Document 0qqJEDGbJ9mEKmNy6e8kqjNbO

MONSANTO CHEMI/f L COMPANY rnm location , Texas City TO FILE Inttr-Offtce Correspondence c < W. E. 'Alexander H.H. Bible J.M. Chamberlin Hi Ti Clark C.P. Fullerton O. C. J ones R.W. Kienker R.H. Kittner R.E. Lenz W.R. Nisbet / 4-R B Stobangh, ' R. C. Tallman B. L. Williams On Thursday, .February 7, Messrs Reese, Chamberlin, Nisbet, Williams, O. C. Jones, Alexander and Kienker met to review the vinyl chloride monomer program from the standpoint of divisional and functional objectives in the areas of capacity, quality, and cost. Presented below are the conclusions arising from this discussion: 1. A minimum level of 150 M*lbs. /yr. of VCM must be obtained to achieve acceptable manufacturing costs. 2. Captive outlets are available for a maximum of 120 Mlbs. /yr. 3. Additional outlets for an additional 30 Mlbs. /yr. of VCM are to be obtained by Marketing - preferably in one or two places and via commercial arrangements which_will insure continuity of demand. 4. Present plant facilities will have the nominal capacity of 170 Mlbs./yr. when present programs on oxidative chlorination and plant modifica tions are brought to a successful conclusion. 5. No further work should be done on expanded VCM capacity or alternate VCM processes except as this work relates to reduced manu facturing costs and is applicable within the framework of our existing capital commitments. 6. By the end of 1963 the present programs on acetylene purification will lead to further improvement in VCM quality - which is generally competitive at present. However, research will review and recom mend programs on-methyl and ethyl chloride removal. 7. Our quality "level" tends to vary because of our "system" of three processes (acetylene, ethylene,.iand oxidative), Future effort will be directed toward tightening of quality variations within each of the processes as the only way to reduce variations within the "blend". CBY 1023696 v RSV0031829 VCM PROGRAM - 2- February 12, 1963 8, Approval is given to Marketing to use our dilatometer test for poly rate as a sales tool at selected customers. C. P. Fullerton should review this with Plastics Division (C. L. Knowles) before releasing the infornhation. * 9. Raw materials at 4. 0/lb. out of 6. 6/lb. in 1962 is the major manu facturing cost factor for VCM. Our lack of a "chlorine economy" hurts us vis-a-vis Dow and Ethyl. 10. Research will undertake work aimed at a process based on by-product HC1, a "cheap" available carbon source, and flexibility for operation in "package plants" at locations where the company has excess HC1. . DETAILS A, Industry Po'sition The projected industry position in 1^63 for VCM is as follows: Captive and committed production Merchant sales Idle plant Total Industry Capacity 1.050.000.000 lbs. - 58% 350.000.000 lbs. - 20% 400.000.000 lbs. - 22% 1.800.000.000 lbs. 100% The above figures include the Tenneco Plant and highlight the low percentage of non-captive business and the high percentage of idle capacity in relation to "free" merchant business. The VCM industry is, and will continue to be, one characterized by a dominant "captive" market. The captive markets may be actual organizational integrations (e. g., Carbide, Monsanto, Goodrich, etc.) or long-term financial and commercial arrangements (e.g., Tenneco - Cary, Ethyl - Firestone, Dow - Firestone, etc.). The percentage of the market tied up via integrations and'hrrange- ments" is expected to increase. CBY 1023697 B. Monsanto Position The anticipated 1963 position of Monsanto is as follows: Budget Minimum Possible Plastics Division Monsanto-Mexicana / 120 M" lb. .5 Mlb. 115 Mlb. 5 Mlb. *V * s. 120 Mlb. 5 Mlb. RSV0031830 0 VCM PROGRAM -3- February 12, 1963 Domestic Sales Escambia \ Great American ( Atlantic Refing Total Budget Minimum Possible 8 M lb 0 133 Mlb. 120 M lb 0 8 M lb. 133 Mlb Long-range it appears that the maximum demand of Plastics Division is 110-120 Mlb6./yr. of VCM, Present Plastics Division planning makes no provision for added investment in PVC polymerization capacity - rather the emphasis is on upgrading profitability through product modification at existing polymer capacity. In actuality, the Plastics. Division has not taken over 100 Mlbs./yr. of VCM in any year, although present process improvement programs should increase their ''take" - off-set by the extent that product modification is- achieved by adding co-monomers to the polymerization formula and replacing VCM. Long-range, also, it is assumed that the Mohsanto-Mexicana business : will be lost because of trade barriers. Also, the MOCAN business does not seem available because of tariff barriers. In view of the above, the total captive or committed business which we have available is 120 Mlbs. /yr. maximum. Although the published price of VCM is 8.0^/lb. it is probable that a large segment of the-material in inter-company commerce is moving directly, or indirectly, under this price. Prices as low as 7.0^/lb. are rumored with one unsubstantiated report of'6.8/lb. In contrast to these sales prices, our Cost of Goods at 136 Mlbs/yr. ' rate was 6. 6/lb. in 1962. It is true that out-of-balance operation contributed to the cost, but basically our manufacturing cost position is not in good shape for a depressed market price. ) CBY 1023698 RSV0031831 1963 110 M_lbs./yr. 130 Mlbs. /yr. 150 M'lbs. /yr. 170 Mlbs. /yr. 0.6/lb. 0.3^/lb. 0.l/lb. -- Beyond 170 Mlbs./yr., the manufacturing cost decreases become minimal as a function of volume. ; From the above it was concluded that we should strive for an operating level of 150 Mlbs. /yr. in order to reduce our volume related cost to a practical minimum. t Since our internal needs are 120 Mlbs./yr., Marketing is to pursue an additional 30 Mlbs./yr. of committed business. This business will have to be "bought" and.should be pursued in one or two outlets for minimum disturbance to the total market picture. C. Plant Capacity ' The VCM plant currently is rated at 150 Mlbs. /yr. However, the various segments of the plant have been run independently at rates which would indicate that 170 Mlbs./yr. could be obtained - although not necessarily at minimum cost. In view of this potential capability and the problems facing us on product disposal, technical effort should ceatfe on increasing capacity beyond 170 Mlbs./yr. Technical . effort may proceed on eliminating proven bottlenecks which stand in ' the way of reaching 170 M lbs, /yr; however, this work should take second priority to cost or quality related projects. D. Product Quality Our average product quality is competitive and by late '63 we hope to be as good, or better than the best on all factors which have been cited as undesirable components. See the attached charts. At the present our C3 - C4 content is undesirably high because of natural gas purging of our acetylene purification beds. However, later this year we plan to switch to a nitrogen purge. We have had little or no effort on ethyl and methyl chloride removal since these -ft cbY 1023699 RSV0031832 VCM PROGRAM N & - 5 February 12, 1963 were not believed of significance. However, there is increasing interest in having these contaminants reduced. Research will review the problem and initiate appropriate action. We do suffer in comparison with competition because of variation ^ in quality which our monomer exhibits. This variation arises from our system of blending two processes, and it is anticipated that the vari ability will increase as we bring oxidative chlorination on stream as a third process. With the achieving of our gross product quality goals in 1963, Research will re-orient their process control efforts toward the individual process routes in order to raise purity levels in each process and thus "squeeze" the purity level of the system higher with less variability. C. P. Fullerton had requested permission to release information on our dilatometer test for poly-rate to selected customers to use as a sales "tool". It was agreed that this should be done after checking with Plastics Division to insure that their interests are not jeopardized. C. P. Fullerton will handle with Plastics (presumably C. L. Knowles). E. Manufacturing Cost In addition to volume effects (see Section B), the major cost factors in - VCM manufacture include: Raw materials Maintenance Utilities Ethyl variances, Exc. cost 4.0/lb. 0.75/lb.(0. 50/lb. - 1963 goal) 0.25^/lb. 0.70^/lb. The manufacturing goals in 1963 call for a Cost of Goods of 6. 675^/lb. @ 133 Mlb. (including a 0.2/lb. increase associated with re-allocation of the Heyden fee). Attainment of this goal will call for successful exploitation of a wide variety of process and equipment developments including successful operation of oxidative chlorination and acetylene purification. Success in these process and equipment areas will essentially exhaust the known areas of process improve- ment for the existing process. I Other activities which will continue are the graded catalyst study by Engineering and Technical Service and a preparation of an economic model by Manufacturing to optimize the process "system". CBY 1023700 / RSV0031833 n VCM PROGRAM - 6- ` o February 12, 1963 The most challenging area on cost reduction continues to be the area of raw materials. Our failure to have a basic position in chlorine leaveB us at a basic disadvantage with many producers. Despite repeated studies we have not been able to find a sound approach to a basic position in chlorine. However, since the cornpan y and its associates (e.g., Mobay) have an excess HC1 position, tie-in to this HC1 position should represent an improvement in the overall company cost structure. The oxidative chlorination technique offers potential in this area although'it is limited in its present form because of its dependence on ethylene. Tha following target was developed for Research for alternative process work: Produce VCM or an intermediate utilizing: S* 1. By-product HC1. 2. Cheap "carbon" - i.e., ethane or methane. 3. A process subject to a package plant which could be located at locations having excess HC1. R, B. Stobaugh has been asked to survey availability of excess HC1 at various company locations. ^ Alternate process work which is not aimed at the above objective or at a major cost reduction in the present plant should not be pursued. The status of the VCM tars being disposed of at no cost through Hard-Lowe was reviewed. It was agreed that this disposal route still is attractive for Monsanto since it relieves us of a disposal cost and the recovery of components is a break-even operation even for Hard-Lowe. V F. E. Reese CM l237l RSV0031834 TABLE I SPECIFICATION TEST ANALYSES OF COMPETITORS VCM BY MONSANTO TEXAS CITY LABORATORY November 1962 Component Appearance Aldehydes, ppm Acetylene, ppm Acidity, ppm SOa, ppm Iron, ppm Non-Vol. % Inhibitor, ppm Polyrate, % Water Allied Ethyl Goodyear Dow Sl.Cloudy <1 C&C <1 C&C <1 Clear SI. Brown 3-0/3.2 <1 < 1 <1 < 1 <1 <1 <1 <1 <5 0.1 <5 0.1 <5 0.1 <5 1/>1 < 0.05 <0.1 < 0.05 < 0.1 <0.05 < 0.1 < 0.05 < o.l 6.0/6.0 6.2/6.3 Trace-Free No Free 6.4/6.5 NO Free 5.4/5.8 No Free Monsanto C&C <1 <1 <0.1 <5 0.1 < 0.05 < 0.1 6.2 No Free No Samples from Goodrich or Carbide | i i 2-4-63 i CBY 1023702 RSV0031835 TABLE II GLPO ANALYSES OF COMPETITOR SAMPLES QF vqk Monsanto T- C. Lab Unless Otherwise Noted - ppm (Mol) November 1962 Monsanto Allied Dow Ethyl (Typical) Ca's Tr, Propane Propylene 17 <0.1 Acetylene <0.1 N Butane 22 i Butane Butenes L 14 <0.1 Allene M-Acetylene 1.31 Tr. MVA 1 0.42 Butadiene 1.0 Methyl Chloride 22 Ethyl Chloride 0..64 2 Chloropropene <0.1 1-1 Dichloroethylene <0.1 1-2 Dichloroethylene < 0.1 1-1 Dichloroethane < 0,1 1-2 Dichloroethane < 0.1 2.6 <0.1 <0.1 <0.1 <0.1 <0.1 2.8 <0.1 Tr, < 0.1 < 0.1 <0.1 <0.1 ' <0.1 < 0.1 < 0.1 < 0.1 < 0.1 < 0.1 <0.1 < 0.1 < 0.1 <0.1 < 0-1 < 0.1 < 0.1 <0.1 0.75 0.3 0.7 Tr. 6 < 0.1 12.4 < 0.1 < 0.1 < 0.1 < 0.1 < 0.1 < 0.1 117 < 0.1 < 0.1 < 0.1 < 0.1 < 0.1 <0.1 5.8 <0.1 < 0.1 <0.1 < 0.1 < 0.1 < 0.1 Goodyear Goodrich (Spfld. Lab) <0.1 1 < 0.1 <0.1 0.5 0.6 < 0.1 4 <0.1 0.2 - <0.1 < 0.1 1.6 - 2.6 - 1.4 - 2.0 7-5 O.g 1.5 70 .. <0.1 < 0.1 0.5-27 _ < 0.1 _ < 0.1 _ < 0.1 - Cfly IO23?03 Goodrich Carbide (Goodrich (Carbid Lab) Lab) Tr. ' 0.8 _ Tr. 0.6 _ 10 4 _ . _ . 20 . _ 2.3 12 50 200 _ RSV0031836 w TABLE III PUBLISHED SPECIFICATIONS - VCM Appearance Aldehydes, ppm. Max. Acetylene, ppm. Max. Acidity, ppm, Max. S0a, ppm. Max. Iron, ppm. Max. Non Vol., <f, Max. Inhibitor, ppm ' Polyrate, f Water, ppm Color APHA Dorell Weather AT Rel. Viscosity, Min. Peroside, ppm. Max. Allied 5 2 5 2* 0.5 0.01 As Req. 90(5Hr.) 250 0.2 2.80 Ethyl C&C 5 2 10 6* , 0.5 0.05 0-500 80 200 0.5 2.75 .06 Carbide Clear 4 2 5 0.4 - 50-150 2 Max. 300 20 - Dow . 5 10 10 20* . 0.5 0.10 25-100 80(4cfc) 100 _ Monsanto C& C 5 2 10 5 0.5 0.10 40-100 B0(7Hr.) No Free _ . -. * speclfy thls Property expressed as sulfur thus. Allied is l ppm S, Ethyl is 3 and Dow is 10. 1 Typical Performance Monsanto e&c <1 <1 <0.1 3 <5 0.1 < 0.05 < 0.1 No Free O N. D. 2-4-63 CBY 1023704 RSV0031837