral or rock type that is commonly quarried for aggregates construction materials in the CALABARZON Region is basalt, simply because they are the most abundant mineral resource that passes ASTM standards. Basalts are mafic lavas in which calcic plagioclase is the chief mineral constituent. Associated with basalt are augite olivine, iron oxidesm hornblende, biotite, and hypersthene. There are tow groups of basalt, the olivine bearing and the olivine free varieties. Olivine bearing basalts are commonly associated with alkalic differentiate such as trachybasalts, trachyandesite and phonolite, whereas olivine free varieties are marked by the presence of quartz, it is closely associated with calc-alkalic differentiates such as andesite, dacite and rhyolite. Generally basalts exhibit both fine grained and pophyritic texture. It has vesicles that are often developed with varying sizes and filled commonly with zeolites, agates, opals and chaldedony. Late Cretaceous to Upper Pliocene spilitic basalt flows of the Barenas-Baito Formation underlies most of the western and central Rizal area. Basalt that are exposed along creeks, road cus, trail trenches and previous quarrying or excavation within these areas exhibits strong fracturing and high degree of weathering and moderate to strong alteration. Alteration or mineral assemblage notes is characterized by carbonate fracture filling, pervasive chlorite, and clusters of epidote. Fresh and unweathered outcrops of pillow basalt mapped in the area exhibits dark greenish-gray to bluish greenish gray to chocolate brown color. Typical basalt with bluish greenish gray color is commonly known to quarry operators as “bluerock.” Weathered outcrops on the other hand exhibit crumbly to soft texture and brown to yellowish brown color due to oxidation and weathering effect. This weathered material is commonly known to quarry and aggregate plant operators as “crusher rock”. Depth of weathering and soil overburden noted vary from one (1) meter to five (5) meters. Chemical Composition of a Typical Rizal Basalt Sample Compound SiO2 Al2O3 Fe2O3 FeO MgO CaO Na2O K2O H2O TiO2 P2O6 Total

Amount in Percent 52.0 18.0 3.5 5.8 5.3 10.7 3.2 0.9 0.4 0.3 0.3 100.4 49

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Petrological and Mineralogical Analysis Results Analysis shows the following characteristics of the basalt: Primary Minerals: Physioclase Microlites Opaque Minerals

35% trace

Secondary Minerals: Chlorite Quartz Calcite Opaque Minerals

30% 5% 15% 15%

Raw Material Classification of the Basalt Mineral Resource Found in Rizal Province

The basalt mineral resource in the Rizal area are graded or classified by the local aggregates industry in the province as: Class A, B and C raw materials, which are described in detail as follows: CLASS “A” MATERIALS greenish gray to bluish gray massive to slightly fractured basalt (locally called “blue rock”). These are the top of the line quality type of rock raw materials for crushing plants. CLASS “B” MATERIALS - mixture of fresh and weathered rocks and stripped overburden materials (locally called “crusher rock materials”). Though these types of raw materials are of slightly lower quality than the so-called “blue rock”, they are called “crusher rock” locally by aggregates industry insiders simply because these type of rock raw material is much easier to crush or process than the much harder and tougher “blue rock”. These raw material types, therefore, are most preferred by crushing plant operators because of their relatively lower strength, they are easier and cheaper to crush or process and therefore less fuel, power or energy costs are entailed. Nonetheless, when these types of rock are finally crushed and processed into smaller fragments they become generic aggregate products that are indistinguishable from the top-quality “bluerock” aggregates and therefore can be marketed or passed off as such. CLASS “C” MATERIALS - this particular material is composed of soils, highly weathered rocks and minor fresh basalt (this materials grade is commonly marketed as “base course materials”)

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Test Properties of a Typical Rizal Crushed Aggregates Sample Test Properties

Sieve Analysis Specific Gravity & Absorption Bulk Dry SSD Absorption, % Unit Weight Dry Loose, pcf Dry Rodded, pcf Abrasion Loss, % Soundness, %Loss MgSo4 (Magnesium Sulfate) Na2So4 (Sodium Sulfate)

G-1

3/4”

3/8”

S-1

Passing Passing Passing Passing 2.75 2.82 2.80 2.85 0.20 0.80

2.72 2.82 2.75 2.85 0.40 0.90

2.72 2.82 2.75 2.85 0.40 0.90

88 – 92 88 – 94 88 – 94 95 - 100 98 - 104 98 - 104 15 - 20 20 - 24 22 - 26

2.72 2.82 2.75 2.85 1.0 - 2.0 95 – 100 100 108 N.A.

2.0 - 4.0 2.0 - 4.0 2.0 - 4.0 4.0 - 8.0 0.8 - 2.0 1.0 - 3.0 1.0 - 3.0 2.0 - 5.0

The above test results for basalt materials found in the Rizal and surrounding areas clearly pass the standards set by the American Society for Testing Materials (ASTM) which are the generally accepted and applied benchmark used by the construction industry here in the Philippines and in most countries abroad.

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Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

ANNEX-II Housing Need Per Region 2010-2015 Region

NCR CAR I

Annual Backlog 58,412 1,309 5,556

II

4,078

III

12,569

IV

23,827

V

12,267

VI

16,816

VII

10,578

VIII

7,281

IX

7,642

X

5,912

XI

11,158

XII

6,661

ARMM CARAGA Total

5,126 5,942 2

Backlog + New 1

Households 2010

2011

2012

2013

2014

82,182 6,494

82,434 6,589

82,689 6,685

82,946 6,783

83,206 6,882

83,469 6,984

496,928 40,416

25,027

25,446

25,874

26,310

26,757

27,212

156,626

17,725

18,032

18,346

18,667

18,995

19,330

111,094

71,938

73,837

75,798

77,821

79,909

82,064

461,368

127,872

131,742

135,757

139,920

144,239

148,718

828,248

28,288

28,557

28,830

29,109

29,392

29,679

173,855

36,941

37,255

37,574

37,898

38,227

38,561

226,455

45,880

46,865

47,877

48,918

49,988

51,087

290,616

18,766

18,940

19,116

19,294

19,476

19,660

115,252

21,824

22,133

22,449

22,772

23,101

23,438

135,717

18,880

19,164

19,455

19,751

20,054

20,364

117,668

41,922

42,722

43,542

44,384

45,248

46,134

263,952

18,033

18,270

18,511

18,758

19,009

19,266

111,847

22,800

23,482

24,190

24,926

25,691

26,484

147,574

12,791

12,902

13,016

13,131

13,248

13,367

78,456

597,362

608,370

619,708

631,389

643,422

655,821

3,756,072

2015

195,133 1 2

Refers to the annual Housing Backlog plus projected yearly New Households. Annual Backlog is the total housing backlog for the medium-term divided by six years.

52

TOTAL

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

ANNEX-III LIST OF EXISTING SKYSCRAPERS IN THE PHILIPPINES

Rank

1

Name

PBCom Tower [3]

Location

Makati

Height (m)

259

Storeys

52

Built

Notes

2000

Tallest building in the Philippines (2000present), 120th tallest building in the world

GMA-7 Transmitter tower, tallest manmade structure in the Philippines until completion of PBCom Tower

-

GMA 7 (DZBBTV) Tower of [4] Power

Quezon City

237

-

1988

2

G.T. International [3] Tower

Makati

217.3

47

2001

3

The St. Francis Shangri-La [3] Place

Mandaluyong 213

60

2009

Currently the tallest twin towers in the Philippines.

4

Petron [3] Megaplaza

Makati

210

45

1998

former tallest building in the Philippines (1998-2000)

5

UnionBank Plaza

Pasig

206

49

2004

Makati

204.5

57

2009

6

The Residences at Greenbelt - San Lorenzo Tower [3]

53

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

7

1322 Golden Empire Tower [3]

Manila

203

57

2002

8

One Corporate [5] Centre

Pasig

202

45

2009

9

Philamlife Tower

Makati

200

48

2000

-

ABS-CBN Tower

-

Transmitter tower

Mandaluyong 197

51

2000 partial

Makati

46

2001

10

11

St. Francis Square Towers [3]

RCBC Plaza Yuchengco [3] Tower

Quezon City

198

191.7

12

One San Miguel Avenue

Mandaluyong 183

54

2001

13=

LKG Tower

Makati

180

38

2000

13=

The Shang Grand Tower

Makati

180

46

2006

15=

Pacific Plaza [3] Towers

Taguig

179

52

2001

San Juan

179

37

15=

[3]

Atlanta Centre [3]

Transmitter of the ABS-CBN Broadcasting Network

54

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

17

Robinsons Equitable [3] Tower

Pasig

175

45

1997

18=

One Roxas [3] Triangle

Makati

174

40

2000

18=

Robinsons Summit Center

Makati

174

38

2001

20

The Enterprise Center Tower 1

Makati

172

45

1999

Makati

171

48

2008

21

[3]

[3]

The Residences at Greenbelt Laguna Tower

former tallest building in the Philippines (1997-1998)

[3]

22

RCBC Plaza [3] Tower 2

Makati

170

41

2001

23

Pearl of the [3] Orient Tower

Manila

168

42

2004

24

Discovery [3] Suites

Pasig

167

40

1999

Other Notable Buildings Name

GA Twin Towers

City

Mandaluyong

Height (m)

Storeys

165

40

Completed

Notes

2005 (Tower 1) & 2008

55

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

(Tower 2)

Rufino Pacific Tower

Makati

161

41

1996

former tallest building in the Philippines (1993-1998)

Ayala Tower One

Makati

160

35

1996

Headquarters of the Ayala Corporation

Orient Square

Pasig

160

35

1999

Lancaster Suites [3] Tower 1

Mandaluyong

158

42

2007

Makati

155

36

1998

Headquarters of Export and Industry Bank (Exportbank)

Makati

154

37

1998

Serviced apartment building

[3]

Makati

152

30

1995

The Salcedo Park Tower 2

Makati

151

Pacific Plaza Condominium

Makati

150

44

1992

Pasig

150

35

2000

Makati

150

45

2006

Exportbank Plaza [3]

BSA Tower

[3]

The World Centre

[3]

Wynsum Corporate Plaza

One Legazpi Park [3]

1996

56

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

Joy ~ Nostalg [3] Center Manila

Pasig

150

40

2009

One McKinley Place

Taguig

149

47

2003

The Malayan [3] Plaza

Pasig

145

37

2006

Insular Life Corporate Center [3] Tower 1

Muntinlupa City

140

34

2000

Crown Regency Hotel and Towers [3]

Cebu City

140

38

2005

Opened last 09 September 2009

Fuente Tower 1 (Hotel tower) is the tallest building outside Metro Manila

57

Mines and Geosciences Bureau Region IV-A CALABARZON Technical Bulletin no. 2010-2 “CALABARZON CONSTRUCTION AGGREGATES INDUSTRY STUDY 2010” Engr. Randy L. Discipulo, EM, MBA E-Mail: [email protected]

ANNEX IV MINING PERMIT/TENEMENT MAP OF CALABARZON REGION

CALABARZON OPERATING MINES, QUARRIES AND MINERAL PROCESSING PLANTS Medium Scale (Capital Investment of Php 10 million to Php 250 million) Rock Aggregates Crushing Plants Rizal - 18 Quezon - 9 Laguna - 3 Batangas - 2 Cavite – 1

Large Scale (Capital Investment of Php 250 million up)








Marble Quarry and Processing Plants Teresa Marble Corporation Lime Processing Plants (Rizal Province) Teresa Limestone Producer’s Cooperative . Lime Processing Plants (Quezon Province) 1. Tayabas Rocklime 2. Guanzon Lime 3. Las Buenas 4. Fuji Minerals, Inc. (Atimonan Rock)

Solid Cement Corp. (CEMEX)  Antipolo, Rizal FR Cement Corp. (LaFarge-Republic Cement Teresa Operations)  Teresa, Rizal Fortune Cement Corporation (LaFarge-Republic Cement Batangas Operations)  Taysan, Batangas

Small Scale Mines and Quarries (Capital Investment below Php10 million)    

Commercial Sand & Gravel Permits- 28 Industrial Sand & Gravel Permits - 69 Quarry Permits - 90 Small Scale Mining Permits -9

58