Volume Costs in Plastic Applications
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Volume Costs in Plastic Applications

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Article published in Industrial Minerals in Aug 2011. This is is the International version of the study of the effect of Filler on the economics and quality of PVC Pipes and other applications

Article published in Industrial Minerals in Aug 2011. This is is the International version of the study of the effect of Filler on the economics and quality of PVC Pipes and other applications

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Volume Costs in Plastic Applications Volume Costs in Plastic Applications Document Transcript

  • Performance fillers T he volume cost of a raw material input is the purchase cost of a unit volume of the material.1 It is extremely important to understand the volume cost of polymers and their additives as this plays a key role in their selection for a particular application. Price is one of the first characteristics of a polymer that a designer looks at before specifying it as the material of construction. Prices vary from time to time, sometimes wildly, but tend to maintain their proportion in respect to other polymers. The recent prices of the commodity thermoplastics, using average prices, are shown in Table 1. While it would appear that UPVC is by far the cheapest polymer, the natural question is: why does it have such limited applications in eg. moulded products? Assuming that UPVC is as easy to mould as the other commodity thermoplastics, why is it not used in widespread applications such as plastic buckets? At this point we have to focus on an important polymer property that is often overlooked – fortunately this is not a property which changes with time or location! The density of a polymer (see Table 2) is measured from a fully gelled and fused sample and should not be confused with bulk density, 1 42 Mueritz Volume cost in plastics applications Mineral fillers are widely used in the plastics industry to enhance polymer properties and reduce ingredient costs. But, as Siddartha Roy demonstrates, over-use of fillers can be a false economy which is the apparent density of the granules or powder that the polymer is sold and measured as prior to processing. Bulk density has more relevance to rate of flow through the hopper throat of the processing machine, tendency to bridge/stick and other handling and storage considerations. Bulk density can change depending on particle size/shape, but density of a polymer is constant. When the volume cost is plotted, a completely different picture appears. Polypropylene now becomes the cheapest (see Figure 1). In the case of the household plastic bucket, it is interesting to note that in India these were first moulded in LDPE in the early 1960s. As HDPE became available in the late ‘60s, its lower volume cost was one of the reasons why there was a wholesale shift by bucket manufacturers to HDPE. Of course the better stiffness and warm water resistance of HDPE were major factors for the shift, but the lower volume cost helped Volume cost (Rs./litre) = Purchase cost (Rs./kg) x density (kg/litre or gm/cc) industrial minerals July 2011
  • Performance fillers Table 1: Prices of commodity thermoplastics* Price (Rs./kg) Polymer Abbreviation Unplasticised PVC UPVC 48 Plasticised PVC FPVC 60 Low density polyethylene LDPE 70 High density polyethylene HDPE 67 Polypropylene homopolymer PP 68 Polypropylene copolymer PPCO 70 Polystyrene PS 80 High impact polystyrene HIPS 82 Acrylonitrile butadiene styrene ABS 85 * Note for international readers: the taxation structure in India tends to push up polymer prices compared to international norms. Price is so variable that a study can quickly become out of date especially with volatile petroleum markets. However, the comparative price ratios between polymers are more stable even with wild price fluctuations overall. The Indian Rupee is approx 45 to a US$: thus PP Table 1 (Rs. 68/ kg) is about US$ 1,500/tonne. to keep bucket moulding firmly in the polyolefin family. In the 1990s, polypropylene had also made inroads into the bucket market; aided no doubt by its lower volume cost though its superior clarity, although stiffness and temperature resistance were also factors. It is smart marketing which has positioned the clearer and stiffer PP bucket as a premium product sold at higher prices than its HDPE counterpart. As they say, “pricing depends on marketing policy while costing depends on facts”, and the fact is that the volume cost of the higher-priced PP bucket is lower than the HDPE one. That is to say that if PP and HDPE are injected into the same bucket mould volume, lesser amount of PP in kilograms would be required. It is a separate matter that the PP bucket mould would be different with perhaps a thinner wall to cash in on PP’s higher rigidity, but the reality of better volume cost remains. PVC has never been in the picture because of its higher volume cost – if its volume cost had been lower than the polyolefins, ways and means would have been devised to mould PVC into buckets! This example is simplified and there are of course many factors which have to be considered to select the correct plastic for a specific application, but the point to take Figure 1: Polymer price vs. volume cost 90 Rs/Kg 80 70 away is that volume cost is a less understood but extremely important factor. On the basis of volume cost, when chief of R&D of VIP Industries, a leading Indian moulded luggage producer, the author formulated a directive to the company’s luggage designers that any new plastic component should be designed with PP copolymer unless the design intent could not be met by the properties of PPCP. Only then was there a need to look at other higher volume cost polymers. Importance to the plastics formulator The consideration of volume cost is even more important when polymers are compounded with additives. The density of the final product can change considerably especially when mineral fillers are added primarily to reduce costs. Volume cost and its implications are not properly understood by many entrepreneurs, formulators and people undertaking cost reduction/value engineering. It is vital to understand its implications before embarking on cost reduction exercises. Most plastic products are sold by volume. They are priced either per piece (mouldings) or per unit length (pipes, cables, tape) – thus the costing and pricing are for fixed volumes. As the plastic raw materials are always purchased per unit weight, the tendency is to calculate cost on a per kilogram basis, and the finished product is priced accordingly to the weight per piece. However, in the marketplace, competitive pressures often force the entrepreneur to offer discounts to protect market share. The discount is normally a percentage of the existing selling price, which, in the majority of cases is the realisation on volume basis. Table 2: Polymer density (kg/lt) 60 Polymer Density (kg/lt) UPVC 1.38 50 FPVC 1.25 LDPE 0.92 40 HDPE PP 0.96 0.90 PPCO 0.905 PS 1.05 HIPS 1.05 ABS 1.05 FPVC LDPE HDPE PP PPCO PS HIPS ABS 48 60 7O 67 68 70 80 82 85 Rs/Ltr. 2 UPVC Rs./Kg 67.2 75 64.4 64.32 61.2 63.35 84 86.1 89.25 Explanatory note for international readers: While ratios between polymer prices would be roughly the same globally, the price ratios of PVC resin and important compounding ingredients like calcium carbonate fillers, stabilisers and pigments could be very different from country to country. This is because the taxation tariffs are quite different for polymers and minerals. Also the mineral filler prices have a major transportation cost element especially for the cheaper GCC grades. I have intentionally calculated the costing with individual compounding ingredients in a classical lead stabilised twin screw pipe formulation. The calcium carbonate price is for a precipitated uncoated grade. One pack stabiliser lubricant systems are the norm in India as it is globally, but there is a paucity of density data for such one packs. It is more accurate to calculate volume cost with well documented densities of the separate ingredients. An interested reader could redo the calculations with their local price data and the one pack density if it is known. My guess is though the percent cost reductions may vary, the pattern will be in line with my workings. July 2011 industrial minerals 43
  • Performance fillers 3 Table 3: Summary of volume costs for PVC pipes 0 PHR 10 PHR 20 PHR 30 PHR 40 PHR 50 PHR Formulation cost Rs/kg 50.08 46.53 43.86 41.32 39.30 37.39 Volume cost Rs/lt 69.99 67.94 66.55 64.83 63.51 62.05 % Reduction in cost/kg 7.08 12.42 17.48 21.53 25.33 % Reduction in cost/lt 2.94 4.91 7.37 9.26 11.35 Figure 2: Volume cost vs. per kg cost Rs. 71.00 Formulation Cost Rs./kg Rs. 71.00 Rs. 66.00 11.35% Rs. 66.00 Rs. 61.00 Rs. 61.00 Rs. 56.00 Rs. 56.00 Rs. 51.00 Rs. 51.00 Rs. 46.00 25.33% Rs. 41.00 Rs. 36.00 Formulation Cost Rs/Kg Volume Cost Rs/Ltr Rs. 46.00 Rs. 41.00 0 PHR Rs.50.08 Rs.69.99 10 PHR Rs.46.53 Rs.67.94 20 PHR Rs.43.86 Rs.66.55 30 PHR Rs.41.32 Rs.64.83 40 PHR Rs.39.30 Rs.63.51 50 PHR Rs.37.39 Rs.62.05 Volume Cost Rs/Litre If costs are calculated on a per kilo basis, often the reduction in cost by adding fillers/extenders is calculated as a percentage of original formulation cost. The savings may be translated into a price reduction based on this percentage. After some time the entrepreneur realises that he is sustaining losses as the reduction in volume cost was nowhere near the per kilo cost reduction on which the discounts were based, especially when mineral fillers are the main cost reducing input. All mineral fillers have a higher density than most plastics. Rigid PVC pipes are a prime example. The ease with which calcium carbonate can be loaded and processed by modern twin screw extruders has led to mindless loading of fillers in a desperate bid to reduce costs. The pitfalls are many as is illustrated by the calculations in Tables 3 and 4.2 It is interesting to note that even though these are theoretical calculations, the predicted density is quite near the actually measured density, with the difference being a few points in the third decimal place. Rarely do we find errors in the second decimal place. Assuming that the pipe is gelled fully and has no voids, the density figures predicted are quite close to actual densities. There is some volatile loss, but in a pipe formulation this is a low percentage. The graphical representation shows the big difference in the reduction in cost when measured per kilogram and the volume cost (Figure 2). By adding 50 PHR calcium carbonate, which is not unusual in commercial grade PVC water supply pipe (in India some processors sell such pipes for water supply, albeit for irrigation), and in the non-pressure applications like SWR, the expected cost reduction appears to be a healthy 25%. However, in actuality, the volume cost has reduced only 11%. Such a high loading of filler not only ruins the pipe impact strength and pressure resistance, but the wear and tear on costly twin screw equipment is severe. Thus it is not worth sacrificing so much quality deterioration and machine life reduction for a mere 11% reduction in cost. This should be understood by all PVC pipe manufacturers and other sectors which rely on dense mineral fillers primarily for cost reduction. Of course nobody makes pipes with 0 PHR filler, and around 8-10 PHR filler is the optimum level for good quality pipe conforming to BIS 4985 (Bureau of Indian Standards), which is in line with the DIN and British Standards for pressure PVC pipes. Screw barrel life is of acceptable levels, and it is heartening to note that most of the quality Rs. 36.00 Figure 3: The filler-based cost reduction trap Reduce pipe costs to be more competitive by increasing filler loading Reduce pipe prices based on per kg. reduction in costs Losses mount as reduced price is not matched by actual cost reduction conscious PVC pipe manufacturers have persisted with such formulations and have been successful in the long run. It is when higher loadings are resorted to for cost reduction that a vicious cycle starts. Let us say a manufacturer increases his filler loading from 10 PHR to 40 PHR. Relying on formulation costing he expects a reduction of 15.5%, and so reduces the price of his pipes by Pipe business collapses Quality plummets, customer confidence erodes, markets shrink further Despec pipe by reducing thickness/increasing filler to compensate for losses 15% from his BIS 4985 price. However his cost per length of pipe has gone down only by only 6.5% (the volume cost reduction). Soon the producer finds out that he is losing money, so what is the next step? More filler loading coupled with decreasing the wall thickness of the pipe, deteriorating quality even further: and the downward spiral in quality and shrinking returns continues (see Figure 3)3. The pressure to cut costs is surely not restricted to Indian markets. I am sure worldwide that cost reduction of PVC pipes with fillers is endemic, but it should be within limits. Addition of fillers is the easiest way out of the many avenues available to cut costs, but the dangers of doing so blindly without heed to volume costs would lead to disastrous results similar to those illustrated in Figure 3. July 2011 industrial minerals 45
  • Performance fillers The author hopes those PVC processors tempted to take the high filler route pause and rethink their strategy. One of the reasons that so many PVC pipe and profile extrusion firms have collapsed and closed shop is that they got caught in this vicious cycle: higher filler loading, decreased wall thickness, product failures, and compensation claims – trapping the company with heavy losses. What has been highlighted above is a most dangerous trend. Many polymer applications in India have faced declining demand due to loss in confidence of the consumers because of repeated failures of poor quality, cheap products. Examples are too numerous, and it is most saddening to persons and companies who have worked so hard in establishing such applications. In the pipe field itself one can recall the hammering HDPE pipes took in the early 1980s due to large scale failure of pipes made from offgrade/scrap HDPE and sold to prestigious government projects as prime grade pipes. While HDPE pipe markets languished because of the bad name, PVC pipes surged ahead. Even major companies like Polyolefin India Ltd, a Hoechst licensee, were so badly affected that they had to stop the manufacture of their well established Hasti brand HDPE pipes. It has taken two decades for HDPE pipes to claw back to good volumes, which involved consistent quality and development of new application areas like drip and sprinkler irrigation, gas piping, large diameter sewerage pipes etc., as well as consolidation in the core water supply sector with good quality pipe with second generation HDPE grades. A dangerous fallout of mindless filler loadings is when markets change from pricing per piece, or – in the case of pipes – per unit length of specified thickness to pricing on a per kilo basis. Such a change encourages higher filler loadings and should be resisted by all discerning manufacturers. In plastics, ‘heavier’ does not mean ‘stronger’: physical properties are seriously compromised in PVC products made heavy by excessive filler additions. Formulating polyolefins With polyolefins, the situation is different. Here fillers like talc and calcium carbonate are added to improve stiffness to PP, or desired properties like anti-fibrillation in HDPE or PP raffia tape. Incorporation of fillers in polyolefins is an expensive process, requiring costly corotating twin screw extruders or sophisticated equipment like Buss KoKneaders. Compounding costs for filling polyolefins can be as high as Rs. 10-15/kg (US$250-350/tonne), while in PVC the increase in dry-blending cost with filler addition is negligible. Filled polyolefins (10-30%) are costlier than the base polymer because compounding costs outweigh the lower filler cost. The volume costs go up sharply, but requirements of better stiffness in auto components, moulded furniture and other technical parts Table 4: Volume costs of PVC formulations for PVC pipes   Ingredient     0 PHR Filler 10 PHR Filler 20 PHR Filler Price Rs/kg Density kg/lt PHR (kg) Cost (Rs.) Volume (lt) PHR (kg) Cost (Rs.) Volume (lt) PHR (kg) Cost (Rs.) Volume (lt) 72.46 48 1.38 100.0 4,800 72.46 100 4,800 72.46 100 4,800 TBLS PVC Resin K67 120 7.2 0.8 96 0.11 0.8 96 0.11 0.9 108 0.13 DBLS 140 4.5 0.5 70 0.11 0.5 70 0.11 0.6 84 0.13 Lead stearate 100 2.1 0.4 40 0.19 0.4 40 0.19 0.5 50 0.24 Calcium stearate 80 1.1 0.4 32 0.36 0.4 32 0.36 0.5 40 0.45 Filler 10 2.7 0 0 0.00 10 100 3.70 20 200 7.41 Lubricant 140 0.95 0.3 42 0.32 0.3 42 0.32 0.4 56 0.42 TiO2 130 5.6 0.6 78 0.11 0.6 78 0.11 0.6 78 0.11 50 0.98 0.1 5 0.10 0.1 5 0.10 0.1 5 0.10 Carbon black Total     103.1 5,163 73.77 113.1 5,263 77.47 123.6 5,421 81.45 Formulation cost       50.08 Density   46.53 Density   43.86 Density Volume costs       69.99 1.398   67.94 1.460   66.55 1.517 30 PHR Filler Ingredient 40 PHR Filler 50 PHR Filler Price Rs/kg Density kg/lt. PHR (kg) Cost (Rs.) Volume (lt) PHR (kg) Cost (Rs.) Volume (lt) PHR (kg) Cost (Rs.) Volume (lt) 72.46 48 1.38 100.0 4,800 72.46 100 4,800 72.46 100 4,800 TBLS PVC Resin K67 120 7.2 0.9 108 0.13 1 120 0.14 1 120 0.14 DBLS 140 4.5 0.6 84 0.13 0.65 91 0.14 0.65 91 0.14 Lead stearate 100 2.1 0.5 50 0.24 0.45 45 0.21 0.45 45 0.21 Calcium stearate 80 1.1 0.5 40 0.45 0.55 44 0.50 0.55 44 0.50 Filler 10 2.7 30.0 300 11.11 40 400 14.81 50 500 18.52 Lubricant 140 0.95 0.4 56 0.42 0.5 70 0.53 0.5 70 0.53 TiO2 130 5.6 0.6 78 0.11 0.6 78 0.11 0.6 78 0.11 50 0.98 0.1 5 0.10 0.1 5 0.10 0.1 5 0.10 Carbon black Total 5,521 85.16 143.9 5,653 89.01 153.9 5,753 92.72   41.32 Density   39.30 Density   37.39 Density Volume costs 46 133.6 Formulation cost   64.83 1.569   63.51 1.616   62.05 1.659 industrial minerals July 2011
  • Performance fillers is the driving force for filler addition. It is only at filler levels of over 40%, as in filler masterbatches, that the cost per kilo dips below polymer cost levels, but the volume cost will be adverse. Thus normally filler addition does not automatically lead to cost savings with polyolefins as it does with PVC. This is why polyolefin pipes cannot be cheapened by adding filler, as in PVC, and it is volume cost considerations which determine this. Glass-filled and fibre-filled polymers are a special case with the fillers price sometimes exceeding the polymer prices. It should be obvious that glass filling is done purely to improve mechanicals. In flexible PVC, considerations of volume costs come into play. Large amounts of plasticisers and extenders (secondary plasticisers) are used. The volume cost calculations are similar, though the contraction in volume in flexible PVC compounds is slightly more because of volatile constituents in the liquid added. A simple example of a soft PVC compound stabilised with a mixed metal stabiliser/ESO mix is shown in Tables 5-7. It is interesting to note how the relative costs of the other ingredients change in relation to PVC resin when viewed from the volume cost angle. Plasticisers like DOP, which per kilo is much more expensive than resin, have always been thought to be the reason why plasticised PVC is costlier than RPVC. But DOP, for example, is not that costly from the volume cost viewpoint. In fact when PVC prices had flared up, DOP was actually cheaper than resin on a per litre basis. Chlorinated paraffin (CP), a secondary plasticiser that is very popular in India, is cheaper than DOP. As the tables demonstrate, an expected cost reduction by tripling the filler loading is considerably eroded on a volume cost basis. Secondary plasticisers like the popular chlorinated paraffin family have a higher density than the primary plasticiser. The higher the chlorination, the higher the density and thus the lesser the cheapening effect. Apart from fillers, CP is the favoured cost reduction tool. It takes considerable skill to balance the compatibility with the chlorination level of the CP selected with the addition PHR to achieve an effective cost reduction without compromising quality. Compounding of moderately filled plasticised PVC compounds can be handled by single screw extruders. Unlike UPVC compounds, normally plasticised PVC is processed after a pelletising pass. With single screw extruders, compounding costs are low compared to filled polyolefins. However, as filler loadings increase over July 2011 Table 5: Volume cost of major ingredients % cost of resin Density (kg/lt) Volume cost (Rs/lt) % resin volume cost Ingredient Cost (Rs/kg) PVC 50 1.4 70 DOP 80 160 0.98 78.4 112 CP 50 62.5 1.25 62.5 89.29 Stabiliser 150 187.5 1.05 157.5 225 Filler 12 15 2.7 32.4 46.29 Table 6: Volume cost – formula 1 Product PVC Recipe (kg) 60 Cost (Rs/kg) 3,000 Litres 42.86 DOP 30 2,400 30.61 CP 15 750 12 Stabiliser 2 300 1.9 Filler 10 120 3.7 Total 117 6,570 91.08 Cost per unit – 56.15/kg 72.14/lt Table 7: Volume cost – formula 2 Product PVC DOP Recipe (kg) 60 30 Cost (Rs/kg) 3,000 2,400 Litres 42.86 30.61 CP 15 750 12 Stabiliser 2 300 1.9 Filler 30 360 11.11 Total 137 6,810 98.49 Cost per unit – 49.71/kg 69.15/lt Reduction (from formula 1) – 11.48% 4.14% 40-50 PHR, even flexible PVC requires intensive compounding equipment with much higher compounding costs (examples: cable sheathing compounds). This cost increase has to be factored in for determining the cost savings while boosting filler levels in flexible PVC. Needless to say, the reduction in volume costs compared to unfilled/lightly filled formulations is less in comparison to UPVC, as the base unfilled compound has a lower density than that of UPVC. Instances of soft PVC products which are sold by weight are too many for comfort for discerning persons working for healthy growth of the PVC industry. Agricultural hoses, low quality cables, and some small mouldings are sold by weight. Customers do not realise until after using the product that they have got less actual product, whether in terms of per metre or numbers when he buys such highly filled products with attractively low per kilo prices. The industry as a rule should discourage per kilo prices for finished products, although raw materials are always sold by weight. There are other ways of reducing costs which do not impact quality and offer value for money. The author hopes PVC processors will explore and exhaust all of these other routes before increasing filler levels. If so this article on volume costs would have served its purpose. Contributor: Siddhartha Roy is a chemical engineer from IIT Kharagpur (1968). He has worked with plastics throughout his career and was actively involved in development of PVC markets and applications, especially pipes and fittings. Roy worked with Shriram Vinyls, PRC (now DCW) and Chemplast, manufacturers of PVC resin and compounds. He has managed a PVC pipes and fittings factory in Kuwait and helped Jain Pipes (now Jain Irrigation) set up their pipe production facilities. Roy headed R&D at VIP Industries, Nasik, and is well versed in the processing of polyolefins, styrenics, polyamides and PC. He has been active in the Indian Plastics Institute’s activities and was recently awarded the Fellowship by the governing council of IPI for his contribution to the plastic industry. industrial minerals 47