A Historical Perspective On The Chemical Industry


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  • Liebig’s lab in early 19th century Image of J ustus von Liebig, 19 th Century German chemist and co-founder of today‘s Süd-Chemie, Inc., courtesy of Süd-Chemie, Inc., and J. Ladebeck. Used with permission.
  • A Historical Perspective On The Chemical Industry

    1. 1. Unit 1: A Historical Perspective on the Chemical Industry Introduction to the Chemical Industry for Technical Assistance Providers
    2. 2. Outline of this unit <ul><li>A (very brief) history of the Chemical industry </li></ul><ul><li>U.S. Chemical industry today </li></ul><ul><li>Many faces of industry / market sectors </li></ul><ul><li>Business trends </li></ul><ul><li>Environmental trends </li></ul><ul><li>Impact on assistance providers </li></ul>
    3. 3. Learning Objectives <ul><li>Gain an appreciation for the evolution of the chemical industry from craft-based to science-based industry </li></ul><ul><li>Gain an appreciation for the diverse business, technical and environmental contexts presented by the many faces of the industry </li></ul><ul><li>Understand key business and environmental drivers affecting the industry </li></ul>
    4. 4. From Alchemy to Industrial Chemistry <ul><li>Early precursors (prior to 19 th century) </li></ul><ul><ul><li>dyes, pigments, soaps </li></ul></ul><ul><ul><li>often more craft-based than science-based </li></ul></ul><ul><li>Large scale chemical industry began in in UK in 1800s </li></ul><ul><li>First science-based industry (versus mere technology based) </li></ul>
    5. 5. Some Technological Milestones in the History of the Chemical Industry <ul><li>1850s -- synthetic dyes from coal for textiles </li></ul><ul><li>1869 — plastics/celluloid </li></ul><ul><li>1909 — synthetic fertilizers (Am. Cyanamid Co) </li></ul><ul><li>1914 — rayon from wood fibers </li></ul><ul><li>1928 — nylon (DuPont) </li></ul><ul><li>1920s/30s — rise of petrochemicals </li></ul><ul><li>1940s — synthetic rubber </li></ul><ul><li>1990s — increased focus on new specialty chemical products </li></ul>
    6. 6. Increasing Importance of Environmental Regulations <ul><li>Pre-1950’s – environmental concerns largely a localized phenomena </li></ul><ul><li>1950s -- growing concern about toxic waste spurred by environmental illnesses in Minamata, Japan </li></ul><ul><li>1962 “Silent Spring” focuses domestic attention on toxics in the environment </li></ul><ul><li>1970 EPA established, Clean Air Act passed </li></ul><ul><li>1984 -- Bhopal disaster and growing concern about environmental regulation </li></ul><ul><li>1988 – First wave of TRI reporting </li></ul><ul><li>1990’s -- shift to a “beyond compliance” philosophy begins; industry sustainability initiatives </li></ul><ul><li>2001 – Growing concern over plant security </li></ul>
    7. 7. Growth of Environmental Regulations
    8. 8. The U.S. Chemical Industry today <ul><li>Today chemical industry produces over 70,000 products </li></ul><ul><ul><li>Most are not direct consumer products but rather consumed by other industries </li></ul></ul><ul><li>Essential contributor to increased living standards </li></ul>
    9. 9. The U.S. Chemical Industry today <ul><li>Industry still growing, but overall lower profits </li></ul><ul><li>U.S. is world’s largest producer, 2 nd largest exporter </li></ul><ul><ul><li>Canada, Japan largest markets </li></ul></ul><ul><li>Largest employer in U.S. manufacturing sector </li></ul><ul><ul><li>Over 1 million workers </li></ul></ul><ul><ul><li>Provides high-paying jobs </li></ul></ul><ul><li>Significant level of R&D - $26 billion annually </li></ul>
    10. 10. The Many Faces of the Industry <ul><li>Industry is not monolithic nor homogeneous </li></ul><ul><ul><li>wide variation in technical sophistication, staffing levels, profit margins, and environmental awareness </li></ul></ul><ul><li>Aggregate data doesn’t tell us much - sizes, products, operations vary from plant to plant </li></ul><ul><li>Ways to differentiate: </li></ul><ul><ul><li>underlying chemistry (organic vs. inorganic) </li></ul></ul><ul><ul><li>mode of processing (batch vs. continuous) </li></ul></ul><ul><ul><li>location in value chain (specialty vs. commodity) </li></ul></ul><ul><ul><li>company size (small vs. large) </li></ul></ul>
    11. 11. The Many Faces of the Industry Underlying Process Chemistry <ul><li>Type of feedstock </li></ul><ul><ul><li>Organic: hydrocarbon-based </li></ul></ul><ul><ul><li>Inorganic: ores or elements taken from earth (e.g., phosphate), air (e.g., nitrogen) Biofeedstocks – newest type </li></ul></ul><ul><li>Type of processing </li></ul><ul><ul><li>Batch – individual “batches” of specific products </li></ul></ul><ul><ul><li>Continuous – same product over time </li></ul></ul>
    12. 12. The Many Faces of the Industry Position in the Value Chain <ul><li>Specialty chemicals: </li></ul><ul><ul><li>small quantity, customer-specific products </li></ul></ul><ul><ul><li>tends to rely on batch processing </li></ul></ul><ul><ul><li>typically high value-added products </li></ul></ul><ul><ul><li>emphasis on versatility, flexibility of operations </li></ul></ul><ul><li>Commodity chemicals: </li></ul><ul><ul><li>“ standard” products – plastics, solvents, “building block” ingredients </li></ul></ul><ul><ul><li>high production volumes </li></ul></ul><ul><ul><li>usually low value-added </li></ul></ul><ul><ul><li>emphasis on cost per unit production </li></ul></ul><ul><li>Chemical Distribution </li></ul>
    13. 13. The Many Faces of the Industry Company and Facility Size <ul><li>Company Size </li></ul><ul><ul><li>Large, multi-national corporations (e.g., Dow, Dupont, Rhodia) </li></ul></ul><ul><ul><li>Small businesses with one or a few plants </li></ul></ul><ul><li>Plant size </li></ul><ul><ul><li>Large, e.g., petrochemical plant next to refinery </li></ul></ul><ul><ul><li>Small, e.g., reformulator in a small industrial park </li></ul></ul>
    14. 14. The Many Faces of the Industry Market sectors <ul><li>Based on type of chemicals being produced (e.g., rubber versus fertilizers) </li></ul><ul><li>SIC Codes – original coding system </li></ul><ul><li>NAICS – new coding system since 1997 </li></ul><ul><li>Main sectors: </li></ul><ul><ul><li>Petrochemicals </li></ul></ul><ul><ul><li>Other organic chemicals (synthetic organic) </li></ul></ul><ul><ul><li>Inorganic chemicals (alkalies, chlorine, etc.) </li></ul></ul><ul><ul><li>Resin and synthetic rubber </li></ul></ul><ul><ul><li>Pesticide, fertilizer, agricultural chemicals </li></ul></ul>
    15. 15. Related Sectors <ul><li>Related sectors – not covered by this course: </li></ul><ul><ul><li>Pharmaceutical & medicine manufacturing </li></ul></ul><ul><ul><li>Paint, coating, and adhesives </li></ul></ul><ul><ul><li>Soap, cleaning compounds, toilet preparations </li></ul></ul><ul><ul><li>Other products (ink, explosives, photographic chemicals) </li></ul></ul><ul><li>Though not technically part of the Chemical Industry, these industries share technological, historical and regulatory ties with the chemical industry </li></ul>
    16. 16. Business Trends Affecting the Chemical Industry <ul><li>Globalization of markets and technology </li></ul><ul><li>Overall state of the economy </li></ul><ul><li>Rationalization of the industry </li></ul>
    17. 17. Globalization of Markets and Technology <ul><li>Globalization </li></ul><ul><ul><li>Chemical industry long-time major trading sector </li></ul></ul><ul><ul><li>2001— imports began to exceed exports </li></ul></ul><ul><ul><li>Reasons: </li></ul></ul><ul><ul><ul><li>Changes in international trade rules </li></ul></ul></ul><ul><ul><ul><li>Growth in chemical industry in 3 rd world (Asia, Middle East, Latin America) </li></ul></ul></ul><ul><ul><ul><li>Growth in offshore markets for products </li></ul></ul></ul><ul><ul><ul><li>Movement of U.S. Manufacturing abroad </li></ul></ul></ul>
    18. 18. Overall State of Economy <ul><li>Other key factors impacting business: </li></ul><ul><ul><li>Cost of oil and natural gas - feedstock and energy source </li></ul></ul><ul><ul><li>Economic conditions in other industries (manufacturing) / other countries (exports) </li></ul></ul><ul><ul><li>Workforce change – retirement of experienced workers </li></ul></ul><ul><li>Result: increased pressures, competition </li></ul>
    19. 19. Rationalization and Exit <ul><li>Adaptations to changing markets and new opportunities </li></ul><ul><ul><li>Greater focus on specialty chemicals </li></ul></ul><ul><ul><ul><li>have technological advantage </li></ul></ul></ul><ul><ul><ul><li>can produce higher value-added </li></ul></ul></ul><ul><ul><li>Mergers, acquisitions, multi-national operations </li></ul></ul><ul><ul><li>Exit of major players into related industries </li></ul></ul><ul><ul><ul><li>health sciences (e.g., DuPont) </li></ul></ul></ul><ul><ul><ul><li>agricultural science (e.g., Monsanto/Solutia) </li></ul></ul></ul>
    20. 20. Other Business Trends <ul><li>Business and process efficiencies </li></ul><ul><li>Increased use of IT for automating all parts of business </li></ul><ul><ul><li>enterprise level systems provide new opportunities for optimization </li></ul></ul><ul><li>Growth of of bioprocesses / biofeedstocks </li></ul><ul><li>“ Chemistry by Design” – growing importance of computational chemistry in product development </li></ul>
    21. 21. Environmental Management Trends Affecting the Chemical Industry <ul><li>Responsible Care ® and industry “self-regulation” </li></ul><ul><li>increased outsourcing and rationalization of EHS function </li></ul><ul><li>emergence of a supply-chain approach to product stewardship </li></ul><ul><li>globalization of environmental management practices </li></ul><ul><li>“mainstreaming” of sustainability </li></ul><ul><li>chemical plant security and the war on terror </li></ul>
    22. 22. Responsible Care ® and Industry Self-Regulation <ul><li>Responsible Care ® / Responsible Distribution ® is a central paradigm in chemical industry ES&H management </li></ul><ul><li>conformance with codes is a duty of membership in major trade associations </li></ul><ul><li>purpose is to improve performance in </li></ul><ul><ul><li>environment </li></ul></ul><ul><ul><li>health </li></ul></ul><ul><ul><li>safety </li></ul></ul><ul><li>seeks to place industry “beyond compliance” </li></ul>
    23. 23. Key Elements of Responsible Care ® <ul><li>Responsible Care ® Principles </li></ul><ul><ul><li>Improved chemical processes </li></ul></ul><ul><ul><li>Significant waste reduction (P2) </li></ul></ul><ul><ul><li>Minimization of accidents </li></ul></ul><ul><ul><li>Safe production, transportation, use and disposal of materials </li></ul></ul><ul><ul><li>Enhanced customer relations and service (“product stewardship”) </li></ul></ul><ul><ul><li>Increased communication with the public </li></ul></ul><ul><ul><li>Better communication with government agencies </li></ul></ul>
    24. 24. Understanding Responsible Care <ul><li>Results of Responsible Care (comparison to before adoption) </li></ul><ul><ul><li>Industry emissions down 60% </li></ul></ul><ul><ul><li>Incidence of illness and injury down 31% </li></ul></ul><ul><ul><li>While industry output volume up 30% </li></ul></ul><ul><li>New direction: 5-year, multi-million dollar science initiative </li></ul>
    25. 25. Lest I Forget: Reconciling EMS and Responsible Care ® <ul><li>Goal: Weave environmental decision-making into way facilities do business </li></ul><ul><ul><li>Sounds like an EMS, right? </li></ul></ul><ul><li>Challenge: How to reconcile EMS’ with existing investment in Responsible Care ® ? </li></ul><ul><li>SOCMA, EPA are currently working to incorporate EMS requirements into RC framework </li></ul><ul><ul><li>“ Responsible Care Management Systems” </li></ul></ul><ul><ul><li>developed by end of 2004 </li></ul></ul><ul><li>Will link EMS, Responsible Care, National Environment Performance Track program, other improvement programs into a cohesive framework </li></ul>
    26. 26. HPV Challenge Program <ul><li>HPV = “High Production Volume” chemicals </li></ul><ul><ul><li>1 million lbs/yr or more is manufactured or imported </li></ul></ul><ul><li>Part of larger voluntary “Chemical Right to Know” Program </li></ul><ul><li>Voluntary program to test ~2800 HPV chemicals for health and environmental effects </li></ul><ul><ul><li>Started 1998 by CMA (now ACC), EPA, and Environmental Defense Fund </li></ul></ul><ul><ul><li>Consistent with HPV programs from OECD and ICCA (International Council of Chemical Associations) </li></ul></ul><ul><li>Over 400 companies have made commitments to participate in the testing effort </li></ul>
    27. 27. Emergence of Supply Chain Approach to Product Stewardship <ul><li>“Product Stewardship” is a key principle under Responsible Care ® </li></ul><ul><li>Stewardship forces an examination of the supply chain </li></ul><ul><ul><li>both a responsibility and an opportunity </li></ul></ul><ul><ul><li>cornerstone of business relations </li></ul></ul><ul><ul><li>includes both suppliers and clients </li></ul></ul><ul><ul><li>increasing demand to address environmental/regulatory issues of customers by redesign/reformulation of product </li></ul></ul><ul><ul><li>exemplified by chemical management services </li></ul></ul>
    28. 28. Impact of Globalization on Environmental Management <ul><li>Globalization of commerce has also led to globalized environmental management trends </li></ul><ul><ul><li>Responsible Care ® </li></ul></ul><ul><ul><li>ISO 14000 </li></ul></ul><ul><ul><li>hybridization of RC & EMS </li></ul></ul><ul><li>Next up: E.U. REACH proposal </li></ul><ul><ul><li>R egistration, E valuation, and A uthorization of Ch emicals </li></ul></ul><ul><ul><li>Registration of chemical uses + testing </li></ul></ul><ul><ul><li>Evaluation of risks (additional testing) </li></ul></ul><ul><ul><li>Authorization of specific uses </li></ul></ul><ul><ul><li>Applies to downstream users as well </li></ul></ul>
    29. 29. The “Mainstreaming” of Sustainability <ul><li>Chemical industry was among the first to embrace sustainability in concept </li></ul><ul><ul><li>leadership from key players (DuPont, Dow, Monsanto) </li></ul></ul><ul><ul><li>well-supported through AIChE </li></ul></ul><ul><ul><ul><li>Center for Waste Reduction Technologies </li></ul></ul></ul><ul><ul><ul><li>AIChE Institute for Sustainability </li></ul></ul></ul><ul><li>Sustainability – rallying call of late 90s </li></ul><ul><ul><li>Fair amount of business and technological attention </li></ul></ul><ul><ul><li>Became basis for new business directions </li></ul></ul><ul><ul><li>Proved difficult to define, implement </li></ul></ul><ul><ul><li>Other issues taking more attention (e.g., security) </li></ul></ul><ul><li>Concept still moving forward, but with less fanfare </li></ul>
    30. 30. Value of Environmental Excellence S&P Specialty Chemical (22.5% CAGR) EV ’21 Top Tier (10.5% CAGR) Courtesy Battelle, Copyright 1999 1992 1993 1994 1995 1996 1997 300 200 100 0 Relative Stock Price
    31. 31. Chemical Plants: the Next Terrorist Target? <ul><li>Chemical manufacturing facilities may routinely process large quantities of materials that are: </li></ul><ul><ul><li>toxic </li></ul></ul><ul><ul><li>volatile </li></ul></ul><ul><ul><li>flammable </li></ul></ul><ul><ul><li>stored under extremes of pressure, temperature </li></ul></ul><ul><li>Often close to population centers </li></ul><ul><li>Vulnerable to attack </li></ul><ul><ul><li>relatively low security </li></ul></ul><ul><ul><li>numerous </li></ul></ul><ul><ul><li>critical to the economy </li></ul></ul>
    32. 32. Policy Responses to the Threat <ul><li>Agencies and industry responses </li></ul><ul><ul><li>GAO recommends a comprehensive chemical security strategy </li></ul></ul><ul><ul><li>EPA specifically addressed chemical sector in its Homeland Security strategic plan </li></ul></ul><ul><ul><li>Department of Homeland Security now has lead for infrastructure protection (including chemical sector) </li></ul></ul><ul><li>Legislative efforts </li></ul><ul><ul><li>Corzine Bill (S. 157) </li></ul></ul><ul><ul><li>Inhofe Bill (S. 994) </li></ul></ul>
    33. 33. Industry Responses to the Threat <ul><li>Industry response stresses site security, voluntary action </li></ul><ul><ul><li>“ guns, gates and guards” </li></ul></ul><ul><ul><li>inherently safer processing has been on industry agenda for decades, but is not seen as a short-term response </li></ul></ul><ul><li>“ Site Security Guidelines for U.S. Chemical Industry” issued Oct. 2001 </li></ul><ul><ul><li>Joint effort by ACC, SOCMA, and the Chlorine Institute </li></ul></ul><ul><ul><li>emphasis on site and operational security via “rings of protection” </li></ul></ul><ul><li>Security Vulnerability Assessment (SVA) and related Prioritization Methodologies </li></ul><ul><ul><li>AIChE/CCPS </li></ul></ul><ul><ul><li>Sandia National Lab </li></ul></ul><ul><ul><li>SOCMA, ACC </li></ul></ul><ul><ul><li>Many private companies (BASF, Air Products, G-P) </li></ul></ul>
    34. 34. Unit Summary <ul><li>Chemical industry evolved from craft-based industry to a science-based industry over the last 100 years </li></ul><ul><li>The industry is extremely diverse in its products, business environment, and technologies </li></ul><ul><li>Globalization, rationalization are significant forces in the industry </li></ul><ul><li>More than most industries, subject to a social “License to operate” which influences environmental responses </li></ul>