CHAPTER 2
MARKET ANALYSIS
2.1
INTRODUCTION
2.1.1
(BGE) in this project paper is about 100,000 MT per annum. Basically, BGE that will be
produced in the plant should not just based on the world demand but also need to
consider the other countries that also produce the same product. If the production is
higher than demand, means the price of the product in world trade market will decrease
and probability for the plant to gain profit is difficult and may lead to bankruptcy. Thus,
the production of BGE other than Malaysia must be investigated first before design up a
plant.
19
2.2
2.2.1
China, seven companies in Germany, six companies in India, four companies in Japan,
three companies in the USA, two companies each in Argentina, Mexico, Taiwan.
Approximately 650 million pounds (300 kilotonnes) of BGE are produced each year in
the United States and Europe. In Europe, the total European Union (EU) production of
all butyl glycol ethers is given in CEFIC statistics as 181,000 tonnes. Virtually no BGE is
believed to be imported into the Europe (CEFIC, 2006). Approximately 2000 tonnes of
BGE per year are manufactured by Australia. Thus, roughly world production is
estimated to be 400 to 500 kilotonnes per annum.
20
2.2.2
(ethylene oxide & ethylene glycol) Sdn. Bhd. Optimal Glycols Sdn. Bhd is a joint venture
formed by Petroliam Nasional Berhad (Petronas) of Malaysia owning 64%, Union
Carbide Corporation, which has been bought out by Dow Chemicals owning 24%, and
South Africa's Sasol Polymers (formerly Polifin) owning 12% of the company. It has its
headquarters in Kuala Lumpur, Malaysia. Optimal Glycol produces about approximately
45-50 kilo tonne per annum in Malaysia.
Year (in kg)
2007
2008
2009
40 111 943
41 575 167
48 758 356
21
used in cleaning products, 3% in printing inks and 1% in other uses such as in textile,
pulp and paper processing, pesticides, hydraulic fluids, etc.
Country
2000
2005
2010
North America
3580
3550
3325
Western Europe
2950
2930
2845
Japan
1452
1587
1715
Other Asia-Pacific
3681
4774
6095
Rest of World
3470
4229
5095
22
Country
kg
United States
605 174
Taiwan
285 188
Germany
178 745
India
161 100
United Kingdom
131 961
Singapore
71 404
France
58 810
Netherlands
15 200
China
15 180
South Africa
15 000
South Korea
8 818
Japan
4 400
Italy
362
Total
1 551 342
23
2.3
ethylene oxide (EO) with Butanol (C2H5OH) and the presence of Sodium Hydroxide
(NaOH) as the catalyst. Thus, the quantity and price of these 3 chemicals needed to be
known before produce the BGE.
2.3.1
24
2.3.3
Since the Sodium Hydroxide (known Caustic Soda) is unavailable to get within
Malaysia, this catalyst need to import from outside since it is necessary in the
production of Butyl Glycol Ether (BGE). The table below shows the quantity of the
NaOH import and its price from year 2007 to 2009.
2007
2008
2009
Quantity
Price
Quantity
Price
Quantity
Price
(10^6 Kg)
(per Kg)
(Kg)
(per Kg)
(10^6 Kg)
(per Kg)
19.6
0.59
20.5
RM 0.66
25
BGE is one of the most versatile chemicals in the marketplace today for a wide
variety of uses. The US E- and P-series glycol ethers contract prices shed up to 3
cents/lb - depending on grade, volume and application (on weak raw material costs and
sources). E-series (ethylene-derived) prices have decrease, ethylene glycol monobutyl
ether and di-ethylene glycol monobutyl ether by up to 2-3 cents/pound. The same was
applied to P-series (propylene-derived) values.
26
2.5
BREAK-EVEN ANALYSIS
2.5.1
27
From the PFD, there are 2 reactors, 4 tanks, 3 distillation column, 4 heat
exchangers and 2 mixers. Thus by referring the table above, the equipments cost can
be summarized in the table below:
Price
Price
Equipment
Unit
(US Dollar)
(US Dollar)
(RM)
Reactor
145 000
290 000
1 046 900
Heater
23 200
23 200
83 752
Cooler
23 200
69 600
251 256
Distillation Column
816 000
2 448 000
8 837 280
Tank
227 000
908 000
3 277 880
Mixer
33 000
33 000
119 130
Splitter
33 000
33 000
119 130
Total (RM)
13 735 328
CC = 0.15CTBM
RM 2 060 299.2
Fees
CF = 0.03CTBM
RM 412 059.84
RM 16 207 687.04
CSD = 0.05CTBM
RM 686 766.4
Auxiliary Building
CAB = 0.04CTBM
RM 549 413.12
Offsite Facilities
COS = 0.21CTBM
RM 2 884 418.88
Total
RM 4 120 598.4
28
Direct Cost
Specification
Cost
4 % GRC
RM 164 823.9
(installed)
20 % GRC
RM 824 119.7
Piping (installed)
70 % GRC
RM 2 884 418
10 % GRC
RM 412 059.8
Building
15 % GRC
RM 618 089.76
Yard Improvements
1 % GRC
RM 41 205.98
Service Facilities
50 % GRC
RM 2 060 299
2% GRC
RM 82 411.97
Onsite
Purchased Equipment
Installation
Instrumentation and Control
Offsite
Land
Total 1
RM 7 087 428
Indirect Cost
30 % GRC
RM 1 236 179
Construction Expenses
5% GRC
RM 206 029.9
Contractors Fee
5 % GRC
RM 206 029.9
Contingency
10 % GRC
RM 412 059.8
Total 2
RM 2 060 298.6
RM 9 147 726.6
29
2.5.2
Fixed Capital Investment, FCI is also known as Total Module Cost, CTM of the plant.
This is a cost to build the plant minus the cost of land and represents the depreciable
capital investment.
CTM = FLang
where,
CTM
Cp,i
n
FLang
From the FCI, the working capital and Start-Up cost also can be determined.
Working Capital, Wc = 12%
FCI
Wc =
Start-Up Cost = 8%
FCI
=
Thus, the Total Capital Investment, TCI = (FCI) + (Wc) + (Start-Up Cost)
TCI= 65 105 454.72 +
+
= RM 78 126 545.66
30
2.5.3
Price of EO
= RM 6.62/kg
= 4 839.2872 kg/h
Usage rate of EO
Price required
[Note: n-Butanol in the process will be recycled back at 286 945 465 kg/yr and
become feed. This value is double from its initial value that used in the feed.
Since it is been recycled, BuOH is excess in the process. Thus, the ratio for this
raw material been bought is at 1:3 day than other materials]
Price of n-Butanol
= RM 9.0/kg
Usage of n-Butanol
Price required
Price of NaOH
= RM 0.66/kg
Usage of NaOH
= 10000 kg/yr
Price required
Price of BGE
= RM 6.52/kg
31
2.5.3.2 Utilities
The cost of utilities (CUT) to produce 100 000 MT of BGE can be refer in the table
below:
32
Price
Equipment
Unit
(RM)
(RM)
Heater
608 086
608 086
Cooler
608 086
1 824 258
Mixer
210 824
210 824
Splitter
210 824
210 824
Total
2 853 992
In the process reaction, water is also included. The cost for water utility for Terengganu
is shown in table below:
Price of H2O
= RM 1.15/kg
Flow rate
= 298.9026 kg/h
33
= RM 2722.4
2.5.3.3 Operating Labor
No. Unit
Nnp
Reactor
Heater
Cooler
Distillation Column
Tank
Mixer
Splitter
Total
11
* Tank, Vessel and pumps are not counted in evaluating N np in the equation.
* P = Number of processing steps. In general value of P is zero. (Richard Turton, 2009)
Table 2.11: Operator Labor Cost
NOL
= [6.29 + (0.23)(11)]0.5
= 2.97
Operating labor
= (2.97)(4.5)
= 13.365 14
34
Cost
5 % FCI
RM 3 255 272.7
Operating Labor
RM 1500 (14)
20 % operating labor
RM 13 021 090
Laboratory Charges
10 % operating labor
RM 6 510 545.5
1 % FCI
RM 651 054.5
Local Taxes
1 % FCI
RM 651 054.5
Insurance
1% FCI
RM 651 054.5
Plant Overhead
50 % operating labor
RM 21 000
Total
RM 32 552 727.4
RM 57 313 799.1
35
General Expenses
Administration Cost
15 % operating labor,
supervision
& maintenance.
RM 1 956 313.5
36
8% of FCI
3% of FCI
RM 5 208 436.38
RM 1 953 163.64
Depreciation, ABD
10 % FCI
RM 6 510 545.47
APC + ABD
RM 10 489 023.93
Income Taxes
RM 2 936 926.699
Rate of return, I
RM 7 552 097.231
((ANNP + ABD)/TCI)*100
17.99%
Table 2.13: General Expenses
37
2.6
Years
0
1
2
Capital
Investment
PAYBACK PERIOD
Incoming
sales
Depreciation
Total
Expenses
Cash
Income
Net profit
Federal
Income
taxes
Net profit
after taxes
11718982
23437964
50782255
Net Cash
Income
-11718981.8
Cumulative
Net Cash
Income
-11718981.8
-23437963.7
-35156945.5
657364514.4
6510545.5
634990976.1
22373538.3
15862992.83
4441637.992
11421354.84
-32850354.4
-68007299.9
663938159.5
6510545.5
634990976.1
28947183.44
22436637.97
6282258.633
16154379.34
22664924.81
-45342375.1
670577541.1
6510545.5
634990976.1
35586565.04
29076019.57
8141285.479
20934734.09
27445279.56
-17897095.5
677283316.6
6510545.5
634990976.1
42292340.45
35781794.98
10018902.59
25762892.39
32273437.86
14376342.31
684056149.7
6510545.5
634990976.1
49065173.62
42554628.15
11915295.88
30639332.27
37149877.74
51526220.04
690896711.2
6510545.5
634990976.1
55905735.11
49395189.64
13830653.1
35564536.54
42075082.01
93601302.06
697805678.3
6510545.5
634990976.1
62814702.23
56304156.76
15765163.89
40538992.86
47049538.33
140650840.4
704783735.1
6510545.5
634990976.1
69792759.01
63282213.54
17719019.79
45563193.75
52073739.22
192724579.6
10
711831572.5
6510545.5
634990976.1
76840596.36
70330050.89
19692414.25
50637636.64
57148182.11
249872761.7
11
718949888.2
6510545.5
634990976.1
83958912.08
77448366.61
21685542.65
55762823.96
62273369.43
312146131.2
12
726139387.1
6510545.5
634990976.1
91148410.97
84637865.5
23698602.34
60939263.16
67449808.63
379595939.8
13
733400780.9
6510545.5
634990976.1
98409804.84
91899259.37
25731792.62
66167466.74
72678012.21
452273952
14
740734788.7
6510545.5
634990976.1
105743812.6
99233267.18
27785314.81
71447952.37
77958497.84
530232449.8
38
15
748142136.6
6510545.5
634990976.1
113151160.5
106640615.1
29859372.22
76781242.85
83291788.32
613524238.1
16
755623558
6510545.5
634990976.1
120632581.9
114122036.4
31954170.2
82167866.23
88678411.7
702202649.8
17
763179793.6
6510545.5
634990976.1
128188817.5
121678272
34069916.16
87608355.85
94118901.32
796321551.2
18
770811591.5
6510545.5
634990976.1
135820615.4
129310069.9
36206819.58
93103250.36
99613795.83
895935347
19
778519707.4
6510545.5
634990976.1
143528731.3
137018185.9
38365092.04
98653093.82
105163639.3
1001098986
20
786304904.5
6510545.5
634990976.1
151313928.4
144803382.9
40544947.22
104258435.7
110768981.2
1111867967
794167953.6
6510545.5
634990976.1
159176977.5
152666432
42746600.95
109919831
38303830.84
1150171798
21
78126546
39
Figure 2.7: Cumulative Cash Flow Diagram for Non-Discounted After-Tax Cash Flows
40
41
Cumulative Net
Cash Income
-11.71898185
Discount
Rate at
(10%)
-11.719
Discount
Rate at
(15%)
-11.719
Discount
Rate at
(20%)
-11.719
-23.438
-35.15694555
-31.9609
-30.5713
-29.2975
-32.8504
-68.00729992
-56.2044
-51.4233
-47.2273
22.66492
-45.34237511
-34.0664
-29.8133
-26.2398
27.44528
-17.89709555
-12.224
-10.2327
-8.63093
32.27344
14.37634231
8.926577
7.147583
5.77753
37.14988
51.52622004
29.08521
22.27621
17.25603
42.07508
93.60130206
48.03227
35.1882
26.12241
47.04954
140.6508404
65.61466
45.97901
32.71089
52.07374
192.7245796
81.73404
54.78435
37.35131
57.14818
249.8727617
96.33677
61.76473
40.35585
62.27337
312.1461312
109.4053
67.0937
42.01112
67.44981
379.5959398
120.951
70.9492
42.57421
72.67801
452.273952
131.0077
73.50716
42.27128
77.9585
530.2324498
139.6268
74.93704
41.29798
83.29179
613.5242381
146.8728
75.39875
39.82108
88.67841
702.2026498
152.8198
75.04072
37.98066
94.1189
796.3215512
157.548
73.99889
35.8928
99.6138
895.935347
161.1418
72.39616
33.65226
105.1636
1001.098986
163.6877
70.34254
31.33526
110.769
1111.867967
165.2721
67.93544
29.00202
38.30383
1150.171798
155.4234
61.10941
25.00095
42
43
44
Conclusion
From the aspects that mentioned above, it can be conclude that the process
plant for the production of BGE is feasible due to its market demand and the raw
material prices. However, the production of BGE will not profitable in Malaysia because
there the demand in Malaysia is unfortunately low. Thus, this BGE production is better if
exported to outside Malaysia since the global demand still high.
In the economic analysis of this plant, it is assumed that any new land
purchases required are done at the start of the project that is at time zero. After the
plant established, the process begins to generate finished products for sale and the
yearly cash flows become positive (Table 2.14). The payback period for the plant is only
takes 3 years minimum to become profitable. Payback period is a time required after
start-up to recover the FCI for the project.
45
References
http://www.dow.com/productsafety/finder/egbe.htm
http://www.tnb.com.my
http://www.mida.gov.my/en_v2/
http://www.statistics.gov.my/portal/index.php?lang=en