UK Competition Commission paves way for new cement producer

The 5436 UK Competition Commission is looking to invigorate competition in the Great Britain cement market by opening the way for a new independent producer.

As well as provisionally requiring 7235 Lafarge Tarmac to sell a cement plant ((either Tunstead in County Derbyshire or Cauldon in County Staffordshire, England have been suggested)  accompanying ready mix concrete plants if necessary to facilitate entry of this new producer, the commission is also proposing to limit the flow of information and data between cement producers.

Additionally, it is looking to increase competition in the supply chain for ground granulated blast furnace slag (a partial substitute for cement) by ordering the sale of suitable production facilities. This remedy is subject to further consultation on the GGBS (ground-granulated blast furnace slag) market.

The measures are outlined in a summary of its provisional decision on remedies, the penultimate stage of the commission’s market investigation into the supply of aggregates, cement and ready mix concrete in Great Britain.

In May 2013, the commission published its provisional findings which found that both structure and conduct in the cement sector limits competition by aiding coordination between the three largest producers (Lafarge Tarmac, 643 Cemex and 1343 Hanson) and is likely to be resulting in higher prices for all cement users.

In an Addendum to the provisional findings, published for consultation, the commission also identifies competition issues in the supply chain for GGBS. It has not identified any problems with the markets for aggregates or RMX.

The commission has not, at this stage, made a final decision regarding the existence and form of any competition problems. Therefore, itsr final decision on any competition problems, and appropriate remedies, will take account of responses to its provisional findings (as published in May) and to the addendum to the provisional findings and of responses to its provisional decision on remedies (also published recently).

Professor Martin Cave, the commission’s 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.”