A process, capital intensive industry
The cost of cement plants is usually above € 150M per million tonnes of annual capacity, with correspondingly high costs for modifications. The cost of a new cement plant is equivalent to around 3 years of turnover, which ranks the cement industry among the most capital intensive industries. Long time periods are therefore needed before investments can be recovered and plant modifications have to be carefully planned and must take account of the long-term nature of the industry.
An energy intensive industry
Each tonne of cement produced requires 60 to 130 kilogrammes of fuel oil or its equivalent, depending on the cement variety and the process used, and about 110 KWh of electricity.
An industry with low labour intensity
With the development of modern automated machinery and continuous material handling devices, the cement industry has become a process industry using a limited amount of skilled labour. A modern plant is usually manned by less than 150 people. In the EU the cement industry represents 45 000 direct jobs. In CEMBUREAU countries, it represents approximately 56 000 direct jobs.
An industry with a homogeneous product
Although produced from natural raw materials which vary from plant to plant, cement can be considered a standard product - there are only a few classes of cement and in each class, products from different producers can generally be interchanged. Therefore, price is the most important sales parameter next to customer service; quality premiums exist but are rather limited.
A heavy product
Land transportation costs are significant and it used to be said that cement could not be economically hauled beyond 200 or at most 300 km. The price of long road transportation may even be higher than the cost price. Bulk shipping has changed that, however, and it is now cheaper to cross the Atlantic Ocean with 35 000 tonnes of cargo than to truck it 300 km. However, in large countries transportation costs normally cluster the markets into regional areas, with the exception of a few long-distance transfers (where, for example, sea terminal facilities exist).
A mature product
Demand for cement (which was first produced in the early 1800s) increased considerably in the 20th century, reflecting the development of industry and growing urbanisation. Consumption in the industrialised countries multiplied 6 to 8 times following World War II. Other than a few ups and downs in both the United States and Europe in the intervening years, growth continued until the 1975 oil crisis - with a subsequent decline of 20 to 40 percent in mature markets.
However, over the last 25 years, some European countries have doubled or even tripled their consumption (Greece, Portugal, Spain and Turkey), since these countries have experienced significant growth over the last 10 years.
Consumption of cement is closely linked to both the state of economic development in any given country or region and to the economic cycle. In mature markets, such as in Europe, where cement consumption per capita still varies considerably from one country to another, cement sales are dependent on evolution and habits in the construction sector, a sector that is itself following very closely (usually after a brief delay) the evolution of the economy in general.