Concrete Evidence? Sources say:'Nesher Used Gov't Relations to Cement Monopolistic Status'

In 2003, Nesher was bought by Nochi Dankner and the Livnat and Manor families, when they bought control of the IDB group which controls Nesher.

By using its political connections, Nesher Israel Cement Enterprises has leveraged its monopoly position over the years to overcharge for cement - which harms all Israelis - said construction materials industry sources.

"The connections between Nesher and [people] in the government, alongside import barriers, are preventing the opening of the market to competitive imports of cement, and have left Nesher a monopoly with 85% of the market," said industry sources. In 2003, Nesher was bought by Nochi Dankner and the Livnat and Manor families, when they bought control of the IDB group which controls Nesher.

Ehud Olmert
Michal Fattal

The case of French industrial company Lafarge is the perfect example to demonstrate these claims. Lafarge specializes in cement, concrete and similar products for the construction industry. It has production plants in some 70 countries and started operating in Israel in 1999. It operated through its local partner, Cement Israel (known better as C&L ), in partnership with Oded Feller's Chemovil. As a result of Lafarge's entry into the Israeli market, imports reached 30% in 2000-2001. But in 2002, the Industry, Trade and Labor Ministry started placing limitations on cement imports.

Lafarge stopped operations in Israel after the ministry, at the request of Nesher, opened an investigation into suspicions of "dumping" by a number of importers, including Lafarge. Dumping is a form of predatory pricing in which a firm sells a product at a price much lower than its home market. International trade agreements ban dumping.

As a result, the ministry decided to set anti-dumping duties, or reach agreements with importers to set prices equivalent to those of Nesher. This decision came despite fierce opposition from then-Antitrust commissioner, Dror Strum.

Lafarge left Israel, saying that if Israel wanted to make it difficult to compete with Nesher with cement imports, it would not make the effort since Israel was in any case a small market, said an industry source.

Lafarge received an offer a year ago to reexamine reentry to the Israeli market but turned it down, said a different construction industry source. Lafarge's answer was that Israel may be very advanced in high tech, but in cement it is worse than African countries, Lafarge apparently said.

Lafarge has written Israel off as a place where it is impossible to develop the cement industry for political reasons, due to the power of the IDB group, said the source.

Nesher cheaper in PA

Strong government connections have helped Nesher keep its monopoly status over the years, according to 1998 research on the Israel cement industry by Amir Etzioni. These and similar findings were presented to the Knesset in 2008, and both industry and government sources say little has change since 1998.

When Ehud Olmert was Industry, Trade and Labor Minister in 2003, the ministry agreed to restrict cement imports in response to demands from Nesher.

After leaving office in early 2010, Olmert was appointed the chairman of the Livnat Group, one of the partners in IDB. The Livnats also controls Taavura, which has a monopoly for the transport of cement. Nesher owns 50% of Taavura and the Livnat family owns the remaining 50% directly.

The research presented in 2008 claimed that Nesher not only fought opening the market to imports, it did everything in its power to prevent the building of facilities to handle cement imports in the ports, which are necessary to allow commercial volumes of imports. Etzioni said Nesher threatened customers who dared to use imported cement, and those customers who did ran into all sorts of problems and delays with Nesher.

Today, there is only one cement importer in Israel: Lev Baron Commodities, which only imports products that do not compete with Nesher. Nesher has an 85% market share and Lev Baron 15%.

Nesher also sells cement to the Palestinian Authority, but at 20% less than it charges in Israel. This information came out in sessions in the Knesset in 2007, when Nesher was trying to extend the restrictions on cement imported from Turkey. "If the state had built a terminal for unloading cement in the Ashdod port, it is reasonable to assume that the main barrier to centralized imports would have been removed," said the source. The investment would have required only $5-7 million, he said. This is a large amount for a small importer, but not for a large one such as Lafarge.

Israeli cement imports were worth $54 million in 2010, up from $52 million in 2009 and $31 million in 2008, said industry sources. Imports made up 5 to 10% of the market in 2010.

Nesher said: "It is not clear what the source and the baseless claims we were presented with rely. The Israeli cement market is open to free competition and there are no customs duties or limitations in any form on imports of cement to Israel. Israeli cement prices are lower than in most developed countries." The Industry, Trade and Labor Ministry did not comment.