Cemex’s Energy Solution

WSJ writes about the innovative solution being used by Cemex of Mexico:

Mexico-based Cemex, the biggest cement producer in the U.S., has cut its energy bills by 17% in the past four years. The company is reaping the benefits of an ambitious decade-long effort to refit its cement plants so they can operate on cheap, little-used fuels such as an oil-industry residue called petroleum coke and industrial waste like oily rags.

Cemex’s success in reducing its energy expense offers an unusual lesson in global business, showing what a developing-world company can do when forced to deal with competition from the developed world. In some cases the difficult operating environments of emerging markets — economic turbulence, high borrowing costs, creaky infrastructure and corruption — can act as a rigorous corporate boot camp, breeding the kind of innovation that makes for lean competitors on the world stage.

Cemex’s biggest weapon in its war on energy costs has been petroleum coke, a blackened leftover from the oil refining process. It had long been used as an occasional energy supply in some cement plants around the world. It burns hotter than coal, the cement industry’s main fuel source, and is much cheaper. But burning pet coke creates its own problems and the difficulty of getting enough supply had prevented “pet coke” from becoming a primary fuel source for the cement industry.

After overcoming those hurdles, Cemex is using pet coke at most of its global plants. Pet coke now accounts for half of Cemex’s fuel needs. That has given Cemex a big competitive advantage, particularly in recent months as the price of coal soared to about twice that of pet coke.

Cemex has also been written about by CK Prahalad in his book “The Fortune at the Bottom of the Pyramid.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.