14th Jan 2014 15:22
LONDON (Alliance News) - The UK Competition Commission Tuesday confirmed that it will require Lafarge SA and Anglo American PLC to sell one of their joint venture cement plants in the UK after it deemed that the venture had too much power in a market dominated by some of the world's biggest cement producers.
The antitrust regulator wants the plant sale to result in a fifth cement producer entering the UK market, saying a lack of competition is costing cement buyers at least GBP30 million a year and probably more in the future.
It said the joint venture, Lafarge Tarmac, will be required to sell either its Cauldon or its Tunstead cement plant and some accompanying ready-mix concrete facilities.
Lafarge Tarmac said it was "disappointed" by the commission's report and said it had not been given a fair opportunity to defend its position.
"The commission has based its remedies on a partial and historic picture of the market," Cyrille Ragoucy, Chief Executive of Lafarge Tarmac said in a statement. "Its analysis of industry profitability, which is central to its conclusion of Adverse Effect on Competition, is flawed, grossly overestimating the returns made."
The measures follow a two-year investigation by the regulator which found that the structure and conduct in the UK cement sector restricted competition by aiding coordination between the three largest producers: Lafarge, Cemex SAB de CV of Mexico, and Hanson Ltd, which is owned by Germany's HeidelbergCement AG. It had produced its initial findings back in October.
The fourth current producer in the UK is Hope Construction Materials, which was only established a year ago when the Competition Commission made Lafarge and Anglo American divest cement, aggregates and ready-mix concrete businesses as a condition of forming their joint venture.
Lafarge Tarmac Chief Ragoucy said the commission had failed to take into account the new business environment established by its divestments to create a new competitor, and the entry of new importers into the market.
"We are focused on reviewing our options based on today?s (Competition Commission) announcement and making a decision that is in the best interests of our employees, customers and shareholders," he said.
The commission said the three largest producers have refrained from competing "vigorously" with each other by focusing on maintaining market stability and their respective market share.
'We believe that the entry of a new, independent cement producer is the only way to disturb the established structure and behaviour in this market which has persisted for a number of years and led to higher prices for customers," Competition Commission deputy Chairman and leader of the cement market inquiry, Martin Cave, said.
"Despite falling demand and increasing costs during the last few years, profitability among GB producers has been sustained and their respective markets shares have changed little. This is not what you would expect to see in a well-functioning market, under these circumstances," he added.
Lafarge is the world's biggest cement producer by capacity, followed by Switzerland's Holcim Ltd. In terms of listed companies, HeidelbergCement and Cemex and number three and four in the world.
The UK antitrust regulator also said it would require HeidelbergCement's Hanson to sell one of its ground granulated blast furnace slag production plants after finding that the market for the cement ingredient and partial substitute was also uncompetitive, potentially costing buyers of the product between GBP15 million and GBP20 million a year.
"The problem in relation to (ground granulated blast furnace slag) stems from there being only one domestic producer (Hanson) which again leads to higher prices for customers," Cave said.
Hanson wasn't immediately available for comment.
Lafarge Tarmac will be required to enter a long-term deal to supply granulated blast furnace slag to the buyer of the Hanson plant, the Competition Commission said.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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