planning cement terminal operations

7/28/2019 Planning Cement Terminal Operations

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Planning Cement Terminal Operations

The real costs of running a cement terminal and the relation between terminal design and itsoperation are not well known in the cement industry. Phil Caldwell and Ad Ligthart, both ofCement Distribution Consultants (the first a former owner/operator of a large terminal, the

second a terminal design specialist) provide some guidelines in this respect, with a focus on thesituation in the US.

Introduction

Apart from meeting the strategic goals of an import operation, the cement terminal shouldprovide its owners with a maximum Return on Investment. This is obtained by selecting theoptimal combination of terminal concept (i.e. capital cost) and the method to run it (operationalcost). In the United States two types of import terminals prevail. The first one is the flat storageterminal. This type is mostly used by "independent" importers (i.e. importers that do not have acement production facility in the country where they import). The second type of terminal is the

dome terminal. A typical type dome terminal in the U.S.

has a two domeconfiguration with mechanical reclaim systems. Such terminals are mostly used by importers thathave additional cement production facilities in the country where they import.

This article will compare these types of terminal in respect to operational cost, capital cost andReturn on Investment.

Smart terminal design, based on detailed operational experience can achieve a combination oflow capital cost, low operational cost and also a better redundancy than traditional design. Basisfor this is a thorough knowledge of the operational aspects of cement terminals. This article willtry to give some insight in this as well.


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Setting a benchmark

To get an insight in the operational costs of a terminal and to look at methods how to improvethis, it is best to start with a realistic example. Intable 1 the operational costs of a large flatstorage terminal are given. Table 2shows the operational costs associated with the shipunloading

for this terminal. It is important to separate these. The operational costs of a shipunloadingsystem can be almost directly related to the throughput of the terminal. The operational costs ofthe terminal facility itself are depending not only on annual throughput but also on a number offixed costs per year.

The figures provided are representative for the US situation. Operational costs can vary hugelyworld-wide based on labour cost/Union situation, power cost, wharfage cost, lease cost, etc.However, the way how these figures are calculated is explained in this article and with thatoperational costs can be recalculated for other situations.

The costs to run a cement terminal in the US are relatively high. In this example the operational

costs to unload a ton of cement, store it, reclaim it and load it into a bulktruck come up toapproximately $ 7,30 per ton. We have to realise that this example is for a flat storage terminal,which is labour-intensive and requires front-end loaders to reclaim the cement. The terminal alsodoes not have automated truckloading. It is therefore easy to improve the operational cost by aterminal concept that includes automatic reclaim and automated truckloading. The question isdoes it pay?

The flat storage terminal in this example has an all in cost of $ 13.000.000. This includes astorage facility larger than 65.000 tons, a 600 tph ship unloader and a triple truckloading station.The facility is capable to handle over one million tons per year. In comparison, the typical dometerminal design has 2 domes of 30.000 tons each, a similar shipunloader and mechanical

automated reclaim and truckloading equipment. The overall cost of such a typical dome terminalconcept ranges between 18 and 25 million dollars, depending on soil conditions and conveyingdistances.

Does the extra investment required for such a traditional terminal pay off in respect to savings onoperational cost? To a large extend this depends on how we calculate the capital cost. Table 3shows the capital cost calculation based on 600.000 short tons per year and a 10 yeardepreciation. The difference in capital cost between the flat storage and traditional dome terminal
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is $ 700.000 per year or $ 1,16 per ton.

Looking at depreciation itself is not sufficient. Money has a cost, either by paying interest on aloan for the capital cost and/or by a required Return on Investment.Table 4 shows a capital costcalculation for the same terminals based on a loan of 50% of the capital cost (5 year paybackperiod) against 6% interest and a required Return on Investment of 10% on the other half of thecapital cost. The difference in capital cost between the flat storage terminal and the traditionaldome terminal is then between $ 1.240.000 and $ 1.050.000 per year, or between $2,10 and $1,75 per ton.

We now have the starting points to compare operational costs for various types of terminals andlook which is the best combination. We also can look how to reduce operational costs in general.

Terminal operation costs

As table 1 shows the operational costs of the terminal facility (which excludes the shipunloading)consist of several factors.

Wharfage

Wharfage is the agreed cost with the port for using their facilities. Wharfage is based on acost per ton unloaded and put trough the terminal. A minimum throughput, in general,has to be guaranteed. The height of the wharfage is negotiable and will depend on theamount of business that the port will generate with the cement terminal and the quality ofthe facilities that the port has to offer. Given the size of the wharfage cost it might begood to have a look at several (port) sites taking into account the possibilities/limitationsthat each site has in combination with the transportation distance to the cement market.
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The wharfage cost is independent of the type of storage facility or the level ofautomation.

Labour cost

The second largest operation cost factor is labour. For a flat storage facility with semiautomated truckloading, a crew of 6 people on a continuous basis is required. A largecement terminal servicing a densely populated area with corresponding traffic jams has tobe open 24 hours per day, 6 days a week. The cost of this is substantial amounting to $435.000 per year, or (at 600.000 short tons per year) $ 0,73 per short ton.

Of the 6 men required for the flat storage terminal, 3 are involved in the reclaiming of thecement with front-end loaders. For a dome terminal with automated reclaim, this will notbe required. This means that a labour cost saving of $ 217.500 per year or $ 0,36 pershort ton is obtained.

Automated truckloading will reduce the labour with an other man per shift. This means asaving of $ 72.500 per year in labour cost or $ 0,12 per short ton. Given the relatively lowcost of automated systems to position the truckloading bellows, load the trucks and printthe ticket, automation of the truckloading operation is clearly cost effective.

Is it an absolute requirement to keep a terminal open 24 hours per day? The savings tooperate the terminal only two shifts instead of three shifts per day are considerable. Acareful evaluation is required in this respect looking very much at the required servicelevel of the terminal compared to its competition.

Maintenance & parts

Maintenance and parts also represent a substantial sum. These costs are associated withthe upkeep of storage building and other facilities and the maintenance of all conveyingand truckloading equipment.

The maintenance costs of a traditional dome terminal with automated mechanical reclaimare not lower than a flat storage terminal (excluding the front-end loader costs). On thecontrary the mechanical reclaim systems and onward equipment to the truckloading silosrepresent substantially more equipment than the equipment required to convey cementfrom the flat storage reclaim hoppers to the truckloading silos. The maintenance costs forthe traditional dome terminal will be approximately $ 0,05 to $ 0,10 more expensive per

short ton than the flat storage terminal.

Front-end loader costs

Flat storage terminals require front-end loaders to move the cement from the storagefacility into reclaim hoppers. A large flat storage terminal will require two front-endloaders of a size similar to a CAT 980. The annual costs of these front-end loaders isprovided in table 5. They amount to $ 124.532 or $ 0,21 per short ton. Dome terminals
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with automated reclaim systems do not require any front-end loaders and these coststherefore are not applicable to them.

Lease of terminal area

The lease cost of the terminal site is directly related to the area it occupies. A flat storageterminal of over 65.000 tons of storage, including truckloading facilities requires about 3acres. One would expect a dome terminal to occupy less space. However, the typicaldome terminal design with two spherical domes of 30.000 tons each, includingtruckloading station also requires about 3 acres. There is therefore no difference inleasing cost between the two terminal types.

Utility costs

The utility costs of the terminal facility consist largely of the electrical powerconsumption. The power consumption of the terminal facility in turn, is largely

depending on the consumption of the reclaim system. To get the cement from the storagefacility to the truckloadout silos (The power consumption of this shipunloading system isa separate issue, discussed later in this article.).

The overall costs for the front-end loader reclaim have already been addressed. They arenot applicable to the automated mechanical reclaim of the typical dome terminal.

The electrical energy consumption oft the flat storage and conveying system thereforeconsists of the consumed power between reclaim hopper and truckloadout silos. For thetypical dome terminal the electrical energy consumption includes the mechanicalreclaimers plus the conveying from reclaim to truckloading silos. The electrical power

consumption of the typical dome terminal therefore is higher than the flat storageterminal.

The electrical power cost of a cement terminal is build up from a peak demand chargeplus a consumed kWh charge. The peak demand charge is a charge on maximum usedpower. In California for example the peak demand charge is $ 10,-- per kW per month.This means that if the maximum consumed power of the reclaim system is 270 kW, thecorresponding peak demand charge is $ 2.700 per month. The consumed kWh charge inCalifornia is $ 0,05 per kWh. When a reclaim and conveying system would require onaverage 0,8 kWh to get one ton into the truckloading silos the consumed kWh charge is0,8 x $ 0,05 = $ 0,04. Taking both peak demand charge and consumed kWh charge into

account it will be clear that the higher the monthly output of the terminal is, the lower theoverall energy cost per ton.

As electricity charges are lower in off peak hours it might be interesting to focus thereclaim operation on these hours. This is depending on the capacity of the truckloadingsilos of course and for large scale import terminals will not be relevant. A high peakdemand charge, in general, will favour mechanical reclaim and conveying equipment


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over pneumatic, but the actual equipment selection is dependent on more factors such asoverall system cost, maintenance, site restrictions, etc.

Other costs

Each terminal faces general costs such as supplies, communications, general manager,etc., etc. These costs are not specifically connected to the type of terminal and will besimilar for either flat storage or dome terminal.

Which terminal type has the best Return on Investment?

From above operational cost overview we can see that the overall operational cost of the flatstorage terminal at 600.000 short tons per year is $ 2.013.836 or $ 3,36 per short ton.

The typical dome terminal has lower labour costs and does not need front-end loaders. This givesan overall cost saving of $ 332.232 per year or $ 0,57 per short ton.

However, the traditional type dome terminal with mechanical reclaim has higher maintenanceand electrical power costs. These represent approximately $ 60.000 per year or $ 0,10 per shortton. The overall operational costs savings of the dome terminal over the flat storage terminaltherefore are approximately $ 270.000 per year or $ 0,47 per short ton.

When we look at the capital cost difference between the two types of terminals (figure 3 and 4)we can see that the lower operational costs of the traditional dome terminal are not sufficient tocompensate for the higher capital cost.

Even when only taking depreciation costs into account the capital cost per short ton is $ 1,16

higher for the dome terminal than for the flat storage terminal. This is not compensated by thelower operational cost of the typical dome terminal ($ 0,47 per short ton).

When we take a cost of money also into account it is clear that the difference in capital cost perton becomes substantially larger. From a Return on Investment perspective the flat storageterminal is clearly better than the typical dome terminal.

Does this mean that flat storage is a superior type of terminal compared to dome terminals? Notnecessarily. It very much depends on the perspective of the terminal owner in combination withthe actual economic figures. For independent terminal owners and traders the flat storageterminal combines the strategic goal of an independent cement supply with a very good Return

on Investment. Technically the flat storage terminal can handle large throughputs (The largestflat storage terminal CPC in Los Angeles handles over one million tons per year at present)but itseconomy remains good even at low throughputs. Flat storage terminals can easily be adapted orexpanded to meet changing circumstances. Flat storage is not just a short term solutioneither.The oldest flat storage terminal in the USA (in San Diego, now owned by Cemex) is over20 years old. It is not likely to be retired soon.


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Cement producers look at terminals differently. For them the strategic goal is to keep their localplant(s) at full production and importing the balance. For the globally operating cement groupsthese terminals are a method to balance out shortages on one side of the world with excesscapacity in other places. The economic picture of the terminal then becomes part of a muchlarger operation whereby the capital cost is of less importance. The outlook is long-term and

more focussed on operational costs. The terminal is considered more an extension to theircement plants than an independent profit centre.

Smart terminal design to reduce operational and capital costs

The examples given are for existing typical flat storage and dome terminals. Over the past 10years the typical terminal design has not progressed very much. However, at present a number ofdevelopments are taking place that drastically will improve capital and operational costs of bothdome and flat storage terminals.

Dome terminals

The development that is changing the typical dome terminal (with its two domeconfiguration with mechanical reclaim systems) is the fluidising floor. The fluidisingfloor is now being installed in several dome terminals. It allows a much larger freedom indome type selection and dome terminal design.

Cement Distribution Consultants in combination with Dome Technology has developed asingle dome design with the following features:

- Loading and reclaiming from the dome can be done simultaneously.

- Full rotation of cement stock is possible (no dead stock accumulations).

- Complete redundancy of the reclaim system.

The single dome configuration represents a cost saving of several million dollars of 60.000 tonsstorage compared to the present typical two dome terminal configuration.

The operational costs of the single dome configuration are also lower as less equipment isinvolved (maintenance), conveying distances are shorter (energy) and less area is required for theterminal (land leasing cost).


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Figure 3 Flow diagram of a dome terminal with a fluidised floor

Fluidised floors allow for more innovations such as drive-through truckloading (elimination ofoverhead truckloading silos, partial gravity only reclaim). The cost savings of these innovationsare less drastic and more situation dependent. It does allow the use of dome terminals in

situations where only a very small land area is available.

Fluidised floors also allow the use of internal walls in domes. This means that a dome can bedivided in compartments. For terminals were shiploads of different cement suppliers have to bekept separated this is an important feature. The same applies for terminals that receive twodifferent materials or will blend various materials at the terminal. Studies on optimal wallconfigurations have only recently started and the exact cost consequences must still bedetermined but further developments and improvements can be expected.

Flat storage terminals

Also for flat storage terminals a number of new developments are in progress. Thesedevelopments include:

- Internal truckloading storage, eliminating overhead truckloading silos.

- Subdivision of the storage facility allowing cement shipments to be kept separated, etc.

- Blending plants for flat storage terminals.

"No valve" loading pipeline systems

These developments will enhance the capabilities of flat storage terminals and alsoreduce capital costs and operational costs.

Other smart terminal design features.

Smart terminal design focuses on material flows within the terminal. It tries to optimisethese flows reducing operational costs and in most cases capital costs as well.


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- An example for instance is to include the possibility to fill the truckloadingstation directly from the shipunloader. This means that instead of al cement firstbeing stored in the storage facility and then reclaims, about a third of the cementcan be loaded directly into trucks (in this 600.000 short tons per year example) bypassing the storage facility. The savings in operational costs can be in the $

70.000 to $ 100.000 per year range.

This is a very simple solution to realise but relative few terminals include this feature.

Putting the truckloading station on the "waterside" of the terminal tends to have a positive

effect on the overall conveying distances of shipunloading and reclaim systems. Grouping equipment as much as possible together reduces installation cost and also

provides opportunity to create redundancy as equipment can have multiple functions.

Figure 4 Flow diagram of a flat storage terminal

Conclusion

From a viewpoint of Return on Investment the flatstorage terminal in most cases is the mosteconomical terminal concept. It is therefore a much used type of storage facility for independentcement importers. For importers that use the terminal to supplement their production facilitiesthe import terminal is not an independent profit center but part of a much larger operation. Thecapital cost of the terminal is than of less importance and operational costs almost become thesole cost factor.

Recent developments in dome terminal design can provide substantial reductions in capital cost.This makes this type of storage facility also attractive to the independent importer. Further

developments in dome terminal and flatstorage terminal design also make these terminals moresuitable for operational requirements such as keeping cement shipments separated, multiplematerial storage and blending at the terminal.


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planning cement terminal operations

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