2.

1 Introduction

Market is been define as a medium that allow two parties, which are buyers and sellers to
communicate directly or via intermediaries in order to trade products or services. Therefore,
market analysis is a process of collecting relevant information in order to discover if there is a
market for the proposed products or services. This information will aid the entrepreneurs in
making a wise and profitable decision for their business. For this project, the main focus will be
on the market potential of propnol production across the countries including in Malaysia.

The term oxo is the generic name for the chemicals manufactured from oxo synthesis
chemistry, which is the hydroformylation of olefins by using syngas, carbon monoxide, and
hydrogen. The oxo process or hydroformylation of olefins with synthesis gas (or syngas)is the
principal route to C3C15aldehydes, which are converted to alcohols, acids, or other derivatives

Propanol is a type of alcohol compound that is colurless which can be divided into 2 types.
Firstly, iso-propanol. This compound is used in many type of application in industry such as
cosmetic, personal care product, resin and many more. Secondly, n-propanol is been used as
medium-volatile alcohol in the coating industry for improve the drying, flexographic and many
more. In this project we choose n-propanol to be discusssed and analyses.

As we know that, the increases of cosmetic industry nowdays is one of the causes that make
the demand of propanol start rising rapidly and make the forecast increase. Beside that, the
various uses of propanol and uses in the pharmecutical will lead to extensive growth because
the growth of pharmacuticel in industy in various region. One of the example Asia Pacific, like
China, Indina, Japan and also Korea.

In this chapter, more details will be described for supply and demand, target market, price of raw
materials and catalysts use

Table 2.1 List of materials

Product Raw Material Solvents

Natural gases Rhodium
Propanol Carbon Dioxide Cobalt
Hydrogen

2.2 Market Analysis

2.2.1 Global Supply & Demands of Propanol

The oxo alcohol market can also be segmented on the basis of regions North America,
Latin America, Asia-Pacific, Europe and the Middle East and Africa. In terms of oxo alcohol
production and consumption Asia Pacific and North America spearhead the oxo alcohol market.
Asia-Pacific is the largest market for oxo alcohol and with the increase in consumption of oxo
alcohol for acetate. Key region driving the oxo alcohol demand in the Asia Pacific region is China
followed by India and South Korea. Followed by North America, Europe, Middle East & Africa are
key geographies for the oxo Alcohol market. The demand for oxo alcohol in Europe is anticipated
to be modest owing to the maturity and stringent environmental regulations present

The Oxo alcohols market has grown rapidly during the past few years and this trend is expected
to continue in the next five years. The growth is mainly driven by the increasing demand in the
Asia-Pacific region. Asia-Pacific is the biggest market for Oxo alcohols followed by Europe and
North America, which together accounted for more than 90.0% market share in 2014. China is
the biggest market for Oxo alcohols, followed by United States, and is projected to grow at a
CAGR of 7% between 2015 and 2020.

Production of Oxo-alcohol on Southeast Asia

 Kg/year

Singapore Vietnam China Thailand Hong Kong

Based on the above picture, malaysia do not produce propanol alocohol. Most of the propanol
been imported to the neareast country which is Singapore

2.2.2 Market Analysis for Raw Material

 In the selected process which is the hydrofromylation of ethylene followed by
hydrogenation to produce n-propanol, the raw materials needed are natural gas, hydrogen and
carbon idoixde. This section will discuss the market analysis of the raw materials involved.

2.2.2.1 Natural Gas

Malaysias total natural gas resources are estimated to be 100.7 tscf. Thus, based on the
current production rate, Malaysias natural gas resources should be able to last up to 40 years.
Natural gas therefore is expected to continue to play an important role in helping to power
Malaysias economy, as well as feature prominently in ensuring security of the nations energy
supply up to 2050.

Figure 2.9 Natural Gas Resources by Region

Source: (Malaysian Gas Association, 2016)
 Natural Gas Price
4 3.68 3.77

US Dollars per Million Metric

3.5 3.32
2.95
British Thermal Unit
2.87
3
2.5 2.32

2
1.5
1
0.5
0
2012 2013 2014 2015 2016 2017
Year

Figure 2.10 Natural Gas spot price at the Henry Hub terminal in Louisiana
Source: (Indexmundi, 2017)

Ever since the country started exporting LNG in January 1983, natural gas exports have
since emerged as a major contributor of Malaysias export earnings. According to data published
by Department of Statistics, Malaysia exported RM47 billion worth of LNG in 2015 decreasing
from RM64 billion in 2014 due to lower volume and prices as LNG prices were indexed to oil
prices. From Figure 2.10, the data shows that the highest price recorded was in 2014 where 3.77
USD for every one million British thermal unit (mBtu). Average price for natural gas in Malaysia in
2017 is 2.87 USD. Currency conversion on 13th May 2017 is 1USD = RM4.34.
2.2.3 Catalyst
Hydroformylation reaction is the reaction that we used to convert the alkene, carbon monoxide
and hydrogen in aldehyde by increasing the length-chain of alkene. The product of this reaction
are raw materials for bulk and speciality chemical like detergent and plastic. Hydroformylation
process also cab used in the organic synthesis for various functional alkene and can be used as
reactant.
For this hydroformylation process, all the transition metal can be used as the catalyst to form
carbonyl. Based on the research been studied, the hydroformylation activity will be dececrease
in the order of Rh >> Co >> Ir > Os > Pt > Pd. Rhodium and coblat are used comercially as the
catalyst.
2.2.3.1: Cobalt
The cobalt catalysts are cheap, easily modifiable and some of the most active in the reactions of
synthesis gas, both in CO hydrogenation and hydroformylation.Thus, they provided a natural
starting point for this work.

2.2.3.2: Rhodium
The results for CO hydrogenation indicated that CO insertion took place ontheCo2(CO)8/SiO2
catalyst, and therefore it may be envisaged to exhibit activity inthe vapour phase
hydroformylation of light olefins, a reaction which alsoproceeds through CO insertion.
Accordingly, the activity of these catalysts was determined in the hydroformylation of ethene at
423503 K.

In this section of market analysis, we will be discusses all the global demand and supply of this
catalyst
2.2.3.3: Production Of Cobalt

Based on the above, we can see that the china one of the country that is belong to the th hight
share production of critical raw materials (antimony, fluorspar, gallium, germanium, graphite,
indium, magnesium, rare earths, tungsten.For the cobalt production 2 country which are
Democrtic of Congo and Canada that still active to produce this this type of catalyst. We can
assume that, this cobalt catalsyt not been produce around the Asia Region and we need to
import it from both of the countries that been stated to uses in out plant design for the
production of propanol
60% of the worlds cobalt reserves originate in the Democratic Republic of the Congo. Within
the DRC, 20% of the cobalt exported comes from the hands of underage artisanal miners,
something that has not escaped the public eye.
Global Demand of Cobalt Catalyst
Global demand of the emerging technologies analysed for raw materials in 2006 and 2030 related
to todays total world production of the specific raw material (Updated by BGR April 2010)

Demand from Demand from

Indicator1
Production emerging emerging ) Indicator1
Raw material )
2006 (t) technologies technologies 2030
2006
2006 (t) 2030 (t)
Gallium 152 6) 28 603 0,18 3,97
Indium 581 234 1.911 0,40 3,29
Germanium 100 28 220 0,28 2,20
Neodymium 16.800 4.000 27.900 0,23 1,66
(rare earth)
Platinum (PGM) 255 very small 345 0 1,35
Tantalum 1.384 551 1.410 0,40 1,02
Silver 19.051 5.342 15.823 0,28 0,83
Cobalt 62.279 12.820 26.860 0,21 0,43
Palladium 267 23 77 0,09 0,29
(PGM)
Titanium 7.211.000 2) 15.397 58.148 0,08 0,29
Copper 15.093.00 1.410.000 3.696.070 0,09 0,24
0
Production of Rhodium

Rhodium is part of a group of metals called the platinum group metals. Along with platinum,
palladium, ruthenium, iridium, and osmium, these metals have similar physical and chemical
properties.

Rhodium is used in specialty optical instruments, electronics, aircraft turbine engines, and as a
jewelry finish.But the primary use for rhodium is for automobile catalytic converters

United States
2% Other areas
Canada 1%
2%

Zimbabwe
11%

Russia
13%

South Africa
71%
Based on the above pie chart, we can see that the biggest production of rhodium is
produce around the South Africa Region that took around 71%, secondly Rusia which is
around 13%, Zimbabwe 11% and for USA the production or rhodium is the 2nd smaller
around 2% that also same with the Canada also 2%

PRODUCTION OF RHODIUM

PRODUCTION OF RHODIUM

3720
3710
3700
3690
3680
3670
3660
3650
3640
3630
2012 2013 2014 2015

Series 1 Column1 Column2

The above graph identified and conducted by the mineral USGS to collect the data and
analysis how many production of rhodium is produced by the US for 4 years. Based on
the graph we can prove that many of rhodium is been produced from the Africa Region.
Around 24% been import form South Africa

The price for the rhodium alos decrease based on the information that been collected by
the USGS goverment. Table below show the price of the rhodium catalyst. The table
below show that the price of rhodium catayalst decreasing rapidly in over 3 years.

YEAR 2013 2014 2015

PRICE: DOLLAR 1069.10 1174.23 970.00

PER TRAY OUNCE
2.3.General Expenses

General expenses are the costs that represent an overhead burden which is necessary in
order to carry out business functions. It is seldom varies with the changes in the production
rates. The general expenses include administration costs, research and development, and
distribution and selling costs.

2.3.1 Profit Margin Calculation

2.3.2.1 Cost of Raw Material

The production rate of this propanolplant is 1,000,000 metric tons per year. The
hydroformylation process is selected to produce ammonia whereby the raw materials used
are natural gases, hydrogen, and carbon dioxide whilst the catalyst used is cobalt and
rhodium

Assumptions:

a) Plant will be operating for 341 days/year which equal to 6.54 days/week.
b) The production of propanol is 1,000,000 metric tons/year.
c) Mass flowrate for both reactants and catalyst is 100 kg/hr.

Natural gases price per year;

kg m3 m3
95,660.25 = 133,157.36
hr 0.7184 kg hr

m3 1 mmBtu mmBtu
133,157.36 = 4,711.86
hr 28.26 m3 hr

mmBtu 24 hr 341 day mmBtu

4,711.86 = 38,561,920.16 year
hr day year

mmBtu USD USD

38,561,920.16 2.87 = 110,672,710.85 year
year mmBtu
Table 2.4 Cost of raw materials (Source: Natural Gas Monthly Price Commodity Prices
Price Charts, Data, and News IndexMundi, 2017)

Reactants Mass flowrate Price per unit Price per year

(kg/hr) (USD/mmBTU) (USD/year)

Natural gases 95,660.25 2.87 110,672,710.85

Solvents Mass flowrate Price per tonnes Price per year

(kg/year) (USD/tonnes) (USD/year)

Cobalt and 26.76

rhodium catalyst

Total Cost of Raw Material ( )

2.3.2.2 Cost of Product

The mass flowrate of propanol 122.19 MT/hr. Therefore, the calculation for the product cost
is as follow:

Propanol cost:

MT 24 hr 341 days 281 USD 281,000,000 USD

122.19 =
hr day year MT year

Thus, the cost of product is 281,000,000 USD/year.

2.3.2.4 Profit Margin

Total cost of product and by-product:

164,000,000 USD 20% of 281,000,000 USD 445,000,831.76 USD

+ =
year year year

2.3.3.1 Cost of Equipment

Table 2.5 shows the total number of equipment used in the plant operation and its respective
cost estimation.

Table 2.5 Type of equipment and cost estimation (Source: www.matche.com)

Type of equipment Unit Price per Unit Total Price

(USD/unit) (USD)
Absorption column 2 509,228 1,018,456
Compressor 8 51,306 410,448
Condenser 2 41,852 83,704
Cooler 7 20,734 145,138
Evaporator 1 39,644 39,644
Heater 3 41,785 125,355
Process Vessel 1 258,790 258,790
Pump 1 14,735 14,735
Reactor 5 427,397 2,136,985
Separator 3 43,916 131,748
Total 32 4,365,003

Thus, the total of cost of purchased equipment is 4,365,003 USD.

 2.3.3.2 Estimation of Fixed Capital Investment

Fixed Capital Investment (FCI) represent the cost when plant ready for start-up. Fixed
capital does not change with production rate. FCI commonly includes the following cost
(Sinnot, 2005):

i. Design and other engineering and construction supervision

ii. All item of equipment and their installation
iii. All piping, instrumentation and control systems
iv. Building and structures
v. Auxiliary facilities, for examples utilities, land and civil engineering work

For working capital, it is the additional investment needed in order to start-up the plant and
finance the first few months of operation before an income can be generated from the
process. The value of working capital is usually 10 to 20 percent of the fixed capital. Most
of the working capital will be covered at the end of the project. This includes the cost of:

i. Start-up
ii. Initial catalyst charges
iii. Raw materials and intermediates in the process
iv. Finished product inventories
v. Funds to cover the outstanding accounts from customers

Thus, the sum of both fixed capital and working capital represent the total fixed capital
investment needed for a project.

Based on the total estimation of cost equipment in Table 2.5, the value of total purchased
equipment cost, CP is 4,365,003 USD. Table 2.6 below shows the calculation for total fixed
capital investment.
Therefore, the profit margin would be:

(Cost of product + Cost of by-product) Cost of raw materials

445,000,831.76 USD 124,346,210.69 USD 320,654,621.07 USD

=
year year year
Table 2.6 Calculation for the Fixed Capital Investment (FCI) (Sinnot, 2005)

Direct Cost

Component Estimation Cost (USD) Total (USD)

Total Purchased CP 4,365,003

Equipment Cost, CP

Equipment Installation 0.40CP 1,746,001.2

(includes installation and
painting)

Piping System Installation 0.70CP 3,055,502.1

Instrumentation and 0.20CP 873,000.6

Control System

Electrical System 0.10CP 436,500.3

Installation

Utilities 0.50CP 2,182,501.5

Storages 0.15CP 654,750.45

Building, Process and 0.15CP 654,750.45

Auxiliary

Land 1,000,000m2 x 246,640,000

246.64 USD/m2

Ancillary Building 0.15CP 654,750.45

Site Development 0.05CP 218,250.15

Total Direct Cost 261,481,010

 Indirect Cost

Component Estimation Cost (USD) Total (USD)

Design and Engineering 0.30CP 1,309,500.9

Contractors Fee 0.05CP 218,250.15

Contingencies Allowance 0.10CP 436,500.3

Total Indirect Cost 1,964,251.35

Fixed Capital Investment Direct Cost + Indirect Cost 263,445,261

(FCI)

Working Capital

Working Capital 0.15FCl 39,516,789.2

Investment

Total Fixed Capital Investment 302,962,051

2.3.3.3 Estimation of Operating Labour Cost

The operating labor cost is the sum of all wages paid to the employees. So, to determine
the operating labor cost, the number of operators needed to run the process unit per shift
has to be calculated. The equation to calculate the number of operators per shift, NOL is as
follows:

NOL = (6.29 + 31.7P2 + 0.23NNP ) 0.5 (Equation 2.1)

Where;

NOL : Number of operator shifts

P : Number of processing steps involving particulate solids
NNP : Number of non-particulate processing steps and includes
compression, heating and cooling, mixing and reaction.

P is the number of processing steps involving the handling of particulate solids. Since the
process does not involve in handling particulate solids, therefore the value of P is equal to
zero. The value of NNP is given by Equation 2.2

NNP = compressors Equipment

towers (Equation 2.2)
reactors
heaters
exchangers

Table 2.7 shows the type and number of equipment needed for operation
Table 2.7 Type and number of equipment

Type of equipment Unit NNP

Absorption column 2 2

Compressor 8 8

Condenser 2 -

Cooler 7 7

Evaporator 1 1

Heater 3 3

Process Vessel 1 1

Pump 1

Reactor 5 5

Separator 3 3

Total NNP 30

Then, substitute the NNP into Equation 2.1

NOL = (6.29 + 31.7(0)2 + 0.23(30)) 0.5 = 3.63

Assumption:

a. A chemical normally operates 24 hours per day. This require:

3 shifts 341 days shifts

= 1023
day year year

b. A single operator works on average of 49 weeks a year. This is due to 3 weeks of

time-off for vacation and sick leave. Therefore,

shifts 5 days 49 weeks shifts

1 = 245
day.operator week year operator.year

c. Numbers of operators needed are:

.
1023 = 4.18 operators
year 245 shifts

Therefore, the total number of operating labor needed is:

= Number of operators needed NOL

= 4.18 operators 3.63
= 15.18 operators
16 operators

About 16 operators are needed to operate with average annual salary of 3320 USD
(www.salaryexpert.com). Therefore, the cost of operating labour, COL can be determined as
follow:

3320
COL = 16 operators year = 53,120 USD/year

2.3.4 Cost of Manufacturing

The total cost of manufacturing is given by the Equation 2.3 below (Turton et. al., 2012):

Total cost of manufacturing (TCOM)

= Direct Manufacturing Costs (DMC) + Fixed Manufacturing Costs (FMC)
+ General Expenses (GE)

TCOM = DMC + FMC + GE (Equation 2.3)

Meanwhile, the cost of manufacturing (COM) is given by Equation 2.4 below:

COM = 0.280FCI + 2.73COL + 1.23(CUT + CWT + CRM ) (Equation 2.4)

Where, COM = Cost of manufacturing

FCI = Fixed capital investment
COL = Cost of labour
CUT = Cost of utilities
CWT = Cost of waste treatment
CRM = Cost of raw material

Table 2.8 Estimation of total cost of manufacturing (TCOM) (Turton et. al., 2012)

Direct Manufacturing Costs (DMC)

 Factor Multiplying Factor Cost (USD)

a. Raw Materials, CRM CRM 124,346,210.69

b. Waste Treatment, CWT 0.09FCI 27,266,584.55

c. Utilities, CUT CUT 2,182,501.5

d. Operating Labor, COL COL 53,120

e. Direct Supervisory and 0.18COL 9,561.6

Clerical Labor

f. Maintenance and 0.06FCI 18,177,723.03

Repairs

g. Operating Supplies 0.009FCI 2,726,658.45

h. Laboratory Charges 0.15COL 7,968

i. Patents and Royalties 0.03COM 8,224,278.202

Total Direct Manufacturing Costs 182,994,606

Fixed Manufacturing Cost (FMC)

 Factor Multiplying Factor Cost (USD)

a. Depreciation 0.1FCI 30,296,205.06

b. Local Taxes and 0.032FCI 9,694,785.61

Insurance

c. Plant Overhead Costs 0.078COL + 0.036FCI 10,910,777.18

Total Fixed Manufacturing Costs 50,901,767.85

General Expenses

Factor Multiplying Factor Cost (USD)

a. Administration Costs 0.177COL + 0.009FCI 2,736,060.695

b. Distribution and Selling 0.11COM 30,155,686.74

Costs

c. Research and 0.05COM 13,707,130.34

Development

Total General Expenses 46,598,877.78

Total Cost of Manufacturing 280,495,251.63

Table 2.9 Cost of manufacturing without depreciation (COMd )

Type of Cost Symbol Value (USD)

 Fixed Capital Investment FCI 302,962,051

Cost of Operating Labor COL 53,120

Cost of Utilities CUT 2,182,502

Cost of Waste Treatment CWT 27,266,585

Cost of Raw Material CRM 124,346,211

Total Cost of Manufacturing (COM) 274,142,606.70

Substitute the values from Table 2.9 into Equation 2.4:

COMd = 0.280FCI + 2.73COL + 1.23(CUT + CWT + CRM )

Thus, COM = 274,142,606.70 USD

2.3.4.1 Total Variable Cost

The total variable cost is given by the Equation 2.5 below:

 Total of variable cost (TVC)
= Cost of Raw Material (CRM ) + Cost of Water Treatment (CWT )
+ Cost of Utilities (CUT ) + Cost of Operating Labor (COL )

= CRM + CWT + CUT + COL (Equation 2.5)

Thus, the total variable cost, TVC:

= CRM + CWT + CUT + COL = 153,848,416.74 USD

2.3.5 Break-Even Analysis

The break-even analysis is to determine when the plant will be able to cover its expenses
and begin to make a profit. This analysis is to find break-event point whereby the total cost
is equal to the total revenue in which there is no gain or loss for the plant. Table 2.9.7 shows
the calculation of break-even analysis.

Table 2.10 Calculation of break-even analysis

Start-up Cost = 0.1FCI 30,296,205.06 USD

Total Investment Cost = Start-up Cost + FCI 333,258,256 USD

Variable cost unit =

CRM +CWT +CUT +COL 153.84 USD
Production rate
year

Estimation of Selling Price = Total cost of product + 445,000,831.76 USD

(or Total Sales) Total cost of by-products

Unit selling price =

Total Sales 445.00 USD
Production rate
year

Total Revenue = Unit selling price 445,000,831.76 USD

Production rate year
 Break Even Point Analysis
600,000,000
500,000,000
Cost (USD)

400,000,000
300,000,000
200,000,000
100,000,000
0

Production of Ammonia (Metric tonnes)

total cost sales

Figure 2.16 Break-Even Analysis

Table 2.11 Summary of Break-Even Analysis

units fixed cost variable cost total cost sales

0 302,962,051 0 302,962,051 0
100000 302,962,051 15384000 318,346,051 44500000
200000 302,962,051 30768000 333,730,051 89000000
300000 302,962,051 46152000 349,114,051 133500000
400000 302,962,051 61536000 364,498,051 178000000
500000 302,962,051 76920000 379,882,051 222500000
600000 302,962,051 92304000 395,266,051 267000000
700000 302,962,051 107688000 410,650,051 311500000
800000 302,962,051 123072000 426,034,051 356000000
900000 302,962,051 138456000 441,418,051 400500000
1000000 302,962,051 153840000 456,802,051 445000000
1100000 302,962,051 169224000 472,186,051 489500000
 2.3.5.1 Break-Even Point using Interpolation Method

A. Break-Even Point:

Fixed Cost
Break-even point =
SalesVariable cost

302,962,051 USD
Break-even point = USD = 104,056 metric tons of propanol
(445.00153.84)
tons

B. Break-Even Sales:

Fixed Cost
Break-even Point =
1(Variable costSales)

302,962,051 USD
Break-even Point =
1(153.84445.00)

Break-even Point = 463,037,892 USD

Therefore, in order for the plant to gain profit, the plant has to produce at least
104,056 metric tons of propanol per year, and the sale has to exceed 463,037,892
USD.
2.3.6 Net Annual Profit

According to Turton et. al. (2012), the basic federal taxation rate is 35 percent for most large
corporation. The taxation rate is important as it will affect the net annual profit of the plant.
The higher the taxation rate, the lower the net annual profit, and vice versa.

Net Annual Profit,

= Total Revenue Total Manufacturing Cost
= (445,000,831.76 182,994,606) USD = 262,006,225.8 USD

Income Tax,
= 35% Anp
= 91,702,179.02 USD

Net Annual Profit after Tax,

= Anp Income Tax
= (262,006,225.8 - 91,702,179.02) USD
= 170,304,046.7 USD
2.4 Conclusion

Based on the research done on market analysis, it can be concluded the demand of
ammonia is relatively high especially in Asia countries. Therefore, the new production of
ammonia is proposed to be built in the Asia continents whereby the market demand is high.