Companies still trying to broker solution to cement price war

Companies still trying to broker solution to cement price war
Published: 14 October 2005

Despite a September 28 deadline set by Colombia’s senate to resolve the price war in the domestic cement market, the companies are still negotiating to find a solution, an official of one of the companies involved told BNamericas.  "We are still at the table, our lawyers and the competition’s lawyers, searching for a formula that will allow us to establish clear market policies," said the source, who asked to remain anonymous.  "The authorities have been quiet on the issue so as to allow us to continue uninterrupted with our talks," added the company insider. 

The senate subcommittee formed to deal with the price war issued the September deadline after trade minister Jorge Botero sent a letter to trade and industry regulator Jairo Rubio Escobar calling for definition of whether the low prices in the market were being set artificially or were merely the result of natural competition.  Earlier this year the conflict was sparked by a complaint filed by Cemento Andino with the trade and industry regulator, claiming that the three largest firms in the local cement market - Cemex, Holcim and Cementos Argos - were intentionally trying to force small producers such as Cementos Andino which has just completed a new plant close to Barranquilla) out of business, by keeping prices low. 

The solution to this problem being discussed by the companies "can’t deal directly with prices themselves or by dividing up the market as that would be illegal, but it can at least seek a medium like those found in other countries to calm the market," the company source said.  "There has been additional pressure from construction companies recently as they are well aware that if the smaller rivals in the market are forced to disappear for example, the big companies will want to recover all they’ve lost in the last year," he added. 

With Plan 2500, designed to bring about improvements in the deteriorated inadequate highway network, several thousand kilometers of roads will be built, paved or otherwise improved and the costs of doing this will depend greatly on what happens in the current talks between the cement firms.  In the last year, cement prices have fallen from around 22,000 pesos (US$9.60) to just 7,000 pesos per 50kg sack, which is obviously good news for the construction industry, but a solution to the price war will surely mean an increase in these costs.