Cement pricing developments in the European Union

Generally, the cement pricing situation in Europe continue fairly stable, although if energy prices continue their recent current upward momentum, price increases are likely to follow. That would suggest national increases being announced in the late autumn or early winter for implementation early next year (2011), unless there are drastic energy price increases, in which case earlier action may be called for.

There are, however, some notable exceptions to this, generally stable pricing scene, particularly emanating from Spain and Turkey. The prolonged construction boom in Spain that reached its peak in 2007 had attracted a considerable number of new entrants, none of which operated cement kilns. Until most of these have sold out or simply withdrawn, the pricing scene in Spain is likely to remain unstable and domestic prices likely to continue to be under quite some pressure.

The over-capacity in Turkey has affected cement price levels at home and also in neighbouring Bulgaria as its proximity to Turkey has led to a fair amount Turkish cement being landed in Bulgarian ports. At the same time, Turkish producers are also buying their way into the Italian market, with Turkish producer Çimsa having acquired a 60 per cent stake in a Trieste cement terminal that is well located to supply Austria and Slovenia as well as northern Italy.  Çimsa is likely to use this terminal to bring in both grey and white cement.

The fragmented markets of Germany and Italy, with 20 and 26 cement producers respectively, are seeing very different developments. German prices have still not recovered from the price war that reached its peak in 2003 and remain at the low end of the European price range. List price increases have been announced, but the late start to the construction season because of the long winter suggest that the test of whether these increases will stick has been delayed, and may net be apparent until some time in May. In Italy, prices are clearly drifting down in the light of reduced demand and increasing supply as countries that were supplying Spain during its unsustainable boom are looking for alternative markets. Italy was the third largest source of imports into Spain, so the Italian cement industry is being hit in two ways, by reduced export opportunities, and by other foreign producers diverting their attention to Italy.

British prices have risen in spite of weak demand, partly because of the weakness of the pound sterling that has made cement imports less competitive. French cement prices have traditionally been at the top end of the European scale, but a price increase this year in a declining market looks more difficult, without encouraging the excess supply in Southern Europe in the direction of French markets on both the Mediterranean and Atlantic coasts.

With respect to anti-competition tendencies, the EU remains vigilant and is apparently well aware of regional and national pricing trends. On a local level, the Polish Office of Competition and Consumer Protection (OCCP) has recently announced fines totalling PLZ 411 million (€ 99 million) for seven local cement manufacturers accused of price fixing. OCCP says two cartels were in place for 11 years. Back in 2002, six German cement producers were also fined a total of €660m by the authorities for similar misdemeanours. Spanish cement producers are now all subject to local cement cartel investigations, with some analysts even speculating that French and UK producers might even be due a surprise visit from the inspectors.

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