Cost Structure and Pricing of Cement Industry

1. Cost And Management Accounting
PGDM Semester- 1
Batch 2014-2016
TITLE: Cost Structure and Pricing of Cement Industry
Group- 1

2. CEMENT INDUSTRY

3. INDUSTRY OVERVIEW
 The cement industry of any nation plays an important role
in its development through the construction of
infrastructure
 Presently, India is the second largest producer of cement
in the world
 The cement sector in India is expected to witness positive
growth in the coming years
 Cement production increased at a CAGR of 9.7% to 272
million tonnes over FY06-13
 As per 12th Five Year Plan, production is expected to
reach 407 million tonnes by FY17

4. CHARACTERISTICS
 An industry with low labor intensity-
The cement industry has become a process industry using
a limited amount of skilled labor.
 An energy intensive industry-
Each tonne of cement produced requires 60 to 130
kilograms of fuel oil or its equivalent, depending on the
cement variety and the process used, and about 110 KWh
of electricity.

5.  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.
 A mature product-
Demand for cement increased considerably in the 20th
century, reflecting the development of industry and
growing urbanization.

6. MAJOR PLAYERS
Market share is 43%.
Market share is 25%.

7. Market share is 12%.
Market share is 7%.
Others Market share is 13%.

8. PRODUCT RANGE
 Ordinary Portland Cement (OPC)-
OPC, popularly known as grey cement, has 95%
clinker and 5% of gypsum and other materials. It
accounts for 70% of the total consumption.
 Portland Pozolona Cement (PPC)-
PPC has 80% clinker, 15% pozolona and 5% gypsum
and accounts for 18% of the total cement consumption.

9.  Portland Blast Furnace Slag Cement (PBFSC)-
PBFSC consists of 45% clinker, 50% blast furnace slag
and 5% gypsum and accounts for 10% of the total
cement consumed.
 White Cement-
Basically, it is OPC: clinker using fuel oil (instead of
coal) and with iron oxide content below 0.4% to ensure
whiteness.

10. COST SHEET
COST SHEET OF ACC LIMITED
For the year ended 31st march 2013
Mar-13 Mar-12 Mar-11
Particular Amount (in rs.) Amount (in rs) Amount (in rs)
Raw material
Limestock 3607.32 4141.18 4788.24
chawk 346.87 398.19 460.4
clay 69.37 79.63 92.08
slag 2913.6 3424.44 3867.43
PRIME COST 6937.16 7963.82 9208.17
Power and fuel cost 65.19 91.33 98.69
employee cost 666.15 853.65 1024.61
other manufacturing expenses 68.8 73.35 75.36
WORK COST 7737.3 8982.15 10407.37
Administrative expenses 466.22 561.66 575.34
COST OF PRODUCTION 8203.52 9543.81 10982.71
selling expenses 635.1 804.51 937.56
COST OF SALES 8838.62 10348.32 11920.27
Profit 1136.23 1157.65 1092.25
SALES 10458.92 12035.44 13339.54

11. REGULATIONS AFFECTING CEMENT
INDUSTRY
 Clean Air Act-
This serves to protect public health and to regulate
emissions of hazardous air pollutants.
 NESHAP Rule-
The Environmental Protection Agency proposed
another rule to regulate some emissions. These rules
would impact cement manufacturing plants.

12.  Fallout From Regulation-
If cement production goes overseas as a result of such
regulation, to countries where cement plants have
higher levels of emissions, the result will be a net
increase in global pollution.