A cabinet committee working on ways to lower the cost of living approved a plan Tuesday to inject competition into the cement industry.
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Although lower cement prices would reduce the cost of residential construction to some extent, cement is not a major element in the cost of building homes, but the decision was also taken amid a forecast that by 2023, demand would outstrip the capacity of Nesher cement, which has a monopoly in the sector here.
The plan was approved by a committee headed by Economy Minister Naftali Bennett. The blueprint is based on recommendations from another panel headed by Finance Ministry budget director Gal Hershkovitz.
Hershkovitz predicted that in a decade, Israel’s current cement makers would be unable to meet the country’s expanding demand. He urged the government to begin the lengthy process of establishing another major cement producer that would compete with Nesher.
Although lower cement prices may not have a major impact on the cost of construction of homes themselves, the product is also used in non-residential infrastructure such as bridges and roads.
Nesher, which has production facilities near Ramle and in the Beit Shemesh area, is the only company producing cement in Israel. The company, a unit of Clal Industries, also has a plant near Haifa that produces clinker, an ingredient that is crushed to make cement. In the course of the reform, Nesher would be left only with its Ramle facility.
The only other local player in the cement industry is Lev Baron Commodities, an Ashdod cement importer with just 10% of the market. Although Lev Baron denies it, the company has been accused of tacit cooperation with Nesher rather than taking it on as a competitor. Over the years, Nesher has managed to limit other cement imports.
Nesher’s new CEO, Moshe Kaplinsky, is a well-connected former Israel Defense Force deputy chief of staff. Members of Hershkovitz’s committee expressed concern that Kaplinsky would attempt to scuttle legislation required to implement the plan. “There is major pressure,” said a member of the Hershkovitz panel. “This is Bennett’s chance to show that he is not caving in to it.”
It should also be noted that the country’s leading major cement hauler is part of the Ta’avura group, which is controlled by Nesher and the Livnat family. The Ta’avura subsidiary has an 83% share of the cement transportation market.
Ta’avura could also be hurt by the reform because the plan calls for government price oversight of its cement-hauling profit margins, with the prospect that at a future date, hauling services could come under actual price controls.
The reform plan is geared to create competition not only by encouraging the formation of another major cement producer, but by fostering the creation of three cement importers and an importer of clinker that could set up a crushing plant here at an estimated cost of NIS 80 million.