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A Historical Perspective On The Chemical Industry

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 A Historical Perspective On The Chemical Industry Presentation Transcript

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