While employees of the Harsa plant in Beersheva are battling against the Hamat group's plan to close the factory down and move to Turkey, where production costs are lower, the Nesher Cement monopoly is also struggling against cheap Turkish production flooding the sector in Israel.
After laying off 40 employees in 2018, Nesher has recently begun considering further layoffs and reductions in its activity throughout Israel, including closing down its plant near Haifa.
Nesher's profits fell steeply last year, and the decline in the sector is projected to continue over the coming year as a result of large-scale cement imports from Turkey sold in the Israeli market at dumping prices. "The situation that has emerged in the cement market requires Nesher to take a series drastic measures in order to survive in the long term," a senior cement sector source told "Globes."
The exporting of the Turkish cement industry's unemployment to Israel in recent years is difficult to ignore. Production by cement factories in both Turkey and Greece has outstripped the falling demand in those countries caused by their dire economic situation and the war in Syria.
Cement industry sources said that imported cement currently has a 40% share of the entire Israel cement market, at the expense of Nesher and Hartuv Cement, a small cement manufacturer located near Beit Shemesh. "The cutbacks at Nesher are necessary, and are being evaluated with the utmost seriousness. They will include closing down its plant in the north and dozens of additional layoffs, as well as lowering prices to enable the company to survive in the face of cheap cement imports from Turkey. At this level of prices, Nesher will be affected in the long term, with Turkey constantly breathing down its neck," the senior source added.
Nesher had an unchallenged monopoly in the cement market for many years. It is still regarded as a monopoly in the market, but its market share has fallen to less than 60%.
Exports must continue, even when demand is low
The Turkish cement industry's activity features cement production surpluses. In order to get rid of the large inventory that it has accumulated, some of it is exported to the Israeli market and sold at prices lower than those at which cement is sold in Turkey. This dumping has engaged the attention of Ministry of Economy and Industry director of import administration and commissioner of anti-dumping measures Danny Tal for a long time.
Cement production is processive, based on the use of large furnaces that cannot be turned off when demand for the product is low. Production is therefore continued under these conditions, thereby increasing the supply and creating a need to dispose of inventory, even at low prices.
Most of the dumping is conducted by Israel Shipyards subsidiary Ciment. Past complaints by Hartuv Cement resulted in the opening of an investigation of the matter by Tal. Hartuv Cement alleged that cement dumping created unfair competition and jeopardized its existence and the future employment of its 120 employees.
Ciment, the main importer of cement from Turkey, argued that its imports had lowered the prices of construction inputs. The company said that competition was now lowering prices after many years of over-concentration in the sector. This assertion was supported by an opinion by Competition Authority director general Michal Halperin. It was also argued that Hartuv Cement's production infrastructure was outmoded, making it difficult for the company to manufacture at competitive prices. On the other hand, in contrast to Hartuv Cement, Nesher is an efficient company that invested in mechanization and advanced production facilities in recent years.
Following an 18-month investigation, Tal found that the complaint was justified, and that cement produced in Turkey and Greece was indeed being sold in Israel at dumping prices. He recommended imposing anti-dumping customs duties of 7-22% on cement imported from these two countries. In late 2018, however, Cohen rejected Tal's recommendation and set customs duties on imported cement at 0.25% for 30 months.
Minister of Economy and Industry Eli Cohen ruled that during the period when customs duties are low, the ministry official in charge of customs duties in his ministry would regularly inspect the development of imports and the level of prices in the industry. When imported cement reaches a 50% market share, an increase in customs duties will be considered in order to restrain imports for the sake of local production.
Sources inform "Globes" that the official responsible for customs duties contacted Hartuv Cement and Nesher, the importers, and other players in the sector during the past few days asking them to provide him with up-to-date data within two weeks about the state of imports and production in the sector in the framework of the quarterly assessment of the sector's situation that he planned to conduct.
This measure was taken at a time when the Knesset Finance Committee, chaired by MK Moshe Gafni (United Torah Judaism) is monitoring the cement industry crisis. The committee held a special discussion on the subject six weeks ago while the Knesset was not in session.
The Manufacturers Association of Israel today warned that the crisis at the Harsa plant and at the Phoenicia Glass Works bottle plant in Yeruham, which is in danger of closing down because of a haredi (Jewish ultra-Orthodox) boycott because it operates on the Sabbath, was only the beginning. The Manufacturers Association said that many industrial companies were continually under threat of closing down, and that Hartuv Cement, Ha'argaz, and Merkavim were operating in a market exposed to cheap imports.
Figures compiled by the Manufacturers Association economics division show that municipal property tax rates rose 25% over the past decade, not including various exceptional increases and fees that increase industrialists' expenses. Water and electricity rates have also risen. The Manufacturers Association asserted that these increases were detracting from the competitiveness of Israeli industry.
Published by Globes, Israel business news - en.globes.co.il - on May 1, 2019
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