Cement producers dismayed by competition measures

Industry disappointed by remedies announced in Competition Commission’s final report

IN its final report into the market for aggregates, cement and ready-mixed concrete, published earlier this week, the Competition Commission announced a number of measures affecting companies in the cement market. No problems were identified by the Commission in the markets for aggregates or ready-mixed concrete.

The Competition Commission (CC) has said Lafarge Tarmac must sell either Cauldon or Tunstead cement plant, as well as some accompanying ready-mixed concrete plants if necessary, in order to facilitate the entry of a new cement producer.

The CC is also planning to introduce measures to limit the flow of information and data concerning cement production and price announcements, as well as looking to increase competition in the supply chain for ground granulated blast-furnace slag (ggbs) by requiring Hanson to sell one of their ggbs production facilities.

Commenting on the measures, Cyrille Ragoucy, chief executive officer of Lafarge Tarmac, said: ‘We are disappointed that the CC has asked Lafarge Tarmac to divest another cement plant only a year after it allowed the creation of the joint venture. This is not reasonable or proportionate and we have not been given a fair opportunity to defend our position.

‘The CC has based its remedies on a partial and historic picture of the market,’ he continued. ‘Its analysis of industry profitability, which is central to its conclusion of Adverse Effect on Competition, is flawed, grossly overestimating the returns made. It has also failed to take into account the new business environment that has been established by our divestments – only 12 months ago – to create a new competitor, and the entry of new importers into the market.

‘Regrettably, the biggest loser in this process will be the customer. We are focused on reviewing our options based on the CC’s announcement and making a decision that is in the best interests of our employees, customers and shareholders,’ said Mr Ragoucy.

A spokesperson for CEMEX UK commented: ‘We are pleased that the CC has confirmed that there is no problem with the effective functioning of the ready-mixed concrete and aggregates markets in the UK, and also that the proposed divestment remedies will not affect our own assets and operations directly.

‘However, in CEMEX’s view, the conclusion that there is insufficient competition in the cement market is incorrect and, therefore, the remedies are disproportionate to the alleged harm, which is itself unproven. The allegation of excessive profit is based on a highly theoretical model that is fundamentally flawed and which we do not recognize in our day-to-day dealings with the market.'

Hanson UK’s head of legal, Ed Gretton, said: ‘We are pleased that the CC has changed its mind on the proposed remedy for ggbs and withdrawn the multi-site divestment package, but we remain disappointed about the way the process was carried out. The CC did not consult us properly on its findings in relation to ggbs and we found many errors in its analysis. We will now consider our position before making a decision with regard to the appeal we filed before Christmas.’

A statement issued by the Mineral Products Association (MPA), which co-operated fully with the CC throughout the investigation, particularly in areas such as the operation of the mineral planning system and other regulatory issues impacting on industry operations, said the Association would review the content and findings of the report, and noted that the CC had not identified any problems with the markets for aggregates or ready-mix concrete. The statement added that the MPA supported the proposed remedy relating to the publication of GB cement market data and had already taken action on this issue.