RIGA - Upon learning of a dearth of cement in Latvia, Prime Minister Aigars Kalvitis first blamed producers for artificially creating the deficit and then instructed the Economy Ministry to begin preparations for an international tender for building a new cement plant.
Arno Pjatkins, Kalvitis' spokesman, was quoted on Oct. 14 as saying that the prime minister suspects cement producers of artificially creating the deficit in order to ratchet up prices during the current construction boom. He said that two large cement producers operating on the market 's Cemex, which owns Broceni, and CBR Heidelberg, which owns a cement production plant in Estonia 's are in a "monopoly situation" that they are putting to use.
"The Broceni cement plant at present is producing some 200,000 tons of cement annually, while at present some 600,000 tons of cement a year are needed," Pjatkins said.
He said cement could not be imported in Latvia because special cement storage facilities are required for that purpose.
A similar deficit has been observed in Lithuania, forcing government ministers to come up with a long-term plan. The Cabinet has proposed helping the country's only cement factory, Akmenes Cementas, procure EU finance to build a new production line.
The price for a kilo of cement has skyrocketed in Lithuania over recent months.
Pjatkins said Prime Minister Kalvitis has sent several resolutions to Economics Minister Krisjanis Karins calling on the Competition Council to assess by Oct. 20 if there are signs of a possible cartel of cement producers seen in Latvia, as well as to coordinate with other Baltic ministers steps that might be taken against monopolists.
Juris Reisons, board chair of Cemex, which owns Broceni, told reporters that Cemex in no way is in a monopoly situation. He explained that, according to a study of the cement market carried out by Cemex, the latter controls some 62.3 percent of the country's cement market and is thus not a monopolist, Some 29 percent is controlled by CBR Heidelberg, 6.44 percent by Lithuania's Akmenas Cementas and 2.2 percent by Byelorusia in the neighboring country.
Reisons said the company forecasts that this year some 500,000 tons of cement will be required in Latvia; however, with its existing capacities the company can produce only 350,000 tons of cement a year.
"We are working above our production capacities, so the remarks by the prime minister that Cemex is abusing its position on the market are out of place," he said, adding that the entire cement output is sold on the local market and no cement is exported.
He said the company this year had to raise its cement price by 3 percent as a result of inflation, but even this is lower than the country's annualized inflation of 7 percent.
Pjatkins said that Kalvitis was worried about a sufficient supply of cement since a shortage could have disastrous consequences for the national construction industry, which is currently undergoing a boom. The prime minister has also instructed the ministry to look into possibilities of acquiring shares in Akmenes Cementas since it is the only Baltic cement producer not controlled by international concerns.
According to the Latvian National Statistics Office, construction volume reached 294.8 million lats in the first half of this year, a rise of 16 percent year-on-year.
Reisons said he did not comprehend the concerns of the prime minister about the shortage of raw material for cement production because the largest quarry in Latvia has 70 million tons of limestone needed for cement production, while producers can use just some 500,000 tons during one year due to the cement production capacities.
Reisons said that all appropriate measures are being taken right now for Cemex to be able to build a new cement processing plant in Broceni with an output capacity of up to 1 million tons a year. The company plans to invest $50 million in the plant.