The post Second World War period gave North America a tremendous advantage to invest and earn good profits in the chemical industry. Shinnar and Avidan' have observed that "this head start combined with high growth rates allowed North American industry to become used to higher rates of return on capital investment compared to other countries". This tendency to look for higher rates of return in North America has continued due to higher real interest rates (particularly in Canada), compared to Europe and japan.
In the meantime the industries in Germany, japan and some Pacific countries were rebuilt and apparently accepted a lower rate of return on their investments. They were also able to combine the advantages of free competition and market forces with government planning in the form of cheaper capital costs due to lower real interestrates) along with other advantages. The North American chemical industry reacted to this competition using economies of scale by building larger single train plants to design limits. However, many plants reached the size where scale is no longer important. As Landau' pointed out in his analysis of the past and future of the chemical process industry, flexibility is more important than capacity when required to adjust to economic cycles - smaller plants operating at full capacity can be more profitable over their life cycle. Large scale projects are increasingly being looked upon with disfavour. Large-scale projects can take so tong that obsolescence may set in before the project is complete. The nuclear industry, which has a substantial chemical engineering content, has been particularly handicapped by projects taking too long to implement.
Due to increased global competition Shinnar and Avidan show a reduction from an average of about 8% return on investment in 1960 in North America to less than half that by the mid 1980s. This resulted in considerable effort by the chemical industry to reduce production costs and capital costs of new plants. Bodman(3) notes it was lawyers and MBAS who assumed leadership positions in the 1970s and 1980s, rather than the scientists and engineers who create new industries. Production costs were reduced mainly by reducing manpower. Capital costs per unit of product were reduced by going to larger single process trains with the inherent hidden cost penalties due to inflexibility. Also, there have been some not too successful attempts at low cost construction using minimum equipment and building standards. in our experience the best control of capital costs comes from a well defined project which has a well defined process and high quality drawings and specifications.
