Chemicals and specialty chemicals
Chemical margins measured batch by batch, not averaged by the tonne
A chemical business earns its margin in yields, raw-material timing and the channel it sells through, and reports it as a single number per tonne. We cost each product from the batches that made it, track raw-material movements against selling prices, and measure each channel after what it takes back.
Cost by the batch, not the tonne.
Batch yield → product cost → channel margin
At a glance
Product cost is a plant average per tonne, so low-yield products are priced as if they ran as well as the rest.
Costing and price
Contribution by product, customer and channel.
7 trades
Each trade runs on different numbers, so each has its own page
Open the one that matches your business. Each sets out how the money moves, where it usually breaks down and what we would do first.
The economics
Why the numbers are harder here
Chemical production converts a few volatile raw materials, many of them linked to crude oil or imported, into products whose yields, solvent losses and by-products vary from batch to batch. The same plant often runs many products through shared equipment, so the cost of any one product depends on how long it held that equipment and how well each batch ran. A plant-wide cost per tonne hides all of it.
Selling is just as varied. Specialty and export products go to a few qualified customers on contract prices with index-linked revisions; paints, adhesives and agrochemicals go through dealers on schemes, credit and returns; gases go out in cylinders that remain company assets at customer sites. Each route has its own working-capital pattern, and most companies run two or three of them at once.
The problem
Where visibility breaks down
- Product cost is a plant average per tonne, so low-yield products are priced as if they ran as well as the rest.
- Raw-material price increases reach selling prices a quarter or more late, and the lag is never measured.
- Solvent recovered and solvent lost are netted in one line, so no product carries the solvent it consumed.
- Dealer schemes, returns and season-end credit are settled long after the sale is booked.
- Assets at third-party sites — cylinders, tinting machines, tanks — are on the register but not verified.
Where we concentrate
How we focus the engagement
Costing and price
- Batch or campaign costing built from actual yield, solvent, utilities and equipment time.
- By-products and co-products valued on a stated, consistent basis.
- Raw-material cost tracked monthly against the cost embedded in current prices.
- Contract price revisions claimed on schedule from the indices they reference.
- Contribution by product and customer after freight, packing and credit cost.
Channel, stock and assets
- Dealer and distributor margin measured after schemes, returns and credit.
- Season and channel stock aged against shelf life, with a stated provisioning basis.
- Assets at customer and dealer sites registered, verified and charged to the business they support.
- Hazardous and bonded stock reconciled physical-to-book on a fixed cycle.
- Export orders costed to the rupees realised, with duty and obligation records kept current.
Reporting
Reports worth receiving
- Contribution by product, customer and channel.
- Yield and solvent loss against standard, by product.
- Raw-material cost against price-list cost, monthly.
- Dealer receivables and returns, aged by season.
- Third-party-site assets verified against the register.
Common questions
Questions we hear in this sector
Our ERP already calculates product cost. Why would we need help?
Because most ERPs compute cost from standards and bulk issues. If yield is only recorded at the end, solvent is pooled and equipment time isn't booked, the system gives a precise figure built on averages. The work is in getting the batch record into the cost.
We sell through dealers and to industrial customers. Can you separate them?
Yes. Each channel is reported with its own schemes, packing, freight and credit cost, so you can see which one is carrying the other. It's often not the one you'd expect.
Do you handle pollution-control or hazardous-chemical licences?
No. Consents, licences and approvals are your own responsibility. We keep the stock, waste and asset records those approvals depend on, and coordinate any certification a licensed professional must sign.
Pollution-control consents, hazardous-waste authorisations, PESO licences, product registrations and DGFT or customs filings are the client's own responsibility. Cost audits, statutory audits and prescribed certifications are signed by independently engaged licensed professionals. 5th Quadrant prepares the records, reconciliations and data behind them. Full detail is on our Professional Scope page.
Explore further