Saturday, September 13, 2014

Difficulties in Polyol Use Estimates

Data can be found on the Internet that are estimates of current and future use (consumption) for both petro- and bio-based polyols.  Often these estimates are found in reports being sold by marketing research companies.  For example, the following data was found:

2012 total global use of polyols (total of petro- and bio-based) – 7.5 million metric tons (MT)

Range of the total global polyols used that are bio-based – 5% to 15%

Compound annual growth rate (CAGR) for total polyols use, 2012 to 2018 – 5.5% to 7.5%

CAGR for bio-based polyol use, 2012 to 2018 – 9.5% to 10.5%

These 2012 and future use estimates are important for company planning purposes and hopefully they are reasonably accurate.  However, even if reasonably accurate, just a small change in the estimates can result in large differences about future polyol use.

Assume that the estimate that a 2012 global total of 7.5 million MT is correct for the use amount of polyols (both petro- and bio-based).  Supposedly, from 5% to 15% of this total is bio-based.  What percentage is used in the 5% to 15% range can make a big difference in the computation of future petro- and bio-based polyol estimated use.  The difference between 10% (percentage of bio-based in the total polyol use) and 15% results in a difference of 547,270 MT of petro-based estimated use in 2018 and 844,500 MT of bio-based estimated use in 2018.  These results are based on a CAGR of 6.5% for total polyol growth use and a CAGR of 10% for bio-based growth use.

Changing the assumed 2012 polyol total global use (7.5 million MT) and the CAGRs for either (or both) the total and bio-based polyols for 2018 will also change the results significantly.

The purpose of this blog is to try to demonstrate, in the above paragraphs, that even small changes in the percentage that is bio-based and the CAGR percentages can make a large difference in results relevant for planning purposes.  A prudent approach, it seems to me, would be to compute expected results for each of the variables, while holding the other variables fixed.   The results should demonstrate how large a range of 2018 use amounts for both petro- and bio-based polyols are (as well as how uncertain they are), even as the estimated ranges for the bio-based percentage of the total and the CAGRs are relatively small.  

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