Displaying items by tag: Lafarge Tarmac

UK: The Competition Commission (CC) has demanded that Lafarge Tarmac sell one of its cement plants in the UK to create a fifth cement company in the country to increase competition in the market. The CC also intends to increase competition in the supply chain for ground granulated blast furnace slag (GGBS) by forcing Hanson to sell one of its GGBS production facilities. The CC is also introducing measures to limit the flow of information and data concerning cement production and price announcements.

"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," said CC Deputy Chairman and Chairman of the Inquiry Group, Professor Martin Cave.

The measures follow a two year investigation which found that both structure and the conduct in the cement sector restricts competition by aiding coordination between the three largest producers: Lafarge Tarmac, Cemex and Hanson. Competition problems also arose from the UK having only one domestic producer of GGBS in the UK (Hanson) with exclusive rights to use the output of Lafarge Tarmac, the single domestic producer of granulated blast furnace slag (GBS), which is the main raw material input into GGBS. The CC estimates that the lack of competition for both of these issues may have cost UK customers up to Euro60m/yr.

The final report follows the publication of the CC's provisional findings in May 2013 and an Addendum to the provisional findings and its provisional decision on remedies in October 2013.

UK: Anglo American announced that it has reached an agreement to sell Tarmac Building Products Limited (TBP) to Lafarge Tarmac Holdings Limited.

Lafarge Tarmac is the 50:50 joint venture of Lafarge's and Anglo American's construction materials and services businesses in the UK. The terms of the transaction are confidential and the transaction is subject to regulatory approvals. The transaction is expected to close in the first half of 2014.

Both TBP and Lafarge Tarmac operations will continue to operate independently until such approvals are obtained.

UK: Lafarge Tarmac has marked the official launch of its new headquarters, Portland House in Solihull, by welcoming Caroline Spelman, MP for Meriden, to the facility.

More than 100 employees joined Spelman for a celebratory lunch at Portland House before being briefed on the company's plans and its contribution to the region's economy, as well as its importance to UK construction, by Lafarge Tarmac's chief executive officer, Cyrille Ragoucy.

"This is a big day for us and we were delighted to welcome Caroline to Portland House to mark this special occasion. It was good to meet her and provide her with an overview of our business. She was extremely interested to meet our colleagues and hear about the important contribution that we are making to the regional and national economies and the role that our innovative products are making to the future of UK construction," said Ragoucy.

Spelman said she felt privileged to have been invited to inaugurate the building and visit such an exceptional site. "It's great to see that a business based in the heart of the UK with fantastic transport links is developing products which are making a positive contribution to the sustainability of the built environment,' she said.

Portland House, the company's new low-energy headquarters near Birmingham International Airport, has undergone a major internal refurbishment to allow the offices to accommodate up to 500 Lafarge Tarmac employees. The state-of-the-art sustainable building, which was originally constructed in 2007 using the company's materials, reduces the need for heating and cooling thanks to its innovative concrete design.

Well, it seems like they were serious.

The UK Competition Commission has provisionally decided that Lafarge Tarmac should sell off one of its cement plants in the Midlands. The Commission also wants the sale to exclude buyers from any pre-existing UK cement producer. The door is open from Holcim or CRH downwards to enter the UK market. Although if the enforced Lafarge sale of Hope to Mittal Investments in 2012 is indicative, it may well be to an industry outsider.

If the move goes ahead it will open up the Midlands and north of England from four cement producers - Hope Cement, Lafarge Tarmac, Hanson and Cemex - to five. Lafarge Tarmac's cement production capacity lead of nearly 4Mt/yr will be knocked down to nearer 3Mt/yr, putting it level with Hanson Cement's production capacity.

Unsurprisingly Lafarge Tarmac is not best pleased, putting out the following in response to the commission's announcement. "The Commission's assumptions and reasoning have serious flaws and the biggest loser in this process will be the customer. There is strong evidence to demonstrate there is effective competition in the sector – with new players having recently entered the marketplace."

The Commission also wants to increase competition in the supply chain for ground granulated blast furnace slag (GGBS). According to the Commission findings Hanson dominates the UK GGBS market and Lafarge Tarmac controls the market for its precursor, granulated blast furnace slag (GBS). So production facilities may need to be sold by both Hanson and Lafarge Tarmac.

As an aside it's worth noting that the Belgian Competition Council recently imposed fines due to anti-competitive practices also related to GGBS. Also, elsewhere in the news this week Irish GGBS cement producer Ecocem is aligning itself with the EU carbon roadmap to 2050, partly at least because its product produces less CO₂ per tonne of cement. Whoever or whatever controls the supply of GGBS in the UK has implications for how emissions are lowered in the cement sector.

Other suggested measures from the Commission such as restricting the publication of UK cement market data seem problematic. Although it may make it more difficult for UK cement producers to collude it will also make it harder for related businesses (including press and industry analysts like Global Cement) to understand what is happening at any given time.

Finally, we have to ask what the effects of the Commission's suggestions might be at the start of an uncertain recovery in the UK construction market might be. According to the Minerals Production Association cement production fell from 8.5Mt in 2011 to 8Mt in 2012, the first decrease since 2009. 2013 seems set for modest growth on 2012. The implications of Commission's plans - if they happen – could be huge.

UK: The UK Competition Commission (CC) has provisionally decided that Lafarge Tarmac should sell a cement plant to increase competition in the UK cement market. The CC is also proposing to limit the flow of information and data between cement producers and to increase competition in the supply chain for ground granulated blast furnace slag (GGBS).

"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," said CC Deputy Chairman and Chairman of the Inquiry Group Professor Martin Cave.

In detail the CC has provisionally decided that 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 ready mixed concrete plants from Lafarge Tarmac subject to the purchaser's total internal cementitious requirement being capped at 15% of the acquired cement production capacity. The buyer would have to be approved by the CC and not be one of UK'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. UK 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 organisation.

UK 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.

Subject to further consultation on the GGBS supply chain, Hanson should divest two of its GGBS production facilities and Lafarge Tarmac should divest two of its granulated furnace slag production facilities, again to a suitable purchaser approved by the CC but not to another UK cement producer.

Responses to the CC's suggested measures will now be gathered before it publishes its final report by 17 January 2014.

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.

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.

UK: Lafarge and Anglo American have announced the completion of a 50:50 venture which combines their cement, aggregates, ready-mix concrete, asphalt and asphalt surfacing, maintenance services and waste service businesses in the UK. The joint venture will be known as Lafarge Tarmac and began trading today. The Lafarge Tarmac combination is expected to generate savings of Euro74m through improved operational, logistical and purchasing efficiencies and the introduction of value-added products across a wider geographic area.



Completion of the Lafarge Tarmac joint venture follows final clearance from the UK Competition Commission, based on the completed sale of a portfolio of Tarmac and Lafarge construction materials operations in the UK, which also occurred on 7 January 2013. The agreed sale of Tarmac's 50% ownership interest in Midland Quarry Products is subject to a right of pre-emption in favour of Hanson Quarry Products Europe Limited. As a result of this the completion of this transaction is pending.



"We have successfully united two high quality and complementary UK businesses to create the leading UK construction materials company with high quality assets, two experienced management teams and a portfolio of well-recognised, innovative brands," said Cynthia Carroll, Chief Executive of Anglo American.



"The closing of this transaction and the creation of a new British construction materials champion reinforce Lafarge's ongoing commitment to the UK market and its efforts to continuously improve its offering to customers, as well as playing a full role in developing the infrastructure needed for a growing economy," said Bruno Lafont, Chairman & Chief Executive of Lafarge.