Construction Cost Location Factors
Easily Convert Capital Cost of Industrial Plants from One Country to Another
Construction cost location factors, also referred to as location factors or area cost factors, are multiplying factors for instantaneously translating the total overall construction cost of projects, from one geographic location to another. Location factors take into account various local components that contribute to construction costs, such as labor cost, material cost, logistic costs and business environment.
Such tools offer straightforward means to assess the relative variances in costs between two geographic locations, being useful in multiple studies including: economic evaluations, site selection studies, conceptual estimates, project planning. Construction cost location factors are commonly utilized in preliminary assessments to determine the viability of projects, and make early-stage “go/no go” decisions.
Construction cost location factors may be suitable for specific industries or sectors, and may be obtained from construction cost handbooks, industry reports, or online tools and databases. Intratec Solutions, a company that provides strategic commodity market information, offers its Plant Location Factors (IL Factors) to convert construction costs of industrial plants, among more than 30 countries worldwide.
This article describes location factors provided by Intratec, how to use such tools and Intratec’s methodology for developing them.
Intratec Plant Location Factors (IL Factors)
IL Factors are monthly series of dimensionless multiplying factors calculated in a comparative manner, taking a United States-based plant as the reference location (USA = 1). Each IL Factor represents the relationship between the construction cost in the target location and the USA, in a given date. In this context, a factor greater than 1 indicates that construction costs in the target location are higher than in the USA, while a location factor less than 1 indicates lower costs.
Intratec provides IL Factors since 2000 for 30+ strategic countries, grouped by 6 world regions:
Americas: Canada, Mexico, Brazil
West Europe: Germany, France, Italy, Belgium, Netherlands, United Kingdom, Switzerland, Austria, Spain, Portugal
Central & North Europe: Sweden, Norway, Finland, Poland, Czech Republic, Hungary, Greece
Southeast Asia & Oceania: Australia, Singapore, Indonesia, Thailand, Philippines, India, Malaysia
East Europe & North Asia: China, Japan, Russia, South Korea, Taiwan
Africa & Middle East: Saudi Arabia, South Africa, Turkey
More information about Intratec Plant Location Factors can be found at:
▶ https://www.intratec.us/products/plant-location-factors
Intratec also offers in its website, for free, Plant Location Factors for Finland.
The full sample shows all functionalities of Intratec Plant Location Factors, as well as all data available for Finland since 2000. The free sample can be accessed below:
▶ https://www.intratec.us/products/construction-cost-location-factors
Using Intratec Plant Location Factors
Intratec Plant Location Factors usage is straightforward. To get the plant cost in a country A, multiply the known plant cost in the USA by the country A’s IL Factor in the specific period.
Plant Cost in Country A = Plant Cost in the USA * Country A IL Factor.
Example. A research group would like to assess the construction cost of a chlor-alkali plant in April 2017 in Brazil. A similar study was already made in the United States in the same period, and the plant cost
was estimated at USD 100 million.
To convert plant cost estimates from the US to Brazil, you just have to multiply the plant cost in April 2017 in the USA (USD 100 million) by the IL Factor Brazil at April 2017 (1.09), as expressed in the equation below:
Plant Cost in Brazil[Apr 2017] = Plant Cost in the US[Apr 2017] * IL Factor Brazil[Apr 2017]
By applying this calculation, the plant cost in Brazil in April 2017 would be approximately USD 109 million.
How Intratec Plant Location Factors Are Calculated
The Intratec Plant Location Factors are compiled based on a structured methodology, which involves gathering and processing a huge amount of economic parameters that are categorized into four major components,
as follows:
Labor cost. It includes wage rates, directly paid benefits, and other expenditures incurred by the employer to employ a worker, as well as the difference in local productivity data.
Material cost. It considers steel prices, import needs, availability of local equipment, need of spare equipment, and freight, taxes, and duties on imported and domestic materials.
Logistic costs. It refers to all costs associated with a country’s infrastructure, such as: availability and quality of ports, roads, airports, and rails; communication technologies; warehouse infrastructure; border clearance; and local incentives.
Business environment. It takes into account the costs associated with doing business in the country, such as: readiness of bureaucratic procedures; legal protection of investors; enforcing contracts; and getting credit.
All components that make-ups the previous major components are then weighted according to their relative importance. Finally, the factors are calculated in a comparative manner, taking the United States as the reference location.
About Intratec Solutions LLC
Intratec is a leading B2B provider of commodity strategic data and analyses. We are an online business whose mission is to provide reliable information about commodities, empowering companies to make accurate, high value-added decisions.
For more information, visit www.intratec.us
