The cement & glass industry follows the business cycle and the overall economic activity. The cement market is also regional in its nature, as transportation costs are high and the end user landscape is highly fragmented. The cement industry is a capital- and energy-intensive business that employs a relatively low intensity of labor. Capital allocation in the industry averages about $225 million per million tons of production capacity. With these levels of investments and highly cyclical demand, it is imperative to run operations efficiently, reliably, and economically throughout a wide range of production rates. All Cement & Glass companies must deploy the latest technologies to stay competitive. ARC covers top technology trends in the Cement & Glass industries on an ongoing basis. Please visit Technology Evaluation and Selection Guides page for recent ARC research reports.
Equipment utilized in this industry involve relatively large investments with high power requirements. For example, mechanical drive trains typically fall in the range of 200 to 6,000 HP or even much higher for some applications such as large mills and kilns. Since 1995, the energy costs associated with operating a cement plant have increased more than three-fold, along with other business challenges in the industry. While a large percentage of these energy costs are for heating the kilns by coal, petcoke, or natural gas, a significant amount of electrical energy is also consumed. High-performance motors and highly efficient production machinery can provide manufacturers with a cost advantage. The industry and the production process can be described as:
- Capital intensive - The cost of cement plants is usually above $150 million per million tons of annual capacity. ROI is long and plant modifications have to be carefully planned.
- Energy intensive - Each ton of cement produced requires between 60 and 130 kilos of oil or its equivalent and about 105 KWh of electricity.
- Low labor intensity - Less than 150 people are needed to operate a modern plant
- Homogeneous product - There are only a few classes of cement. In each class, products are interchangeable. Price is the most important sales parameter
- High transportation costs - Land transportation is costly and cement cannot be shipped economically beyond 300 km (except by sea).
- Mature product - New markets only develop when countries experience general economic/population growth, otherwise production needs to follow the cycle.
Trends in the cement industry largely center around efficiency improvements, including more flexible production scheduling to avoid peak electric prices, alternative fuels for cement kilns, CO2 capture, energy recovery from incinerators, co-generation with grid integration, and so on. Today, many plants use a wide variety of alternative fuels as part of their overall energy scheme to meet from 10 to 70 percent of their energy requirements.