Displaying items by tag: UK
UK Competition Commission talks tough
09 October 2013Well, it seems like they were serious.
The UK Competition Commission has provisionally decided that Lafarge Tarmac should sell off one of its cement plants in the Midlands. The Commission also wants the sale to exclude buyers from any pre-existing UK cement producer. The door is open from Holcim or CRH downwards to enter the UK market. Although if the enforced Lafarge sale of Hope to Mittal Investments in 2012 is indicative, it may well be to an industry outsider.
If the move goes ahead it will open up the Midlands and north of England from four cement producers - Hope Cement, Lafarge Tarmac, Hanson and Cemex - to five. Lafarge Tarmac's cement production capacity lead of nearly 4Mt/yr will be knocked down to nearer 3Mt/yr, putting it level with Hanson Cement's production capacity.
Unsurprisingly Lafarge Tarmac is not best pleased, putting out the following in response to the commission's announcement. "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 Commission also wants to increase competition in the supply chain for ground granulated blast furnace slag (GGBS). According to the Commission findings Hanson dominates the UK GGBS market and Lafarge Tarmac controls the market for its precursor, granulated blast furnace slag (GBS). So production facilities may need to be sold by both Hanson and Lafarge Tarmac.
As an aside it's worth noting that the Belgian Competition Council recently imposed fines due to anti-competitive practices also related to GGBS. Also, elsewhere in the news this week Irish GGBS cement producer Ecocem is aligning itself with the EU carbon roadmap to 2050, partly at least because its product produces less CO2 per tonne of cement. Whoever or whatever controls the supply of GGBS in the UK has implications for how emissions are lowered in the cement sector.
Other suggested measures from the Commission such as restricting the publication of UK cement market data seem problematic. Although it may make it more difficult for UK cement producers to collude it will also make it harder for related businesses (including press and industry analysts like Global Cement) to understand what is happening at any given time.
Finally, we have to ask what the effects of the Commission's suggestions might be at the start of an uncertain recovery in the UK construction market might be. According to the Minerals Production Association cement production fell from 8.5Mt in 2011 to 8Mt in 2012, the first decrease since 2009. 2013 seems set for modest growth on 2012. The implications of Commission's plans - if they happen – could be huge.
UK Competition Commission planning to create new cement producer
08 October 2013UK: The UK Competition Commission (CC) has provisionally decided that Lafarge Tarmac should sell a cement plant to increase competition in the UK cement market. The CC is also proposing to limit the flow of information and data between cement producers and to increase competition in the supply chain for ground granulated blast furnace slag (GGBS).
"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 CC Deputy Chairman and Chairman of the Inquiry Group Professor Martin Cave.
In detail the CC has provisionally decided that 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 ready mixed concrete plants from Lafarge Tarmac subject to the purchaser's total internal cementitious requirement being capped at 15% of the acquired cement production capacity. The buyer would have to be approved by the CC and not be one of UK's existing cement producers.
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. UK 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 organisation.
UK 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 and Lafarge Tarmac should divest two of its granulated furnace slag production facilities, again to a suitable purchaser approved by the CC but not to another UK cement producer.
Responses to the CC's suggested measures will now be gathered before it publishes its final report by 17 January 2014.
Cementing the recovery
25 September 2013The timing of the UK Mineral Products Association's (MPA) latest call to arms makes one wonder how well the economic recovery is going in parts of Europe. The MPA has launched a document entitled 'Cementing the Future – Sustaining an Essential British Industry' to promote the UK cement industry. It is the MPA's job to beat the drum for the industries it represents so in this sense it should always be trying to raise the minerals sector's profile.
Yet as the UK economy starts to lumber out of the recession, a publication like this suggests that the challenges ahead of the industry are still large. MPA figures released in July 2013 showed that year-on-year growth in cement volumes hit a low of -10% in the second quarter of 2012 before rising to better (negative) rates to the first quarter of 2013. No data was available for the second quarter of 2013.
One of the MPA's recommendations is that the UK government does more to protect the main internationally-owned players from international trading markets. At least foreign-owned companies provide local jobs. The main thrust is to protect the industry from carbon taxation, ensuring better international competiveness. On the back of Cembureau's latest industry figures, chief executive Koen Coppenholle recommends much the same thing for Europe as a whole in his column in the September 2013 issue of Global Cement Magazine.
One thing the MPA doesn't need is more bad news when the UK Competition Commission publishes its report on an investigation on the aggregates, cement and ready-mix concrete market in December 2013. On that score the investigation hasn't been too troubling so far with its provisional findings concluding that despite poor competition between firms on price there was no explicit collusion.
In terms of competition though things could be worse. For example, take Colombia. In August 2013 the Colombian competition agency, the Superintendency of Industry and Commerce (SIC), announced its investigation in the country's main players for 'sustained and unjustified' increases in the price of cement since 2010. For the first six months of 2013 cement prices rose by 8% compared to an inflation rate of 1.73%.
Whatever is happening in Colombia, its largest cement producer, Cementos Argos, saw its profits rise by 5.9% to US$218m in 2012. At present the MPA can only dream of times like that again and hope that the UK government takes note of its advocacy.
MPA calls for UK government to ‘Cement the Future’
23 September 2013UK: The Mineral Products Association (MPA) today, which promotes the interests of the cement industry in the UK, has today launched a landmark document for the UK cement industry, 'Cementing the Future – Sustaining an Essential British Industry'. The new publication sets out to explain the importance of cement and concrete to the UK economy and society and draws attention to the vulnerability of the industry to overseas competition unless the government acts to create a level playing field in terms of the cost of regulation and unilateral 'green taxes' that overseas competitors do not face.
"Cement is a key constituent in concrete, the most widely used man made substance on the planet , and underpins our economy and everyday life," said Dr Pal Chana, Executive Director of the MPA. "Our shops, factories, offices, homes, schools, hospitals and much more all depend on this critical material yet the industry is struggling to compete in the face of ever increasing costs, some of which are centrally imposed by government. Our strategic significance to the economy cannot be overstated."
"The government's own economic growth plans are predicated on a substantial increase in the construction of infrastructure and housing and cement and concrete are going to be needed for both," continued Chana. "We cannot allow the supply of this essential material to be left to the vagaries of the international trading markets, especially not when we have a deep rooted industry here in the UK with factories in mainly rural locations providing much needed jobs."
'Cementing the Future' calls on the government to: recognise the industry's strategic significance and potential to generate economic growth; acknowledge the industry's role in delivering a low-carbon future for the UK; deliver an economic climate of investment security and reduce regulatory uncertainty in the industry; reduce the cumulative cost burden on the industry and; lift unilateral green taxes. In return, the industry will deliver: a secure supply of quality-assured cement made in the UK; commitment to the UK government's infrastructure and built environment programme; continued investment in the future of a healthy domestic cement industry; sustained employment at our network of UK cement plants and the supporting supply chain and; a planned reduction of 81% in greenhouse gases as detailed in our Carbon Roadmap to 2050.
"The UK cement industry has provided an essential material for the built environment for over 100 years. Working with government, we can continue to make a vital contribution to development and cement the future of an essential British industry", concluded Chana.
Bill Brett appointed chairman of Mineral Products Association
04 September 2013UK: Bill Brett has been appointed as the chairman of the Mineral Products Association (MPA) for the next two years to 2015. He will succeed Dyfrig James. Brett, the chairman of Brett Group, has a wide range of commercial interests and industry involvement.
"Members have appreciated Dyfrig's inclusive approach and the efforts he has made to engage with all parts of the MPA, particularly in the regions and of course his beloved Wales," said Nigel Jackson, chief executive of the MPA. "The MPA would like to thank Dyfrig for all his efforts and wish Bill Brett every success for his two year tenure."
Weston uncertainty ends in New Zealand
07 August 2013Weston is off. The 'will-they, won't they' of the New Zealand cement industry took a more decisive turn this week with the announcement that Holcim New Zealand intends to import cement instead.
Once Holcim's existing cement plant at Westport winds down there will be no more indigenous cement production on New Zealand's South Island. Golden Bay Cement on North Island will be left as the nation's sole cement producer. Instead Holcim now plans to build US$80m on an import terminal and related infrastructure.
Given a previous price tag of US$400m for the Weston project, switching to an import strategy makes sense for Holcim which has had a hard time of late with a poor first quarter following a tough year in 2012. Despite the benefits that the construction sector in New Zealand has seen with the rebuilding following the 2011 Christchurch earthquake, Holcim is thinking of its wider strategy. Although, as one of the largest multinational cement producers, Holcim has a wide supply chain for clinker, Australia reported poor sales in 2012 and it would be an obvious hub to keep New Zealand topped up with sufficient product.
Last week's doubts about the Indian cement market – when Holcim announced major business restructuring in India – may also have an effect as Vicat too has reported problems in the country this week. The question to ask when Holcim releases its half-year results in mid-August 2013 is how much excess capacity does the company have?
Coincidentally, importing cement is one issue that has come up in the UK Competition Commission's on-going investigation into the UK cement industry. An Irish cement importer has alleged that unnamed European cement producers have blocked his attempts to import cement to Ireland. The UK Competition Commission will continue its investigation until late 2013. Whilst we are not suggesting that the New Zealand cement industry has any problems of this kind, as the market adjusts to a higher level of imports it will encounter new challenges.
UK/Ireland: Irish cement importer Eircem has told the UK's Competition Commission that 'there is no free competition' in the cement market in Europe. Managing director Peter Goode submitted the comments as part of the evidence being gathered by the UK Competition Commission in its ongoing investigation on the UK cement industry, as reported by the Irish Independent.
"The most recent act of such practices and anti competitive activity by [European Cement Producer 1] and [European Cement Producer 2] against me, my business and my family is so blatant that it defies reality and logic," said Goode in his submission to the Competition Commission.
Goode alleges that his previous company suffered anti-competitive measures from a European cement producer in 2009 when it attempted to import cement from Turkey. Further claims include an incident on a visit to a UK cement plant in 2012 when an employee of a cement producer refused to supply him with cement because it had a pre-existing agreement with another company not to supply cement to Ireland.
According to the Irish Independent, Goode previously owned Goode Concrete, which collapsed in early 2011. The company is currently attempting to sue Irish building materials manufacturer CRH for damages also related to alleged anti-competitive behaviour.
The Competition Commission's investigation on the UK aggregates, cement and ready-mix concrete market is due to be completed in late 2013 with a publication date set for December 2013. Evidence from the investigation has been published on the Competition Commission website.
Fairport Engineering appoints Jeff Buxton
19 July 2013UK: Fairport Engineering has appointed Jeff Buxton as the Sales Manager for Heavy Industries. Buxton holds over 35 years of experience working in the bulk materials processing and handling industries and is a fully-qualified mechanical and electrical engineer. His industry knowledge includes the technologies and systems used in the cement, gypsum, aggregates and alternative fuels sectors, amongst others. Previously Buxton has worked for a number of the leading suppliers of proprietary equipment to these markets.
Same product, same price? Competition in the UK
22 May 2013Back in November 2012 this column asked whether the UK cement market had become more competitive following the sale of the Hope cement plant. Broadly, we thought it had. Half a year later though and it seems that the UK Competition Commission doesn't think so. On 21 May 2013 it released provisional findings that the UK's three major cement producers were failing to compete on price with each other.
Its three main points of evidence included increases in average cement prices between 2007 and 2011, rising profitability for UK producers between 2007 and 2011 and only small changes in annual market share of sales. All of these market outcomes occurred despite a 'significant' slump in demand for cement from 2007 to 2009.
The problem here is that the Competition Commission's data refers to the UK market before it took action. In 2012 it forced the sale of Lafarge's Hope cement plant as a condition of the joint-venture between Lafarge and Tarmac. Subsequently, Lafarge and Tarmac's combined cement production capacity in the UK fell from 5.15Mt/yr to 3.85Mt/yr. However, the Competition Commission has modelled Hope Construction Materials as an effective replacement of Tarmac's previous market share in its analysis. With no major change to the status quo in the UK cement industry, it feels that competition is unlikely to improve. Hence the need for further action.
It must be emphasised that the Competition Commission did not find any evidence of explicit coordination between the producers. Professor Martin Cave, Competition Commission Deputy Chairman and Chairman of the Inquiry Group, summed it up as follows: "In a highly concentrated market where the product doesn't vary, the established producers know too much about each other's businesses and have concentrated on retaining their respective market shares rather than competing to the full."
To look at just one example, it should be noted that most of the management team of Hope Construction Materials came originally from jobs at either Lafarge or Tarmac. However in Hope's defence, who else would the new company hire except seasoned industry personnel. Naturally they would want the best people possible!
With the revival of the UK construction industry hanging in the balance the Competition Commission has a tough job ahead to ensure increased competition in the future.
UK: The Competition Commission has provisionally found that the UK's three major cement producers are failing to compete on price.
The UK regulator said there were serious problems in the way that the cement market operates in the UK, with customers facing higher prices because the producers know too much about each other's businesses. It estimated that this behaviour could have cost consumers around Euro212m between 2007 and 2011, adding that it was looking at a wide range of remedies to increase competition.
"Strikingly, despite low demand for cement over recent years, prices and profitability for the British producers have still increased," said Commission deputy chairman Martin Cave. He added that Lafarge Tarmac, Cemex and Hanson have concentrated on retaining their respective market shares rather than competing to the full.
The watchdog said that there was no explicit collusion between the firms. Instead there have been conditions that allow them to coordinate their behaviour, including established information channels such as price announcement letters, copy-cat behaviour and cross-sales.
"Given the extent of the problems we have found, we feel that hard-hitting measures may be necessary to open up the cement market to greater competition by transforming existing structures and behaviour," said Cave. Possible remedies could include requiring the firms to divest of cement plants as well as prohibiting generalised price announcement letters.
The UK cement industry consists of four companies: Lafarge Tarmac, Cemex and Hanson, a subsidiary of HeidelbergCement. The fourth company, Hope Construction Materials, was established in January 2013 as a result of the one of the Competition Commission's requirements for the creation of a joint-venture between Lafarge and Anglo American (Tarmac) in 2012. It led to the Euro353m sale of plants and quarries to steel tycoon Lakshmi Mittal's investment vehicle, including one of the UK's largest cement plants in Hope, Derbyshire.