Business Insight Zone

That’s the takeaway message from the WSJ Energy Roundup item quoted below, which discusses Lafarge’s $12.9 billion deal to buy the cement operations of Orascom Construction Industries.

For a while I covered the Egyptian beat for Hoover’s, and became fascinated with the Sawiris family that controls Orascom. (Naguib Sawiris, who runs Orascom Telecom, is particularly interesting.) I’m also intrigued by any deal that merges environmental-green benefits with dollar-green ones. That appears to be the case with this deal, since Orascom’s cement ops run more efficiently than Lafarge’s European plants.

Green Cement in Egypt

. . . Why the rush to clean up? Cement makers aren’t any more altruistic than the next guy. But it takes a lot of energy to fire up kilns to 2,000 degrees Centigrade, and energy accounts for between one-quarter and one-third of the industry’s costs. To stay competitive, cement makers have to trim energy consumption and make their plants as clean as possible.

Precisely. Over the years, companies across many industries have become accustomed to the idea of a certain amount of waste in their operations as being inevitable. That works for a while, but only until a new wave of technology — or of new market entrants with different ideas — upsets the apple cart. Then you have to get leaner and make your operations (or your products) more efficient.

We’ve seen this in industry after industry, whether it’s cars (American makers responding to fuel-efficient imports) or lighting (consumers realize they can get much more cost-effective lighting using technologies besides Edison’s bulb) or mutual funds (Vanguard undercuts the rest by keeping such a low fee structure).

More and more we’ll be seeing this in heavy industry, as manufacturers come to embrace the mandate that has driven the semiconductor business for decades: eliminate more waste every year, or else get out of the business.