Document MM4goKvgzw3j6yDE0LaX9vp69

c.c: Central Files MONSANTO CHEMICAL COMPANY TEXAS CITY, TEXAS May 10, 1961 To: Subject: W. E. Alexander A. W. Andrews, Springfield J. M. Chamberlin L. B. Crosby, Springfield R. K. Dimmitt, Springfield C. T. Massey W. R. Nisbet I. L. O'Brien, St. Louis A. F. Pond/N. G. Bach G. T. Ryan J. Y. Waggoner, Springfield J. C. Wrobleski Report on King-Size YCM Tank Cars Attached is the Pre-Project Board's report on king-size tank cars for shipping vinyl chloride monomer (VCM) from Texas City to Springfield. Changes to the preliminary report were made to conform with the latest long range forecast and with the latest Company leasing policy. Pre-Project Board W. T. Anderson A. D. Bloomberg, Springfield >R. W. Bueker, Springfield L, B . Bullock JohnO. Clay, St. Louis J. N, Flanagan hi H..T. Hale, St. Louis (Advisory) Pre-Project fioa.rd Report an King-Size VCM Tank Cars I. Description of Project This project covers increasing the size of tank cars used for shipping vinyl chloride monomer from Texas City to Springfield. Freight rates have been reduced from $1.06/cwt to 86/cwt for shipments in the larger 20 M gallon tank cars. The project will improve the profit ability of the vinyl chloride product line by reducing the cost of shipping monomer. II. Recommendations 1 . That the fleet of regular size (10 M gallon) tank cars now used to ship VCM from Texas City to Springfield be replaced with the 20 M gallon king-size tank cars. 2. That the king-size tank cars for converting the VCM tank car fleet be obtained by finance lease. (An Appropriation Request will be submitted to the Board of Directors to replace present: supplierleased regular-size (10,000 gallon) tank cars with financed-leased king-size (20,000 gallon) tank cars . The preliminary draft was issued for review May 4, 1961 , by Engineering Planning.) III. Total Cost, for Project and Discussion of Capital New Capital Expenses for Project Total for Project Total $ 73,300 27,700 Texas City $ 37,000 15,000 $101,000 $ 52,000 Springfield $ 36,300 12,700 $ 49,000 The new capital and expenses are needed for changes to the loading and unloading facilities for handling king-size cars at Texas City and Springfield. The total estimated expenditure at Texas City of $52,000 is to lengthen one of the existing weighing scales and for miscellaneous revisions to the loading racks. The total estimated expenditure at Springfield of $49,000 is for a new unloading compressor and for add ing another spur track. The spur track for $1'8, OOCTj.SyJ^^yneeded for the vinyl plant expansion at Springfield. " /''t/E' Six months delivery is required for the king-size tank cars, and the present fleet could be changed over by the first quarter of 1962. The changes to the loading and unloading facilities will be needed the fourth quarter of 1961. (The new capital for loading and unloading facilities will be handled under Divisional approval. Texas City and Springfield will request separately for expenditures.) n m rnA^ A o r\ A Page 2. IV. Annual Sa.vin.gs .Based on 1964 operating level, arm.ua'! savings for using finance d~ leased king-size cars over present supplier-leased regular-size cars are $225,000. A breakdown of the cost is shown in Section VIII. and summarized below: Regular Size King-Size. Before-Tax (142) Cars (74) Ca.rs Savings Transportation Cost (Including Lease Charges) Loading a.nd Unloading Costs $.1,312,000 214, 000 $3,152,000 $ 160,000 149,000 65,000 $1,526,000 $1,301,000 $ 225,000 V. Reason for Recommendations A 1. With the use of king-size tank cars, the ^rpfitabilitv of the VCM product line would be improved. . ^ 2. Finance leasing of the king-size tank cars conforms with the Com pany's leasing policy approved by the Board of Directors March 23, 1961. The Treasurer's office and Traffic Department have recom mended finance leasing in preference to supplier lease or to purchase. The Treasurer 's office developed the following annual acquisition cost for leasing and. purchasing ($1,660,000 for 74 cars): t\yy 1 Supplier Lease (10-year term)* Finance Lease (20-year term) Purchase (20-year depreciation) $ 219,000 174,000 159,000 Ten years is th.e longest term available for Supplier Lease. VI. Tank Car Requirements Based on VCM Forecast Shipments from Texas City t.o Springfield ________ _________________ ___ _________ ______ _ * 1962 1963 1964 1965 VCM M Ibs/yr 11.5 125 136 146' Tank Cars Needed Regular Size King Size 120 62 131 68 142 74 153 79 The number of tank cars is based on a round-trip time of 27 days plus 11% for delays, repairs, and inspections. T> OT Tf\f\**i VII. Co.Tnpa.ri.son of Capital and Expenses (At 1964 Operating Rate) Regular Car King-Size Cars King-Size Ca.rs Supplier Lease Supplier Lease Purchase or Finance Lease New Capital Texas City Springfield For Tank Cars $0 18,000 0 $ 37,000 36,300 0 $ 37,000 36,300 1,660,000 Total $ 18,000 $ 73,300 $ 1,733,300 Retired Capital Texas City Springfield 0 1,330 3,600 1,330 3,600 1,330 Dismantling Expense Texas City Springfield 0 1,200 3, 100 1,200 3,100 1,200 Repair Expense Texas City Springfield 0, 10,900 10,900 0 10,000 O ooo ooo Ooo r--* Sta rt - up Expen s e Texas City Springfield 0 1,500 1,500 .1,500 DCTmm/no/; Page 4. VIII. Annual Operating Cost (At. 1964 Operating Rate) Regular Cars Supplier Lease (Present. Ope ration) ________ King-Size Cars______ _____________ Supplier Lease Finance Lease Purchase I0~Year Term 20-Year Term 20-Year Dep. Freight. $ 1,467,000 Mileage Allowance - 371,000 Car Cost# 216, 000 Loading 75,000 Analysis 27,000 Weighing 6,000 Maintenance of. Car Valves 86,000 Unloading 20,000 Depreciation Texas City Springfield - - $ 1,170,000 $ 1,170,000 $ 1,170,000 - 192,000 219,000 60,000 15,000 3,000 - 192,000 174,000 60,000 15,000 3,000 - 192,000 159,000 60,000 15,000 3,000 44,000 18,000 44,000 18,000 44,000 18,000 4, 600 4,400 4, 600 4,400 4, 600 4,400 Totals $ 1 ,526,000 $ 1,346,000 $ 1,301,000 $ 1,286*, 000 * King-size tank car costs were developed by the Treasurer's office. IX . 1 Project- Scope Survey Objective The objective of this project is to take advantage of a recent lower freight rate for transporting VC.M from Texas City to Springfield in larger kingsize tank cars. The tentative target date for converting the first portion of the fleet to kingsize cars is January If 1962. Conversion of additional portions of the fleet will be made as the need requires and the delivery permits. A firm date can be set only after the project; is approved and delivery dates for the king-size cars are quoted by the suppliers. r> rT A *5 (\n Page 5 . XX. Project, Scope Survey (Continued) Cap a.city King - size tank cars for VCM service have a capacity ilmpst:'double the existing standard size cars. The king-size car has a VCM capacity eventual expansion to 180 M lbs/yr, since this i^ the most probable capacity of the monomer plant for the long range, forecast. Any new facilities for unloading at. Springfield will also be sized for eventual expansion, according to the long range forecast for polymer. Flexibility of Operation Any changes to the existing car handling facilities at Texas City and. Springfield for king-size tank cars will in no way prevent the handling also of standard tank cars. The replacement of existing standard cars will be made without unw usua.1 interference in shipping schedules. A sufficient number of standard cars for shipments to other customers will also remain in the VCM tank car fleet. Storage Facilities No new storage tanks are required at Texas City or at Springfield. Quality Level of Construction The king-size tank cars will be constructed in accordance with the latest ICC regulations for VCM tank cars. Attempts will be made to change the ICC regulations where such action can be justified. Utilities No additions or revisions to utilities a,re required. nmAnAO Page 6, IX. Project Scope Survey (Continued) Safety Problems No unusual safety problems are anticipated. Material Handling No major changes will be required in the existing procedures for load ing, sampling, weighing, or unloading of VCM tank cars. Additions to the loading racks will provide sufficient loading stations for the longer king-size cars. Existing loading and unloading stations that are revised to handle king-size cars will also handle the standard cars. Railroads The railroa.d trackage within the plant property at Texas City and Springfield will be revised, where needed, to handle the king-size tank cars . ! Weighing Scale One of the two existing tank car scales at Texas City will be modified, to accurately weigh king-size cars . T?svnn?4't99