Blog

A major breakthrough has been made in the process for manufacturing silicon. Not only does the new method use less energy (with potential cost savings of 90%), but it has a carbon footprint of almost zero and so has minimal environmental impact.

Since the 1930’s chemists have faced a ‘great challenge’ in how to manufacture silicon with less energy. Whilst the element silicon is readily available in all manner of organic substances, up till now scientists had been unable to efficiently uncouple the silicon from its tight bond with oxygen.

That is until Richard Laine, a professor of materials science and engineering at the University of Michigan discovered how it was possible. He is focusing his further studies on the readily available agrocultural waste of rice hull ash; the burnt remains of the shell that surrounds a grain of rice. As the University noted, “Laine found two easy and inexpensive ways to break that bond: ethylene glycol, or antifreeze, and ethanol, or grain alcohol. The antifreeze combined with a small amount of sodium hydroxide weakens the chemical bonds between the silica and rice hull ash at the beginning of the process, dissolving the silica into a liquid solution. The solution is then heated to 390 degrees Celsius, forming a polymer of silica and antifreeze.

Grain alcohol is then added at the end of the process. It’s chemically similar to antifreeze, so it easily swaps in to replace the antifreeze, which is then recycled. The liquid silica can then be distilled out of this second solution and used to make a high-purity precipitated silica product for industrial use.”

One of the most significant aspects of this discovery is that the basic raw material can be taken from any number of agricultural waste products, as silicon is abundant in most of them, but for now Laine plans to focus on processing rice hulls. Currently, thousands of tons of hulls produced every day are burnt for fuel, however many more thousands of tons are simply dumped as waste. This discovery may make this waste useable.

As a result of this research, Laine was awarded the 2015 Michigan Green Chemistry Governor’s Award and plans to turn his idea into a profitable enterprise. As Laine said whilst collecting his award, “I think eventually, we’ll be producing high-purity silica and other silicon compounds right next to the rice fields. By processing the rice husks we’ll be able to produce high-grade silica in a single location with little or no carbon footprint. It’s really very exciting.”

Questions still remain about the effectiveness of the up scaling and the quality of the mass product that will be produced, but as Laine explains, “If scale up is successful, the process will change the way high purity alkoxysilanes and precipitated and fumed silica are produced worldwide, because there are multiple sources of biogenic silicas everywhere.”

If successful, then clearly Laine’s company will benefit, but who else will? Would you be happy to trade or use a silicon made from rice hulls?

For many, the pricing of chemical products may seem to be a short-term policy, designed to maximize profits in the present (or near future) by valuing a product for what the market will pay. However, there is much to be said for taking a longer term view on pricing, and seeing the value you and your clients assign to your products as part of your overall business strategy.

This is a point made by business consultants Walter L. Baker, Michael V. Marn and Craig C. Zawada from McKinsey, when they discussed the importance of product pricing in their report, ‘Do you have a long term price strategy’. They observed how , “In the late 1990s, the world’s three major independent producers of hard-disk drives invested about $6.5 billion in research and development in the course of just four years. During the next decade, the bytes that can be stored per unit of a drive’s surface area increased a thousand-fold—while the price per unit of that surface area dropped 70 percent. The three companies created enormous value for customers. Yet their failure to price products correctly throughout this period of significant innovation contributed to net losses totalling almost $800 million.”

Clearly long-term price planning is crucial to success, and should be considered carefully. Joanne Smith, former Corporate Head of Marketing, Pricing and Customer loyalty at DuPont, and currently president of Price to Profits Consulting believes that traders should ask many questions about the market before deciding to act. She notes that it is often tempting to change prices based on short-term fluctuations in demand or feedstock supply, but asks if it is possible for chemical companies to, “…  make pricing decisions in a way that optimizes their profits while maintaining long-term customer loyalty? How do you establish a systematic approach to manage these cyclical and volatile market conditions?”

In her book, ‘The Pricing and Profit Playbook’ she continues to outline key decision factors when considering adjusting chemical prices. Noting that, “There are many key factors that must be taken into account to decide the best course of action. These include:

• What have been my price increase practices and messages to the industry in the past? Have all my customers fully accepted my past price increases?
• Do I have any fair rationale for holding, or even increasing prices, at this time? Do my competitors? Logic and a feeling for the industry trend is an invaluable resource.”

Smith’s last point is also crucial in long-term pricing policy; the ability to understand your products and to ‘feel the industry trend’. Whilst experience is certainly invaluable in this area, product knowledge is also a major advantage.

This is especially true when considering the supply of raw materials. Jeff Zamek from the College of Ceramics, in New York State, considers the problems of a long-term supply ending in his book ‘Pottery Production Practice’. In it he notes that, “Awareness of the current raw material market is essential. While every one of the hundreds of materials do not have to be monitored, it is advisable to keep in touch with your suppliers about the raw materials used in your formulas. Do not assume that the material is still being produced [or will be long term] just because your stocks are full.”

This is another good reason to take pricing as a long-term, planning decision, as supplies and prices of your feedstocks increase and decrease over time. Being aware of supply trends can make all the difference to your bottom line.

Being prepared for cost increases, will allow you to warn your customers of possible price adjustments well ahead of time. Whilst cost reductions can also be foreseen, resulting in the difficult decision of whether or not to pass the reduction on. A pricing challenge summed up by Smith when she notes, “Chemical companies are torn between enjoying high profits [by keeping prices high] and reacting to the customers’ requests for price relief. What’s a business to do?”

One of the great untapped sources of information in your industry are your customers. As a famous quote by Bill Gates doing the rounds on social media states, “Your most unhappy customers are your greatest source of learning.” Finding out if price is a factor in your customer’s discontent can form a base to your pricing strategy.

This is a philosophy supported by Becky Sheetz-Runkle, author of ‘Sun Tzu for Women: The Art of War for Winning in Business’. She recommends the following good business practice, “Whenever you win a new customer, find out who they used before, and why they switched to you (i.e. the reason they were dissatisfied with their previous supplier). Do the same when you lose a customer—identify what they preferred about your competitor.”

If price was an issue, it is important to learn from the experience and study the market. One useful tool for this is use online sales sites to compare prices and gauge what the ‘going rate is’. Websites such as Alibaba will sell almost anything (including industrial chemicals), whilst other companies, like Spotchemi offer an E-commerce hub designed specifically to serve the chemical industry. Whilst this article must declare that it is paid for in part by Spotchemi, this does not deny the fact that such a service allows price tracking of wholesale chemical prices from actual offers to buy and sell in real time.

If you do not want to track prices yourself, then it may be worth using other industry specialist services. As Sheetz-Runkle says, “I recommend routinely tracking what the industry analyst firms, like Gartner, are reporting about your industry, as well as trade associations and advocacy groups. These organizations are doing research and studies that evaluate the people who are and should be your competitors. What are they telling you about where the industry is trending? Where are the unmet market needs that you can fill? How are prices trending”

Another strategy to find out more about your competitors is to hire employees from competing firms—especially those from the sales department. As Sheetz-Runkle suggests, “No one knows more about the inside of those organizations than the employees,” she says. “Find out all that you can about how these companies operate, and more importantly, what’s on the horizon for them? Where are they taking their business? What markets are they venturing into? How are they leveraging innovation to cut costs and advance productivity? Where is the highest level of dissatisfaction with their products or services? No one has more and better intelligence when it comes to sales than disgruntled sales people.”

If hiring new staff is not a possibility then a much more cost effective way to gain information on your customers’ prices and actions is to simply call them up and play the part of a prospective customer. According to Jordan Harbinger, the co-founder of ‘The Art of Charm’, “You’d be surprised how often companies will tell you everything you’d like to learn over the phone, especially if the question is phrased in a context that makes sense. For example, if you want to know how many people work there, you can say: ‘I’m looking for individualized attention, and my fear is that your organization is too large, and I’ll get lost in the shuffle. How many coaches do you have on staff? Oh, wow, that’s quite a few. How much support staff do you need for a team that size?’ This approach has served me very well.”

Tips like these can be very useful to finding out what your competitors are doing and how they are pricing their products. Do you know of any other ways to use your competitors to help you price chemical products?