IP/02/34
Brussels, 11 January 2002
Commission clears joint venture for the production and marketing of salt between K+S and Solvay
The European Commission has approved the creation of a joint venture called European Salt Company (ESCO) between German company Kali & Salz AG and Solvay S.A. of Belgium. ESCO will combine the parent companies' businesses for the production and sale of salt thus creating Europe's second largest producer for crystallised salt behind Akzo of the Netherlands. But the Commission's investigation has shown that the concentration would not impede effective competition in Europe.
K+S and Solvay notified the Commission on 28 November 2001 of a plan to combine their activities in the field of production and distribution of salt (crystalline salt and brine, a highly concentrated salt water) into a jointly controlled venture in which they will hold interests of 62% (K+S) and 38% (Solvay). Solvay will, however, retain control of facilities related to the production of salt and brine for its internal consumption in various chemical processes.
The joint venture will have sole responsibility for the production of salt and its sale to third parties. It will operate production facilities primarily in Germany, France, Belgium and the Netherlands but also in Spain, Portugal and Italy.
Salt is used for a variety of applications, the most important being electrolysis (a chemical transformation process which changes salt or brine into other chemical products used in the production of PVC, aluminium and paper among other things), de-icing of roads and human consumption. These three applications account roughly for 40%, 25% and 15%, respectively, of all salt uses. Other applications include dishwasher salt, water-softening salt, animal feed and pharmaceutical use. ESCO salt will be used for all these applications.
A total of about 21 million tons were consumed in the European Economic Area (EEA) in the year 2000, of which approximately 5 million tons were produced by K+S and Solvay together.
The Commission examined the impact of the merger in all relevant markets and concluded that ESCO's behaviour would be sufficiently constrained by the presence of Akzo, the EEA's largest salt producer, Salins du Midi (France), Südsalz (Germany) and Salt Union (UK). These are powerfull competitors which, like ESCO, can produce the full range of salt products.
The situation of over capacity in the salt sector means that competitors will be able to increase production for a particular application without having to reduce output for other applications. This exerts a restraining effect on the ability of any market player to raise prices. In addition all the important competitors in the salt markets operate extensive and homogeneous distribution networks throughout Europe and can therefore compete in each country. Illustrating this, intra-community trade amounts to one third of the total market.
The proposed transaction will bring about high market shares in de-icing salt in the Nordic countries (Norway, Sweden, Finland and Iceland). However, the Commission's investigation has found, that customers - mainly public authorities - exercise considerable countervailing buyer power and allot orders in a transparent and open way by organising annual invitations for tender. The Commission also took into account the fact the Nordic countries import all the de-icing salt consumed locally by ship from as far away as Chile, which accounts for 15.5% of all Nordic countries' imports compared 3% for the EEA overall.
High combined market shares will also be reached in salt for water-softening and pharmaceutical applications in the central regions of the Community. But with regard to pharmaceutical applications (ex. dialysis solutions and physiological salt solutions), there are also large European customers which can obtain supplies from a variety of suppliers, including Akzo, Südsalz, OSAG of Austria and British company New Cheshire Salt besides ESCO itself. In addition, barrier entries to the production of pharmaceutical salt are low. With regard to water-softening, the Commission also established the existence of large customers as well as powerful retailers and chemical distributors. In addition, market entry for producers of salt of food grade purity, which is used for this application, is relatively easy, as they only have to compress the food grade salt into tablets or pebbles to produce salt for water-softening.
The Commission has therefore concluded that the concentration will not create or strengthen a dominant position likely to impede effective competition in the EEA or any substantial part of it and has decided not to oppose to the operation.
Solvay is the parent company of an international group of companies active in four main areas: chemicals, plastics, pharmaceutical and processing businesses. Solvay produces salt in order to cover its in-house salt requirements for its chemical and pharmaceutical production and also supplies salt and salt products to third parties.
K+S is the parent company of a group of undertakings engaged in production and distribution of salt, salt based industrial products, fertilisers and potash based products, and in providing waste disposal services.