Costs industry cost curves

The same effort produced a set of robust industry cost curves that outlined the capacity and cost position of each local and import player in the market today and... 

Pressure on prices has developed for commodity chemicals as technology has diffused ever more rapidly, flattening industry cost curves and impeding differentiation (Fig. 4.1). An analysis of a basket of commodity petrochemicals reveals a real decline in gross margins of 2 percent per annum in the USA. 

The problem of optimizing production from several plants with different cost structures and distributing the products to several distribution centers is common in the chemical industry. Newer plants often yield lower cost products because we learn from the mistakes made in designing the original plant. Due to plant expansions, rather unusual cost curves can result. The key cost factor is the incremental variable cost, which gives the cost per pound of an additional pound of product. Ordinarily, this variable cost is a function of production level. 

The concept of the producer cash cost curve, that aligns and ranks producers in ascending order based on their cash costs of production and the intersection of which with market demand identifies the marginal - and therefore price-setting -producer, is universally known in commodity industries and requires no further explanation here. 

We noted earlier that commodity chemicals have earned superior returns to other commodity industries. Closer analysis that we have undertaken of the key differentiating factor behind chemicals higher profitability compared to other commodities shows it to be the recurrence of fly-ups, resulting from robust demand growth, limits on low-cost new capacity, and relatively flat cash cost curves. 

Industry s continued interest In shale oil, despite Its current unattractiveness, is sustained primarily by the belief that the real cost of Imported oil will continue to rise and ultimately surpass shale oil at some unpredictable future date. Government assistance is sought by Industry before that date on the grounds that a) there is a public value, which cannot be directly captured by a company undertaking a shale oil venture now, in reducing imported oil and b) there is need for an immediate start In order to have significant shale oil production in place when the cost curves do intersect. 

Note that the position of the bound in exogenous (low R D intensity) sunk costs industries says something about the intensity of competition. A Northward displacement of that curve implies an increase in the intensity of competition. 

A low temperature of approach for the network reduces utihties but raises heat-transfer area requirements. Research has shown that for most of the pubhshed problems, utility costs are normally more important than annualized capital costs. For this reason, AI is chosen eady in the network design as part of the first tier of the solution. The temperature of approach, AI, for the network is not necessarily the same as the minimum temperature of approach, AT that should be used for individual exchangers. This difference is significant for industrial problems in which multiple shells may be necessary to exchange the heat requited for a given match (5). The economic choice for AT depends on whether the process environment is heater- or refrigeration-dependent and on the shape of the composite curves, ie, whether approximately parallel or severely pinched. In cmde-oil units, the range of AI is usually 10—20°C. By definition, AT A AT. The best relative value of these temperature differences depends on the particular problem under study. 

While the new mines increase mid-term supplies, they do not extend industry life. Ceteris paribus, as fuel prices rise, mines with high water ratios are apt to close unless some form of hydrodynamic mining can be introduced (3). If normal depletion curves are used rather than constant production rates, Frasch industry life is extended but at the cost of lower short and mid-term production. 

Potential. The development of MS/MS for analyses of foods and flavors will follow the same growth curve as it has in other applications. At this point, only the first part of the growth curve is evident. Several industrial laboratories are beginning to use MS/MS on a routine basis, and ocnmercial pressure will drive the expansion of the method. The speed of the MS/MS analysis is a strong initial advantage. In the long term, it is likely to be the flexibility of MS/MS analysis that will sustain its use in these areas, and justify the high initial cost of the instrument. It is... 

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