Displaying items by tag: Competition

Vietnam: Producers exported approximately 2.82Mt of cement in January and February 2020, down by 49% year-on-year from 5.75Mt in the corresponding period of 2019. Vietnam News has reported that this is a result of the coronavirus outbreak. In February 2020 Vietnam’s Ministry of Construction said that Vietnamese cement exporters would face fierce competition as China and Thailand increase exports over the coming year.

Vietnam Cement Association president Nguyễn Quang Cung previously predicted that Vietnamese cement exports would hold steady at 34.0Mt in 2020 before falling by 26% to 25.0Mt in 2021 as a forecasted rise in domestic demand reduces the reliance on low-priced exports. China remains the primary importer of Vietnamese cement, which it buys at US$36.3/t. Domestic demand fell by 37% year-on-year to 2.88Mt in January 2020 from 5.43Mt in January 2019, according to Arab News.

Production rose by 0.1% year-on-year to 13.0Mt in January and February 2020 from 12.9Mt one year previously.

Australia: Adelaide Brighton’s profit in 2019 was US$31.1m, down by 74% from US$122m in 2018. Sales were down by 7% to US$997m from US$1.07bn. Adelaide Brighton chairman Raymond Barro explained that ‘increased competition and softer demand for construction materials’ locally impacted revenue and earnings. He said that ‘cost pressures across sea freight, transport and raw materials’ caused the dive in profit.

Australia: The Australian Competition and Consumer Commission (ACCC) says that Barro Group’s acquisition of a 43% stake in Adelaide Brighton will not ‘substantially’ lessen competition. The ACCC examined the completed acquisition closely because the two vertically integrated companies have overlap in the market for the supply of cement, ready-mixed concrete and aggregates.

It found Barro and Adelaide Brighton will continue to face competition from Boral, Holcim and Hanson, three large vertically integrated competitors with national operations, along with a number of smaller independent competitors. The ACCC looked at competition impacts on the pre-mixed concrete and aggregates markets in Melbourne, Brisbane and Townsville, where Barro and Adelaide Brighton’s operations overlap and did not identify any areas of concern.

Barro did not seek informal merger clearance from the ACCC prior to acquiring Adelaide Brighton. However, the ACCC says it may reopen its investigation if it receives further information that alters its current conclusions.

UK: The Competition and Markets Authority (CMA) has issued Initial Enforcement Orders (IEOs) to Breedon Group and Cemex over the former’s acquisition of a minority of UK ready-mix and aggregates operations, as well as a cement terminal, belonging to the Mexican cement giant for Euro211m. Breedon Group said that the IEO was expected and would govern, among other things, the ‘form and scope of the information that can be shared between Breedon and Cemex’ in defence of customers’ interests, according to The Construction Index website.

The Australian cement supply spat calmed down a little this week with the announcement that Wagners Holdings has agreed to resume the supply of cement products from its Pinkenba grinding plant in Brisbane to Boral. Legal proceedings are still on-going with a trial date set at the Supreme Court of Queensland in late November 2019.

The argument blew up publicly in March 2019, when Wagners said it had suspended its cement supply to Boral for six months. Wagners has a cement supply agreement with Boral whereby it supplies cement on an annual basis for a fixed price. However, Boral informed Wagners that it had found cheaper cement from a ‘long established’ supplier in South East Queensland. Local press speculated that this ‘long established’ supplier was Cement Australia, the joint venture between LafargeHolcim and HeidelbergCement. Wagners then had the choice to either match the lower price or suspend its supply. The disagreement took the legal route as the parties failed to reach an agreement. Wagner says that its cement supply agreement with Boral ‘remains binding on both parties’ until 2031.

Wagners later reported that it expected the suspension to cost it around US$7m in 2019. The deal with Boral constituted about 40% of its cement sales volumes. Its overall revenue grew year-on-year in its 2019 business year to the end of June 2019 but its cement sales volumes fell. Its earnings also fell. This was blamed on higher activity in lower margin areas such as contract haulage and fixed plant concrete, and delays in major infrastructure project work in South-East Queensland.

Boral, meanwhile, suffered from falling revenue and earnings from its Boral Australia subsidiary in its financial year to June 2019 due to a slowing construction market. Notably, its cement sales revenue rose by 7% due to ‘favourable’ pricing, higher volumes and cost-saving programs. It didn’t say whether the cost cutting included sourcing cement from a different supplier! All of this though was counteracted by lower contributions from its Sunstate joint venture (JV) with Adelaide Brighton and higher fuel and clinker costs.

All of this is fascinating because these kinds of disputes usually remain out of the public eye. The large size of Wagners’ cement supply deal with Boral meant that when it was threatened it likely had to tell its shareholders due to the potential financial impact. Whether Boral can wriggle out of the contract is now a matter for the courts.

The broader picture is that even though Boral Australia’s cement division seemed to be growing in its 2019 financial year it was still trying to reduce its costs in the face of a decelerating construction market. Added to this, the companies hold both a supplier and a competitor relationship. On the production side Boral operates an integrated plant at Berrima in New South Wales (NSW), a grinding plant at Maldon, NSW and another grinding plant in its Sunstate JV at Brisbane, Queensland. Wagners runs its own grinding plant at Pinkenba, Queensland. Both companies operate concrete plants. This is not unusual for a concentrated industrial sector like cement but it creates problems for the regulators. Note that, also this week, the Australian Competition and Consumer Commission was reportedly paying attention to the links between Barro Group and Adelaide Brighton. Barro owns a 43% stake in Adelaide Brighton but the authorities are concerned about a possible overlap in the two companies’ roles as suppliers of cement, concrete and aggregates. Any slowdown in construction in Australia seems likely to heighten these kinds of issues.

Australia: Barro Group, the family-owned supplier of premixed concrete, quarry machinery and associated products, has attracted the scrutiny of the Australian Competition and Consumer Commission (ACCC) over its 43% stake in Adelaide Brighton due to the possible overlap in the two companies’ roles as suppliers of cement, concrete and aggregates. The Advertiser reported that Adelaide Brighton chairman Raymond Barro defended the pairing, saying the companies had ‘complementary footprints’ with ‘limited crossover of products and locations in which for Adelaide Brighton and Barrow Group to compete.’

Romania: The national competition authority stated yesterday that it will investigate LafargeHolcim’s deal with Oresa for the latter’s takeover of the precast concrete producer Somaco. LafargeHolcim assumed the asset in July 2019 at an undisclosed price.

Nigeria: Dangote Cement has stated that the rate at which consumers are winning valuable prizes in its on-going national consumer promotion, tagged ‘bag of goodies,' is not a gimmick, but a means of giving back to the loyal consumers of its cement products. The response follows criticism that there are too few winners.

At a prize ceremony in Port Harcourt, Aliko Dangote, Chairman of Dangote Cement, stated that the presentation events were proof that the promotion was not a scam. The company is giving out 43 cars around Nigeria as well as other prizes, including televisions. “We value everybody in our value chain – distributors, wholesalers and retailers – and this is our own way of giving back to our consumers,” said Dangote.

UK: The Global Cement and Concrete Association (GGCA) has launched a photography competition to showcase the role of concrete in the world. The contest has three categories and is open to both professional and amateur photographers. A top price of US$10,000 is on offer for the winning entry.

Malaysia: Suhadi Sulaiman, the chief executive officer (CEO) of CMS Cement, says that the company does not intend to increase its prices ‘anytime soon.’ He said that any potential enquiry into a differene in prices between Peninsular Malaysia and Sarawak would show that the cement producer had not riased its prices since early 2016, according to the Borneo Post newspaper. He made the comments in a reponse to a call by the Finance Minister Lim Guan Eng for such an enquiry.

“We welcome the enquiry for two reasons... Firstly, it will show that the disparity in prices is purely due to the recent aggressive price war, which led to industry mergers and acquisitions in Peninsular Malaysia,” said Suhadi. “Secondly, an enquiry of this nature will also serve to show once and for all that Sarawak is not, and never has been, a cement monopoly.”

Lim said previously that an investigation was necessary to determine whether cartel-like behaviour was responsible for higher cement prices in Sarawak. He noted that the price was ‘significantly’ higher in the state than in Peninsular Malaysia.