CEMEX’s Cement Pricing and Country Profitability
In December of 2017, Colombia’s competition authority fined Argos, CEMEX and Holcim the equivalent of 66 MM USD after conducting a four-year investigation that found that the firms—accounting for 96% of cement supply to the country—had broken the law by forming a cartel to significantly increase the price of their product between the years of 2010 and 2013.
In the years after 2013, CEMEX has more than halved the price of cement it sells in Colombia (see graph above). As it stands today, CEMEX’s cement in Cali, Colombia retails for the equivalent of 116 USD/ton (image below) excluding the applicable 19% value-added tax (VAT) when purchased at Sodimac’s home improvement stores.
A key contributing factor to the competitive dynamic improving consumer welfare in the Colombian market is the entry of several local players new to the cement industry such as San Marcos (2012), Ultracem and Fortecem (both in 2013), Patriota (2014), Vallenato (2016) and ALIÓN (2019).
The situation in Mexico, however, is radically different from that in Colombia. The high level of cement prices in Mexico is evidenced by the fact that CEMEX’s product in Mexicali, Mexico currently retails at The Home Depot for 317 USD/ton (image below) excluding the 8% VAT applicable in the border region.
Both CEMEX and the The Home Depot have been subjects of investigation on the part of Mexico’s competition authority. The construction materials company was found guilty of improper behavior in an effort to boicot the importation of cement into the Mexican market and the retailing giant was charged with strong-arming vendors to prevent them from supplying a competitor (Lowe’s).
It is impossible to explain the price differential of cement between Mexico and Colombia on the basis of cost (a brutal 201 USD/ton separates its retail price in Mexicali vs. Cali). In order to understand what is happening, one must look for evidence that explains what is really going on: an exercise in market power with the objective of extracting significant economic rents. It is more than obvious that the Mexican State should aggressively pursue the implementation of policy that encourages intense competition in the cement sector.
Mexicans are the victims of economic predators in far to many sectors of activity, including not only cement but also telecommunications and retail financial services. This politico-economic system has produced an enormous accumulation of wealth in the hands of a few and the immiseration of tens of millions, which makes for an increasingly volatile and potentially explosive social situation.