Rowse- The Development of an Industry

8/7/2019 Rowse- The Development of an Industry

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THE DEVELOPMENT OF ANINDUSTRY

using nylon as an example

E S Rowse

5/6/2008 2

TWO APPROACHES

MAKE A PRODUCT TOFIT THE NEED

Example: Nylon

Wallace H. Carothers1935 DuPont

knew what properties hewanted and developed apolymer to meet thatneed

MAKE A PRODUCT ANDFIND A NEED

Example: Teflon

Roy J. Plunkett-1938DuPont

was looking for acompletely differentproduct and came uponthis one by accident

5/6/2008 3

NYLONPolyamide Polymers begin with coal

COAL1 TON

COAL TAR

120 LB

1000 1400 Co

COKING PROCESS

COKE-used in ironproduction, then

COKE OVENGAS*

There are 18 cokeplants in the USA

Thermal cracking,indirect heat

steel

*51%H2, 30%CH4,7%N2,H2S,12%other HCs

Low sulfur ~1%

5/6/2008 4

The distillation of coal tar

COAL TAR 2 LB BENZENEboils at 80Co

0.5 LB TOLUENE

0.1 LB XYLENE

0.5 LB PHENOL

2.0 LB CRESOL

5.0 LB NAPTHALENE

Distillation process120 lbs

Volatile, flammable, toxic,carcinogen

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The hydrogenation of benzene

3H2

BENZENE

C6H6

CYCLOHEXANE

C6H12

+

Boiling point=81C, toxic, highlyflammable, irritant

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Oxidation of cyclohexane tocyclohexanol and cyclohexanone

O2

OH O

cyclohexanonecyclohexane

2 H2

cyclohexanol

heat++

KETONE-ALCOHOL BLEND

Boils at 160C, flammable,irritant, reactive, low toxic

Boils at 156C, flammable,irritant, low toxic


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Formation of adipic acidby nitric acid oxidation

HNO3HOOC-(CH2)4-COOH

heat

OH

CYCLOHEXANOLand/or the ketone-alcohol combination

ADIPIC ACID

Melts at 152 Co

Difficult to handle solid

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Amidization step and nitrile step

HOOC-(CH2)4-COOH + 2NH3

H2NCO-(CH2)4-OCNH2 + 2H2O

H2NCO-(CH2)4-CONH2 NC-(CH2)4-CN

ADIPAMIDE ADIPONITRILE

2 H2O

HEAT

ADIPAMIDE

HEAT

ADIPIC ACID AMMONIA

+

5/6/2008 9

Nitrile reduction step

N=C-(CH2)4-C=N + 4H2 H2N-(CH2)6NH2Ni

ADIPONITRILE HEXAMETHYLENE DIAMINE

Melts at 42 Co

Caustic, irritant

Must keep it warm to pump it

Tends to plug the pipes, valves

Turns yellow with air contact

HYDROGEN+

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Salt Strike and Salt Storagea much safer method!

Hexamethylene diamine + adipic acid +water+ agitation

H2N-(CH2)6-NH2 + HOOC-(CH2)4-COOH

H2N-(CH2)6-NH- +OC(CH2)4COOH +H2O

Hexamethylene adipamate salt in water at just above roomtemperature, easy to store and pump

Caustic diamine liquid Blocky, hard to move adipic acid

H2O

5/6/2008 11

Condensation Polymerization ofnylon 6,6

Hexamethylene diamine + adipic acid

Poly(hexamethyleneadipamide)+water

H2N-(CH2)6-NH2 + HOOC-(CH2)4-COOH

H2N-[(CH2)6NH-CO-(CH2)4]n-COOH + nH2O

280 Co

H+Ac-

3-4hrs

An endothermic, polycondensation reaction, in equilibriumwith the two monomers. Molecular weight is about 10,000,measured by relative viscosity (RV) and end groupsconcentration.

250psi

1 kg 1.26 kg

2.10 kg 0.16 kg

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The Orientation of polymer molecules

UNORIENTED MOLECULES

Low strength

ORIENTED MOLECULES

Very high strength


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Characteristics of nylon polymer

Waxy solid

White

Tough

High melting (270 Co)

Hygroscopic

Crystalline

Sharp melting point

Can form gels

Can oxidize-yellow

Can be reworked

Can be oriented

Can be used with otherplastics, rubbers

Can be colored

Can be used with manyadditives

Safe to use

Non-polluting

Does not biodegrade

Recyclable

Versatile

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INGREDIENT COSTS

Benzene-growth at 2.2%/yr

3,235,000,000 gallons capacity in US alone

cost: $1.28/gallon or about $0.02/lb or RMB 0.143/lb

Hexamethylene diamine-growth at 8%/yr.

China Shenma Group 150,000 tpa capacity

cost: RMB 25,000 / ton, or RMB1.75/lb

Adipic acid-growth at 2.6%/yr

2,450,000,000 lb capacity in US alone

cost: $0.75/lb or RMB 5.35 /lb

5/6/2008 15

Business assumption

You are working within an existing businessenterprise to which this proposal is added

You will comply with all the companys existingcodes of ethics, visions, core values (ie. Safety,environmental protection, etc)

This business will add to and not take away fromthe overall company effort. It may however, draincash from the company for a time period.

It will provide a place in which employees cansee a future for themselves professionally, andwhere talented new employees are attracted.

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Business Questions

Where shall the plant be located?

What capacity should it be designed for?

Has a good decision & risk analysis been done?

Where and who will be the customers?

Is your entire management in agreement?

Can you enter into this business at the right levelregarding basic feedstock?

Does our company have the expertise to enterthis venture?

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Decision & Risk Analysis

Develop the 10-50-90 analyses for Sales volume by grade (after deciding how many grades) Selling price by grade Growth with time by grade Cost factors (what if raw materials escalate?)

Investment factors Competitive forceswho are they, where are they, what new ones

could enter the market? What other factors are there? Patents? Which factors would stop you? Does our company have the expertise, or must we hire it from the

outside? Have we done enough research & development?

5/6/2008 18

Decision and Risk Analysis, contd

Are we going into a sustainable business?

Will we devote R&D to:

making a better nylon 66?

making other nylons, like 610, 612, 6?

making better plastics?

Dont spend millions building canals!!!

Dont become a carburetor expert!!!


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Choosing a D&RA team

A lead project engineer

Marketing Sales

Research and Development

Production

A financial person

A consultant from outside the company

May want a branding person

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Choosing a location

Is this site close to raw materials?

Is this site close to customers?

Does this site offer a good labor force, of the right kind?

Does this site have reliable utilities?

Will the locals accept this plant?

Are competitors close or far away?

How good is the infrastructure?

What are the tax costs, and other government costs?

Can the plant operate here without polluting theenvironment?

Choose the best 3 and then decide on the best one.

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Typical D&RA curves

90% chance

50% chance

10% chance

Operating years 1 thru 10

SalesVolume,

Lb/yr

This is acceptable

1 105/6/2008 22

Where does our product fit in with otherplastics?

Properties nylon ABS PP stl

Tensile strength 11,200 5,100 4,900 85

Impact strength 2.1 4.2 1.2

Modulus 175K 300K 210K

HDT, Fo 455 218 225

Sp Grav 1.14 1.02 0.90 8

Price, $/lb 1.60 0.95 0.93 3

5/6/2008 23

Customer applications

Injection molded parts

Profiles

Tubes

Automotive

Thin film and packaging

Filaments

Do we understand our customers well? Canwe help them use our products?

5/6/2008 24

Polymerization areadesign basis: 250,000,000 lb/yr, 365 day/yr

HMD liquid

Adipicsolid

Saltstrike

Batchautoclaves

Underwaterpelletizers

silos

H2O

Melt

280Co

H2O

Rail deliveries

cooler

Pellets at100Co

process waterelectricitysteam

compressed airnitrogen

H2O 200 Co

additives


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AutoclaveSalt solution,limited additives

Typical 2 ton batch

Dowtherm heat jacket

Steam extracted

To scrubber then atm

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Railcar UnloadingAdipic acid and HMD are very difficult to handle!

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Finishing areaDesign basis: 300,000,000 lb/yr, 365 day/yr

Twin screw compounder

Weigh feeders

Feed

silos

vacuum

Underwaterpelletizer

Fluid bed

Finished productblending and silos

packaging

Inventory

MTO or MTI

Qualitycontrol lab air

Several additives*

*Antioxidants

Colorants

Stabilizers

Lubricants

Minerals

Fiberglass Utilities-> 5/6/2008 28

Gravimetric Feeders

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Gravimetric Feeder Arrangement

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Twin screw compounders


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Twin screw extruder

Leistritz, GmbH co-rotating, intermeshing, self-wiping 5/6/2008 32

Twin screw compounders

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Screw elements

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Underwater Pelletizer

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Fluid Bed Cooler

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Fluid bed cooler


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Silo blenders and storage silos

5/6/2008 38

Process Hazards Survey

Failure mode & Effect method

Examine each and every component, asking:How could this component fail?

If it did fail, what would happen?

What is the probability of a failure?

How should we protect ourselves?

Why is our safety important to our customers?

5/6/2008 39

investment

Polymer plant equip. $150,000,000

Finishing plant equip. $ 50,000,000

Total equip. $200,000,000

Design cost (who?) $ 10,000,000

Testing costs, R&D $ 10,000,000

Building & Land $ 20,000,000

Site support investment $ 10,000,000

Total capitalized invest. $250,000,000

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Cost of manufacture estimatesingredients only

Raw Matls Lb/yr Unit cost, $/lb $/yr $/lb fin prod

Capacity 250,000,000

HMD 121,000,000 0.25 29,700,000 0.12

Adipic acid 153,000,000 0.75 114,800,000 0.46

Additives 1,020,000 4.00 4,080,000 0.02

Yield 0.98

Ingredneeded

274,000,000

Cost of

ingred.

148,580,000 0.60

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Cost of manufacture estimateRaw Materials,lb/yr and $/yr

274,000,000 148,580,000 $ 0.600 $/lb fin prod

Finished product,lb/yr

250,000,000

Opera ting labor 100

Day labor 50

Maintenancelabor 30

All other labor 25

Kw connected load 8000

Kw used 6500

Capital needed, $ 250,000,000

Interest on capital 0.06

5/6/2008 42

Cost of Manufacture Estimate, contd.

Interest expense 15,000,000 $/yr 0.0600 $/lb fin pro

Insurance & taxes 25,000 0.0001

Office expense 25,000 0.0001

Maintenance sup. 100,000 0.0004

Operating supply 50,000 0.0002

Analytical supply 50,000 0.0002

Waste handling 75,000 0.0003Electricity cost 1,081,600 0.0043

Water cost 30,000 0.0001

Nitrogen cost 50,000 0.0002

Allocate overhead 100,000 0.0004

Packaging matls 7,500,000 0.0280

Railroad usage 50,000 0.0002

TOTAL cost ex 24,136,600 0.1050

TOTAL cost of mfg 172,716,600 $/yr 0.6950 $/lb fin pro


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Total cost of salesVolume of sales 250,000,000 lb/yr 220,000,000 lb/yr 190,000,000 lb/yr

Ingredients, $/lb 0.6000 0.6000 0.6000

Cost of mfg, $/lb 0.1100 0.1200 0.1400Cost of marketing& advertising

0.1000 0.1000 0.1000

Cost of research &customer service

0.1000 0.1000 0.1000

Administrative 0.1000 0.1000 0.1000

Total cost ofgoods sold

1.11 $/lb 1.12$/lb 1.14$/lb

Selling price, $/lb 1.60$/lb 1.60$/lb 1.60$/lb

Before tax profit 0.49$/lb 0.48$/lb 0.46$/lb

After tax profit 0.29 $/lb 0.29$/lb 0.28$/lb

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What is the cumulative cash flow and thepayback year?

Full year operation 1 2 3 4 5 6 7 8

Volume sales, $/yr 190 220 250 250 250 250 250 250

Selling price, $/lb 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

Total costs of sales 1.14 1.12 1.11 1.11 1.11 1.11 1.11 1.11

Net profit $/lb 0.28 0.29 0.29 0.29 0.29 0.29 0.29 0.29

Net profit MM$/yr 53.2 63.8 72.5 72.5 72.5 72.5 72.5 72.5

Investment MM$ 250

Net cash flow, MM$/yr -196.8 63.8 72.5 72.5 72.5 72.5 72.5 72.5

Cumulative cash flow -196.8 -133 -60.5 12 84.5 157 229.5 302

Payback 4 years

5/6/2008 45

Cash flow estimate

Cumulative cash flow

-300

-200

-100

0

100

200

300

400

0 2 4 6 8 10

Year of operation

cash

flow,

M

M

$

Break even in 4th year

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Where can we reduce costs?

R&D

6% Cust Serv

6%

Admin

12%

Sales/mkt

8%

Advertise

6%All Other Plant

Costs

8%

Labor

2%

Raw matls52%

5/6/2008 47

Managing the Business

Will our raw material supply go away?

Will our raw material supply go up in price?

What is the political security of our plan?

Is our customer base stable or will it change dramatically

in the years ahead? Do we have all of the right people in place to support this

venture?

Are our volume forecasts accurate?

Is our plant safe from catastrophe?

Can we guarantee our customers a reliable supply?

Do all of the employees understand the goals?

5/6/2008 48

Conclusions and recommendations for

students

80% of what you learned in school, you will never seeagain

Become a fast learner of new things Become the resident expert in whatever you are

assigned to do for your boss Speak well and write well Learn to debate and defend your ideas Learn from the operators and the vendors; they know

more than you do. Anything is possible if you dont care who gets the credit. Like other people! You cant do it alone. If you cant do it safely, dont do it!!

Documents

Rowse- The Development of an Industry