Chemicals are all around us: from the paint on the walls to the most sophisticated electronic components in your mobile phone. Often referred to as “the process industries” the common feature of chemical businesses is to convert raw materials into the chosen product by undergoing chemical reactions under controlled conditions. These industries are complex and highly regulated and are often associated with environmental legacies from previous operations. The sector can be further divided into base chemicals, fine chemicals, specialty and formulated chemicals, and materials.
Base chemicals are typified by large capital plants in continuous operation, which are inflexible with regards to feedstock and product slate and tend to require low operational fixed cost and are dominated by operational efficiency. Review of these assets must concentrate on the process flow sheet and operational controls and the feedstock and product advantage. Fine chemicals including pharmaceuticals are manufactured in facilities dedicated to chemistry types or product families and are often batch in operation. These assets are normally significantly smaller than those of base chemicals and have much higher relative fixed cost for operation. Change of product can require significant re-engineering of the plant and major turn around time due to cleaning and set-up. Review of fine chemicals businesses must concentrate on the efficiency of batch operations, change over time, man power efficiency, first run on specification performance.
Specialty and formulated chemicals are manufactured from base and fine chemicals to produce formulations with very specific functional qualities. The factories used for formulated chemicals can be compared to a chef’s kitchen. One day the chef can prepare a gateau and the next day a soup. The asset base is lower cost and flexible but the fixed cost for operations, including product development and sales and marketing, are very high. The variety of products possible is seldom limited by the manufacturing process. This type of business is know-how driven and the analysis should focus on the product development cycle, research & development, client certification of products and the intellectual knowledge in the business.
Materials are similar to formulated chemicals in that they are made from many different raw materials. The aspect that differentiates a material from a chemical is that it is processed into a physical form that conveys engineering characteristics that cause the material to perform a specialist function. Examples of materials are the carbon fibre reinforced epoxy resin materials used to manufacture aerospace components or racecar bodies. The businesses tend to have much larger assets than for formulated chemicals as the productions of materials requires large workshop spaces. They are often labour intensive and operational analysis should start from the workflow efficiency to arrive at the marginal cost of manufacture. This type of business is know-how driven and the analysis should focus on the product development cycle, research & development, client certification of products and the intellectual knowledge in the business.