Energy firms are ‘Trump-proofing’
Developing power infrastructure in the Philippines may become costlier amid the trade war triggered by US President Donald Trump, but a silver lining may emerge with the sector increasing its reliance on local production and foreign investors redirecting their focus on the country, analysts say.
Trump’s return to the White House marked broader trade tensions as he imposed new 25 percent tariffs on imports from Mexico and Canada this week and another 10 percent on Chinese goods.
“We’re definitely keeping an eye on the ongoing global trade tensions. While these may seem far from the Philippines, they will affect global supply chains—especially when it comes to critical energy infrastructure like solar panels, frames and major electrical equipment including rotors, batteries and other components,” says Emmanuel Rubio, president and CEO of Meralco PowerGen Corp. (MGEN).
“It could mean higher prices and may affect lead times as well. But we’re taking proactive steps in MGEN to mitigate potential risks from this trade tension,” he adds.
In the short term, Rubio doesn’t foresee any “significant” impact, but is closely monitoring the situation.
“We need to continue building resiliency into our supply chain strategy to shield us from these situations,” he says.
Jayniel Carl Manuel, an equity trader at Seedbox Securities, says the local energy sector won’t be unscathed from the recent development, recalling that tariff hikes in the past resulted in “a profound ripple effect on global commodity prices.”
“For the Philippines, where the power industry relies significantly on imported materials for power plant construction and grid expansion, this historical precedent suggests that ongoing trade tensions between major economies … could similarly drive up costs,” he tells the Inquirer.
A rise in raw material costs will translate to higher capital, which Manuel says can lead to project delays.
Mineral resources
But while these could be seen as hiccups, Manuel is confident this may also push the local market to lessen their dependence on imports.
“The Philippines could capitalize on this trend by leveraging incentives for local production and diversifying its supply chains,” he adds.
On the other hand, Peter Garnace, equity research analyst at Unicapital Securities Inc., says that while Trump’s latest tactics could “significantly impact metal prices in the United States,” the Philippines may not be vulnerable to the looming supply chain woes.
“The country itself is a major producer of critical metals for energy infrastructure,” Garnace tells the Inquirer in a separate interview.
Meanwhile, another analyst cites the energy efficiency segment of the market, which could be shielded from the “price shock.”
“Protecting our energy efficiency sector from such price shock is the fact that most equipment imports in the recent years, including those of a few US brands, are sourced directly from China, Japan, Europe and Asean (Association of Southeast Asian Nations)-based suppliers,” says Alexander Ablaza, president of Philippine Energy Efficiency Alliance.
More or less foreign investments?
Garnace believes that given the Philippines’ close ties with the United States, it could be “less exposed to tariffs” and even benefit from “the opportunities of changing global trade dynamics.”
“We see the Philippines to be a beneficiary of reshoring or ally-shoring activities of companies relocating their manufacturing sites from China to friendlier countries,” Garnace says.
Manuel echoes this, saying the Philippines can entice foreign investments “seeking stability in a turbulent global market.”
“[This could] position the Philippine power industry for long-term resilience and competitiveness,” Manuel says.
