Cement Factories Cost Data: Complete Technical Guide

The cost data of the cement factories is the financial intelligence of the industry: the comparative numbers of the production costs, the energy consumption, the margins and the profitability of the plants that the analyst uses to benchmark the own factory, to evaluate the investments and to understand the competitive positions of the producers. The workbook of this article is a real cost data file of the cement industry: its sheet carries the net profit after taxation of the DG Cement Company for the six financial years from 2009 to 2014 (the 525,581,000 rupees of 2009, the 233,022,000 of 2010, the 171,000,000 of 2011, the 4,108,118,000 of 2012, the 5,502,169,000 of 2013 and the 5,965,498,000 of 2014, in the Pakistani rupees), the dataset that the analyst extends with the revenue, the costs and the production volumes to build the complete cost picture of the company.

This article builds the complete methodology of the cement factory cost data: the structure of the factory cost, the industry cost benchmarks (the energy, the power, the materials, the freight and the overheads), the per-tonne cost build-up with the worked numbers, the profitability analysis with the DG Cement data of the workbook, the international comparison and the use of the cost data in the decision making. The Complete Cement Technical Package (931 files: the handbooks, the courses, the Excel tools and the financial data files, $249.99 one-time, instant download through the secure PayPal payment) delivers the cost data workbook together with the full library of the cement industry tools.

1. The Cost Data of the Cement Factories: What the File Contains

The cost data workbook of the package carries the financial series of the DG Cement Company, one of the largest cement producers of Pakistan with the plants at Dera Ghazi Khan and the surrounding operations, and the six-year profit series of the file tells the complete financial story of the industry period:

Year	Net profit after taxation (PKR)	Change (%)
2009	525,581,000	—
2010	233,022,000	−55.7
2011	171,000,000	−26.6
2012	4,108,118,000	+2,302
2013	5,502,169,000	+33.9
2014	5,965,498,000	+8.4

The series of the workbook reflects the classic cycle of the regional cement industry: the depressed margins of the 2009–2011 period (the overcapacity, the cost inflation and the demand weakness squeezing the profits from the 526 million down to the 171 million rupees), followed by the dramatic recovery of the 2012 (the profit multiplying to the 4,108 million as the demand, the prices and the capacity utilization recovered together) and the continued growth through the 2013 and the 2014 to the 5,965 million rupees: the analyst reads the cycle in the profit series and builds the cost data behind the numbers.

• The profitability series: the net profit after taxation of the six years: the bottom line of the company, the product of the volume, the price, the cost per tonne and the tax: the starting point of the cost analysis;
• The extension rows: the analyst extends the workbook with the revenue, the production volumes, the cost of the sales and the margin rows from the company reports: the sheet of the package provides the structure and the example;
• The industry context: the same period data of the other Pakistani producers (Lucky Cement, Maple Leaf, Bestway, Fauji) for the comparison: the cost data file is the seed of the industry benchmark database.

The workbook therefore opens with the real company data and invites the analyst to build the complete cost picture: the profit series of the file is the skeleton, and the cost structure of the article fills the body.

2. The Structure of the Factory Cost

The production cost of the cement factory splits into the components that the industry compares in the rupees per tonne and the percent of the total, and the standard structure of the cost data serves every factory of the world:

• The raw materials: the limestone, the clay, the iron ore and the gypsum: the limestone from the captive quarry at the low cost of the 5–10 percent of the total, the purchased materials (the gypsum, the additives) at the market prices: the total materials line of the 20–25 percent of the manufacturing cost;
• The power: the grid electricity, the captive coal power and the waste heat recovery power: the 85–100 kWh per tonne of the cement at the 4–12 cents per kWh depending on the region and the mix: the power line of the 15–25 percent;
• The fuel: the coal, the petcoke and the alternative fuels of the kiln: the 85–120 kg of the coal equivalent per tonne at the 60–120 USD per tonne of the coal: the fuel line of the 25–35 percent, the largest single component of the factory cost;
• The freight: the raw material inbound and the cement outbound logistics: the 10–20 percent of the delivered cost in the landlocked markets and up to the 25–30 percent in the markets with the long distances;
• The salaries and the wages: the 5–15 percent depending on the automation and the labor market: the modern plants below the 100 employees per million tonne;
• The stores, the spares, the repairs and the overheads: the refractories, the grinding media, the maintenance materials, the administration, the insurance: the 10–20 percent of the total: the buffer of the maintenance and the administration policy.

The structure of the factory cost is the universal anatomy of the industry: the same lines in the Pakistan, the India, the Egypt, the Europe and the America, with the shares moving with the local prices: the cost data file of the package gives the analyst the framework of the comparison.

3. The Energy Cost Data: The Thermal and the Electrical Consumption

The energy data are the heart of the cement factory cost because the fuel and the power together carry the 40–55 percent of the manufacturing cost, and the cost data of the industry quote the specific consumptions as the primary benchmarks:

• The thermal energy: the specific heat consumption of the kiln in the kilocalories per kilogram of the clinker (kcal/kg) or the gigajoules per tonne (GJ/t): the modern five-stage precalciner lines at the 700–800 kcal/kg (2.9–3.3 GJ/t), the four-stage at the 750–850, the old long dry at the 900–1,200 and the wet lines at the 1,300–1,600: the difference between the best and the worst technology reaches the 500–600 kcal/kg, the 30–40 USD per tonne of the fuel at the coal prices of the period;
• The electrical energy: the specific power consumption of the factory in the kilowatt-hours per tonne of the cement: the complete plant (the mining, the crushing, the raw grinding, the kiln and the cooler drives, the cement grinding, the packing) at the 90–110 kWh/t for the ball mill plants and the 75–90 kWh/t for the plants with the VRM and the high-efficiency classifiers: the power line of the 8–15 USD per tonne;
• The heat to power ratio: the thermal to the electrical ratio of the industry at about 3.5–4.0 GJ of the heat to the 100 kWh of the power per tonne: the ratio that the cogeneration and the waste heat recovery strategies address: the WHR plants of the modern industry generate the 15–25 percent of the factory power demand;
• The energy cost per tonne: the combined energy cost of the typical dry process factory at the 30–50 USD per tonne of the cement, the 50–60 percent of the total production cost in the markets with the expensive fuel: the energy data of the cost sheet are the primary comparison of the factories.

The energy benchmarks of the cost data give the analyst the first comparison of any factory: the specific consumptions of the plant against the technology curves and the regional best practice, and the gap quantifies the improvement potential in the fuel and the power money.

4. The Cost Per Tonne: The Worked Build-Up

The cost data of the industry are expressed in the cost per tonne of the cement, and the worked build-up below follows the standard structure with the representative numbers of the South Asian dry process industry in the 2012–2014 period (the period of the workbook’s profitability recovery):

• The raw materials: the limestone at the 120 rupees per tonne (the quarrying, the crushing, the haulage), the clay at the 40, the iron ore at the 30, the gypsum at the 250 and the other additives: the material cost of the 550–650 rupees per tonne of the cement;
• The power: the 95 kWh per tonne at the average 11 rupees per kWh (the grid and the captive mix): the 1,045 rupees per tonne in the period of the high power prices;
• The fuel: the 100 kg of the coal equivalent per tonne at the 8,500 rupees per tonne of the coal (the imported and the local mix): the 850 rupees per tonne;
• The freight: the 600–900 rupees per tonne depending on the market distances: the structural cost of the landlocked South Asian plants;
• The salaries, the stores and the overheads: the 450–600 rupees per tonne;
• The total production and the delivery cost: the 3,500–4,000 rupees per tonne against the average realization of the 4,500–5,000 rupees per tonne in the recovered market of the 2012–2014: the gross margin of the 700–1,200 rupees per tonne, the margin that the profit series of the workbook reflects: the DG Cement profit of the 4,108 million rupees of the 2012 corresponds to the 500–600 rupees of the net margin per tonne at the 7–8 million tonnes of the sales.

The per-tonne build-up connects the cost structure of the factory to the profit series of the workbook: the same rupees per tonne that the cost data quote explain the millions of the profit rows, and the analyst reconstructs the cost data of any company with the same building blocks.

5. The Profitability Analysis with the Workbook Data

The profit series of the workbook supports the full profitability analysis of the company, and the analyst derives the standard ratios and the drivers from the six years of the data:

• The profit cycle: the series of the 2009–2014 (the decline, the trough at the 171 million in the 2011, the recovery to the 5,965 million in the 2014) traces the capacity utilization cycle of the Pakistani industry: the overcapacity of the 2009–2011 depressed the prices and the margins, and the demand growth of the 2012–2014 lifted the utilization and the realizations together;
• The volume and the margin decomposition: the profit = the volume × (the price − the total cost per tonne) × (1 − the tax): the recovery of the 2012 combined the volume growth (the utilization from the 60–70 percent to the 85–95) and the price recovery: the analyst of the workbook splits the profit change of each year into the volume effect and the margin effect;
• The cost ratio: the cost of the production to the sales turnover: the 78–88 percent of the healthy industry: the ratio of the workbook period improved with the utilization and the fuel prices, and the analyst tracks the quarterly movement;
• The margin benchmarks: the EBITDA margin of the 20–35 percent and the net margin of the 8–18 percent of the profitable Pakistani producers of the period: the net margin of the DG Cement in the peak year of the 2014 at the 12–15 percent of the revenue, the healthy position of the recovered cycle;
• The capital intensity: the profit relative to the invested capital: the return on the capital employed of the industry at the 10–20 percent in the good years: the measure that the investors of the cement sector watch.

The profitability analysis of the workbook data turns the profit series into the complete financial picture of the company and the industry cycle: the analyst reads the drivers behind the numbers and compares the company with its peers.

6. The Comparison Across the Factories: The Benchmarking Database

The cost data of the individual factories gain their value in the comparison, and the benchmark database of the industry organizes the data of the plants in the standard rows:

• The production cost ranking: the factories ranked by the cost per tonne: the quarry location, the kiln technology, the power mix, the plant age and the utilization decide the ranking: the gap between the best and the worst plants of the same market reaches the 20–30 percent of the cost: the competitive map of the industry;
• The energy ranking: the specific heat and the power consumptions of the plants against the technology benchmarks: the energy league table of the industry, published by the national cement associations and the consultants: the plants at the bottom of the table carry the improvement potential of the millions of the rupees per year;
• The freight comparison: the logistics costs of the plants with the different market positions: the plants with the rail, the sea and the grinding stations at the markets against the road-only plants: the logistics structure of the company shows in its delivered cost;
• The utilization comparison: the capacity utilization of the industry: the 85–95 percent of the tight markets against the 60–75 of the oversupplied: the utilization is the first number of the cost comparison because it scales the fixed cost per tonne;
• The public data sources: the annual reports of the listed companies, the national association statistics, the export price data: the analyst assembles the database from the public sources, and the workbook of the package provides the format and the example rows.

The benchmarking database of the industry is the decision tool of the sector: the new capacity decisions, the acquisition valuations and the pricing strategies all read from the cost ranking, and the cost data workbook of the package is the seed of the analyst’s database.

7. The International Cost Comparison

The cost data of the cement factories extend across the borders, and the international comparison explains the trade flows of the industry:

• The production cost bands: the production cost per tonne of the cement across the world in the 30–60 USD band of the competitive markets: the 25–35 USD of the low-cost producers (the captive power, the cheap coal, the low labor), the 45–60 of the high-cost markets (the expensive energy, the carbon costs, the high labor), and the 70–90 in the extreme cases of the island and the imported-fuel markets;
• The energy price effect: the coal at the 60–80 USD per tonne in the international trade, the electricity at the 30–60 USD per MWh of the cheap power markets against the 100–200 of the expensive: the energy lines of the cost sheets differ by the factor of two to three between the regions;
• The carbon cost: the European carbon price and the emissions trading add the 5–15 USD per tonne of the cement in the carbon-priced markets: the new line of the cost sheets that the non-carbon markets do not carry: the regulatory difference of the costs;
• The trade flows: the clinker and the cement move from the low-cost to the high-cost regions along the cost differences: the exports of the Middle East and the South Asia to the Africa and the Americas, the coastal plants serving the sea markets: the freight of the 15–30 USD per tonne decides the reach of the trade;
• The currency and the accounting: the cost data in the local currencies converted at the market rates: the analyst of the international data works in the USD per tonne as the common language, with the currency and the purchasing power corrections for the labor and the local materials.

The international comparison places any factory on the world cost map: the same structure of the cost sheet serves the plant in the Pakistan and the plant in the Poland, and the analyst reads the competitive position of the own company against the global benchmark line.

8. The Use of the Cost Data in the Decisions

The cost data of the factories serve the decisions of the industry at the every level, from the shift improvement to the boardroom investment:

• The operational decisions: the energy projects (the heat balance optimization, the WHR power, the alternative fuels) justified by the fuel and the power lines of the cost data: the savings measured in the rupees per tonne and the payback in the months: the cost data file converts the engineering proposals into the money;
• The pricing decisions: the market prices of the cement set against the delivered cost data of the company and the competitors: the price floor of the company is its cash cost, and the price ceiling is the market’s willingness plus the import parity: the cost data define the pricing freedom;
• The investment decisions: the capacity expansions, the acquisitions and the grinding stations evaluated on the cost data of the target plants: the acquisition of the high-cost plant at the discount versus the greenfield at the full cost: the cost data are the valuation inputs;
• The export decisions: the export viability of the plant computed from the production cost plus the freight and the duties against the import price of the target market: the export windows of the industry open when the domestic costs fall below the import parity of the neighbors;
• The reporting decisions: the quarterly and the annual reporting of the industry: the cost per tonne disclosures, the association statistics, the investor presentations: the cost data workbook of the package gives the analyst the standardized structure of the reporting.

The decision chapter shows the cost data at work: the same rupees per tonne numbers that fill the workbook drive the operational, the pricing, the investment and the export decisions of the industry, and the analyst who masters the cost data structure reads the industry through its numbers.

9. The Cost Data and the Technical Performance

The financial cost data of the factories are the mirror of the technical performance, and the engineer translates the cost lines into the process numbers:

• The fuel line to the kiln: the fuel cost per tonne divided by the coal price gives the specific fuel consumption: the fuel line of the 850 rupees per tonne at the 8,500 rupees per tonne of the coal = the 100 kg per tonne: the heat balance target of the plant: the kiln engineers improve the line with the thermal optimization;
• The power line to the mills: the power cost per tonne divided by the tariff gives the specific power: the 1,045 rupees at the 11 rupees per kWh = the 95 kWh per tonne: the mill optimization target: the separator upgrades, the VRM conversions and the WHR projects attack the line;
• The stores line to the maintenance: the refractories and the grinding media costs reflect the brick life and the media consumption: the better kiln stability and the coating extend the brick life, and the optimized ball charge reduces the media cost: the maintenance quality shows in the stores line;
• The conversion tables: the standard conversions of the cost analysis: the 1 kcal/kg = 4.1868 kJ/kg, the 1 GJ/t = 238.8 kcal/kg, the 1 USD = the local currency at the period rate, the 1 tonne = the 1,000 kg: the conversion discipline of the workbook keeps the cost and the technical data in the same file;
• The integrated view: the monthly report of the best plants combines the cost per tonne, the specific consumptions and the process KPIs in the one dashboard: the cost data and the technical data together: the picture that neither view alone gives.

The technical translation of the cost data makes the workbook a common language of the finance and the engineering departments: the fuel line of the cost sheet is the heat balance of the kiln in the money, and the engineer and the accountant read the same number with the two eyes.

10. The Cash Cost and the Competitiveness Curve

The final layer of the cost data analysis is the position of the factory on the industry cost curve: the ranking of all the producers of the market by their cash cost per tonne, plotted from the lowest to the highest, with the market demand line crossing the curve at the marginal price of the industry. The cost curve is the most powerful picture of the competitiveness, and the cost data workbook of the package provides the data structure of the ranking:

• The cash cost basis: the cash cost of the production (the variable costs plus the cash fixed costs, excluding the depreciation and the non-cash items): the cash cost is the price floor of the company: the plant priced below its cash cost stops the production and imports or shuts: the cash cost basis of the curve ranks the plants by their survival price;
• The curve construction: the plants of the market ranked by the cash cost per tonne, the cumulative production volume on the horizontal axis and the cash cost on the vertical axis: the steps of the curve are the plants: the flat and the low steps are the competitive low-cost plants, and the steep and the high steps are the marginal plants that run only when the demand justifies their cost;
• The marginal pricing: the market price of the cement settles near the cash cost of the marginal producer (the highest-cost plant that the demand keeps running): the plants below the marginal cost earn the margin, and the plants at the top of the curve run the risk of the shutdown: the position of the DG Cement on the Pakistani curve (the low-cost producer with the captive power and the modern lines) is the position of the margin earner: the profitability series of the workbook reflects exactly this position;
• The curve movements: the fuel price rises shift the whole curve up, the new capacity adds the new steps at the bottom or the top, and the demand growth slides the marginal price up the curve: the analyst of the workbook tracks the curve movements with the quarterly cost data: the industry’s price cycles read from the curve positions;
• The decision use: the investment decisions of the industry use the curve: the new capacity justified when the plant’s expected cost step lands below the expected marginal price, the acquisitions valued by the target’s step position, and the shutdown and the import decisions read from the survival prices: the cost curve of the data workbook is the strategic map of the industry.

The competitiveness curve closes the cost data analysis with the strategic view: the same rupees per tonne of the workbook that fill the cost sheets rank the plants on the curve, and the analyst who builds the curve from the cost data reads the industry’s pricing, its investments and its trade flows in one picture.

11. Frequently Asked Questions

What are the main cost components of a cement factory?

The main components of the manufacturing cost are the raw materials (the 20–25 percent), the power (the 15–25 percent), the fuel (the 25–35 percent), the salaries and the stores (the 10–20 percent), and the freight adds the further 10–25 percent of the delivered cost. The fuel and the power together carry the 40–55 percent of the manufacturing cost, which is why the energy efficiency dominates the cost reduction of the industry.

What does the DG Cement profit data of the workbook show?

The workbook carries the net profit after taxation of the DG Cement Company for the 2009–2014 years: the decline from the 525 million rupees (2009) to the 171 million (2011), the dramatic recovery to the 4,108 million (2012) and the growth to the 5,965 million (2014). The series reflects the capacity utilization cycle of the Pakistani industry: the overcapacity and the weak demand of the 2009–2011, and the demand recovery and the improved utilization of the 2012–2014.

How is the cost per tonne of cement calculated?

The cost per tonne is the total cost of the production (the materials, the power, the fuel, the salaries, the stores and the overheads) divided by the tonnes of the cement produced, and the delivered cost adds the freight per tonne. The analyst builds the number from the company reports (the total costs and the production volumes) or from the plant’s cost accounting, and the standard structure of the article gives the framework of the build-up.

Why do the production costs differ so much between the factories?

The main drivers of the cost differences: the technology and the age of the plants (the modern precalciner lines against the old wet and long dry lines), the energy prices and the power mix of the region, the freight distances, the labor markets, the capacity utilization and the carbon costs. The gap between the best and the worst plants of the same market reaches the 20–30 percent of the cost per tonne, and the benchmarking of the cost data quantifies the positions.

What are the typical specific consumptions that the cost data compare?

The industry compares the thermal energy (the 700–800 kcal/kg of clinker for the modern five-stage lines) and the electrical energy (the 90–110 kWh per tonne of cement for the ball mill plants, the 75–90 for the VRM plants). The two specific consumptions multiplied by the local energy prices give the energy lines of the cost sheet, and the improvement potential of any factory is read directly from the comparison with the best practice.

Is the cost data workbook included in the package?

Yes: the Complete Cement Technical Package (931 files) includes the original cement factories cost data workbook with the DG Cement profit series of the 2009–2014 years, the structure that the analyst extends with the revenue, the production and the cost rows, and the full library of the industry tools: the purchase below delivers the file and the package.

12. Conclusion

The cost data of the cement factories are the financial intelligence of the industry: the structure of the factory cost (the materials, the power, the fuel, the freight, the salaries and the overheads), the per-tonne benchmarks, the profitability series and the international comparison give the analyst the complete picture of the competitive positions. The workbook of the package carries the real profit data of the DG Cement Company for the six years (the 525 million of the 2009 to the 5,965 million of the 2014), and the article built the complete methodology around the numbers: the cost build-up of the 3,500–4,000 rupees per tonne, the energy benchmarks, the ratio analysis and the decision uses of the data.

The cost data workbook and the full family of the financial and the technical tools of the cement industry are part of the Complete Cement Technical Package: the 931 files, the one-time payment of $249.99, the instant download and the lifetime access. The purchase button below delivers the cost data file, the analysis structure and the complete library of the cement engineer and the analyst in one package.

This file is part of the Complete Cement Technical Package (931 files) available from cementequipment.org. Respective rights holders; library copy for the licensed single user.