Chemical engineering plant cost index
The Chemical Engineering Plant Cost Index (CEPCI) fell slightly in June 2024 compared to the previous month, with its value hovering around 800 since the beginning of the year. The decline was due to decreases in four subindices: Equipment, Construction Labor, Buildings, and Engineering & Supervision. In contrast, the Current Business Indicators
show a small decrease in CPI output index but an increase in CPI operating rate for June 2024. The CEPCI value is now 0.56% lower than its corresponding value from June 2023. Chemical plant cost indexes are used to update capital costs required to build a chemical plant, taking into account inflation and deflation changes. These dimensionless
numbers are helpful for long-range planning, budgeting, and managing contract costs. A cost index is calculated as the ratio of actual prices in a time period compared to a base price, multiplied by 100. Raw materials, products, and energy prices change at different rates, making plant construction cost indexes composite and able to compare generic
chemical plants' capital costs. The available indexes are compiled differently, but they encompass specific conditions and items. Both the CE and IC indexes use BLS data for pricing information. To update an item's cost from one period to another, you multiply the previous cost by the ratio of the new index to the old index. Cost indexes allow for fairly
accurate estimates of cost escalation if the difference between periods is less than 10 years. However, differences between actual and predicted prices tend to grow over time, surpassing typical errors in budget-level estimates. The majority of cost indexes are delayed due to data collection and compilation time, but some exceptions exist. The ENR
construction index and IC index provide relatively current values. Process industry main indexes include the Chemical Engineering Index (CE), Marshall and Swift Cost Index (M&S), Intratec Chemical Plant Construction Index (IC), and Nelson-Farrar Indexes (NF). CE uses a base period of 1957-1959 and lags by about 3 months. M&S was established
in 1926 with a value of 100, published monthly until April 2012. IC is developed by Intratec and presents a smaller delay between release date and index date, plus a 12-month forecast. NF indexes were established in 1946 with a value of 100 and are suitable for petroleum or petrochemical business, published once a month in the Oil and Gas Journal.
Cost indexes are widely used to evaluate equipment and plant costs in the chemical and process industries. However, when index data is not available for a particular location, a new term called the Location Factor (LF) must be incorporated into the standard index value. This dimensionless value represents the relative cost of a specific location
compared to a reference basis, such as the USGC (United States General Construction Cost). The LF is influenced by currency exchange rates and can vary significantly over time due to their impact on the index value. In recent years, the location factors for various locations have trended close to 1, indicating minimal regional cost variations.
Nevertheless, a commonly used method to estimate location factors involves adding 10% to the reference location's index for every 1000 miles. A widely referenced publication, Aspen Richardson's "International Construction Cost Factor Location Manual" (2003), provides published location factors and updates for various locations. These factors can
be found in journals such as Chemical Engineering and other industry publications. Cost professionals recommend using only data from the past five years due to changes in technology, construction practices, labor efficiency, and index formulation. The Chemical Engineering magazine publishes the Chemical Engineering Plant Cost Index, which is
widely used to quickly evaluate equipment and plant costs for the chemical and process industries.
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