Competition watchdog paves way for new cement player
The Competition Commission is looking to boost competition in the cement market by opening the way for a new independent producer.
The commission is provisionally requiring Lafarge Tarmac to sell a cement plant and proposing to limit the flow of information and data between cement producers in a bid to open the market.
The commission is also looking to increase competition in the supply chain for ground granulated blast furnace slag by ordering the sale of suitable production facilities.
The measures are outlined in a summary of its provisional investigation into the supply of aggregates, cement and readymix in Great Britain following fears that cement prices are too high.
Professor Martin Cave, CC Deputy Chairman and Chairman of the Inquiry Group, said: “As we indicated in May, both the scale of the problems we found in the GB cement markets and the way that they stemmed from established structure and conduct meant that extensive measures were likely to be necessary to address them.
“The best way to disturb the balance of a market where producers have focused on retaining their respective market shares rather than competing is to create the opportunity for a major new entrant.
“Being able to buy a cement plant—and a number of accompanying RMX plants if necessary—will give the new producer a foothold in the GB cement markets and will increase the number of GB cement producers, thereby disrupting the established patterns in these markets.
“In addition to this, we will tackle the channels which facilitate the flow of information between the GB cement producers, such as price announcement letters and industry data. For a long time, these channels have given producers too much awareness of how their counterparts are performing and their future pricing strategy.
“We think that these measures will go a long way towards establishing a more competitive market for customers. The fundamental importance of cement to the construction and building sectors and the amount of such work that is funded by the public purse only underlines the need for these actions.”
A spokesperson for Lafarge Tarmac said: “We’re disappointed with the Commission’s Provisional Decision on Remedies.
“The Commission’s assumptions and reasoning have serious flaws and the biggest loser in this process will be the customer.
“There is strong evidence to demonstrate there is effective competition in the sector – with new players having recently entered the marketplace. The CC should take these factors on board for its final report.
“The CC is yet to publish its final report and it would not be appropriate to speculate or comment further at this stage before the final outcome of this process.”
A summary of the suggested remedies is as follows:
- Lafarge Tarmac should be required to choose between divesting either its Cauldon or Tunstead cement plant. The purchaser of the divested cement plant should be able to acquire a limited number of RMX plants from Lafarge Tarmac subject to the purchaser’s total internal cementitious require¬ment being capped at 15 per cent of the acquired cement production capacity. The buyer would have to be approved by the CC and not be one of the GB’s existing cement producers
- Restrictions on the publication of GB cement market data. Data currently published by the Minerals Products Association (MPA) and the Department for Business, Innovation & Skills should be delayed by no less than three months from the time period to which it refers before it can be made public. GB cement producers will also be prohibited (with a small number of specific exceptions) from providing their sales and production data to any other private sector organization.
- GB cement suppliers will be prohibited from sending generic price announcement letters to their customers. Instead, they should send letters that are specific and relevant to the customers receiving them.
- Subject to further consultation on the GGBS supply chain, Hanson should divest two of its GGBS production facilities (GGBS plants) and Lafarge Tarmac should divest two of its GBS production facilities (GBS plants), again to a suitable purchaser approved by the CC but not to another GB cement producer.
The commission will publish its final report by 17 January 2014 and is now inviting responses.
To submit evidence, please email [email protected]
