How long can French cement prices stay out of line?
French cement prices have a tradition of being among the highest in Europe, if not the highest. Now at in excess of €100/t, they seem to take little account of the falling demand and, in fact, have risen by almost €10/t over the past two years, while national consumption has fallen by some 20% over the same period.
In some border areas, ready-mixed concrete deliveries have for some time been ordered from batching plants in, for example, Belgium or Germany. As the price differential has grown, the area across which the ready-mixed concrete lorries will travel for supplies has widened. With prices holding up so well, competition is taking a new angle. A few independent importers have now set up shop, with some still going while others have been bought out by one of the major producers present in France. For instance, Lafarge acquired Cap Vracs' grinding centre at Dunkirk more or less as soon as it was commissioned. On the other hand, Cap Vracs now has a similar a grinding centre at Fos, near Marseille. Fos is also the home of Ecocem France. The Irish-based ground granulated slag producer Ecocem set up in the Mediterranean port in 2009, with steel producer Arcelor as a 30% minority shareholder. When fully operational, the annual output of the works should be 0.7Mta, larger than Ecocem's existing operations in The Netherlands and in Ireland.
There are sea-borne imports through the ports of Marseille, Nantes, Bordeaux and Lorient. Titan has an import business centred on its terminal in Marseille, with similar operations in England and Italy. The Nantes terminal belongs to a local trader, whose origins lie in the agricultural field and the Bordeaux facility belongs to a Spanish cement group. Privately-owned Cemwest started operations at Lorient in 2007 and in its first full year of activity handled 44,170t of cement, all coming from Turkey.
The latest new entrant looks to be a more serious threat to the high price level in France. The company, called Kercim, is run by Jean-Marc Domange, a former managing director of the Ciments Français subsidiary Ciments Calcia. Kercim aims to build two grinding centres, the first at Saint Nazaire on the Loire and the second near Le Havre. The Saint Nazaire operation should be ready to receive its first ship early in 2012 and will have a capacity of 0.5Mta. The second installation, on the Seine, will be somewhat larger, with a capacity of 0.7Mta and it should also come on-stream in 2012. Kercim's clinker supplies would come from wherever they could be obtained at the cheapest delivered price, in present conditions probably from countries bordering the Mediterranean.
It will be interesting to see how Cemex, the second largest ready-mixed concrete supplier and a major provider of aggregates, will play its cards. So far, it has traditionally bought cement from the French manufacturers, but will clearly only continue to do so if the price is right. On the other hand, if the French cement producers maintain their high-price policy, some local cement plants are likely to have to close. Demand for cement is expected to shrink further in 2011 and, while a modest recovery looks possible in 2012, this will not be sufficient to offset the new independent grinding capacity coming online and all set to undercut current producer prices by a suitable margin to gain market share.
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