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December 15, 2004
Pricey Stuff...
The surging price of oil has been in the headlines continuously during 2004. With producers such as Norway, Nigeria, Venezuela, and of course the Middle East facing output problems, combined with surging demand in India and China, the reasons behind the upswing in prices seemed to be largely explained.
But crude oil is not alone in its price ascent. Another commodity, cement, has also been dramatically increasing in price over the same time period. The reason why was a mystery to me until I read this article (sub. required) earlier this week. U.S. anti-dumping laws, along with Mexico based Cemex's use of regulations and the government to protect its profits, go a long way in explaining why the price of cement is where it is today.
The article follows the story of the ship Mary Nour, currently being held off the coast of Mexico. In a story of an unsuccessful battle to get the ship's cargo of 26,000 pounds of cement to shore we are shown just how uncompetitive this market has become.
TAMPICO, Mexico -- In the five months since Captain Steinar Dahl steered his 34,000-ton vessel, the Mary Nour, into Mexican waters, he has received a rude welcome. His ship was denied entry into one port only to have its load impounded at a second.
The ruddy Norwegian has endured five onboard inspections, a blood test and a police interrogation amid accusations he may be smuggling guns, drugs or illegal immigrants.
The former head of Mexico's powerful spy agency has even interceded. Jorge Tello, who is now a senior executive at the world's third-largest cement maker, Cemex SA, alternated between pleading and making what a port official called "veiled threats" to keep the ship out of the port during a May 25 meeting, according to the port official's written summary of the meeting. Cemex confirms a meeting took place, but calls the summary "an inaccurate and imprecise account by one person."
Now, the ship and its cargo sit in a restricted berth in the Gulf Coast port of Altamira, immobilized by Mexican customs. What's especially striking about Captain Dahl's continuing nightmare is the mundane nature of his cargo: 26,000 tons of cement.
Cement, however, is serious business in Mexico. Two giants, Cemex SA and Holcim Apasco, the local unit of Zurich-based Holcim Ltd., dominate the market, where a metric ton of bagged cement often sells for more than in the U.S., and twice the price in China. As the saga of the Mary Nour shows, Mexico doesn't exactly roll out the red carpet when a rival steps on the turf of one of its most powerful firms.
Also in the article, a Cemex official tried to defend the tactics his company employs in order to limit competition:
Cement-industry officials say they are within their rights to use legal means to protect their industry from what they consider to be unlawful competitors. They deny using any means other than legal to protect their business.
"I have to use all the legal means available to defend our rights," Cemex Chief Executive Lorenzo Zambrano said in a telephone interview.
Ask yourself: How is it that this executive has the "right" to stop Captin Dahl from selling cement (of all things) to another voluntary party? Hopefully with more articles like this one in the WSJ we will begin to solve these types of problems.
Posted by Peter Mork at December 15, 2004 10:50 PM
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