Mass Balance Cost Model

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Chemical reaction models provide a fact based approach to ensure producers' index formulas match their actual costs. When auditing resin pricing, we utilize the mass balance approach to model the exact amount of each feedstock and intermediary needed to create the final product. The cost models also help pinpoint where future pricing pressure is likely to occur and can compare the economics of one material or production process to another.  

• Current Market Outlook- Crude oil reached its lowest point in 13 years during early 2016, and futures markets remain low, which indicates a long term impact on most petrochemicals.
• Contract Pricing Impact- Existing contracts and cost models were likely not structured for such extreme drops in commodity prices.
• Mass Balance Approach- Cost & Capital utilizes the theory of mass balance to develop cost models for a variety of resins and chemical intermediates.
• Pricing Pressure & Value Chain- Pricing pressure analyses help highlight value chain choke points, regional advantages, and variations in producers' processes.
• Price Decreases- Buying organizations should monitor their suppliers' external communications and cost drivers, as suppliers are unlikely to proactively present price decreases. 

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