Cement price bump prompts monopoly allegations

Cement price bump prompts monopoly allegations

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Thu, 28/02/2013 - 16:30

A recent rise in cement prices has raised a red flag for Egypt's Consumer Protection Agency amid increased production and lower demand on the local market.  

The agency filed a complaint with the Protection of Competition and Prevention of Monopoly Practices Authority Wednesday, alleging cement companies tacitly agreed to raise cement prices in a manner not commensurate with the real estate recession, the increasing number of factories and increasing production volume.

“Cement is a strategic product for 95 industries,” said Atef Yaaqoub, president of the Consumer Protection Agency. “Prices were raised by 30 percent.”

He said the country had 16 cement factories in 2010 that produced a total of 43.3 million tons per year. In 2011 that number grew to 19 factories producing 44.7 million tons and in 2012 to 21 factories generating 48.3 million tons annually.

Yaaqoub questioned the price increase given that cement supply has gone up and he called on the government to intervene and fix cement prices.

Ahmad al-Zieny, head of the Building Materials Division at the Federation of Egyptian Chambers of Commerce, said Thursday that cement prices should be fixed at fair prices for consumers. Any subsequent price increase should be agreed upon by all industry leaders, he added.

Furthermore, Zieny said firms found guilty of monopolizing the industry should be penalized to the full extent of the law. He said the Consumer Protection Agency’s request for an investigation is a step in the right direction for the sector.

The FECC member predicts the inquest will reveal illegal price fixing agreements between some companies. According to the competition protection law producers may not meet to discuss product pricing without a representative of the Competition Authority being present.

He stressed that a recent increase in cement prices had nothing to do with the lifting of some energy subsidies targeting firms like cement producers.

In contrast, Medhat Stephanos, head of the Cement Division at the Federation of Industries, refuted that claim and confirmed the rise of natural gas prices to $6 per million BTU from $4 per million BTU were behind the price hike.

Stepahnos contended that the price of cement cannot be fixed due to several factors, including the cost of electricity, which is on the rise.

Getting enough electricity to keep production up has been an issue as well. Sporadic power cuts between October and December last year caused a 5 percent drop in annual production, he said.

If the problem worsens this year, current production could fall by as much as 20 percent, he warned.

Continuing, Stephanos underlined the importance of the Industry Ministry’s decision to study cement export taxes. He said it is difficult to export cement right now due to prohibitive costs and added that the issue, and that of cement prices in general, should be researched thoroughly with the help of companies.

Edited translation from Al-Masry Al-Youm