Operators working in the aggregates, cement and ready-mix concrete (RMX) sector are today waiting to see what impact a new major player in the cement sector will have on their businesses.
Following a two-year inquiry into lack of competition in the cement and ground granulated blast furnace slag (GGBS) markets, the Competition Commission (CC) wants to shake things up for the three main players – Lafarge Tarmac, Hanson and Cemex – by allowing a new entrant to the sector.
The CC is concerned that the main producers of cement in the UK have refrained from competing vigorously with each other, therefore giving customers a raw deal when it comes to the price they pay for their product.
Likewise, the CC revealed that there are similar competition problems with production of GGBS, as Hanson is the only domestic producer, with exclusive rights to use Lafarge Tarmac’s granulated blast furnace slag (GBS), which is the raw material input into GGBS.
To rectify the situation, the CC is forcing Lafarge to sell-off either its Cauldon, Staffs or Tunstead, Derbyshire cement plants, along with a “limited number” of RMX depots, as well as requiring Hanson to offload one of its GGBS production facilities.
Professor Martin Cave, CC deputy chairman and chairman of the inquiry group, said: ‘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.”
Partial picture
Lafarge CEO Cyrille Ragoucy said: “The commission has based its remedies on a partial and historic picture of the market. Its analysis of industry profitability, which is central to its conclusion of Adverse Effect on Competition, is flawed, grossly overestimating the returns made.”
Hanson’s UK head of legal Ed Gretton added that while he was pleased the decision only meant selling one site, as opposed to an earlier multi-site proposal, “we remain disappointed about the way the process was carried out.
"The commission did not consult us properly on its findings in relation to GGBS and we found many errors in its analysis. We will now consider our position before making a decision with regard to the appeal we filed before Christmas.”
Obviously, it will be an uncertain time for those directly employed drivers and subcontractors currently working out of the proposed sale sites, however, with a new player entering the market, will new franchise opportunities or contracts follow, and what will the knock-on affect on subbies’ rates be?