2

Estimate the market size of the cement industry of your country?

Hi guys,

i would like to present to you another market sizing question where I had problems with myself.
Any criticism or suggestions on what I maybe forget are greatly appreciated. My country is Germany.

Basic starting points:

  • I would ask if with cement industry the only think of my concern is building houses or industrial buildings.
  • I assume the interviewer answer with yes, therefore I would suggest to structure my case as follows:

(Calculate no. of houses build per Year in Germany * factor for industrial buildings) * Avg m^3 of cement needed for building * Price per m^3:

Calculate no. of hh build:

  1. No. of people living in germany : No. of people living in a household = No. of Hh 82 Mio : 2 = 42 Mio. Hh (correct is 41 btw)
  2. No. of Hh : No. of Hh per House = No. of Houses in Germany 42 Mio. Hh / 2 = 21 Mio. Houses ~ 20 Mio. Houses
  3. House in Germany : Replacement Rate for houses in germany = Houses build per Year 20 Mio Houses / 80 years = 250'000 Houses / year (Is this replacement rate a good estimation in your opinion?)
  4. No. of Houses build per year * factor for every industrial building = buildings build in germany each year 250'000 H/y * 1.2 = 300'000 H/y (1.2 seems fine to me, since industrial building would be like every 10 house in my opinion but doubles in size (factor = 1 + 1/10 * 2 ))

Calculate Avg m^3 per House (had problems with this one):

  1. New houses have very thin walls, so I estimate a wall is 25cm thick. Since we have 4 walls we can calculate with one wall with thickness of 1m.
  2. Average measures of a wall: 15m in length * 12 m in height. Therefore we have 15 * 12 * 1 = 180 m^3 for the walls of the house
  3. Cement used for floors is 15m*15m*3 (3 floors + basement) *1/3m = 45*5= 225 m^3
  4. Therefore we have ~400 m^3

Prize per m^3: estimated on 200 Euros per / m^3 (thought process is that you then need 80'000 euros for building a houses foundation which seems reasonable)

Therfore we have:
300'000 Buildings * 400 m^3 * 200 €/m^2 = 24'000'000'000. 24 Billion Euros.

Hi guys,

i would like to present to you another market sizing question where I had problems with myself.
Any criticism or suggestions on what I maybe forget are greatly appreciated. My country is Germany.

Basic starting points:

  • I would ask if with cement industry the only think of my concern is building houses or industrial buildings.
  • I assume the interviewer answer with yes, therefore I would suggest to structure my case as follows:

(Calculate no. of houses build per Year in Germany * factor for industrial buildings) * Avg m^3 of cement needed for building * Price per m^3:

Calculate no. of hh build:

  1. No. of people living in germany : No. of people living in a household = No. of Hh 82 Mio : 2 = 42 Mio. Hh (correct is 41 btw)
  2. No. of Hh : No. of Hh per House = No. of Houses in Germany 42 Mio. Hh / 2 = 21 Mio. Houses ~ 20 Mio. Houses
  3. House in Germany : Replacement Rate for houses in germany = Houses build per Year 20 Mio Houses / 80 years = 250'000 Houses / year (Is this replacement rate a good estimation in your opinion?)
  4. No. of Houses build per year * factor for every industrial building = buildings build in germany each year 250'000 H/y * 1.2 = 300'000 H/y (1.2 seems fine to me, since industrial building would be like every 10 house in my opinion but doubles in size (factor = 1 + 1/10 * 2 ))

Calculate Avg m^3 per House (had problems with this one):

  1. New houses have very thin walls, so I estimate a wall is 25cm thick. Since we have 4 walls we can calculate with one wall with thickness of 1m.
  2. Average measures of a wall: 15m in length * 12 m in height. Therefore we have 15 * 12 * 1 = 180 m^3 for the walls of the house
  3. Cement used for floors is 15m*15m*3 (3 floors + basement) *1/3m = 45*5= 225 m^3
  4. Therefore we have ~400 m^3

Prize per m^3: estimated on 200 Euros per / m^3 (thought process is that you then need 80'000 euros for building a houses foundation which seems reasonable)

Therfore we have:
300'000 Buildings * 400 m^3 * 200 €/m^2 = 24'000'000'000. 24 Billion Euros.

(edited)

2 answers

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Hi,

I would also take into account several factors:

  1. What about apartment buildings? Why do you think there are only houses? I would calculate the number of buildings taking into account the average number of apartments per building. You may calculate several segments separately as well
  2. New housing is not only about replacement rate, but also about population growth and the houses bought for investment purpose. For Population growth, you may use a historical growth rate. For investments, you may use personal observations/examples.
  3. There are commercial / government buildings built as well. I would use some assumptions about how many commercial buildings you have per block of private and then apply this benchmark to the newly build private building

Best!

Hi,

I would also take into account several factors:

  1. What about apartment buildings? Why do you think there are only houses? I would calculate the number of buildings taking into account the average number of apartments per building. You may calculate several segments separately as well
  2. New housing is not only about replacement rate, but also about population growth and the houses bought for investment purpose. For Population growth, you may use a historical growth rate. For investments, you may use personal observations/examples.
  3. There are commercial / government buildings built as well. I would use some assumptions about how many commercial buildings you have per block of private and then apply this benchmark to the newly build private building

Best!

Thank you for your answer. To 1: In my estimation a apartment building also consists of single households. Therefore in my opinion I already considered apartment buildings in my calculation. To 2: Would you really concern investment purposes? Does are in my opinion already considered in the replacement rate, since those house are mainly build after deconstruction an old one? The growth rate of the population is a good point. Could you by any chance help with a suggestion on how to implement that in my case. From my standpoint it's not possible to use the replacement rate if you don assume constant underlying factors (population growth). Point 3 i forgot, thanks for the answer! :) — Christian on Feb 18, 2018 (edited)

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Hi Christian,

I agree with Vlad on the additional uses; moreover there is a whole industry not considered in the analysis – the transport industry. Cement can be used indeed also for roads, tunnels and bridges.

Best,

Francesco

Hi Christian,

I agree with Vlad on the additional uses; moreover there is a whole industry not considered in the analysis – the transport industry. Cement can be used indeed also for roads, tunnels and bridges.

Best,

Francesco

That is a very fair point. Roads are mostly build with asphalt tough. But a lot of construction projects use a lot of cement. Thanks for the answer — Christian on Feb 18, 2018 (edited)

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