SummaryRidley Corporation Limited - proposed acquisition of salt operations at Dry Creek, South Australia, of Penrice Soda Products Pty Ltd. The proposed acquisition also involved an exclusive, long-term arrangement for the supply of salt to Penrice by Ridley as an input to Penrice's production of soda ash and sodium bicarbonate.
Market definitionRefining and wholesale supply of salt in South Australia and Australia's eastern States.
Competition analysisOn 27 April 2005 the ACCC decided not to oppose the proposed acquisition.
Most Australian salt production is exported in bulk from northern Western Australia by three producers, Dampier Salt, Onslow Salt and Shark Bay Salt. These exporters produce in excess of 10 million tonnes annually. Dampier Salt supplies a small amount to Quality Salt for refining and supply domestically. Excluding Penrice's non-contestable, internal salt consumption, market demand for salt is approximately 600,000 tonnes annually. Salt applications include bulk chemical industries, pool chemicals, leather and hide industries, animal feeds, and table salt.
Ridley is already the largest supplier of salt to domestic consumers. Penrice is Australia's only producer of soda ash and sodium bicarbonate, and has salt fields and refining operations in South Australia.
Following market inquiries among Australian salt suppliers and customers, the ACCC considered that freight costs would generally prohibit the supply of salt from south-western Australia to the eastern States. The ACCC also considered whether the northern WA producers might divert exports in order to supply the market, or supply a third party for refining and re-supply to eastern states customers. The ACCC did not consider the northern WA suppliers to currently exercise a signficant competitive constraint in the market due to freight costs to eastern states customers and their export focus. The proposed acquisition would therefore exceed the ACCC's concentration thresholds.
However, Penrice's existing salt production is largely directed to internal consumption as an input to the production of soda ash and sodium bicarbonate. While Penrice has been competing to supply third parties, including as part of an arrangement with a Perth-based supplier to secure national customers, Penrice's external sales have been limited in terms of volume, value and relevant customers. External sales from the existing Penrice salt operations appeared unlikely to significantly increase, with or without the proposed acquisition, given forecast demand and prices for Penrice's soda ash and sodium bicarbonate.
Moreover, the merged firm is likely to face an effective competitive constraint from the existence of alternative suppliers in South Australia, Queensland and Victoria, including Pacific Salt, Mulgandawa, Hattah (Sun Salt), Copeland/Pyramid Salt and Dartagook. Some of these suppliers have significant existing salt reserves and/or plans to expand their supply of salt. Indeed, the ACCC found existing excess capacity of approximately 200,000 tonnes among these suppliers. This represents a very significant proportion of salt demand by South Australian and eastern states customers, and also significantly exceeds external salt sales by Penrice in recent years.
Accordingly, the ACCC considered the proposed acquisition unlikely to substantially lessen competition pursuant to section 50 of the Trade Practices Act.