Karsdorf Cement plant sale to be abandoned

Karsdorf Cement plant sale to be abandoned
20 November 2017

Schwenk KG has abandoned its plans to acquire Opterra’s cement plant in Karsdorf, according to a press release by the Bundeskartellamt (Federal Cartel Office - FCO). The withdrawal of the notification also includes the purchase of the cement plant in Sötenich.

"The merger was expected to significantly impede effective competition and would have had to be prohibited. With the acquisition of the plant in Karsdorf Schwenk would have gained a dominant position as a cement manufacturer in the Thuringia, Saxony-Anhalt and Saxony regions. In particular, the position of independent ready-mix concrete customers would have distinctly worsened as a result of the merger,” said Andreas Mundt, FCO president.

At present, the Karsdorf plant is the leading supplier in the regional market, which includes large areas of Saxony-Anhalt, Thuringia and Saxony as well as smaller bordering areas of Brandenburg, Hesse and Bavaria. The works services around 40 per cent of this market. Following the acquisition of the works, Schwenk, which operates a plant in Bernburg, would have increased its market share to around 60 per cent.

Moreover, with the acquisition of Opterra, Schwenk’s closest and most active competitor would have been removed from the market. For many cement customers, finding alternative supplies would result in significantly-higher transport costs. In addition, the limited capacities of the remaining competition would have provided opportunity to increase prices. The FCO said that the merger would also have increased the possibilities for parallel and coordinated conduct among the remaining players in a market where the risk of collusion is already high, as shown by the office's "Sector inquiry into the cement and ready-mix concrete sector", concluded this summer.

Schwenk had offered a commitment to transfer 0.5Mta of Karsdorf’s capacity and a customer base with an offtake of 0.45Mta to an independent third party to avoid a prohibition of the project, but the FCO rejected the proposal as unsuitable following market tests. In the test, almost all surveyed customers considered the so-called plant slice option inadequate or inappropriate to compensate for the adverse impact on competition as they thought that the third-party would be virtually dependent on Schwenk and therefore, coordination of conduct could not be ruled out.

Published under Cement News