Calls for competition in Israel’s cement market

MK Einat Wilf has criticised Israel’s cement monopoly, adding that Prime Minister Benjamin Netanyahu's proposed housing reforms are a good start, but not enough to combat rising housing prices. The Atzmaut party faction head recently called on Netanyahu to open the cement market to competition in order to reduce these prices.

Nochi Dankner IDB Group company, Nesher Israel Cement Enterprises, currently controls Israel’s cement market. The company allegedly controls more than 90% of the market, where an estimated 4.4 million t of cement was sold last year.

"I consider these steps [the Prime Minister’s proposals for reducing housing and rental prices] the basis for action, but there's another subject that hasn't been discussed that should be addressed – introducing competition into Israel's cement market. Nesher's monopoly contributes in no small portion to the high housing prices," Wilf stated recently.

She added that the cement manufacturer has been campaigning aggressively for years against any steps to open the market to imports, which could come from Jordan, Turkey, Romania or other countries.

"Nesher's monopoly hangs on doubtful claims over 'dumping prices,' and thus keeps the market closed at the entire public's expense. This damage has passed under the radar of the housing discussion, and it cannot be allowed to escape proper criticism," she said.

Calling on the government and Finance Minister Yuval Steinitz to uphold their repeated commitment to fighting economic concentration and increasing competition, Wilf noted that "here they have a golden opportunity to open the cement market to competition and to make an important contribution to reducing construction costs, which could in turn lower housing prices.”

As Nesher is Israel's only cement producer it is considered a monopoly. IDB Group company Clal Industries owns 75% of Nesher, while Ireland-based CRH holds the remaining 25%. Nesher's subsidiaries include the Taavura Group, held in equal parts by Nesher and the Avraham Livnat Group. The latter group also holds part of IDB Group's controlling core.

Figures from 2010 reported by market sources show that imports were responsible for only 10% of Israel's cement market. The imported cement was worth a total of ILS54 million, up from ILS52 million in 2009 and ILS31 million in 2008. According to a 2007 report by the Knesset Information and Research Center, Nesher posted revenues of ILS1.4 billion from its cement operations in 2006.

The report found that "The high concentration is not just in the cement market, but continues down the supply chain into the concrete market as a whole…some 45% of the country's concrete market is controlled by a limited number of companies. Cement products reach their final customers (industry and construction companies) mostly through Nesher's big customers."

Partially based on the price of imports, Nesher's cement prices are set by the government. Yet the report found that Nesher's cement was being sold within the Palestinian Authority for 6.25% less than it was being sold in Israel. In addition, in 2006, Nesher's prices were on average 30% higher than those in neighbouring countries.

"The high amount of concentration in Israel's cement market is increasing the price of cement and its derivatives," concluded the report. "While that increase can be explained by the increases in prices of the raw materials used to make cement, in a competitive market the increase ultimately would have been more moderate."

Read the article online at: https://www.worldcement.com/africa-middle-east/27072011/calls_for_competition_in_israel%E2%80%99s_cement_market/