Must-know: Factors that influence the cement industry

Factors that influence the cement industry

There are certain factors that influence the cement industry. The factors include:

• Economic scenario – Phases of growth in the economy are positively linked to cement company growth.
• Cost structure and competitiveness – There isn’t much that cement companies can do regarding cost structure because the margins are less to begin with. Cost advantages are usually due to companies having access to a cheaper power source, a quality limestone reserve, or being close to bigger markets.
• Legal, regulatory, and environmental scenario – The cement industry is affected by regulatory norms. This is prominent in developed countries where environmental issues are more stringent. This adds to the companies’ costs.
• Technological advancement – A disruptive innovation can give the innovating company an advantage. For example, when companies moved from the wet manufacturing process to the dry manufacturing process, there was a cost savings of 5%–10% of the overall cost structure.
• Geographic advantages – It’s an advantage for companies to be near limestone mines or waterways. Ease of transportation is an advantage.

Tracking cement companies

Investors can access and track the cement industry through the Vanguard FTSE Emerging Markets ETF (VWO). Manufacturers in the cement industry include CRH plc (CRH), Cemex, SAB de CV (CX), Eagle Materials Inc. (EXP), and James Hardie Industries SE (JHX).

Cement association

One cement association that can be tracked is the Portland Cement Association (or PCA). The PCA represents America’s cement manufacturers. The association has an active role in industry advocacy for increased infrastructure investment and job creation. PCA has also been active in the passage of a new highway bill in the U.S. and the establishment of fair and reasonable environmental guidelines.