ENGINEERING. DESIGN. AND PROCESS DEVELOPMENT tional equipment and labor cost. The decision to proceed with properly engineered distillat,ion equipment was based on the folloviing facts overlooked by the chemical advocates: 1. Present equipment was doing an inadequate distillation job, because it was not large enough. 2 . Present equipment was not designed t o distil in the nianner uzed. 3. Present arrangeinent did not permit the use of the proper controls. 4. Distillation had produced niat,erial of the proper activity and purity.
Development of Alternative Processes The development of unique and different processes to rnake the same product is an intriguing and fruitful field. Continuous processes speed up batch methods but gcnerally follow established process principles. This t,opic refers t,o the development of cntirely different process schemes. While such radical c h a n g e may not appear to fit in plant adaptation developments, research on a completely different process nil1 shed light on the procedure
now in use. The story of developing a new method for piioiol manufacture is filled with ideas for new process procedures ( 2 ) . d n aiticle discuqsing process alternatives for making urea illuqtrates this thought; many otheis can be found (3).
Summary 1-arious types of process research at'tacks are available and should be used t o 5olve expansion problems. The investigation mupt go beyond routine methods, and skillful selection from the various choices must be made. The full cooperat>ionof reseai'ch, process, engineering, and operating people is required for sucress.
Literature Cited (1) C k e m . Eng., 59, 247 (February 1952).
( 2 ) Cranford, R. 11..Chem. Eng. S e w s , 25, 235 (1947) (3) l b o s e b o o m , A , Chem. Eng., 58, 111 (March 1951). (4) Sittig, AI., Ihid., 57, 106 (December 1950). ( 5 ) Bwezey, F. EI., Ib.i'd., 54, 121 (June 1947).
RECEIVED for review lluril 30, 1954.
ACCEPTED September 10, 1954.
Economic Evaluation of Plant R. D. NEWTON AND C. W. WElL Chas. Pfizer & Co., Inc., Brooklyn, N. Y. Before a new capital venture in plant expansion is undertaken, its economic future should be carefully evaluated. A systematic appraisal presented graphically will often indicate trends and results which might otherwise be overlooked. Over the desired range of market volume the variation of sales price, manufacturing cost, profit, and capital investment should be determined. Choice of optimum plant capacity is thus possible. For the plant size selected, the effect of sales price and output changes may be ascertained in a similar manner.
0"'"ii
the production level selected for expanding an existent plant is based on a soinem-hat arbitrarily selected highcr sales volume at the current, sales price returning a satisfactory profit. Little consideration is given to the variance of economic conditions over the entire range of expanded volume. Unfortunat,ely there is no magic formula which may be employed for determining the proper level to which an expansion should be carried. However, the importance of correct,ly deciding this value fully justifies an orderly presentation of the facts indicating the economic course of events over the expanded output,. A graphical presentation not only reveals these continuing changes but also allows extrapolat,ion of some of the dat,a. Capacit,y determinations should be based on maximum profit,ability, which is the maximum excess of income over expenditure for the investment in question. To do this the variation of sales price, investment, and cost must be calculated over the entire range of contemplated operation. The proper combination of these three independent functions 1%-illt.hus reveal the point of optimum profitability.
Sales Proper sizing of a plant expansion demands first of all a study of the variation of unit sales price as a function of annual sales volume. T o accomplish this, the company's share of the total market a t various sales prices must be ascertained. Such a determination is a very difficult, question to answer in direct quantitative terms, since the factors involved are in most cases not controllable by the producer. Fortunately in t,he expansion of an 2488
existent product line, a great deal more information is availablc than exists for entirely new ventures. Thus some of the complicating fact,ors are reinovpd or a t least reduced. An historic price pattern and current, market volunie by consumer groups are a.vai1able. The producer is aware of his product's acceptance, use, a n d potential. The test of competition has indicat'ed the producer's share of the total market. I n the expansion of a product line, a price should prevail tliat provides a satisfactory return in line with company policy. Competition, substitutes, and usefulness-over which the producer can exercise relatively little direct control-can have n notable effect on pricing in a free economy. Even though t,he product may possess a n-ide potent,ial market, competitors' countcrineasures to price reductions and sales volume increasc must be contemplated and the effect noted. I s t,he demand for a product is stimulat.ed, increased productive capacity and new process t>echniquesjoin to reduce costs and combined with increased aompetit,ion, lower prices result,. I n t,urn, new markets and uses are attracted. iz market study reveals that a curve may be developed s 1 i o ~ ing the variation of unit sales price as a function of sales volunie for an existent product,. Such a curve, which can and does have many different forms, is illustrated in Figure 1.
investment The cost of capital investment must be determined over tlic range of attainable sales volume. Large process plants achieve high capacity through the use of large singular units as ne11 BE
INDUSTRIAL AND ENGINEERING CHEMISTRY
Vol. 46, No. 12
PLANT ADAPTATION multiples of small pieces of equipment. The extent to which multiples are employed rather than single units depends on the maximum size of equipment that can be obtained or designed, the largest size of equipment usable due t o process limitations, the flexibility desired in production rates, and the frequency of mechanical failures.
t z a
2a a
If the likelihood of making subsequent additions to an installation exists, consideration should be given to the ultimate capacit,y when sizing the equipment for the initial facilities. Equipment prices have been found to vary generally with the capacity to a fractional exponential power. For most pieces of equipment the power term has been found to average 0.6 ( 6 ) . Thus if a reactor is twice the size of another, tbe cost of the larger will be 2O.6 times the cost of the smaller. The effect that equipment size plays upon the cost of an entire plant is demonstrated by Figure 2, a logarithmic plot of equipment cost verms capacity of a n operation. Line A represents the relative cost of a single reactor sized to meet the capacity of the entire operation. Line B represents the cost of the reactors for the operation consisting entirely of multiples of the initial minimum size over the same capacity range. An operation composed of multiples will cost more than that having only one piece of large equipment.
m a
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da
I ANNUAL
CAPACITY
I
Figure 1 . Unit Sales Price, Cost, and Profit Variation as a Function of Sales Volume
1
TOTAL?
Generally, additions to plants are composed of a preponderance of small multiple units rather than of a few large units, which most likely would be employed for completely new facilities of a total capacity equal to that of the expanded installation. This usually is necessary in order to preserve the integration with existent facilities. The additional cost of duplicate units employed in an addition is offset somewhat by closer design due t o the experience gained from the operation of the original plant.
I
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1
WNUAL
Figure 3. t
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CAPACITY OF OPERATION
Figure 2.
Effect of Equipment Size on Plant Cost
Furthermore, the investments required for nonproductive components, such as buildings and utilities, for plant additions are as much as one quarter lower than t h a t required for new plants (5). Yet, in a static economy, the total investment for a plant which has undergone expansion i s usually greater than that for a new plant constructed for the same level of total output. December 1954
I
I
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l
CAPACITY
Investment Versus Annual Capacity
Just as the cost of equipment varies with an exponential value of size, similarly a correlation has been found to hold true for complete plants. The duplication of equipment, which always exists to some extent in new plants, tends to raise the power term to an over-all average of 0.7 ( 2 ) . Because of theincreasedtendency in expanding plants toward equipment duplication rather than size increase, the investment above the original output will be proportional to the capacity raised to a power greater than that for the initial plant. Thus the exponent will take on a value between 0.7 and 1.0. The variation of investment over the range of output must be ascertained by analyzing the investrncnt for an expansion based on increasing the number of units, and analyzing the investment as an expansion based on increasing the size of the units. By applying such a principle t o two or perhaps three capital cost estimates for plants of varying volume outputs, the investment may be plotted versus the annual capacity (Figure 3). cost
The third major variable mhich must be determined for plants of various leveIs of annual capacity is the cost of manufacturing and selling the product. Jnasmuch as additions made to existing plants must be integrated with the initial facilities, the resultant manufacturing cost will assume the characteristics of the original
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2489
ENGINEERING, DESIGN, AND PROCESS DEVELOPMENT until further reductions are limited by the economic size of the plant.
Profit
ANNUAL
Figure
4.
Effect
CAPACITY
of Production Range on Manufacturing Expense
plant. If a major cost reduction is necessary to ensure profitable operation of a n expanded unit, i t will not in most cases result from a plant addition. I n such case, completely new facilities or process revisions should receive prior consideration. While manufacturing cost per unit of output usually drops to some extent as the capacity of the plant is increased, it will not be so low for a n expanded plant as it would be for a new installation for the same total capacity. This is due to the higher proportion of multiple equipment employed in additions to existent facilities. Total expenditures for raw materials, utilities, packaging containers, purchased services, shipping, and handling have been found t o vary directly with capacity, and thus will be essentially the same per unit of production a t all levels of output (1, 5 ) . Fixed charges and maintenance tend t o vary for the plant to the same power of capacity as does the investment (I, 5 ) ~Labor and those items proportional t o it, such as supervision, laboratory control, and overheads, have shown a variance of the 0.25 power of the capacity for plants achieving higher capacities through the use of larger sizes of equipment ( 7 ) . If the addition made t o the plant consists entirely of multiples of the original unit, the labor force will increase in nearly direct proportion to the capacity. By analyzing labor needs by these t,wo methods, and combining them x i t h the other components of manufacturing cost, the variation of annual manufacturing expense over the entire range of production may be developed (Figure 4). Bales expenses can have wide and somewhat unpredictable fluctuations. They may remain constant for a unit output if they are primarily due t o distribution. On the other hand a reduction in unit sales expenditure may accompany a n increase in volume, or the additional sales effort required t o market the additional production may conceivably increase the unit cost. Estimates of the variable components of costs at two or three points over the range of volume considered will usually prove sufficient to reveal the correlation existing. Thus the total unit cost may be determined and plotted as a function of capacity. Such a curve will generally take the form illustrated in Figure 1, which shows the rate of cost reduction decreasing as the volume rises, 2490
The difference between the unit sales price and the unit cost a t corresponding levels of output will result in a curve reflecting the unit profit earned-or the loss incurred-over the entire range of proposed output. This profit may be shewn on either a before or an after income tax basis, whichever is preferred. Some estimators consider only the before tax profit on the grounds that income tax rates are externally controlled factors affecting ail earnings in the same proportion. On the other hand, since the desired aim for any venture is to earn a real profit, it may prove desirable to deduct tuxes so that the real profit may be assayed. Figure 1 shows one possible form which the unit profit V A ~ S U S capacity curve can take. As can be imagined, a profit may exist a t all ranges of capacity; a product may prove to be profitable only a t low capacity due to a limited high value market; or the sales price may exceed the cost only a t high volume output. Maximum unit profit, however, cannot be employed as a measure of the plant size selection. The unit profit multiplied by the annual output will produce data which can be plotted in the form of annual profit versus capacity (Figure 5 ) . I n all likelihood the level for maximum annual profit will not coincide with t h a t for maximum unit profit. By expressing the annual profit as a percentage of the investment a t corresponding capacity levels, a curve of per cent return on investment as a function of output can be developed as shown in Figure 5 . Such a graph may show that the point of production,
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Figure
5.
CAWCITY
Annual Profit and Per Cent Return Versus Capacity
ANNUAL PRODUCT1 ON
Figure 6.
Break-Even Chart
INDUSTRIAL AND ENGINEERING CHEMISTRY
Vol. 46, No. 12
TANTALUM AND NIOBIUM may be developed showing the percentage return as a function of operating level for the plant size selected.
where the maximum per cent return lies, differs from t h a t for maximum annual profit. Whether a plant should be expanded t o a point where maximum per cent return on the investment or the maximum annual profit is earned is a question which must be answered by management t o fit the particular product and situation. While it is recognized t h a t the problem has many facets, i t may be resolved generally around one focal point. First of all, no level of production should be considered which fails t o reach a prescribed minimum per cent return on the investment based upon the risk involved. If the per cent return is deemed t o be satisfactory a t the level of annual output which shows the maximum annual profit, then the expansion should be made t o the level of maximum annual profit, provided t h a t the per cent return at such an output exceeds the per cent return, commensurate with the risk, for any other possible investment which could be made. Otherwise the addition should be made t o the capacity shown for the maximum per cent returlq
The principles for evaluating profit remain the same for both an expansion or a new plant. Developing the components of profit, however, differs in a n expansion from that of a completely new plant. This difference centers principally in the result of using a greater proportion of multiple equipment units than would be employed in a new plant of the same total expanded size. Use of the mathematical approximations discussed will minimize the number of cost estimates required and yet provide adequate data for prediction purposes. Graphical portrayal of sales price, cost, and investment over the range of expansion contemplated will allow proper selection of optimum capacity t o take place on a maximum profitability basis. The range of profitable operation of the plant size selected may be indicated by a break-even chart.
Break-Even Point
literature Cited
Once the plant capacity has been selected, the effect upon costs and Profits by operation at less than full capacity Potential should be ascertained. Basically speaking, this type plot is called a break-even chart. Such a chart (Figure 6) is simply a plot of cost and sales for the specified plant size. The intersection of the sales and cost lines is the break-even point, above which production levels the plant will be profitable (4). Expressing the annual profit a t various levels between the break-even point and the maximum capacity as percentages of the investment, a curve
Summary
(1) Aries, R.
s.,
and Newton, R. D., “Chemical Engineering COST
Estimation” pp. 69-84, Chemonomics, New York, 1950. (2) Chfiton, H., them. E ~ ~57, . ,N ~ 4., 112-13 (1950). (3) Kistin, H. R., Cameron, C S., and Carter, A. P., Ibid., 60, No. 11, 191-5 (1953). (4) Newton, R. D., and Aries, R. S., Ibid., 58, No, 2 , 148-50 (1951). (5) Newton, R. D., and Aries, R. S., IND.ENG.CHEM.,43, 2304-6 (1951). (6) Williams, R. Jr., Chem. Eng., 54, NO.12, 124-5 (1950). (7) Wessel, H. R., Ibid., 59, No. 7, 209-10 (1952). RECEIVED for review April 7, 1954. ACCEPTED September 9. 1954
c.
END OF PLANT ADAPTATION SYMPOSIUM
TANTALUM AND NIOBIUM Separation by Liquid-Liquid Extraction Hydrochloric Acid Extraction from Mixed Ketones JOSEPH R. WERNING’ U. S. Bureau o f
AND
KENNETH B. HlGBlE
Mines, Albany, Ore.
S
EPARATION of tantalum and niobium (columbium) has long presented a problem t o both the chemist and metallurgist. Attempts t o separate the two elements by chemical and physical means have, t o date, failed t o develop a substitute for the present commercial method of production, a process ( 3 ) which deviates only slightly from the Marignac process ( 4 ) described in 1866. Since t h a t date many separations have been proposed, but these have failed t o offer a satisfactory substitute for the Marignac process. During the past 2 years a t least three papers have appeared t h a t describe liquid-liquid separations of the two elements (2,6,6).Other studies have been made of the solvent extraction of the individual elements ( 1 ) . This paper describes still another liquid-liquid extraction process, which may merit industrial consideration. 1
Present address, Polychemicals Department, E. I. du Pant de Nemours
& Go., Inc., Wilmington, Del.
December 1954
The separation of tantalum a n niobium by i..e preferential extraction of tantalum from mixed aliphatic ketone solutions containing mixed anhydrous pentachlorides b y 12N hydrochloric acid is shown t o be feasible. The system methyl isobutyl ketone (3liBK)-diisobutyl ketone (DiBK)-l2N hydrochloric acid has been investigated and utilized in the preparation of relatively pure tantalum and niobium oxides. The presence of ferric chloride in the above system is shown to enhance, t o a certain degree, the possibilities of commercial application. A method for rapid separation of niobium from the residual iron in the ketone solution is presented. The work described in this paper utilizes tantalum and niobium fractions recovered from Geomines tin slags. The slags were obtained from the Compagnie Geologique e t Miniere des Ingenieurs e t Industriels Belges, South Africa, “Geomines.” These slags contain large quantities of iron and silicon. The silicon is removed easily by chlorination procedures, but the elimination of
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249 1
