Cement industry referred for competition inquiry
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Wednesday 17 August 2011
The Competition Commission should investigate the market for cement, ready-mix concrete and aggregates such as rocks, sand and gravel, the Office of Fair Trading said yesterday.
The consumer watchdog, highlighting factors which could limit competition in the £3.4bn business, said high barriers to entry in cement and aggregates, and the market share commanded by the biggest companies in all three fields, "may dampen competition".
Other issues include the effects of large, integrated businesses that operate across all three markets, and the "apparent squeeze" between rising cement prices on the one hand and falling ready-mix concrete prices on the other.
The OFT said this squeeze could be affecting independent operators, who buy cement from large companies that also double up as competitors by virtue of their activities in the ready-mix concrete market. The watchdog also raised the issue of multiple contacts and the exchange of information across the industry, "with major firms supplying each other with both aggregates and cement, and engaging in joint ventures and asset swaps".
The OFT, which highlighted the fact that five major players account for over 90 per cent of the cement market, 75 per cent of aggregates sales and 68 per cent of ready-mix production, will now consult until the end of September on its proposal to refer the market to the Competition Commission.
"More than ever, well-functioning markets are crucial to economic growth. Aggregates, ready-mix concrete and cement, important in their own right, are also fundamental to the wider construction industry," the watchdog's chief executive John Fingleton said. "We are concerned that competition is not working well in these sectors, with underlying features of the market giving rise to persistent concerns."
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