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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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical 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)
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
Growth of Environmental RegulationsGrowth of Environmental Regulations
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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)
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
The Many Faces of the IndustryThe Many Faces of the Industry
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
Unit 1: A historical perspective on the Chemical Industry
The Many Faces of the IndustryThe Many Faces of the Industry
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
Unit 1: A historical perspective on the Chemical Industry
The Many Faces of the IndustryThe Many Faces of the Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on 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
Unit 1: A historical perspective on the Chemical 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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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)
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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”
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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
Unit 1: A historical perspective on the Chemical Industry
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)
Unit 1: A historical perspective on the Chemical Industry
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 1: A historical perspective on the Chemical Industry
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