Displaying items by tag: Hanson

Back 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.

UK: Building materials producer Hanson, a UK-based part of Germany's HeidelbergCement, has launched a new range of quality concretes designed to reduce the CO₂ emissions associated with construction projects. The EcoPlus range contains Hanson Regen, a sustainable substitute for Ordinary Portland Cement (OPC) in concrete. Hanson Regen is a ground granulated blastfurnace slag (GGBS) and can replace up to 70% of the OPC content. Replacing 1t of OPC with 1t of Regen in EcoPlus concrete reduces the embodied CO₂ by around 850kg.

Paul Lacey, Hanson's head of sustainability and marketing, said, "EcoPlus is designed to help engineers, specifiers and contractors meet current and future environmental legislation. Our online carbon calculator shows the CO2 savings that can be made by specifying one of our eight standard EcoPlus mixes, which are suitable for foundations, pavements and structural projects. We can also design and supply bespoke mixes."

Using Regen in EcoPlus also improves the durability of structures, particularly where sulphates and chlorides are an issue, and gives a lighter, more aesthetically pleasing colour to the concrete.

UK: Hanson, the UK subsidiary of HeidelbergCement Group, has announced that it will have to make job losses after a fall in demand. Hanson told its workers that demand for its core products, including asphalt, concrete and cement, had fallen by more than 10% during 2012 and that 2013 is likely to be worse.

The company said that it would have to take steps to balance the size of the business by reducing capacity and bringing overheads into line, moves that would 'inevitably' result in job losses.

An announcement on restructuring proposals will be made by the end of October 2012, with no details available yet on the number of job losses. The GMB union said it feared that hundreds of jobs will be lost.

UK: Hanson UK has announced that it is preparing for a 'tough' 2012. Jon Morrish, managing director, said "We informed employees two weeks ago that we were carrying out a detailed review of the cement business to prepare us for what we expect to be a very tough market in 2012 and beyond."

Morrish's comments arose is the wake of rumours that jobs may be cut at the company's Castle Cement plant in Lancashire. The site currently meets 25% of the UK demand for cement and employs around 300 people. Hanson, a subsidiary of the HeidelbergCement Group, currently runs three plants in the UK including plants in Lincolnshire and Wales, with a workforce of over 1000.

Morrish added, "This review, which includes an assessment of recent changes to the European carbon trading rules, encompasses all three of our cement plants and covers all functions from production and sales to technical and distribution. The three plants are all vitally important to the long term future of the business and there is no intention to close any of them."

"However, it is likely that production levels will change, which will have an impact on jobs. We plan to table outline proposals to employee representatives and recognised trade unions early next week and begin a proper and effective consultation process."