The labor intensive part is cutting open the bags and dumping them. I think the bag filling is automated.
Once filled, the bags are stacked on pallets and moved by forklifts or in some cases, conveyors.
are majority of cement users small enough operations that an automagic process to dump contents of the bags would be pointless? Or is the cost of implementing the relevant solutions thought to be more than the salary of the guy doing the dumping full-time?
Coal transloading is a relatively crude process - no packaging, no delicate handling, no nothing. You scoop it, dump it, convey it, clamshell load and unload it, etc. without worrying overmuch about packaging. I have toured and worked at ocean, river, lake, and land coal terminals in several countries, as well as surface and sub-surface mines. If you were shipping cement you would likely need good packaging (especially since ocean transport and its related humidity can really impact goods), probably on strong pallets. I suppose one could make a large transload container, but you get to a point of diminishing returns - the strength and size (and cost) of container to move the cement has to increase dramatically as the volume of the cement per container increases.
Now as I think about it I realize that I can’t find one, single over-riding reason why cement wouldn’t be traded/shipped as a commodity, more lots of little nagging reasons. It’s certainly possible but the economics just don’t work out.
people, question - why does this issue of cement density keep coming up? Steel has high density, but steel gets traded massively by sea. And yes, steel costs three times more than cement and maybe more. So is this a matter of high density stuff being acceptable to ship only if it costs more than some point above the cost of cement?
Besides, does a single container have to contain only the cement bags? Why not split it up in two sections, one for cement and one for something with lower density, to keep the total weight down?
Una Persson’s point about humidity makes sense, thanks. So maybe having to do hermetic sealing of the container would cost too much. Or maybe not - maybe the sealed container could be reused over and over again. Or maybe you can just keep the air inside container warm to reduce condensation without any real airtight sealing.
This is from 2008, but for Portland Cement
So in the area of $50-80/metric ton, when purchased in large bulk amounts. At that point, a $15 or higher shipping charge is going to make it hard to compete.
all right, Tastes of Chocolate, down with the ignorance! Thanks a lot for the bulk prices data.
So do you guys suppose that the prices have increased greatly since 2008? Or is this the sort of industry where you can stick a 200% mark-up when going from bulk to bag and not have the competition bust your sorry business plan?
I would suspect that cement is much more of a commodity than steel. Steel requires alloys and molecular structures and…stuff. Then it needs to be shaped into usable forms. Cement seems like it’s a lot simpler to manufacture and would therefore have fewer barriers to entry.
I’m not sure a 200% markup from 25,000 ton lots to 50-pound bags is that crazy. I don’t know about other similar bulk commodities, but I certainly wouldn’t be surprised if that kind of markup is typical.
I mean, in typical stores, you get a about a 100% markup just going from case lots to individual items. So it doesn’t seem too out of hand to have a 100% markup from 25000 tons to cases.
I deal with quicklime and hydrate lime for my job. All of the lime suppliers make cement grades – it’s dead easy to make, and cheap as well.
Volume discounts are huge on these commodities – you do pay much more for 50# bags than you would for bulk purchases. That is where cement manufacturers make their margins; there is almost no margin for bulk cement.
Incidentally, the requirements for making cement are very low – limestone source and some simple mining, kilning, and milling equipment. As noted above, many fuel sources are acceptable for cement, and just about any limestone source is usable for cement-grade product. It is a trivial capital cost for a large cement company to open up a new cement kiln local to demand, thereby undercutting anyone needing to bulk ship or transport their cement in. There is almost always a suitable limestone source nearby.
However, if there is not a large demand for cement, there is no impetus to build cement plants. So there are many new cement plants coming on-line in China and the Asia-Pacific region. Not so many in the Ukraine.
Quercus and Lightray, can you guys explain just why the volume discount should be so great? Or, equivalently, why the markup on small batches is so big?
If you can just buy the thing in bulk, store it forever in a big warehouse (with commercial real estate getting cheaper and cheaper by the day nowadays) and gradually sell it off to small customers at a markup lower than your competition, doesn’t this sound like an industry with potential for perfect competition?
Or are warehouses still managing to be too expensive nowadays for cement purposes? Would it make sense, let’s say, to use not a warehouse building but rather a big ventilated rubber tent on a metal frame set up on top of a pile of cement bags somewhere out in the low cost Texan badlands land?
I’m not as familiar with cement as I am with quicklime or hydrate. Both of the latter have issues with longer-term storage – after milling, the increased surface area makes the product susceptible to reacting with H2O or CO2 in the air to form calcium hydroxide (from quicklime) or calcium carbonate (from hydrate). Either of these render the product less suitable for use. Cement, I believe, is not as susceptible to this, but it is still a concern.
With smaller packaging sizes, the customer is basically paying for the supplier’s infrastructure for that packaging, and for the margin needed to support those extra personnel. You are charged a higher price for this.
So, if I want to purchase bulk lime delivered by barge to a facility where I will unload the material, there is little investment needed by the supplier – they basically convey it to the barge, and are done.
If I purchase bulk lime delivered by railcar or truck, the supplier will need to invest in hoppers and bins to hold and load these materials. And possibly need to have a rail or truck fleet.
As I said, I’m not as familiar with cement, but I know that most cement plants supply trucks of mixed cement – which require facilities to mix the powder cement, load into the cement trucks, and a fleet of cement trucks.
I I purchase lime in 1-ton supersacks, the supplier will need packaging facilities, and need to hire packagers, and will need a warehouse. Even moreso if I’m purchasing in 50# bags – except, now that’s entirely different equipment and even more warehouse space. (If it’s quicklime, that warehouse will need to be somewhat climate-controlled; not so much if hydrate or cement.)
There is even more cost if you are a tiny purchaser of lime or cement. Cement plants are not interested in selling a few 50# bags to someone – they’d rather sell trucks of bags to Home Depot, or cement-trucks’ worth of mixed cement, rather than having people show up with wheelbarrows to be filled. If that’s the amount you want to buy, there’s an additional cost for that added level of distribution (which probably won’t be directly from the cement plant).
I suspect that the logistics of bulk warehousing of 50# cement bags would be ruinous, but don’t know for sure. I do know that lime/cement companies have huge amounts of capital tied up on working inventory – mine reserves, mined product, kilned product, product being delivered. They have very small margins on a commodity product like cement, which makes their financial numbers look terrible. They spend a good amount of attention on minimizing inventory.
So if you wanted to warehouse 50# bags of cement, you’d need to charge extra for the cost of warehousing. And if there’s enough of a market to justify a warehouse there, it’s probably worthwhile for someone to build a small kiln near some local limestone source, and undercut that price.
In places with available limestone and demand for cement, you can find small cement kilns all over the place. I pass at least three on my 30-minute drive to work every day. There is not a big barrier to building a new cement kiln. The barriers come at supplying specialty products (such as I deal with), or in infrastructure efficiency.
ok, from Lightray’s above post it seems that the big sources of markup are
- truck transportation from the kiln
- packaging into bags expenses
- middlemen (e.g. Home Depot) and their associated warehouses
Of the above presumably the truck transportation cannot be messed with (not even with sea imports - we still need to ship from port to the customer).
Packaging into bags could conceivably be made cheaper by improving the technology and process involved, at least if it is in fact unduly expensive now. Or else maybe the customers could be told to come with their “wheelbarrows” (more like reusable bags) and fill them in by themselves from a “vending machine” that is basically a modified cement truck.
To get rid of the unneeded middlemen sales could be made directly to customers using preliminary online ordering. Sort of like Groupon - if a bunch of customers agree to show up on day D to pick up their orders, the truck will be there for them. Of course, this will work especially well if the customers have their own small warehouses that they can use for stockpiling cement instead of relying on Home Depot to stockpile it for them.
Don’t discount the administrative costs of dealing with hundreds or thousands of tiny little accounts, too. The lime companies we deal with have a limited list of customers to pay attention to. They can make sales to cement companies or power plants, for example, but would have absolutely no way to sell to someone who wanted a couple 50# bags. They can’t just take your credit card and bill you for it.
a properly designed web app to the rescue?
Note that it doesn’t have to be a web app run by the manufacturer itself. It could be a Groupon-meets-TrucksRUs middleman.
Or maybe a single LimeGroupon web marketplace servicing a whole industry of TrucksRUs redistributors. So manufacturer gets big orders from the TrucksRUs, and TrucksRUs know that they will unload the stuff to customers at Springfield USA because they have already made the deal with them online beforehand.
I’d simply be surprised if there’s that much demand for small quantities of cement (as opposed to concrete) – and, if there is, how much the consumers of it would be willing to fart around with having to go to the factory with their own bag, versus just picking some up at Home Depot, in order to save a couple of bucks.