Cost CalculationsProf. Attilio CitterioDept. CMIC – Politecnico di Milanohttp://iscamap.chem.polimi.it/citterio/dottorato//

PhDIN INDUSTRIAL CHEMISTRY AND CHEMICAL ENGINEERING (CII)

Attilio Citterio

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 themanufacture of an intermediate or product AT MINIMAL COST and saferconditions. Throughout the development work, it is important, therefore, to beaware of progress towards the target. If there is direct competition with othercompany, 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?

Attilio Citterio

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

Some, but not all of these will be discussed (see slides). Examples of how castings can assist in chemical development will be provided.

Attilio Citterio

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

Attilio Citterio

Cost of Development Production

Route A

Route B

Cost per Kg

Time in the development production

Attilio Citterio

heat, then add toluene, cool, separatetoluene layer - next stage optimize on cost 70% yieldAqueous layer + catalyst used for next batch optimize on yield 90%

Final process:

Add CH2O, Acrylateto quinuclidine (cat),water and cosolvent,

Cost or Yield Optimization

CO2Butquinuclidine

(CH2O)ndipolar solvents

CO2But

CH2OH

By-products:

CO2ButO

CH2 O

CO2But

in presenceof water

n

Attilio Citterio

M.S. Hoekstra, Org. Process Res.& Dev. 1977, 1, 26

Synthetic route relative costtert-butyl ester route 12.2L-leucine approach 6.1Stobbe condensation 2.2malonate route 1.5resolution of γ-isobutylglutaric acid derivatives 1.0

Lab evaluation indicates that, even with better yield data and processing information, the order of expected manufacturing cost did not change.

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

Attilio Citterio

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

CH3H

H

HBrRoute A

Route B

92%

44%

100%

82% 100%

71%44%

71%

Alternative Synthetic Routes to Dextromethorfan

Attilio Citterio

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.

Attilio Citterio

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.

Attilio Citterio

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)

Attilio Citterio

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!

Attilio Citterio

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

Attilio Citterio

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.

Attilio Citterio

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.

Attilio Citterio

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.

Attilio Citterio

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.

Attilio Citterio

A → B → C → D 75% 93% 85%

RCI RCH2CO2EtEthyl acetoacetate

N-Methylpyrrolidone/KOHA B

H-Cl

RCH2CO2HArCHO

R CO2H

ArD C

Example

Attilio Citterio

Raw Material cost/kg %RM cost % overall costA 3.70 23.45 13.02NMP 2.33 24.66 13.70Ethyl acetoacetate 1.37 5.81 3.23KOH 0.81 3.00 1.67HCl 0.15 0.53 0.30NaOH 0.25 0.42 0.23Ethyl acetate 0.42 2.77 1.54ArCHO 8.04 27.54 15.30K2CO3 0.79 2.15 1.19Acetic anhydride 0.75 7.49 4.16Toluene 0.30 2.17 1.21

TOTAL RM 100.0 55.55

Raw Material Costs

Attilio Citterio

Intermediate Costs

Cost/kg % total RM costA 3.70 23.45B 12.35 57.22C 22.51 57.87D 26.57 100.00

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

1. A-B 75% 21.5 18.72. B-C 93% 20.0 10.23. C-D 85% 28.0 15.6

Overall 59% 44.5%

Attilio Citterio

E. Schmidt, Microbial Reagents in Organic Synthesis 1992, 377-388, Kluiver Academic Press

R-2-Hydroxy-2-phenylbutyric acid

CO2H

O

CO2H

OH

Method 1 Pt/Al2O3/H2 20-25°C. 100 BarChiral modifier

Method 2 Rh(NBD)2CI2,-NORPHOS/H2Method 3 Enzymatic reduction:

D-Lactate dehydrogenase Method 4 Microbial reduction:

Proteus vulgaris

Case Study from Ciba Geigy

Comparison of Chemical and Biochemical Methodsfor Asymmetric Reduction

Attilio Citterio

Advantages and Disadvantages

• Enzyme and microbial synthesis gives 99.9% ee• Heterogeneous cat H2 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)

Attilio Citterio

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 processes5 Dive products of similar cost

Enzymatic 7Microbial 12.7Heterogeneous 210Homogeneous 53

Space Time Yield (g·liter-1·h-1)

Attilio Citterio

Throughput, reaction timematerials of constructiontemppressure

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

all takenaccount 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

Attilio Citterio

Relationship between capital, costliness index and plant size was determined by analysis of data on 45 plants from 300 to 250,000 tonne per year

reaction neutralize filter quench separate phases distil crystallize

formulate compress storage dry mill scrub discharge to effluent

LIST PROCESS STEPS

Attilio Citterio

React100°C, 10 atms

10 hr

Filterand

wash

filtrate5tSS

SS

DISTIL 80°C SS

S (recycled)

4t

Water (to wash)

DRY 120°C MS

C 1twater 0.2t

0.2tWater

Compound “O”

Aq Sol of Byproducts(Effluent - to worksDisposal Unit)

1t

A → B → C in a solvent S

S (recycled)

S 0.5t

Hypothetical flow diagram for a reaction:

Attilio Citterio

Throughput materials of construction temp pressure

multistreaming reaction time storage time special conditions

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

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

Score Each Significant Process Step

Attilio Citterio

Adjustment

ADJUST FOR:

- inflation- off site facilities (e.g. effluent)- use of existing plant (for small capacity products)- location

EXAMPLE:

Capital = 21 × 42 × 20.39 for 2000t/a plant= f 1.98 × 106

Attilio Citterio

Limitations

300 -250,000 t/aprocesses of more than 5 process steps

cannot deal withmods to existing plantbatch plants with capacity > 3000 t/acontinuous plants < 500 t/a

ACCURACY95% confidence limits +36% and -26%standard deviation 15 %i.e. OK for screening R&D projects, evaluating routes

Attilio Citterio

Capital Cost Evaluation

SUM THE COSTLINESS INDICES FOR THE WHOLE PROCESS

Estimate capital cost

= 42(capacity in 1000 tonnes)0.39capital in K€costliness index

or use graph for each step then sum

Attilio Citterio

1000 10000 100000 1000000

Design Capacity in Ton / Year

1000

100

Capital in 1000€/costliness index

(2000)

Graph of eq. 2

Attilio Citterio

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: $15,000,000Working Capital: $3,000,000Fixed and Working Capital = FC + WC = $18,000,000Raw Material Cost: $9,600,000/yrUtilities: $1,440,000/yrLabor: $1,800,000/yrMaintenance (6% yr f.c.): $900,000/yrSupplies (2% yr f.c.): $300,000/yrDepreciation (8%/yr): $1,200,000/yrTaxes, insurance (3%/yr): $450,000/yrTotal Manufacturing Cost = RMC + U + L + M + S + D + T = $15,690,000/yrGross Sales = Production * Product price = $24,000,000/yrGross Profit = Gross Sales - Manufacturing Cost = $8,310,000/yr

Attilio Citterio

References

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