Will consolidation increase competition in Germany?

The German cement industry took another step along the road to consolidation this week with news that Dyckerhoff AG was in position to acquire Portland Zement Seibel und Sohne GmbH & Co, subject to the prior approval of the Bundeskartellamt, Germany's anti-competition authority. The acquisition would add a further 0.7Mta of cement capacity to the Dyckerhoff Group in Germany, where the Buzzi-owned company already operates five integrated and two grinding plants.

The Seibel & Sohne Erwitte cement works is situated in Rhineland-Westphalia, east of Dortmund, near Dyckerhoff's smaller 0.37Mta Geseke cement plant. This latest step enhances Dyckerhoff's presence in the western side of Germany, where it serves the industrial heartland of Essen, Cologne and Dortmund. In total, Dyckerhoff has 7.2Mta of cement capacity in Germany, which still leaves it well behind HeidelbergCement (11Mta).

More consolidation on the way?
The German cement sector has not found it easy to consolidate. Schwenk KG had to abandon the planned acquisition of Karsdorf Cement, for sale by Opterra (CRH group), as well as that of the Sötenich grinding plant in November 2017. However, in October 2017 there was better success for Thomas Gruppe, which bought Portland-Zementwerke Gebr Seibel GmbH & Co KG, the sister works of the 0.6Mta Erwitte facility.

In terms of the Opterra plants up for sale, it is not known if Dyckerhoff would be interested in the 2.3Mta Karsdorf facility, outside of Leipzig, as this is a little to the east of its operations. However, the 0.45Mta Sötenich cement works is near the company's Neuwied plant, to the south of Cologne, and close to the Belgian border for exports. Even if Dyckerhoff were to enquire after the Opterra plants, it would not close in greatly on HeidelbergCement, which is currently expanding production capacity at its Burglengenfeld and Schelklingen plants.

While family-owned Schwenk Cement KG was thwarted in its attempts to get hold of the Karsdorf and Sötenich plants, it could still potentially seek to increase its presence in the domestic market. Schwenk's plants are situated right through the centre of the country with its headquarters at Ulm. Moreover, with its facilities in Allmendingen and Heidenheim-Mergelstetten, it has been ideally located to benefit from the stronger southern cement markets. Only the independent Rohrdorf plant of Südbayerisches Portland-Zementwerk Gebr Wiesböck GmbH is situated further south of Munich.

Increasing competition
However, following the publication of its report into the German cement market in 2017, the Bundeskartellamt concluded that a greater level of competition was needed. "The sector inquiry shows that the structural conditions in the cement and ready-mix concrete industry have a dampening effect on competition and encourage parallel conduct with little competition among the suppliers," said the Bundeskartellamt report." These structural features include in particular many highly-concentrated markets with few suppliers, diverse links between the suppliers and a high degree of market transparency.

"Furthermore, the markets concerned are stable markets for homogeneous bulk goods where competitive moves by other suppliers offering innovative products are hardly possible."

In addition, the report suggests, "The detailed analysis carried out by the authority in the context of its examination also shows that there are significant price differences between the individual regional markets. These differences can only partly be explained by different production costs. In some of the particularly high-price regions, either only few companies are active or there are numerous corporate interlocks between the suppliers, which applies to the ready-mix concrete sector in particular."

E-commerce to shake-up pricing
Finally, the launch of ECEMENT, a new digital trading platform, in early 2018 is expected to stimulate more competition in the German cement sector and shake up pricing. Operated by eBau.pro Handelsplattformen GmbH, the platform allows purchasers to select a supply plant and place an anonymous request for cement deliveries with prices being determined by electronic auction.