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Competition Commission wants a new producer to enter Great Britain’s cement market

World Cement,


The UK’s Competition Commission (CC) has announced that it is considering ways to stimulate competition within Great Britain’s cement sector by encouraging a new entrant into the market. In order for this to occur, the CC could provisionally require Lafarge Tarmac to sell off one of its cement plants and perhaps an accompanying ready-mix concrete facility, in addition to imposing limits on the flow of information and data between existing cement manufacturers.

Furthermore, the CC is investigating ways of increasing competition in the GGBS supply chain through the sale of appropriate production sites.

In May of this year, the CC published provisional findings into its investigation of the aggregates, cement and ready-mix markets in Britain. It found that the structure of the market and conduct within the cement industry increases coordination between the three major cement players (Lafarge Tarmac, Cemex, Hanson), thereby inhibiting competition and potentially leading to higher prices. An Addendum to the report highlights the supply chain issues in the GGBS market. The CC points out that no issues have been found in the aggregates or ready-mix industries.

The CC has not yet reached a final decision on its findings. This will follow consideration of responses to the provisional findings published in May, along with the Addendum and provisional decision on remedies, both published today. The proposed remedies include:

  • Restrictions on publishing data relating to Great Britain’s cement market.
  • Cement producers should send customer-specific pricing letters, rather than generic price announcements to customers.
  • Hanson and Lafarge Tarmac should both divest two of their GGBS production sites, pending further consultation on the GGBS supply chain. These should not be sold to an existing British cement manufacturer.
  • Lafarge Tarmac should be required to sell either its Cauldon or Tunstead cement plant to a CC approved purchaser, not to an existing cement producer within Great Britain’s industry. This purchaser could also acquire a certain number of Lafarge Tarmac’s ready-mix facilities.

“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,” said Professor Martin Cave, CC Deputy Chairman and Chairman of the Inquiry Group.

“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,” added Professor Cave.

“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.”

The provisional finding, Addendum and proposed remedies can be found here. The CC invites responses to these by 29 October 2013. The Commission will publish its final report by 17 January 2014.

Adapted from press release by


 

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