Cost Calculations

Cost Calculations

Prof. Attilio Citterio

PhD

IN INDUSTRIAL CHEMISTRY AND

CHEMICAL ENGINEERING (CII)

Cost Calculations

Before any ground is broken, estimation of production costs and revenues are absolutely necessary to assure CEO's and shareholders that a process is a profitable and worth while venture. There are many avenues to achieve these answers. The best indicator of these answers will be in pilot plant design with estimations for scaled up processes.

Chemical development aims, ultimately, to produce a process for the manufacture of an intermediate or product AT MINIMAL COST and safer conditions. Throughout the development work, it is important, therefore, to be aware of progress towards the target. If there is direct competition with other company, their price will obviously determine the target.

Costing can assist in strategic decision making and in the allocation of scarce development resources to prioritise work, such as deciding:

– which synthetic routes to investigate?

– which stages of a route to begin optimising?

– how important is solvent recovery?

– should reagent substitution be examined?

– is effluent disposal significant?

Cost Calculations

It is vital that rough castings are not bandied about willy-nilly - they lead to much misunderstanding and can easily be misinterpreted, leading to incorrect decisions being taken at a higher management level.

The following factors are important in castings:

* raw materials costs

* yields in each step

* batch size

* vessel utilisation

* overhead and labour charges

* effluent disposal

* solvent recovery

Cost Calculations

 Can affect strategic decisions

- Go/NoGo - Competition

 Can assist in allocating resources and targeting development work

- New routes

- Particular stages of a route - Reagent substitution

- Effluent strategy

- Solvent recovery

Cost of Development Production

Route A Route B

Cost per Kg

Time in the development production

heat, then add toluene, cool, separate

toluene layer - next stage optimize on cost 70% yield Aqueous layer + catalyst used for next batch optimize on yield 90%

Final process:

Add CH

O, Acrylate to quinuclidine (cat), water and cosolvent,

Cost or Yield Optimization

CO₂Bu^t quinuclidine (CH2O)n

dipolar solvents

CO₂Bu^t CH₂OH

By-products:

CO₂Bu^t

O CH₂ O

CO₂Bu^t

in presence of water

n

Synthetic route relative cost

tert-butyl ester route 12.2

L-leucine approach 6.1

Stobbe condensation 2.2

malonate route 1.5

resolution of γ-isobutylglutaric acid derivatives 1.0

Chemical Development of CI-1008

Challenge: identify the synthetic route to CI-1008 superior in a commercial application (in the absence of experimental data!).

“Ideal process” cost projections assumptions:

1) 100% yields,

2) no labor or overhead cost,

3) no waste disposal costs, and

4) bulk prices for raw materials

Both routes give the same overall yield and use the same chemistry, solvents and reagents. Only the order of steps is different.

Chemistry & Industry 1990, 21

NHHBr

OMe N

OMe CHO

NH

OMe H

N

MeO

CHO

NCHO

OMe H

N

MeO

CH₃

N

MeO

CHO N

MeO

CH₃ H

H Route A HBr

Route B 92%

44%

100%

82% 100%

71%

44%

71%

Alternative Synthetic Routes to

Dextromethorfan

Basis of Calculation is Vital

• Different researchers will arrive at different figures because of different assumptions.

• Everyone looks at the final figure, not how it was calculated.

• Therefore, within a company, costs should always be estimated in the same way.

• There must be a STANDARD PROCEDURE.

• The same databases and software analysis data must be

used as far as possible.

Warnings! Costing is a Minefield!

• Costing should always be dated (and updated).

• Costs vary with site of manufacture for the same product.

• Costs vary with scale of manufacture.

• Costs may vary with plant configuration.

• Costs may vary with plant utilization.

• Costing can be real

- based on actual experiments at the scale costed.

• Costing can also be projections

- based on projected scale-up from lab or pilot plant.

• Assumptions should be stated.

Information Required for Costing

• Quantities and Mol. Wt of all raw materials

• Raw material prices (and purities)

• Product yield (and purity)

• Number of hours required to make a batch at the required scale

• ^{Batch size}

• Overhead rate (inc. QC charges, effluent, utilities etc.)

• (Capital cost of equipment)

Use of Costing in Synthetic Route Selection

• Costs can help with comparison of routes, but COMPARE LIKE WITH LIKE.

• Processes should be at same stage of development.

• Routes should have been demonstrated on the same scale.

• Routes should give product of the same quality.

• Start from readily-available (in bulk) materials.

• Use readily-available (in bulk) reagents.

• Comparative castings should be carried out by the same person, using the same assumptions.

• ideally, castings should be estimated by someone who is

independent!

Raw Material Costs

May vary with:

§ Manufacturer

§ Grade/Quality

§ Quantity

§ Pack size (e.g. for solvents, drum or tanker)

§ Site of manufacture (country)

§ Exchange rate!

Even at an early stage of development it is useful to get

quotations from manufacturers for tonne lots as well as lower

quantities, to see how price varies with scale-up and to check

availability

Yields

• Yields should reflect ACTUAL experiments.

• Yields should be adjusted for assayed purity of product and/or starting material.

• Yields from lab experiments should not be extrapolated to plant. (Be conservative -reduce by 10%)

• Yields should not include second crops at this stage.

• Yields in a convergent synthesis should be based on the

most costly intermediate.

Vessel Utilization

• Each company has its own way of costing, but a simple way is to cost on the occupation time for each vessel (regardless of size).

• Thus “overhead hours” may be designated based on the batch cycle time.

- Cycle time will vary with batch size.

- Cycle time will vary with vessel configuration.

• It is not easy to project cycle times on the basis of lab

experiments. As far as possible, data from actual batches should be used.

• Overhead rates will vary from plant to plant.

Batch Size

• Calculated on the basis of the maximum VOLUME during the process.

• Allow for gas evolution, frothing etc.

• Maximum volume may be in the work-up.

• Rate of cooling may determine batch size for exothermic

processes.

Use of Cost Calculations in Process Development

• Optimization means producing a chemical at MINIMUM COST, not maximum yield - usually, however, the two go together.

• Using excess of an expensive reagent may increase both yield and cost/kg. Calculations enable the optimum to be found.

• Can see at which stage cost increases rapidly and why.

• Can see effect of potential changes in process (what if?).

• Ratio of materials to overheads

• Resource planning.

• Solvent recovery.

A → B → C → D

75% 93% 85%

RCI RCH

CO

Et

Ethyl acetoacetate N-Methylpyrrolidone/KOH

A B

H-Cl

RCH

CO

H

ArCHO R CO

H

Ar

D C

Example

Raw Material cost/kg %RM cost % overall cost

A 3.70 23.45 13.02

NMP 2.33 24.66 13.70

Ethyl acetoacetate 1.37 5.81 3.23

KOH 0.81 3.00 1.67

HCl 0.15 0.53 0.30

NaOH 0.25 0.42 0.23

Ethyl acetate 0.42 2.77 1.54

ArCHO 8.04 27.54 15.30

K

CO

0.79 2.15 1.19

Acetic anhydride 0.75 7.49 4.16

Toluene 0.30 2.17 1.21

Raw Material Costs

Intermediate Costs

Cost/kg % total RM cost

A 3.70 23.45

B 12.35 57.22

C 22.51 57.87

D 26.57 100.00

Step Yield Hrs/batch Overhead cost (% total cost)

1. A-B 75% 21.5 18.7

2. B-C 93% 20.0 10.2

3. C-D 85% 28.0 15.6

Overall 59% 44.5%

R-2-Hydroxy-2-phenyl butyric acid

CO₂H O

CO₂H OH

Method 1 Pt/Al

O

/H

20-25°C. 100 Bar Chiral modifier

Method 2 Rh(NBD)

CI

,-NORPHOS/H

Method 3 Enzymatic reduction:

D-Lactate dehydrogenase Method 4 Microbial reduction:

Case Study from Ciba Geigy

Comparison of Chemical and Biochemical Methods

for Asymmetric Reduction

Advantages and Disadvantages

• Enzyme and microbial synthesis gives 99.9% ee

• Heterogeneous cat H

gave 91% on 40Kg scale -required upgrading

- Homogeneous hydrogenation gives 96% ee but only at high catalyst loading

• Enzyme and microbial synthesis require co-factor regeneration using formate dehydrogenase

• Capital expenditure much higher for biochemical

processes (continuous reactor, sterile conditions) than for

chemical processes (batch)

Heterogeneous cat. process is run at 20% cont. With easy work up, offset by the need to upgrade ee by recrystallisation.

Overall conclusion

Biochemical and Heterogeneous catalyzed processes

Enzymatic 7

Microbial 12.7

Heterogeneous 210

Homogeneous 53

Space Time Yield (g·liter

·h

)

Throughput, reaction time

materials of construction temp

pressure

costliness index varies from 10 (e.g. formaldehyde plant) to 200 (pesticide or drug) all taken

account of

Process Step Scoring Method for Quick Capital Estimates

Capital cost related to costliness index

• nature

• complexity of chemistry

• Capacity

Costliness index is related to N° of significant process steps (filter, react,

distil) and a complexity score determined for each intermediate in the

synthetic route

Relationship between capital, costliness index and plant size was determined by analysis of data on 45 plants from

 reaction

 neutralize

 filter

 quench

 separate phases

 distil

 crystallize

 formulate

 compress

 storage

 dry

 mill

 scrub

 discharge to effluent

LIST PROCESS STEPS

React

100°C, 10 atms 10 hr

Filter and

wash

filtrate SS 5t

SS

DISTIL 80°C SS

S (recycled) 4t

Water (to wash)

DRY 120°C MS

C 1t

water 0.2t

0.2t

Water

Compound “O”

Aq Sol of Byproducts (Effluent - to works Disposal Unit)

1t

A → B → C in a solvent S

S (recycled)

S 0.5t

Hypothetical flow diagram for a reaction:

 Throughput

 materials of construction

 temp

 pressure

 multistreaming

 reaction time

 storage time

 special conditions

convert the total score for each step to a costliness index (l) using the conversion table

I = 1.3 ^S where S is the total score for the step

Score Each Significant Process Step

Adjustment

ADJUST FOR:

- inflation

- off site facilities (e.g. effluent)

- use of existing plant (for small capacity products) - location

EXAMPLE:

Capital = 21 × 42 × 2

for 2000t/a plant

= f 1.98 × 10

Limitations

300 -250,000 t/a

processes of more than 5 process steps cannot deal with

mods to existing plant

batch plants with capacity > 3000 t/a continuous plants < 500 t/a

ACCURACY

95% confidence limits +36% and -26%

standard deviation 15 %

i.e. OK for screening R&D projects, evaluating routes

Capital Cost Evaluation

SUM THE COSTLINESS INDICES FOR THE WHOLE PROCESS

Estimate capital cost

= 42(capacity in 1000 tonnes)

capital in K€

costliness index

or use graph for each step then sum

1000

100

Capital in 1000€/

costliness index (2000)

Graph of eq. 2

Example

Use the following information to estimate the manufacturing cost of a plant producing 120*10^6 lb/year with a product price of $0.20/lb.

Fixed Capital: $15,000,000 Working Capital: $3,000,000

Fixed and Working Capital = FC + WC = $18,000,000 Raw Material Cost: $9,600,000/yr

Utilities: $1,440,000/yr Labor: $1,800,000/yr

Maintenance (6% yr f.c.): $900,000/yr Supplies (2% yr f.c.): $300,000/yr

Depreciation (8%/yr): $1,200,000/yr Taxes, insurance (3%/yr): $450,000/yr

Total Manufacturing Cost = RMC + U + L + M + S + D + T = $15,690,000/yr Gross Sales = Production * Product price = $24,000,000/yr

Gross Profit = Gross Sales - Manufacturing Cost = $8,310,000/yr

References

1. Towler G, Sinnott R. “Chemical Engineering Design: Principles, Practice and Economics of Plant and Process Design”. 2

Ed.

Boston: Elsevier; 2013.

2. Turton R, Bailie RC, Whiting WB, Shaewitz JA, Bhattacharyya D.

Analysis, Synthesis, and Design of Chemical Processes. 4th ed.

Upper Saddle River: Prentice-Hall; 2012.

3. Seider WD, Seader JD, Lewin DR. Process Design Principles:

Synthesis, Analysis, and Evaluation. 3rd ed. New York: Wiley; 2004.

4. Peters MS, Timmerhaus KD. Plant Design and Economics for

Chemical Engineers. 5th ed. New York: McGraw Hill; 2003.