a historical perspective on the chemical industry

Unit 1: A Historical Perspective Unit 1: A Historical Perspective on the Chemical Industryon the Chemical Industry

Introduction to the Chemical Industry for Technical Assistance Providers

Unit 1: A historical perspective on the Chemical Industry

Outline of this unitOutline 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 ObjectivesLearning 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 ChemistryFrom Alchemy to Industrial Chemistry

Early precursors (prior to 19th 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 Some Technological Milestones in the History of the Chemical Industryin 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 Increasing Importance of Environmental RegulationsEnvironmental 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 RegulationsGrowth of Environmental Regulations


The U.S. Chemical Industry todayThe 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 todayThe U.S. Chemical Industry today

Industry still growing, but overall lower profits

U.S. is world’s largest producer, 2nd 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 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 IndustryThe Many Faces of the Industry

Underlying Process ChemistryUnderlying 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



Position in the Value ChainPosition 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



Company and Facility SizeCompany 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



Market sectorsMarket 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 SectorsRelated 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 Business Trends Affecting the Chemical Industrythe Chemical Industry

Globalization of markets and technology Overall state of the economy Rationalization of the industry


Globalization of Markets and TechnologyGlobalization 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 3rd world (Asia,

Middle East, Latin America) Growth in offshore markets for products Movement of U.S. Manufacturing abroad


Overall State of EconomyOverall 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 ExitRationalization 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 TrendsOther 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 Environmental Management Trends Affecting the Chemical IndustryAffecting 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 CareResponsible Care®® and and Industry Self-RegulationIndustry 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 CareKey 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 CareUnderstanding 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: Lest I Forget: Reconciling EMS and Responsible CareReconciling 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 ProgramHPV 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 Emergence of Supply Chain Approach to Product StewardshipApproach 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 Impact of Globalization on Environmental ManagementEnvironmental 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 Registration, Evaluation, and Authorization of Chemicals Registration of chemical uses + testing Evaluation of risks (additional testing) Authorization of specific uses Applies to downstream users as well


The “Mainstreaming” of SustainabilityThe “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 Value of Environmental Excellence

1992 1993 1994 1995 1996 1997

300

200

100

0

Relative Stock Price

S&P Specialty Chemical (22.5% CAGR)

EV ’21 Top Tier (10.5% CAGR)

Courtesy Battelle, Copyright 1999


Chemical Plants: Chemical Plants: the Next Terrorist Target?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 ThreatPolicy 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 ThreatIndustry 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 SummaryUnit 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

a historical perspective on the chemical industry

Business

industry industry

industry company

chemical industry introduction

industry position

sciencebased industry

large scale chemical

type of chemicals

s environmental concerns