18

CHAPTER 2

MARKET ANALYSIS

2.1

INTRODUCTION

2.1.1

BGE Capacities and Production

The capacities of chemical plant that need to design for Butyl Glycol Ether

(BGE) in this project paper is about 100,000 MT per annum. Basically, BGE that will be
produced in the plant should not just based on the world demand but also need to
consider the other countries that also produce the same product. If the production is
higher than demand, means the price of the product in world trade market will decrease
and probability for the plant to gain profit is difficult and may lead to bankruptcy. Thus,
the production of BGE other than Malaysia must be investigated first before design up a
plant.

Figure 2.1: Market Applications of Butyl Glycol Ether

(Adapted from www.dow.com/productsafety/finder/egbe.htm)

19

2.2

SUPPLY AND DEMAND OF BUTYL GLYCOL ETHER

2.2.1

Production of Butyl Glycol Ether Worldwide

Available information indicates that BGE was produced by nine companies in

China, seven companies in Germany, six companies in India, four companies in Japan,
three companies in the USA, two companies each in Argentina, Mexico, Taiwan.
Approximately 650 million pounds (300 kilotonnes) of BGE are produced each year in
the United States and Europe. In Europe, the total European Union (EU) production of
all butyl glycol ethers is given in CEFIC statistics as 181,000 tonnes. Virtually no BGE is
believed to be imported into the Europe (CEFIC, 2006). Approximately 2000 tonnes of
BGE per year are manufactured by Australia. Thus, roughly world production is
estimated to be 400 to 500 kilotonnes per annum.

Figure 2.2: World Production of BGE in Year 2009

Dow Chemicals, USA is a full-spectrum supplier of glycol ethers, and is the
world's leading producer of ethylene-oxide-based glycol ethers. Dow has a 500 million
pound (227,000 metric tons) facility dedicated to ethylene glycol butyl ethers production
in Seadrift, Texas.

20

2.2.2

Production of Butyl Glycol Ether in Malaysia

The one and only plant that produce BGE in Malaysia is Optimal Glycols

(ethylene oxide & ethylene glycol) Sdn. Bhd. Optimal Glycols Sdn. Bhd is a joint venture
formed by Petroliam Nasional Berhad (Petronas) of Malaysia owning 64%, Union
Carbide Corporation, which has been bought out by Dow Chemicals owning 24%, and
South Africa's Sasol Polymers (formerly Polifin) owning 12% of the company. It has its
headquarters in Kuala Lumpur, Malaysia. Optimal Glycol produces about approximately
45-50 kilo tonne per annum in Malaysia.
Year (in kg)
2007

2008

2009

40 111 943

41 575 167

48 758 356

*Source of Data: Department of Statistics Malaysia

[48 758 356 Kg = 48 758. 356 MT = 107 million pound]
Table 2.1: Production of Butyl Glycol Ether from Optimal Glycols Sdn Bhd
2.2.3 World Demand for Butyl Glycol Ether
In an analysis of the use patterns of glycol ethers in Sweden over the period
2003-2006, the usage of BGE in 2006 was 4 million pounds (2100 tonnes), of which 3.7
million pounds (1680 tonnes) were imported as BGE and the remainder imported in
chemical products, mainly paints (Johanson and Rick 2006). Approximately, 1.5 million
pounds (700 tonnes) of BGE were imported into Australia during the 2004-2006
financial year from a number of countries including the Netherlands, Russia, Belgium,
Singapore, Sweden, Germany and the USA. In addition, the total of U.S. consumption
for BGE in 2006 was 320 million pounds (145,000 metric tons) and the Europe
consumption is 114 000 pounds. This give the total of BGE demand up to 325.614
million pounds (147 696.20 MT = 147.696 million Kg) through entire world.
It is estimated that an annual average total of 6 million kg of BGE was available
for use in North America. Over 51% of the BGE used in North America was for paints
and coatings; 41% was used in water-borne coatings. Of the remaining BGE, 4% was

21

used in cleaning products, 3% in printing inks and 1% in other uses such as in textile,
pulp and paper processing, pesticides, hydraulic fluids, etc.

Country

2000

2005

2010

North America

3580

3550

3325

Western Europe

2950

2930

2845

Japan

1452

1587

1715

Other Asia-Pacific

3681

4774

6095

Rest of World

3470

4229

5095

*Source of Data: Dow Chemical Company

Table 2.2: World solvent-based coatings demand by region (millions kg)
It is predicted that uses of BGE in paints and coatings for both North America
and Western Europe will decline by over 8% and 4% respectively between year 2000
and 2010. However it will increase by over 18% in Japan, more than 66% in other Asia
Pacific countries and 47% for the rest of the world. Furthermore, the global demand for
BGE is projected to increase in the future mainly due to higher demands from Asia,
which is the target region demand for our product. The United States and Western
Europe are the major producers. However, the use of this product as solvents for paints
is decreasing in the developed world because of environmental concerns.

2.2.4 Demand for Butyl Glycol Ether in Asia and Malaysia

The total of BGE imports to Malaysia is usually to be assumed as the market
demand of BGE inside Malaysia. Table below shows the volume (in Kg) of BGE that
been imports to Malaysia for year 2009:

22

Country

kg

United States

605 174

Taiwan

285 188

Germany

178 745

India

161 100

United Kingdom

131 961

Singapore

71 404

France

58 810

Netherlands

15 200

China

15 180

South Africa

15 000

South Korea

8 818

Japan

4 400

Italy

362

Total

1 551 342

*Source of Data: Department of Statistics Malaysia

Table 2.3: Amount of Butyl Glycol Ether Imported to Malaysia
The volume of BGE that import to Malaysia after combine with the volume of
BGE that produce in Malaysia gives the total up to 50.258 million kg per year (1 551
342 kg/annum (1.5 million/year) and 48 758 356 kg/annum (48.758 million kg/year)
respectively). Means that, it alright to assumed, the plant to produce 100 000
MT/annum (100 million kg/year) in Malaysia still can be designed and run if we consider
the world demand still be high at 147.696 million kg per year.

23

2.3

SUPPLY AND DEMAND OF RAW MATERIALS

Generally, Butyl Glycol Ether is produced by chemical process that involving

ethylene oxide (EO) with Butanol (C2H5OH) and the presence of Sodium Hydroxide
(NaOH) as the catalyst. Thus, the quantity and price of these 3 chemicals needed to be
known before produce the BGE.
2.3.1

World Demand and Price of Ethylene Oxide (EO)

*Source of Data: Department of Statistics Malaysia

Figure 2.3: World Demand and Price of Ethylene Oxide
2.3.2

World Demand and Price of n-Butanol

*Source of Data: Department of Statistics Malaysia

Figure 2.4: World Demand and Price of n-Butanol

24

2.3.3

Availability of Catalyst (NaOH)

Since the Sodium Hydroxide (known Caustic Soda) is unavailable to get within
Malaysia, this catalyst need to import from outside since it is necessary in the
production of Butyl Glycol Ether (BGE). The table below shows the quantity of the
NaOH import and its price from year 2007 to 2009.
2007

2008

2009

Quantity

Price

Quantity

Price

Quantity

Price

(10^6 Kg)

(per Kg)

(Kg)

(per Kg)

(10^6 Kg)

(per Kg)

19.6

0.59

20.5

RM 0.66

*Source of Data: Department of Statistics Malaysia

Table 2.4: Amount and Price of NaOH Imported to Malaysia

Figure 2.5: Amount and Price of NaOH Imported to Malaysia

25

2.4 MARKET PRICE, TRENDS AND APPLICATION

BGE is one of the most versatile chemicals in the marketplace today for a wide
variety of uses. The US E- and P-series glycol ethers contract prices shed up to 3
cents/lb - depending on grade, volume and application (on weak raw material costs and
sources). E-series (ethylene-derived) prices have decrease, ethylene glycol monobutyl
ether and di-ethylene glycol monobutyl ether by up to 2-3 cents/pound. The same was
applied to P-series (propylene-derived) values.

E-series ethylene glycol monobutyl ether values were at 81-85 cents/pound

(1.87/Kg) and di-ethylene glycol monobutyl ether values at 92-96 cents/pound (2.12/Kg)
delivered, for business, according to global chemical market intelligence service (ICIS
news).
Thus from this news, the price of Butyl Glycol Ether increased from RM 5.83 per
kg in October 2009 to RM 6.52 per kg in April 2010.

26

2.5

BREAK-EVEN ANALYSIS

2.5.1

Capital Cost Estimation

To obtain an estimate of the capital cost of a chemical plant, the costs

associated with major plant equipment must be known. The most accurate estimate of
the purchase cost of a piece of major equipment is provided by a current price quote
form a suitable vendor. But, in this case, capital cost calculator (CAPCOST.xsl) is used.
CAPCOST is a build-in capital cost calculator in Microsoft EXCEL and made based on
CEPCI 2008. The result of estimation by using CAPCOST.xsl is shown below:

Figure 2.6: CAPCOST estimation application

27

From the PFD, there are 2 reactors, 4 tanks, 3 distillation column, 4 heat
exchangers and 2 mixers. Thus by referring the table above, the equipments cost can
be summarized in the table below:

Price per Unit

Price

Price

Equipment

Unit

(US Dollar)

(US Dollar)

(RM)

Reactor

145 000

290 000

1 046 900

Heater

23 200

23 200

83 752

Cooler

23 200

69 600

251 256

Distillation Column

816 000

2 448 000

8 837 280

Tank

227 000

908 000

3 277 880

Mixer

33 000

33 000

119 130

Splitter

33 000

33 000

119 130

Total (RM)

13 735 328

Table 2.5: Bare Module Capital, CBM

This is just a rough estimation, it will be discussed further in Chapter 5 and Chapter 9
(Mechanical Design & Economic Analysis).

Total Module Cost,

Contingency

CC = 0.15CTBM

RM 2 060 299.2

Fees

CF = 0.03CTBM

RM 412 059.84

Total (CC + CF + CTBM)

RM 16 207 687.04

Total Grass-roof Capital (GRC)

Site Development

CSD = 0.05CTBM

RM 686 766.4

Auxiliary Building

CAB = 0.04CTBM

RM 549 413.12

Offsite Facilities

COS = 0.21CTBM

RM 2 884 418.88

Total

RM 4 120 598.4

Table 2.6: Total Module Cost and Grass-roof Capital

28

Direct Cost
Specification

Cost

4 % GRC

RM 164 823.9

(installed)

20 % GRC

RM 824 119.7

Piping (installed)

70 % GRC

RM 2 884 418

10 % GRC

RM 412 059.8

Building

15 % GRC

RM 618 089.76

Yard Improvements

1 % GRC

RM 41 205.98

Service Facilities

50 % GRC

RM 2 060 299

2% GRC

RM 82 411.97

Onsite
Purchased Equipment
Installation
Instrumentation and Control

Electrical and Material

(installed)

Offsite

Land
Total 1

RM 7 087 428

Indirect Cost

Engineering and supervision

30 % GRC

RM 1 236 179

Construction Expenses

5% GRC

RM 206 029.9

Contractors Fee

5 % GRC

RM 206 029.9

Contingency

10 % GRC

RM 412 059.8

Total 2

RM 2 060 298.6

Total = Total 1 + Total 2

RM 9 147 726.6

Table 2.7: Direct and Indirect Cost in Capital Investment

29

2.5.2

Total Capital Investment

Fixed Capital Investment, FCI is also known as Total Module Cost, CTM of the plant.
This is a cost to build the plant minus the cost of land and represents the depreciable
capital investment.
CTM = FLang
where,
CTM
Cp,i
n
FLang

= Capital cost of the plant

= Purchased cost for the major equipment
= Total number of individual units
= Lang factor

Lang Factor represents the cost to build a major expansion to an existing

chemical plant which the total cost is determined by multiplying the total purchased
cost to all the major items of equipment by a constant. Since the plant is a fluid
processing plant, the Lang factor used for equation above is 4.74.
Fixed Capital Cost = 4.74

RM 13 735 328 = RM 65 105 454.72

From the FCI, the working capital and Start-Up cost also can be determined.
Working Capital, Wc = 12%

FCI

Wc =
Start-Up Cost = 8%

FCI

=
Thus, the Total Capital Investment, TCI = (FCI) + (Wc) + (Start-Up Cost)
TCI= 65 105 454.72 +
+
= RM 78 126 545.66

30

2.5.3

Estimation of Operating Costs

2.5.3.1 Raw Materials, CRW

Price of EO

= RM 6.62/kg

Mass flow rate

= 4 839.2872 kg/h

Usage rate of EO

= (4 839.2872 kg/h) x (24 h) x (330 days)

= 38 327 154.62 kg/yr

Price required

= (RM 6.62/ kg) x (38 327 154.62 kg/yr)

= RM 253.725 millions

[Note: n-Butanol in the process will be recycled back at 286 945 465 kg/yr and
become feed. This value is double from its initial value that used in the feed.
Since it is been recycled, BuOH is excess in the process. Thus, the ratio for this
raw material been bought is at 1:3 day than other materials]

Price of n-Butanol

= RM 9.0/kg

Mass flow rate (+H2O)

= (14 141.65 kg/h) x (24 h) x (100 days)

Usage of n-Butanol

= 33 939 960 kg/yr

Price required

= (RM 9.0/kg) x (33 939 960 kg/yr)

= RM 305.46 millions

Price of NaOH

= RM 0.66/kg

Usage of NaOH

= 10000 kg/yr

Price required

= (RM 0.66/kg) x (10000 kg/yr)

= RM 6600

Price of BGE

= RM 6.52/kg

Production rate of BGE

= 99 000 000 kg/yr

Profit gain from sales

= (RM 6.52/kg) x (99 000 000 kg/yr)

= RM 645.48 millions

31

2.5.3.2 Utilities

The cost of utilities (CUT) to produce 100 000 MT of BGE can be refer in the table
below:

32

Table 2.8: References of Electricity Prices

The energy used in the plant is determined from CAPCOST.xsl. It is also can be
determine from HYSYS and Energy balance manual calculation. From the CAPCOST
application, the cost of electricity from the plant is shown in the table below:

Price per unit

Price

Equipment

Unit

(RM)

(RM)

Heater

608 086

608 086

Cooler

608 086

1 824 258

Mixer

210 824

210 824

Splitter

210 824

210 824

Total

2 853 992

Table 2.9: Electricity Cost Used

In the process reaction, water is also included. The cost for water utility for Terengganu
is shown in table below:

(Source: MIDA, Malaysia)

Table 2.10: Water rates in Terengganu

Price of H2O

= RM 1.15/kg

Flow rate

= 298.9026 kg/h

Usage of H2O = 2 367.31 m3/yr

Price required = (RM 1.15/kg) x (2 367.31 m3/yr)

33

= RM 2722.4
2.5.3.3 Operating Labor

Number of Operator per Shift can be determined using equation below:

[NOL = (6.29 + 31.7 P2 + 0.23Nnp)0.5]
Equipment

No. Unit

Nnp

Reactor

Heater

Cooler

Distillation Column

Tank

Mixer

Splitter

Total

11

* Tank, Vessel and pumps are not counted in evaluating N np in the equation.
* P = Number of processing steps. In general value of P is zero. (Richard Turton, 2009)
Table 2.11: Operator Labor Cost

NOL

= [6.29 + (0.23)(11)]0.5
= 2.97

Operating labor

= (2.97)(4.5)
= 13.365 14

Labor cost in Malaysia = RM 1500 (14)

Annual Labor Cost

= RM 21 000 per year

34

2.5.3.4 Maintenance and Repairs

Specifications

Cost

Maintenance and Repairs

Operating Supplies

5 % FCI

RM 3 255 272.7

Operating Labor

RM 1500 (14)

Direct Supervision & Clerical Labor

20 % operating labor

RM 13 021 090

Laboratory Charges

10 % operating labor

RM 6 510 545.5

Patents and Royalties

1 % FCI

RM 651 054.5

Local Taxes

1 % FCI

RM 651 054.5

Insurance

1% FCI

RM 651 054.5

Plant Overhead

50 % operating labor

RM 21 000

Indirect Production Cost

Total

RM 32 552 727.4
RM 57 313 799.1

Table 2.12: Manufacturing Expenses

Thus,

Total Manufacturing Cost

= RM 57 313 799.1+ Raw Material Cost + Utilities

= RM 57 313 799.1+ RM 559 192 003.6 +
RM 2 856 714.4
= RM 619.36 millions

35
General Expenses
Administration Cost

15 % operating labor,
supervision
& maintenance.

RM 1 956 313.5

36

Distribution & Selling Expenses

8% of FCI

Research & Development

3% of FCI

RM 5 208 436.38
RM 1 953 163.64

Total General Expenses, AGE

RM 9 117 913.52
Total Production Cost, APC = AME + AGE (excluding
depreciation)

RM 628 480 430.6

Depreciation, ABD

10 % FCI

RM 6 510 545.47

Total Expenses, ATE

APC + ABD

RM 634 990 976.1

RM 645 480 000

Revenue from Sales

Net Annual Profit, ANP

Revenue from sales

ATE

RM 10 489 023.93

Income Taxes

28 % net annual profit

RM 2 936 926.699

Net Annual Profit After Income Taxes, ANNP

Rate of return, I

RM 7 552 097.231

((ANNP + ABD)/TCI)*100
17.99%
Table 2.13: General Expenses

37

2.6

Years
0
1
2

Capital
Investment

PAYBACK PERIOD

Incoming
sales

Depreciation

Total
Expenses

Cash
Income

Net profit

Federal
Income
taxes

Net profit
after taxes

11718982
23437964
50782255

Net Cash
Income
-11718981.8

Cumulative
Net Cash
Income
-11718981.8

-23437963.7

-35156945.5

657364514.4

6510545.5

634990976.1

22373538.3

15862992.83

4441637.992

11421354.84

-32850354.4

-68007299.9

663938159.5

6510545.5

634990976.1

28947183.44

22436637.97

6282258.633

16154379.34

22664924.81

-45342375.1

670577541.1

6510545.5

634990976.1

35586565.04

29076019.57

8141285.479

20934734.09

27445279.56

-17897095.5

677283316.6

6510545.5

634990976.1

42292340.45

35781794.98

10018902.59

25762892.39

32273437.86

14376342.31

684056149.7

6510545.5

634990976.1

49065173.62

42554628.15

11915295.88

30639332.27

37149877.74

51526220.04

690896711.2

6510545.5

634990976.1

55905735.11

49395189.64

13830653.1

35564536.54

42075082.01

93601302.06

697805678.3

6510545.5

634990976.1

62814702.23

56304156.76

15765163.89

40538992.86

47049538.33

140650840.4

704783735.1

6510545.5

634990976.1

69792759.01

63282213.54

17719019.79

45563193.75

52073739.22

192724579.6

10

711831572.5

6510545.5

634990976.1

76840596.36

70330050.89

19692414.25

50637636.64

57148182.11

249872761.7

11

718949888.2

6510545.5

634990976.1

83958912.08

77448366.61

21685542.65

55762823.96

62273369.43

312146131.2

12

726139387.1

6510545.5

634990976.1

91148410.97

84637865.5

23698602.34

60939263.16

67449808.63

379595939.8

13

733400780.9

6510545.5

634990976.1

98409804.84

91899259.37

25731792.62

66167466.74

72678012.21

452273952

14

740734788.7

6510545.5

634990976.1

105743812.6

99233267.18

27785314.81

71447952.37

77958497.84

530232449.8

38

15

748142136.6

6510545.5

634990976.1

113151160.5

106640615.1

29859372.22

76781242.85

83291788.32

613524238.1

16

755623558

6510545.5

634990976.1

120632581.9

114122036.4

31954170.2

82167866.23

88678411.7

702202649.8

17

763179793.6

6510545.5

634990976.1

128188817.5

121678272

34069916.16

87608355.85

94118901.32

796321551.2

18

770811591.5

6510545.5

634990976.1

135820615.4

129310069.9

36206819.58

93103250.36

99613795.83

895935347

19

778519707.4

6510545.5

634990976.1

143528731.3

137018185.9

38365092.04

98653093.82

105163639.3

1001098986

20

786304904.5

6510545.5

634990976.1

151313928.4

144803382.9

40544947.22

104258435.7

110768981.2

1111867967

794167953.6

6510545.5

634990976.1

159176977.5

152666432

42746600.95

109919831

38303830.84

1150171798

21

78126546

Table 2.14: Non-discounted After-Tax Cash Flows (in millions ringgit)

39

Figure 2.7: Cumulative Cash Flow Diagram for Non-Discounted After-Tax Cash Flows

40

41

Net Cash Income

-11.719

Cumulative Net
Cash Income
-11.71898185

Discount
Rate at
(10%)
-11.719

Discount
Rate at
(15%)
-11.719

Discount
Rate at
(20%)
-11.719

-23.438

-35.15694555

-31.9609

-30.5713

-29.2975

-32.8504

-68.00729992

-56.2044

-51.4233

-47.2273

22.66492

-45.34237511

-34.0664

-29.8133

-26.2398

27.44528

-17.89709555

-12.224

-10.2327

-8.63093

32.27344

14.37634231

8.926577

7.147583

5.77753

37.14988

51.52622004

29.08521

22.27621

17.25603

42.07508

93.60130206

48.03227

35.1882

26.12241

47.04954

140.6508404

65.61466

45.97901

32.71089

52.07374

192.7245796

81.73404

54.78435

37.35131

57.14818

249.8727617

96.33677

61.76473

40.35585

62.27337

312.1461312

109.4053

67.0937

42.01112

67.44981

379.5959398

120.951

70.9492

42.57421

72.67801

452.273952

131.0077

73.50716

42.27128

77.9585

530.2324498

139.6268

74.93704

41.29798

83.29179

613.5242381

146.8728

75.39875

39.82108

88.67841

702.2026498

152.8198

75.04072

37.98066

94.1189

796.3215512

157.548

73.99889

35.8928

99.6138

895.935347

161.1418

72.39616

33.65226

105.1636

1001.098986

163.6877

70.34254

31.33526

110.769

1111.867967

165.2721

67.93544

29.00202

38.30383

1150.171798

155.4234

61.10941

25.00095

Table 2.15: Discounted After-Tax Cash Flows (in millions ringgit)

42

43

Figure 2.8: Cumulative Cash Flow Diagram After-Tax Cash Flows.

44

Conclusion

From the aspects that mentioned above, it can be conclude that the process
plant for the production of BGE is feasible due to its market demand and the raw
material prices. However, the production of BGE will not profitable in Malaysia because
there the demand in Malaysia is unfortunately low. Thus, this BGE production is better if
exported to outside Malaysia since the global demand still high.

In the economic analysis of this plant, it is assumed that any new land
purchases required are done at the start of the project that is at time zero. After the
plant established, the process begins to generate finished products for sale and the
yearly cash flows become positive (Table 2.14). The payback period for the plant is only
takes 3 years minimum to become profitable. Payback period is a time required after
start-up to recover the FCI for the project.

45

References
http://www.dow.com/productsafety/finder/egbe.htm
http://www.tnb.com.my
http://www.mida.gov.my/en_v2/
http://www.statistics.gov.my/portal/index.php?lang=en