For Cheaper Homes, Break the Cement Monopoly, Says MK

Anat Wilf highlights 'forgotten' key issue.

Prime Minister Benjamin Netanyahu's proposed housing reforms are a good start, but there's a factor in housing prices that goes unmentioned - the cement monopoly, said MK Einat Wilf yesterday.

The Atzmaut party faction head called on Netanyahu to open the cement market to competition in order to reduce housing prices.

Anat Wilf
Hagay Offen

Israel's cement market is controlled by Nesher Israel Cement Enterprises, a company in Nochi Dankner's IDB group. The company is believed to control more than 90% of the market. An estimated 4.4 million tons of cement was sold last year.

"I welcome the steps the prime minister presented to reduce housing and rental prices," said Wilf. "I consider these steps the basis for action, but there's another subject that hasn't been discussed that should be addressed - introducing competition into Israel's cement market. Nesher's monopoly contributes in no small portion to the high housing prices," she said.

For years, Nesher has been campaigning aggressively against any steps to open the market to imports, which could come from Jordan, Turkey, Romania or other countries, she said.

"Nesher's monopoly hangs on doubtful claims over 'dumping prices,' and thus keeps the market closed at the entire public's expense. This damage has passed under the radar of the housing discussion, and it cannot be allowed to escape proper criticism," she said.

The government and Finance Minister Yuval Steinitz keep repeating their commitment to fighting economic concentration and increasing competition, she said.

housing protest - 26.7.11
Hagai Farad

"Here they have a golden opportunity to open the cement market to competition and to make an important contribution to reducing construction costs, which could in turn lower housing prices," she said.

Nesher is Israel's only cement producer, and is considered a monopoly. IDB group company Clal Industries owns 75% of Nesher, while Ireland-based CRH holds the remaining 25%. Nesher's subsidiaries include the Taavura group, held in equal parts by Nesher and the Avraham Livnat group. The latter group also holds part of IDB group's controlling core.

The Taavura group includes Taavura Holdings and Taavura Cement Containers and has a range of operations in road transport, logistics and infrastructure work.

Market sources say that imports were responsible for 10% of Israel's cement market in 2010. The imported cement was worth a total of NIS 54 million, up from NIS 52 million in 2009 and NIS 31 million in 2008. According to a 2007 report by the Knesset Information and Research Center, Nesher had NIS 1.4 billion in revenues from its cement operations in 2006.

"The high concentration is not just in the cement market, but continues down the supply chain into the concrete market as a whole," stated that report. "Some 45% of the country's concrete market is controlled by a limited number of companies. Cement products reach their final customers (industry and construction companies ) mostly through Nesher's big customers."

Nesher's cement prices are set by the government, based in part on the prices of the inputs.

Yet the report found that Nesher's cement was being sold within the Palestinian Authority for 6.25% less than it was being sold in Israel. In addition, in 2006, Nesher's prices were on average 30% higher than those in neighboring countries.

"The high amount of concentration in Israel's cement market is increasing the price of cement and its derivatives," said the report. "While that increase can be explained by the increases in prices of the raw materials used to make cement, in a competitive market the increase ultimately would have been more moderate."