Global Cement News

China: A new standard for nitrogen oxide (NOx) emissions from cement plants drafted by the Ministry of Environmental Protection is expected to be issued on 1 July 2013, according to the China Securities Journal.

The new standard will cut the amount of NOx emitted by an existing cement plant to below 450mg for every normal cubic meter of cement produced. Currently on average Chinese cement producers emit 880mg of NOx. For those new cement production lines, the emission standard will be capped below 320mg. The drafted requirement is stricter than market expectations for the cap to be set at 500mg.

The Chinese cement industry produces about 11.6% of all NOx emissions across China's industrial sectors. It has been targeted in move to address air pollution, particularly after hazardous smog levels were reported since the start of 2013. In 2011, the Sichuan provincial government said power would be cut for cement plants that fail to achieve the NOx emissions target set by the provincial government for the 2011 - 2015 period.

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.

Pakistan: Lucky Cement has announced that its chief executive Muhammad Ali Tabba has been appointed as a member of the cement producer's Human Resource and Remuneration Committee. The committee now includes the following members of the board: Rahila Aleem, Jawed Yunus Tabba, Zulekha Razzak Tabba and Muhammad Ali Tabba.

India: HeidelbergCement India will sell its 0.6Mt/yr cement grinding unit in Raigad, Maharashtra, to JSW Ispat Steel, part of the JSW Group.

"The disposal is in line with HeidelbergCement's philosophy of divesting less strategic assets with lower margins to focus on more strategic and key operations in central India where the company had recently expanded its cement capacity from 2Mt/yr to 5Mt/yr," said Ashish Guha, chief executive and managing director of HeidelbergCement India, in a statement.

The parties are negotiating and finalising the terms of the business transfer agreement, HeidelbergCement India said in a regulatory filing. The transaction will be finalised only after obtaining all relevant approvals, including that of shareholders.

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.