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Competition Commission paves way for new cement company

The Competition Commission wants to see a new , independent cement company competing in the UK market.

Competition Commission paves way for new cement company

The Commission will require Lafarge Tarmac to sell either its Cauldon or Tunstead cement plants (and accompanying ready mix concrete (RMX) plants if necessary) to ensure entry of a new producer, and is proposing to limit the flow of information and data between cement producers.

In May, the CC 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, Cemex and Hanson) with the likely result higher prices for all cement users.

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

Professor Martin Cave, CC Deputy Chairman and Chairman of the Inquiry Group, said: “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.”

The Commission proposes the following:

  • 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 RMX plants from Lafarge Tarmac . The buyer would have to be approved by the CC and not be one of the GB’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. GB 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 organization.
  • GB 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.

    The Commission is also concerned about competition issues in the market for ground granulated blast furnace slag (GGBS–a partial substitute for cement). It has decided that, subject to further consultation, Hanson should divest two of its GGBS production facilities and Lafarge Tarmac should divest two of its GBS production facilities (GBS plants), again to a suitable purchaser approved by the CC but not to another GB cement producer.

    The CC is required to publish its final report by 17 January 2014 and is now inviting responses. Any interested party is invited to respond to the provisional decision on remedies and the Addendum to the provisional findings by 29 October 2013.

    To submit evidence, please email aggregates@cc.gsi.gov.uk or write to:

    Inquiry Manager

    Aggregates market investigation

    Competition Commission

    Victoria House

    Southampton Row

    LONDON

    WC1B 4AD

  • About Fiona Russell-Horne

    Fiona Russell-Horne
    Group Managing Editor across the BMJ portfolio.

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