EPA-230/1-73-004
AUGUST 1973
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
CEMENT INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
-------
"This document is available in limited
quantities through the U.S. Environmental
Protection Agency, Information Center,
Room W-327 Waterside Mall, Washington, D.C,
20460.
The document will subsequently be
available through the National Technical
Information Service, Springfield,
Virginia 22151."
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EPA-230/1-73-004
August, 1973
ECONOMIC ANALYSIS OF PROPOSED EFFLUENT
GUIDELINES: CEMENT INDUSTRY
So ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF PLANNING AND EVALUATION
WASHINGTON, D. C0 20460
Contract 68-01-1571
Sheldon Schaffer
Pearl Tropper
•o-r- .-• ->r> ton ,u;®tl0''
U.S. r'i'Tl~r""ri'r'"c!; ;"^:',."i'r;.
-------
This report has been reviewed by the Office
of Planning and Evaluation, EPA, and approved
for publication. Approval does not signify
that the contents necessarily reflect the
views and policies of the Environmental
Protection Agency, nor does mention of
trade names or commercial products consti-
tute endorsement or recommendation for use.
-111-
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PREFACE
The attached document is a contractors' study prepared for
the Office of Planning and Evaluation of the Environmental
Protection Agency ("EPA"). The purpose of the study is to
analyze the economic impact which could result from the application
of alternative effluent limitation guidelines and standards of
performance to be established under sections 304 (b) and 306 of
the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Develop-
ment Document") supporting the issuance of proposed regulations
under sections 304(b) and 306. The Development Document surveys
existing and potential waste treatment control methods and tech-
nology within particular industrial source categories and supports
promulgation of certain effluent limitation guidelines and standards
of performance based upon an analysis of the feasibility of these
guidelines and standards in accordance with the requirements of
sections 304 (b) and 306 of the Act. Presented in the Development
document are the investment and operating costs associated with
the various alternative control and treatment technologies. The
attached document supplements this analysis by estimating the
broader economic effects which might result from the required
application of various control methods and technologies. This
study investigates the effect of alternative approaches in terms
of product price increases, effects upon employment, and the con-
tinued viability of affected plants, effects upon foreign trade
and other competitive effects.
The study has been prepared with the supervision and re-
view of the Office of Planning and Evaluation of EPA. This
report was submitted in fulfillment of EPA-230/1-73-004 and
68-01-1571 by Southern Research Institute. Work was completed
as of August, 1973.
This report is being released and circulated at approxi-
mately the same time as publication in the Federal Register of
a notice of proposed rule making under sections 304(b) and 306
of the Act for the subject point source category. The study
has not been reviewed by EPA and is not an official. EPA publi-
cation. The study will be considered along with the information
contained in the Development Document and any comments received
by EPA on either document before or during proposed rule making
proceedings necessary to establish final regulations. Prior to
final promulgation of regulations, the accompanying study shall
have standing in any EPA proceeding or court proceeding only to
the extent that it represents the views of the contractor who
studied the subject industry. It cannot be cited, referenced,
or represented in any respect in any such proceeding as a
statement of EPA's views regarding the subject industry. 1
-iv-
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TABLE OF CONTENTS
Page No,
I„ Introduction and Summary .............. 1
II0 Industry Segments „..»,,.....,,.„ 8 „,....„.. 4
A. Types of Plants as Affected by Pollution Control
Requirements ........ 4
!„ Types of firms .........un...............*.. 9
a„ Size of firms ...».,>..>.....«..........•• 9
b0 Level of integration ........... 17
c. Number of plants ....................... 20
do Number of products .. 20
e. Level of diversification 20
2 „ Types of plants ............................ 20
a. Size of plants „.„.«,.„...„.„...... 21
b0 Age of plants „..<,.......... 21
c „ Location „„. u „„*„.>„. 0 . c, »„ .......... 21
d0 Level of technology .„.».„.......o...... 26
f0 Level of integration in production .,..„. 29
Bo Number of Plants and Employees in Each Segment.. 29
C. Percent of Total Industry in Each Segment 29
lo Number of plants as percent of total ....... 31
20 Production and employment as percent of
totals 33
Do Significantly Impacted Segments of the Cement
Industry .„.....„.„.....u.o................... 33
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TABLE OF CONTENTS (Cont'd)
I'acfe Mo.
III. Financial Profiles . . . . 0 ............... r 0 „ . . „ . . « , . , ,. 36
A. Plants in Each Segment ................ 0 . 0 ...... 36
1. Annual profits before taxes . „ . „ .„...„.„ „ „ 0 r. 38
2. Annual cash flow .....„„.. „ .0.0.0. »»» „ „ » „ = . o 38
3. Market value of current assets o . o .., 0 „ „„..-«, 38
4 . Cost structure „.<>.<,. c, .....„.,..,< ... 40
B. Distribution of Plants by Pollution Control
Categories „ . , ... „ .„.<>. „ ..... .»..„. o . „ . 0 „ ...» - o - 40
C. Constraints in Financing „. u.........o.«... 40
IV. Price Determination .0.0.....,, 41
A. How Prices are Determined in the Cement Industry 41
B. Likelihood of Price Changes and Possible
Secondary Effects .„...«...„ ..„...„., 43
Vc Assessment of Economic Impact of Pollution Control
Requirements on the Cement Industry .............. 48
A. Best Practicable Control Technology Currently
Bo Best Available Control Technology Economically
Achievable „.„... „ . . . o ........... . *u . » . . . . . = . . 48
C. New Source Standards „ . . «, „ . o ... „ . 0 . . . „ . . . . . 48
D. New Source Pretreatment Standards „ . „ . 0 . » 48
VI. Impact Analysis „„.....„.,>,,.. . . » . o «,„.., «, .......... o . « 49
A. Price Effects ........... 0 ... ^ . o ...„, n .». o ...... 49
1 o Price increase „..,.„.......,,.„. 0 .„...,...,.,„ 49
2. Secondary effects . u .............. .„....,.,.» 50
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TABLE OF CONTENTS (Cont'd)
Page No,
Bo Financial Effects 0 . <,. u . * <-,„„„»„*„.„„ 0 .0 . .».... . . 51
1. Profitability ,0.0000., OUo .u.«...o».*o.c,.o.. 52
2. Capital availability ,,o.o.u0l. o0.c,.«.<,„»..>.0. 55
C. Production Effects „<,«,,.. 0 „ 0 <,.,,.„ n „..,.,,. u . 0 „ „„.... 55
D, Employment Effects . 0 . o . „ „ „ * „ „ „ . „ „„..... 0 ... 0,. . 57
E. Resultant Community Effects . u .»» u n 0 ...... .».«.. 57
F« Effects on International Trade oou.-,0.o.o.o.., .„.» 57
VII. Limits of the Analysis and Identity of Major
Information Sources (, „ o „ o 0 „ . o » u . „ » c, . o • o . 0 . „ c, „„.... 58
A. Accuracy o.u,u.0.oo<,.o.., .O0l,c,o. ,,.u.o.„.,...oo.o.. 58
Bu Range of Error e u 0 u c, o r u „ „ n , c. <,„„„„ .„.„.„.„<,. 0 .... 58
C. Critical Assumptions - Sensitivity to Overall
Conclusions c, n „ „ „ „„,„ o „«,„ o „„,.. o. o .„.„..,, o <,„.. 59
D» Unanswered Questions „ «, , 0 ,, „ -, ., . u <. „ . » . . „ „ „ „ » . <> „ 60
Bibliography „ <, „ u -, u o >, „ „ „ „ o „ ,-,, o,.,-, „ „ 0 ,,.„„.„ o „.„<,,„ „ ,.„...„ 0 . 61
-vii-
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LIST OF FIGURES
Page No,
Figure 1. Location of Cement Mills and Cement Dis-
tribution Terminals, May, 1972 ............... 10
Figure 2. Dispersion of Cement Plants by Water Pollution
Status 25
Figure 3. Equilibrium Under Dominant Firm Price Leadership 42
Figure 4. Selected Prices of Bulk Cement „ . „ 45
Figure 5. Equilibrium Under Dominant Firm Price Leadership
Before and After Cost Increases of Competitive
Fringe Firms 45
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LIST OF TABLES
Page No,
Table 1. Number of Cement Plants by Information
Source, Manufacturing Process, Alterna-
tive Pollution Control System, and Type
of Pollution 6
Table 2. Alternative Pollution Control Systems for
Achieving Essentially No Discharge of
Pollutants by Cement Plants in 1977 or
1983 7
Table 3. Cement Companies and Plants Segmented by
Type of Plants, and Required Pollution
Control 11
Table 4. Companies by Number of Plants Reported,
Capacity, Employment, and Production
Segmented by Required Pollution
Control 18
Table 5. Cement Companies by Sales and Other
Activities 19
Table 6. Cement Plants by Location, Capacity,
and Pollution Control Categories 22
Table 7. Cement Plants by Location, Production
in Tons/Day, and Pollution Control
Categories 23
Table 8. Cement Plants by Location, Productivity
Ratio Averages, and Pollution Control
Categories 28
Table 9. Cement Plants by Location, Number of
Employees, and Pollution Control
Categories 30
Table 10. Cement Industry by Number of Plants,
Capacity, Production, Employment,
and Productivity Rates, Distributed
by Pollution Control Categories 32
Table 11. Total Estimated Cumulative Capital
and Operating 35
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Table 12.
Table 13.
Table 14.
Table 15.
Table 16.
LIST OF TABLES (cont.)
Estimated Total and Average-Per-Plant
Net Profits before Taxes, Cash Flow,
and Value of Current Assets, of
Selected Cement Companies and Plants
by Pollution Control Categories . . ,
Page no.
37
Estimated Per-Plant Net Profits before
Taxes, Cash Flow, and Value of Current
Assets in 19 Cement Companies, 1972,
by Pollution Control Categories . . . ,
Estimated Profitability and Annual
Water Pollution Control Costs for
Cement Plants by Company ....
Costs of Meeting Pollution Control
Requirements in the Cement Industry
in 1977 and 1983
Companies by Number of Plants and
Estimated Capital Costs for
Pollution Controls, 1977 and 1983
39
53
54
56
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ECONOMIC ANALYSIS OF PROPOSED EFFLUENT GUIDELINES:
CEMENT INDUSTRY
I. INTRODUCTION AND SUMMARY
The economic impact of water pollution control requirements
on the cement industry, based on the data available, may strain
the internal financial resources of some companies, and will
probably result in negligible increases in cement prices, de-
pending on the type of controls required in each plant and on
the proximity of polluting plants to nonpolluting plants.
Plant closings and unemployment due to the imposition of
pollution control requirements are not anticipated, however, so
long as the demand for cement continues at projected levels.
The methodology used to determine the economic impact of
pollution controls on cement producing companies included
a comparison of the estimated costs of controls, both capital
and annual, at the 123 cement plants reviewed in the study with
estimated profitability and cash flow of cement companies per
average cement plant in 1972. Price effects were measured by
adding estimated average plant production costs per ton in 1973
to the incremental annual operating costs for pollution controls.
Pollution control categories were determined by segmenting plants
according to the quantity and type of pollutants discharged and
by the availability of control technologies. These categories
were based on data reported in the technical study of the cement
industry prepared for the Environmental Protection Agency'. In
the technical study, cement plants were classified as either
nonleaching plants or as leaching plants, according to whether
leaching systems were used for kiln-dust recovery. In this re-
port, subcategories of these two major types of plants were
included to differentiate between 1) nonleaching plants that
were or were not discharging unacceptable levels of pollutants
and 2) leaching plants for which control technologies were or
were not available.
The total cost of achieving essentially pollutant-free
discharges in the cement industry is estimated at $14,885,000
1. Development Document for Effluent Limitations Guidelines and
Standards of Performance: Cement Manufacturing Industry,
report prepared by Southern Research Institute, Birmingham,
June 21, 1973.
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-2-
for capital investment by 1977 and an additional $2,860,000 by
1983. Total annual operating costs for pollution controls are
estimated at $5,510,400 in 1977 and $7,233,100 in 1983. Costs
of meeting pollution control requirements range from a zero in-
vestment for the 56 nonleaching plants already meeting proposed
standards, to almost a half million dollars each for the eight
leaching plants with the most serious pollutant problems. These
latter plants are not likely to shut down, however, as they tend
to be the most productive (and profitable) in the industry.
The analysis of the ability of polluting companies to meet
the increased costs of pollution control was based on average
per-plant company profits and cash flow in 1972, and on the assump-
tion that financial data for 1972 will be reasonably representative
of other years in this decade. Annual reports were obtained
from 28 of the 35 companies known to be producing cement, and
Standard & Poor Company stock sheets were consulted for the
others. The financial analysis was based on the proportion of
cement sales to total sales for only 19 plants, however, as
neither cement's contribution to total profits nor to total
sales could be determined from the other financial data avail-
able. This analysis indicated that all but three companies
could meet the costs of instituting pollution controls in all
of their plants without difficulty, often from internal funds
generated just in 1972. These three companies are presently
engaged in extensive modernization programs that may include
installation of pollution controls, although no specific de-
tails were provided in the sources consulted.
The impact of pollution controls, which might justify
price increase of from 1 percent to 3 percent per ton in
polluting plants are apt to be mitigated by competitive
pressures from nonpolluting plants located in close proximity
to then and selling in approximately the same market areas.
Plant closings, and resulting unemployment in affected areas
are more likely to result from a decrease in cement con-
sumption than from pollution control requirements. The number
of cement plants has been declining for many years, but the
only plant known to have been abandoned during the past two
years was a nonpolluting plant. Communities, therefore, will
benefit from clean water, rather than experience employment
losses due to production curtailments.
The value of cement imports and exports of portland
cement amounted to less than $1 million in 1972, representing
an increase in imports and a decrease in exports over previous
years but still insignificant in terms of our balance of pay-
ments situation. Domestic shortages of cement, generally in
localized areas, are more likely to contribute to shifts in
international trade in cement than pollution controls.
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There are some significant limitations to this study.
Perhaps the most important is the lack of data on the polluting
practices of 44 nonleaching plants. These plants account for
approximately 20 percent of total cement production and
capacity. Moreover, many of these plants are owned by one or
two plant companies for which financial data are also lacking.
The presumption is that plants that did not apply for RAPP
applications may not be polluting plants, but further in-
vestigation appears to be warranted.
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II. INDUSTRY SEGMENTS
A. Types of Plants as Affected by Pollution Control Requirements
The economic impact of water pollution control requirements
on the cement industry can be determined most practically by seg-
menting the industry on the extent to which pollution controls will
be required in plants by 1977 and 1983. As indicated in the report,
Development Document for Effluent Limitations Guidelines and
Standards of Performance,*submitted to the Environmental Protection
Agency(EPA)in June, 1973, pollution control standards are based on
achieving essentially pollutant-free effluent discharges by 1977 or
1983, depending on the availability of technologies to achieve this
goal. Cement plants have been categorized as leaching or nonleaching
plants because the extent to which plants rely on kiln-dust le-iching
systems determines the type and quantity of pollutants discharged,
as well as the extent to which pollution control standards can be
met by 1977 or 1983.
Cement plants can achieve essentially pollutant-free discharges
by:
1. Discharging less than 0.01 Ib/ton of suspended
solids, or 0.01 Ib/ton of dissolved solids, with
the total not to exceed 0.01 Ib/ton of clinker or cement.
2. Limiting thermal pollution to less than a 5°F increase
in stream temperature.
3. Containing coal- and dust-pile runoffs.
4. Limiting the pH of discharged water to less than 9.0.
The technology for achieving these standards by 1977 is
currently available for all nonleaching plants, or plants that do
not recover kiln dust by leaching systems. According to RAPP
applications and Southern Research Institute questionnaire responses,
56 nonleaching plants have already met these requirements. No
technology has as yet been specifically designed to reduce the
discharges of dissolved solids from the leaching systems of cement
plants that practice kiln-dust recovery. Leaching plants, therefore,
1. Op_. cit.
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have until 1983 to limit discharges of dissolved solids and until
1977 to limit discharges of suspended solids to 0.30 Ib/ton and to
meet the same requirements as nonleaching plants for reducing thermal,
dust, and pH pollution to acceptable levels„ Of the 13 reported
plants with leaching systems, five have met the 1977 standards for
reduction of suspended solids, but three of these will require some
additional pollution controls to meet all the 1977 requirements.
A major factor in determining the economic impact of pollu-
tion controls on the cement industry is the cost, both capital and
annual, of implementing these standards. All cement plants will be
affected by pollution control requirements to some extent, but the
type of plant most severely affected will be the type that leaches.
The costs of implementing pollution controls are directly related
to the type and quantity of pollutants discharged, and leachate
systems not only generate the greatest quantity of solid pollutants,
but the pollutants discharged tend to be least amenable to control
at the present time.
An analysis of the variety of pollutants discharged by each
of the 123 plants for which data were available is presented in
Table 1. The alternative technologies to control these pollutants
are described in Table 2, The data indicate that 56 of the 110
reported nonleaching plants currently meeting 1977 control standards
will require no further investment for pollution control systems.
The 54 polluting nonleaching plants will each have an estimated
capital expenditure of $205,UOO for the installation of either the
so-called A or B pollution control systems described in Table 2.
Estimated annual operating costs for Alternative A are $79,900, as
compared with $61,900 for Alternative B. Thermal pollution, however,
can only be treated through Alternative A and only the 21 nonleaching
plants without thermal pollution problems can select either
alternative. Because the control system selected by any one plant
will depend on its existing equipment and local conditions, for
which data are not available, it has been assumed in this study
that all nonleaching polluting plants will choose Alternative A,
The costs for installing the B pollution control technology have
consequently been disregarded in the remainder of this report0 The
total initial cost of installing pollution controls in the 54 non-
leaching plants with pollutant discharges is, therefore, estimated
at $11,070,000.
Cement plants with leachate systems may be considered as
consisting of two separate operations, one involved in the produc-
tion of cement and the other in the recycling of collected kiln
dusts. The cement manufacturing facilities of these plants are
similar to those of nonleaching plants, but the leaching operation
generates far greater quantities of pollutants than does the
direct production process. Pollution control standards for leaching
plants in 1977 are less stringent than for nonleaching plants, as
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Table 1
Number of Cement Plants by Information Source, Manufacturing Process,
Alternative Pollution Control Systems, and Type of Pollution3
Number of plants, total
Nonleaching plants, total
Currently meeting 1977 pollution control
standards for nonleaching plants
By types of pollution:
Total solids of 0.01 Ib/ton or
over (solids)
Thermal rise of 5° or over (thermal)
Dust pile runoff (dust)
pH of 9.0 or over {pH)
Solids and thermal
Solids, thermal, and dust
Solids, thermal, and pH
Solids, thermal, dust, and pH
Solids and dust
Solids and pH
Solids, dust, and pH
Thermal, dust, and pH
Total
Leaching plants, total
By types of pollution:
Currently meeting 1977 standards for
leaching plants but requiring control
of dissolved solids by 1983
Dissolved and suspended solids of
0.30 Ib/ton or over (total solids)
Total solids and thermal
Total solids, thermal, and pH
Total solids and pH
Dissolved solids and thermal
Dissolved solids, thermal, and pH
Dissolved solids and pH
Total
123
110
56
Information source
RAPP SRI
applications surve;
88
76
35
34
Alterna tl v/e
pollution
control
systems
14
13
0
0
13
1
3
2
1
4
2
1
54
13
14
12
0
0
13
1
3
2
1
4
2
1
53
12
0
1
0
0
0
0
0
0
0
0
0
,0
1
1
11
7
0
0
11
0
2
1
1
1
2
1
37
11
3
6
0
0
2
1
1
1
0
3
0
0
17
2
A or B
A
H
H
A
A
A
A
A or B
A or F,
A or B
A
C,C(Aj ,C'H)
D,E
1
2
3
2
1
1
1
13
0
2
3
2
1
1
_i_
12
1
0
0
0
0
0
0
1
0
2
3
i
1
0
_1
11
1
c
0
0
0
1
0
2
C
c
c
c
C(A)
C (A)
C(H)
and
and
and
and
and
and
and
P
D
D
D
D
D
D
o:
(_ r
or
or
Cl
or
cr
L
E
E
E
E
Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and visits
to selected cement plants by staff of Southern Research Institute.
Leaching plants have until 1983 to achieve the essentially pollutant-free status required of nonleaching plants by 1977.
Pollution control standards for 1977 allow leaching plants to discharge 0.30 Ib/tcn of suspended solids and set no
limitations dissolved solid pollutants because the technology is not currently available for their control.
Thermal, dust, and pH pollution must be controlled by all cement plants by 1977, however, as the technology is currently
available and in use.
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Table 2
Alternative Pollution Control Systems for Achieving Essentially
No Discharge of Pollutants by Cement Plants in 1977 or 1983a
Pollution
control
systems
Nonleaching plants
X Currently meeting 1977 and 1983 pollution control
standards
A Requiring installation of cooling tower or spray
pond for control of total solids, thermal and pH
pollution, and containment of dust-pile runoff
B Requiring isolation of cooling streams and limited
reuse of cooling and miscellaneous wastewater for
control of total solids, pH, and containment of
dust-pile runoff
Leaching plants
D Currently meeting 1977 standards for leaching
plants, but requiring electrodialysis or other
technique to reduce dissolved solids and recycle
leachate stream by 1983
C Requiring installation of cooling tower or spray
pond, plus neutralization and reuse of cooling
and miscellaneous water, neutralization and
settling of leachate for control of suspended
solids, and thermal and pH pollution, and
containment of dust-pile runoff
C (A) Requiring installation of cooling tower or spray
pond for control of thermal and pH pollution
C(H) Requiring treatment of pH in effluent discharges
E Electing to abandon leaching systems
Year
1973
1973
1977
1977
1973
1983
1101
56
54
21
1977
1977
1977
1977 or
1983
2
I
13
a. Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire
responses, personal contacts, and visits to selected cement plants by staff of
Southern Research Institute.
b. The sum of individual plants exceeds the total number of plants in each category
because some plants are classified under more than one pollution control system.
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the maximum limit for suspended solids is set at 0.30 Ib/ton of
cement. Reduction of suspended and dissolved solids to 0.10 Ib/ton,
with the total not to exceed 0.10 Ib/ton, will not be required of
leaching plants until 1983.
Two of these leaching-system plants will require no further
expenditures for pollution control until 1983. Two leaching plants
currently causing thermal and pH pollution will each be required
to install the equivalent of Alternative A pollution controls by
1977 at a capital cost of $205,000 and annual costs of $79,900 each.
One leaching plant will be required to treat its effluent discharges
with acid to reduce excessive pH. This treatment, listed as
pollution control Alternative H, is estimated to cost a maximum of
$5,000. The eight other polluting leaching plants will be required
to install so-called Alternative C technology by 1977 to meet con-
trol requirements.
The Alternative C control system is basically the A technology
involving the installation of a cooling tower or spray pond for
recycling and reuse of cooling and miscellaneous water, plus a
neutralization and settling process for the leachate discharges.
The initial investment for installing the complete Alternative C
system is estimated at $425,000 and annual operating expenses are
expected to total $129,500.
The total initial investment for installing pollution controls
at the 11 leaching plants not meeting 1977 standards is estimated
at $3,815,000 by 1977. All 13 leaching plants, however, will also
be required to achieve an essentially pollutant-free status by 1983,
which will entail the application of so-called Alternative D
technology for the reduction of dissolved solids and recycling of
the leachate. The electrodialysis technology was estimated1 to
require an investment of $220,000 over and above the costs for
implementing Alternative C, with annual costs increasing to
$224,500 for the complete control system. By 1983, therefore, the
13 leaching plants will be required to make an additional investment
of $2,860,000, bringing the total capital investment for the control
of effluent discharges at the 13 leaching plants to $6,675,000 by
1983.
The comparatively higher cost of controlling effluent dis-
charges from leachate systems may induce some leaching plants to
abandon the leaching process and maintain only their cement manu-
facturing operations. Those plants that choose this alternative,
listed as Alternative E in Table 2, will be required to meet the
1. Op. cit,
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1977 pollution control standards for nonleaching plants, but will
require no additional investment in 1983, or until such time as
they may again decide to recover kiln dust by leaching„
The total investment for achieving essentially pollutant-free
effluent discharges in the cement industry by 1983 is estimated at
$17,745,000„ As indicated above, these costs are directly related
to the type and quantity of pollutants discharged by the two major
categories of cement plants„ those that leach and those that do not,
lu Types of firms
The cement industry consists of 50 companies and 167 plants
dispersed throughout 41 states and Puerto Rico (see Figure 1)„ The
Bureau of Mines has estimated that total production reached 84B8
million short tons of cement in 1972, with annual plant capacities
estimated at 86 0 8 million short tonst, The industry as a whole may
have been operating at 97„7% of total capacity in that year. Imports
for consumption totaled 404 million short tons in 1972, an increase
of 42o5% over the tonnages imported in 1971.
a» Size of firms
If cement plants were operating at full capacity in 1972, or
for 365 days,, the 123 plants covered in this report, or 7401% of
the total v produced an estimated 68,,3 million short tons, or 80«, 5%
of all cement produced, and accounted for 70Bl million short tons,,
or 80 o 8% of total capacity.. The 44 plants for which no data are
available, except plant name, company, and location, therefore,
represent approximately one-fifth of the total industry,, The
Bureau of Mines has estimated that 15 companies accounted for 67%
of total cement production in 1972u According to the data presented
in Table 3, 14 companies accounted for 67„5% of the total reported
production, suggesting that the larger companies have been adequately
represented by the 123 plants covered in this report„ As also
indicated in Table 3, however, the fewer the number of plants
operated by a company, the fewer is the number of plants that
company is likely to have had included in the 123-plant survey. No
plant data are available for three companies with two plants each
and 12 one-plant companies. Thus, it should be noted that the 35
companies with plants for which data were reported are more repre-
sentative of the larger companies than of the smaller firms in the
cement industry.
Commodity Data Summaries, Bureau of Mines, United States Depart-
ment of the Interior, Washington, January, 1973»
-------
Figure 1
Location of Cement Mills and Cement Distribution Terminals—May, 1972a
o
I
a. Prepared by Southern Research Institute from ivap published by the Portland Cement
Association, Skokie, 1972.
-------
-11-
Table 3
Cement Conipanieb a.ndl Plants Segmented by Type of Plant and Required Pollution Control
Company
Alpha Portland Industries, Inc.
Amcord, Inc.
Arkansas Cement Corporation
Ash Grove Cement Company
Atlantic Cement Company, Inc.
California Portland Cement Company
Capital Aggregates, Inc.
Centex Cement Corporation
Century Cement Company
Columbia Cement Company
Coplay Cement Manufacturing Co.
Dundee Cement Company
The Flintkote Company
General Portland, Inc.
Giant Portland Cement Company
Gi fiord-Hill & Company
Gulf Cost Portland Cement Company
Hawaiian Cement Corporation
Hudson Cement Company
Pla
identi
1 10
Loca-
tion
4
3
6
2
2
7
j
5
5
5
9
9
9
6
7
7
a
9
9
g
I
6
9
i
10
5
5
3
3
5
7
9
9
5
2
4
4
5
4
6
6
4
6
7
9
4
6
6
9
2
None required
(RAPP permits, ' c SRI survey sug-
gest that no further controls are
nt required to meet EPA standards
tica~ Current £or 1977 or 1983)
treatment (1000 short Employees Production
•'.'ode techniques tons) (number) (tons/day)
iOl
102 WTF 430 110 1,220
10)
10j 510 150 1,600
106
c
201 1't.K
202
203
204
205 KSR 490 136 1,597
206 HtK 960 300 3,000
207 HtK 1,220 265 3,500
c
401 WTF 530b 1500 l,570t>
402 660 250 1,600
501 WTF/BkR
1101 HTF
c
c
c
c
c
c
1503
c
c
c
c
2101 WTF/RiR
C
2201 HiH 850 334 2,600
2202 R1.K 280 92 900
2203 WTF/RSR 600 180 1,200
2204 340 150 960
2205 560 401 1,200
2302 WTF
2303
2304
2305 WTF
2306
c
c
c
c
2401 750 250 2,270
c
2601 750 65 1,200
c
c
Alternative A
(Cooling tower or spray pond
and dust containment)
(1000 short Employees Production
tons (number) (tons/day)
340b 134b ^00b
470 130 1,030
170b 77b 56411
660 160 1,690
X,600b 300b 4,850^
850b .i21b 2,260^
360 114 1,030
1,320 321 3,010
470b 17S*> l,350t>
380b 70*> l,880b
660b 153b l,220b
750 160 2,140
-------
-12-
Table 3 (Cont'd)
Cement Companies and Plants Segmented by Type of Plant; and Required Pollution Controla
Leaching plants
Alternative C Alternative (" lA) or (H) Alternative D
("A" plus recycling and reuse of (Cooling tower ~>r spray pond and (Reduction of total dissolved
Plant cooling water; neutralization and dust containment or treatment solids and recycling of leachate
identified- _ settling of leachate) _ _ tor excessive pli) _ _ by 1983) _
- i - Capacity Capacity Capacity
Loca- (1000 short Employees Production (1000 short Lmployees Production (1000 short Employees Production
tion Code tons) (number) (tons/day) tons) (number) (tons/day) tons) (number) (tons/day)
4 101
3 102
6 103
2 105
2 106
7 c
3 201
5 202 260 55 £90
5 203 770 70 2,060
5 204 190 75 1,260
9 205
9 206
9 207
6 c
7 401
7 402
501
"01
10
5
5
3
3
5
7
9
9
5
2
4
4
5
4
6
e
4
6
7
»
4
6
t
»
2
1503
c
c
c
c
2101
c
2201
2202
2203
2204
2205
2J02
2303
2304
2305
2306
c
c
c
c
2401
C
2601
C
c
1.130 220 3,000
-------
-13-
Table 3 (Cont'd)
Cement Companies and Plants Segmented by Type of Plant; and Required Pollution Control'1
Nonleaching plants
None required
(RAPP permits or SRI survey sug-
Plant
identifica-
tion
Company
Ideal Basic Industries, Inc.
Kaiser Cement and Gypsum
Corporation
Keystone Portland Cement Company
Lehigh Portland Cement Company
Lone Star Industries, Inc.
Louisville Cement Company
Marquette Cement Manufacturing
Company
Martin Marietta Corporation
Maule Industries
Medusa Corporation
Loca-
tion
4
6
8
6
e
8
7
e
4
6
8
4
8
9
10
9
8
6
9
9
3
3
2
4
5
7
10
4
5
7
6
3
3
4
6
10
9
6
3
5
5
4
5
2
4
7
5
7
4
3
3
4
5
5
3
7
e
i
8
4
4
3
4
3
5
3
5
4
5
1
Code 1
3201
3202
3205
3206
3207
3208
3209
3210
3211
3213
3214
3215
c
c
c
3301
3304
3305
c
c
c
4101
4102
4103
4104
4105
C
4202
4203
4204
4205
4206
4207
4208
4209
4210
4211
4213
4303
c
c
5101
5102
5103
5104
5105
5106
5107d
5108
5109
5110
5111
5112
5201
5202
5203
5204
5205
5206
5207
5208
5209
c
5801
5803
5804
5805
c
c
required to meet tiPA standards
Current for 1977 °r 1983)
water Capacity
treatment (1000 short
:echniques tons)
WTF
RlR
RtR
WTF
WTF/RtR
«TF
WTF
RtR
WTF
RtR
RtR
RtR
RtR
RtR
WTF/RtR
WTF/RtR
WTF
RtR
RtR
WTF/RtR
RtR
RtR
RtR
RtR
WTF/RSR
RtR
WTF/RtR
WTF/Rsn
380
660
660
920
510
750
550
680
640
410
240
560
240
750
190
300
410
380
190
900
640
430
560
450
Employees
(number )
135
101
143
173
120
148
128
223
197
225
116
256
82
c
c
c
c
c
c
295
c
115
80
c
Production
(tons/day)
563
846
1,129
2,620
1,360
2,375
1,545
1,700
1,700
1,540
1,175
1,200
850
2,080
440
744
1,290
1,150
1,850
2,700
1,900
1,300
1,875
1,150
(Cooling tower or spray pond
and dust containment)
Capacity
(1000 short
tons)
360b
410
280b
66 Ob
360
530
1,600
260
510
510
470
620
280b
450
360b
620b
880
620
410
240
240
640
470b
550
770
660
490
750
Employees
(number)
133b
150
126b
168b
131
164
520
81
138
125
125
170
110b
155
141b.
160b
300
125
165
c
85 •
200 .. .
210b
c -
112
c
190
90
Production
(tons/day)
762b
1,178
/ ";-'
l,384b
805
1,005
4,700
980
1,200
1,090
1,420
1,820
700b
I,a45
,705b
l,300b
1,970
1,700
1,166
670
750
,
1,650
l,250b
1,640
2,000
1,650
1,820
2,100
-------
-14-
Table 3 (Cont'd)
Cement Companies and Plants Segmented by Type of Plant? and Required Pollution Control11
Leachj.ng_ plants
Alternative C
("A" plus recycliny jnd ruusu of
Plant cooling water; neutralization and
identifies- settling of leachate)
ti°n Capacity
Loca- (1000 short Employees Production
tion Code tons) (number) (tons/day)
4 3201 530 158 1,308
6 3202
8 3205
£ 3206
6 3207 bOO 162 9^0
8 3208
7 3209
6 3210
4 3211
6 3213
8 3214
4 3215
8 c.
9 c
10 c
9 3301
8 3304
6 3305
9 c
9 c
3 c
3 4101
2 4102
4 4103
5 4104
7 4105
10 c
4 4202
5 4203
7 4204
6 4205
3 420*
3 4207
4 420*
t 4209
10 4210
» 4211
t 4213
3 4303
5 c
5 c
4 5JOJ!
5 5102
2 5103
4 5104
7 5105
& 5106 240 c «»6
7 SI07<1
4 Slot 230 75 (27
3 510»
3 5110
4 $111
S 5112
S 5201
3 S202
7 5203
* 5204
1 5205
» 5206
4 5207
4 5208
3 5209
4 c
3 5801
5 5803
3 5804
5 5805
4 c
5 c
Alternative C (A) or (11) Alternative D
(Cooling tower or spray pond and (Reduction of total dissolved
dust containment or trea t/mjnt solids and recycling of leachate
for excessive pH ) by 1983)
Ca - t Ca acit
(1000 short Kmployees production (1000 short Dmployees Production
tons) (number) (tons/day) tons) (number) (tons/day)
710a -I55a l,909a
_
-------
-15-
Table 3 (Cont'd)
Cement Co^t-anie:, and Plants Segmented by Type of Plant; and Required Poll
plants
None required
(hAPP permits or SRI survey sug-
Plant
identif ica-
tion
Lo~a-
Company
".. r.=siupi Valley Ceiwnt
. a > = i. r ies , Inc.
lisi-.n Portland Cer-ent Company
rior.arch Cement Company
Monol iti Portland Cement company
S-tiar.al Cement i_c:rp ir.j
Nat-u ial Gypsum Company
'.-*>.. . r-rtland Cement Company
Cement Company
OKC Corporation
Oregon Portland Cexent Company
Penn-^ixie Cement Corporation
Portland Cement Conipany of Utah
Puerto Rican Cement Company, Inc.
Piver Cement Company
San Antonio Portland Cement
Company
5an Juan Ce.nent Cc L,f;.y
sa'.tee 3oi tland Ce.rient Coripany
Soatn Dakota Cen\ent Plant
Soutnwestern Portland Jenient
Company
Division U.S. Steel Corporation
tion
7
7
5
7
6
9
'
5
)
3
7
t>
e
10
10
10
4
5
2
3
3
4
7
8
2
2
7
6
2
4
3
,
5
6
6
6
2
3
3
5
5
1
7
7
4
6
s;oi
5501
5502
5503
5601
c
c
OlOl
«2u:
6202
6301
c
7102
c
7201
7202
7203
730J
7305
c
c
c
c
c
c
7501
7502
c
c
6301
84 Jl
8501
8501
S602
8603
8604
8605
4201
9202
9203
9204
9205
9206
9207
9208
9209
921&
t eq -lire t t
for
ur en r&
treatment £1000 short
RIR
WTF/RtR 560
OTF 450
WTF 380
WTi
3eC
WTF
WTF 660
R.R
w.-F/Rii R 380
WTF/R.R 380
WTF
RI.S 1,410
R>R 620
RlR 341,
RiH 230
Hi.R 230
wTF/RfcK 550
RlR 510
WTF/RSP 470
429
PSR 320
RtR 680
RiR 340
KI.R
:o meet EPA standards (Cooling tower or bpray pond
1977 or 19831 and dust containment)
Capacity
Employees Prod^Lion (1000 short Employees production
(number) (tons, zay) tons) (number) (tons/da>)
.10 53 600
79 1,700
165 1,13U
16C l,12B
2,440 970 0,670
940 110 2,760
J20b 60L l,020b
190 55 3fiO
790 c 830
90 J8C
167 l.aBO
l,60tb J0')b 3,760°
5COt 40.it 1,8^00
..
250 1,^20
100 1,130
450 150 ' ,500
405 2/440
212 1,550
175 800
66 685
69 530 . .
750 280 .^900 •
-------
-16-
Tablu 3 (Cont'd} a
Cement Companies and Plants Segmented by Type of Plant; and Required Pollution Control
Leaching plants
Alternative C(A) or (li! Alternative D
("A" plus recycling and reuse of 'Cooling tower or spray '.ond and (Reduction of total dissolved
Pia/it cooling water; neutralization and dust containment or tieatinent solids and recycling of leachate
identifier settling o< leachate) for exc&ssivc pH) by 1983)
ti2i! Capacity Capacity Capacity
Loca- \1000 sliort i;mployet-s Production (1000 short Linployees Production (1000 short Employees Production
tion Code tons) (number} (tons/day) tons) (number) (tons/day) tons) (number) (tons/day)
7 bSOl 9401! iOOH 2.850H
7 5502 SSOA 147A 1.800A
5 5503
5 6201
1 1202
7102
10 7201
10 7202
10 7203
4 73W
S 7305
2 c
3 c
1 c
4 c
7 c
2 7501
2 7502
1,130
I S5U1
1 8601
5 i«02
« 8603
« S604
6 8405
2 5201
3 9202
3 9203
S 9204
5 9205
5 920S
7 9207
7 82C8
4 9J09
6 9210
3 9301
a. Sources. HAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and visits
to selected cement plants by staff of Southern Research Institute.
b. Nonleaching plants with no discharge of thermal pollutants that can achieve total pollution control through Alternative A
or B.
c. No data available.
d. Closed.
WTF Wast^water treatment facility.
R&R Recycling and reuse of water.
-------
-17-
When cement companies are grouped by size, or by number of
plants reported, as in Table 4, the data suggest that pollution
practices may be related to size of company, particularly companies
with nonleaching plants. The 110 nonleaching plants for which data
are available, as pointed out earlier, are almost equally divided
between polluting and nonpolluting plants, with 56 plants currently
meeting pollution control standards and with 54 to be required to
control pollutant discharges. Companies with either one plant or
with four to seven plants also have approximately the same total
number of polluting and nonpolluting plants. Companies with either
two or three plants or nine or more, however, deviate from this
pattern, as companies with two or three plants have a marked pre-
ponderance of polluting plants. The largest companies,; or those
with nine or more plants operate most of the polluting, leaching
plants. Although the data suggest that the largest cement companies
may have been more active than smaller companies in limiting pollutant
discharges in their nonleaching plants, the evidence is inconclusive
because smaller companies are, as noted above, inadequately repre-
sented in the 123-plant survey.
As indicated in Table 4, the 16 companies with data available
for one plant each account for 46% of the companies and 13% of the
plants. Seven companies with two or three plants reported account
for 20% of the companies and 14% of the plants, and the seven
companies with four to seven plants reported also account for 20%
of the companies, but for 33% of the plants. The five largest
companies, with nine or more plants reported for each, account for
14% of the companies and 40% of the plants, or almost a complete
reversal of the role of the smallest companies. Companies with two
or three plants, however, appear to have a greater share and
companies with nine or more plants a lesser share of total capacity,
employment, and production than is consistent with their share of
total plants. The similarities between these groups of companies,
whether measured by polluting practices or size of plants, suggests
that further investigation might be warranted to determine if'a
relationship does in fact exist between the size of a company and
the need for water pollution controls.
b. Level of integration
Cement companies generally quarry their own limestone and
other raw materials and, thus, are integrated as far backward as
possible. Forward integration has also advanced rapidly to the
production of concrete by most smaller firms, and to construction
and to retail outlets for cement and concrete by the larger companies„
It is difficult to separate integration from diversification for
cement, companies, as the smaller companies are as likely to be
absorbed by concrete producers as they are likely to produce concrete.
Only one of the companies with five or more plants produces cement
exclusively and, as indicated in Table 5, the primary product pro-
duced by cement companies with from one to three plants was as likely
to be concrete as cement.
-------
-18-
Table 4 a
Companies, by Number of Plants Reported, Capacity, Employment, and Production Segmented by Required Pollution Controls
Pollution controls required
1
2 or 3
4 to 7
9 to 12
Total
1
2 or 3
4 to 7
9 to 12
Total
2 or 3
4 to 7
9 to 12
Total
Con
Number
16
7
7
5
35
ipu, i ' ,
Percent
of total (lumber
45.7 16
20.0 17
20.0 41
14.3 49
100.0 123
9,840
13,480
22,710
24,049
70,079
Number
2,888
3,900
5,940
5,907
18,635
Total
Perct
of t
13.
13.
33.
39.
100.
of tc.
14 .
19.
32.
34.
100.
Perce
of to
15.
20.
31.
31.
100.
Nonleaching plants
illt
0
8
3
8
0
Number
7
3
27
56
Percent
of total
5.7
2.4
15.4
22.0
45.5
Number
7
11
18
18
54
Percent
of total Number
5.7 I
8.9
14. G 4
14.', 3
Percent
of total
0.8
3.3
2.4
4J.9 8 6.5
Capacity
(thousand short tons)
Nonleaching plants
0
2
4
3
0
nt
tal
5
9b
9b
0
Total
27,228
35,800
61,993
62,488
187,509
14.
19.
33.
33.
100.
5
1
1
3
0
3,i40
1,600
11,290
13,479
30,009
Number
1,190
336
3,388
2,694
7,608
Short
9,868
3,960
30,252
37,197
81,277
of total
5.2
2.3
16.1
19.2
42.8
Nonleaching
X
Percent
of total
6.4
1.8
18.2
14.5
40.8
Nonleaching
X
5.3
2.1
16.1
19.6
43.3
4,690
10,080
9,970
8,530
33,270
plants
Number
1,298
3,094
2,277
2,738
9,407
A
6.7 380
14.4
14.2 1,450
12.2 1,330
47.5 3,160
Employment
(number)
C
0.5
2.1
1.9
4.5
Leaching plants
c (A) ~»- '"'
Number
2
1
3
Leacni
C(A)
1,500
710
2,210
Percent
of total
1.6
0.8
2.4
ng plants
or (H)
of total
2.1
1.0
3.2
O
Percent
Number of total
1 0.8
1 0.8
2 1.6
D
1,130 I.f,
300 5.4
1,430 2.0
Leaching plants
A
Percent
of total Number
7.0 180
16.6
12.2 275
14.7 320
50.5 775
Production
(tons/day)
plants
A
13,230
26,250
27,104
20,409
86,992
7.1 1.130
14.0
14.5 4,637
10.9 2,974
46.4 8,741
C
Percent
of total
1.0
1.5
1.7
4.2
C
of total
0.6
2.5
1.6
4.7
C(X)
Number
347
155
502
or (H)
Percent
of total
1.9
0.8
2.7
Leaching plants
CIA) or (H)
tons
4,650
1,909
6,559
2.5
1.0
3.5
D
Perc.'nt
Number of lotul
220 1.2
123 0.7
343 1.9
t)
3,000 1.6
940 0.5
3,940 2.1
A. Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and visits to
selected cement plants by staff of Southern Research Institute.
fa. Excludes 18 plants for which no employment data were reported.
-------
-19-
Table 5
Cement Companies by Sales and Other Activities3
Estimated
sales of Companies Companies Companies
cement, 1972 listing cement not listing that are
Number of (in millions as their pri- cement as a divisions or
lor product subsidiaries Other company act i
Hi v Concrete, aggregates , potash
Div Concrete:, furniture, carpets, <_cns ti ,,c'_ j <, r
retail building, rugs, ore process*1'-,
commercial development:
Div Steel production
Retail furniture, real estate d«?\ r 1 onr'ent
biv Aerospace, const ruction mater .il ~
Holding company
Chemicals , hold • nq corrpany
Construction , holding company , < ^.-. r- L i on
products
Concrete, * UT. n i ture, carpetinq
Heavy eng i nc .' - >j
Group Concrete, paper b'>jrd, qypsum, ant. a^best
Sub Manufacturing and wbo!*1^..) gypium
insulating products
Sub Beverages , sugar , 01 L , a no gat.
Concrete, oil and gas exploration
Div
Concrete, machine years
Lime, agricultural products
Lime
Building contractors l.oldi; g jompan/
Sub
Gypsum, wall covering , mob • le linnet ,
building supplies
Crude oil refining, rea 1 instate, OIL.
and gas exploration
Lime, bags, sugar proces .ing
Sub Retail building products
Sub Concrete, petroieiom storage - v-arer-ousi rig ,
trucking
Sub Concrete aggregates, transportati
Div
Concrete, furnituro, carpets, and ruqs
Concrete, lumber, and building material-:
Concrete, oil and gas drilling
Concrete, sand and gravel, stono anJ
products
Company j
Ideal
Marquette
Lone Star
Universal-Atlas
General
Martin Marietta
Amcord
Penn-Dixie
Alpha
Lehigh
Medusa
Flintkote
Kajsei
Southwestern
California
Columbia
Louisville
Missouri
Oregon
Ash Grove
Centex
Coplay
Dundee
Monolith
National Gypsum
OKC
Puerto Rican
Arkansas
Atlantic
Capitol
Century
Giant
Gifford-!".]!
Gulf Coast
Hawaiian
Hudson
Keystone
Maule
Mississippi Valley
Monarch
National Cement
National PC
Northwestern
Portland
River
San Antonio
San Juan
Santee
South Dakota
Texas
Whitehall
>lants
15
12
11
10
9
9
7
7
6
6
6
5
5
5
3
3
3
3
3
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
a. Dun and Bradstreets
of dollars)
175
104
148
n.a.
116
115
106
55
36
108°
81
40
83
56
72b
n.a.
44
31
13
n.a.
259b
17
n.a.
12
78
16
36
19
40
12
n.a.
18
5
n.a.
65"
n. a.
14
32b
3
6
n.a.
n.a.
n.a.
5
36b
5
n.a.
10
6
88b
12
Million Dollar
mary industry
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Directory . Our, ant
b. Sales of cement have been included in to:aj Company sales.
c. Cement sales include sales include sales of other construction materials.
-------
-20-
c° Number of plants
Cement companies, as noted earlier, each currently operate
from one to 15 plants. The 35 companies and 123 plants for which
data were reported include: five companies with nine to 12 plants,
accounting for 44% of the total; seven companies with four to
seven plants, or 29% of the total; seven companies with two or
three plants, or 14% of the total; and 16 companies with one plant
each that account for 13.0% of the total number of plants. Data
on individual companies by number of plants and types of pollution
control systems, required by 1977 or 1983 were presented in
Table 3, above0
d. Number of products
Cement plants generally produce only one product—cement, and
the specialization ratio for the cement industry is generally about
99%. Approximately 95% of total production consists of portland
cement. Portland cement may be classified as normal portland,
white, sulfate resisting, high-early strength, slag, or masonry
cement, but the three basic types classified by the Bureau of Mines
and the Department of Commerce are normal, masonry, and slag cement-
e° Level of diversification
Companies in the cement industry are highly diversified,
particularly the eleven companies with five or more plants. Only
one of these eleven companies produces only cement. The other ten
are divisions or subsidiaries of firms whose activities range, as
indicated in Table 5, from the manufacture of concrete, furniture,
and tufted rugs to retail and wholesale outlets and to engineering,
construction, land development, and holding companies. Companies
with one to three cement plants are rarely diversified except in
concrete manufacturing, and most of the companies that do integrate
forward are divisions or subsidiaries of other companies or
conglomerates„
2„ Types of plants
Cement plants produce one basic product by either a wet or
dry process. Despite numerous variations in the application of
these processes to cement manufacture, the only significant
difference between plants is whether collected kiln dust is reused
or wasted and, if reused, whether it is returned to the kiln
directly or leached. Dust recovery is not essential to cement
manufacture, except to the degree that recovery and reuse affect
-------
-21-
costs and profitability„ Typical cement plant processes were
described in the aforementioned report on effluent limitation
guidelines.1
The 23 plants covered in this report have been segmented by
pollution control categories, as well as by location, size (capacity
and production), age, employment, and productivity levels as measured
in tons of cement produced per man/day. There appears to be little
or no relationship between these factors„ The 13 leaching plants
appear to have higher average levels of productivity than non-
leaching plants, but leaching plants as a whole are neither the
newest nor the largest plants in the industry and their productivity
ratios are not related to the extent to which they discharge
pollutants,
a. Size of plants
Data on the size of plants, by location and pollution control
categories, are presented in Tables 6 and 7. Table 6 describes
cement plants in terms of capacity and Table 7 in terms of produc-
tion of cement in tons/day. Regardless of the measure used, the
data indicate that nonleaching plants requiring Alternative A
pollution controls tend to be larger than nonleaching plants
requiring no additional controls (Category X). For nonleaching
plants, therefore, the data suggest a possible relationship between
size and polluting practices. Data for plants with leaching systems,
however, appear to suggest the opposite, as plants with the most
serious polluting problems, or leaching plants in Category C, are
well below average size in both capacity and production. Size of
plant, therefore, does not appear to bear a significant relationship
to polluting practices.
b. Age of plants
The age of cement plants also appears to be unrelated to
size, efficiency, location, or pollution status. Almost all of the
older plants, and some are a hundred years old, have been extensively
re-engineered so that age alone is no measure of productivity, or
of the technology employed. Fifty-year old plants are as likely to
have computerized controls as newer plants.
1. Development Document for Effluent Limitations Guidelines and
Standards of Performance: Cement Manufacturing~Industry,report
prepared by Southern Research Institute,Birmingham, June 21,
1973.
-------
Table 6
Cement Plants by Location, Capacity, and Pollution Control Categories
(in number of plants and thousands of tons)
Pollution control categories
Nonleaching plants
Leaching plants
EPA Total
District plants
I
II
III
IV
V
VI
VII
VIII
IX
X
Total
Average
capacity
per plant
1
10
17
22
21
19
13
6
9
5
123
Total
capacity
470
7
10
9
12
9
7
2
8
1
70
,040
,540
,860
,969
,820
,010
,190
,220
,960
,079
570
Average
capacity
by
district
470
704
620
448
618
517
539
365
913
392
No. of
plants
3
11
9
10
9
4
1
7
2
56
X
Annual
capacity
1,230
6,420
3,910
5,349
4,470
1,810
430
5,770
620
30,009
536
No. of
plants
1
7
5
10
6
8
7
5
2
3
54
A
Annual
capacity
470
5,
3,
4,
5,
4,
3,
1,
2,
1,
33,
810
740
890
030
080
700
760
450
340
270
616
C C(A) or (H) D
No. of Annual No. of Annual No. of Annual
plants capacity plants capacity plants capacity
1 380
2 760 1 300
4 1,460 1 1,130
1
1 560 1 710 to
2 1,500 '
8 3,160 3 2,210 2 1,430
395 737 715
a. Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and visits
to selected cement plants by staff of Southern Research Institute.
-------
Table 7
Cement Plants by Location, Production in Tons/Day, and Pollution Control Categories*
Pollution control categories
Total
Nonleaching plants
Leaching plants
Average
EPA
district
I
II
III
IV
V
VI
VII
VIII
IX
X
Total
plants,
(number)
1
10
17
22
21
19
13
6
9
5
total
production
1,250
18,624
29,070
26,502
37,656
22,976
19,018
6,501
22,197
3,715
da
production
per
1,
1,
1,
1,
1,
1,
1,
1,
2,
plant
250
862
710
205
793
209
463
084
466
743
No. of
plants
3
11
9
10
9
4
1
7
2
X
Produc-
tion
3
17
11
16
10
4
1
15
1
,880
,700
,133
,010
,225
,237
,300
,237
,555
No. of
plants
1
7
5
10
6
8
7
5
2
3
A
C C(A) or (H) D
Produc- No. of Produc- No. of Produc- No. of Produc-
tion plants tion plants tion plants tion
1
14
10
12
13
9
10
5
6
2
,250
,744
,240 1 1,130
,494 2 1,935 1 940
,940 4 4,706 1 3,000
,872 1 970 1 1,909
,131 2 4,650
,201
,960
,160
1
to
u>
1
123
Average daily
production
per plant
187,509
1,524
56 81,277
1,451
54 86,992
1,611
8,741
1,093
6,559
2,186
3,940
1,970
a. Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and
visits to selected cement plants by staff of Southern Research Institute.
-------
-24-
Cement plants vary in age from new to 96 years. Of the 123
plants reviewed, 23 are no more than 10 years old; 28 are 11 to 25
years old; 29 are 26 to 50 years old, and 42 are at least 50 years
old. The 56 nonpolluting plants include 11 plants no more than 10
years old, 16 plants from 11 to 25 years old, 11 plants 26 to 50
years old, and 18 plants 50 years old or more. Thus, nonpolluting
plants account for slightly less than half of each group, just as
they account for slightly less than half of all cement plants. The
five newest plants in the industryf all operating for less than
five years, are located in five different districts, have annual
capacities ranging from 0,4 to 0,8 million short tons of cement and
produce from 5y3 to 29, 3 tons per worker daily„ Two of these plants
are nonleaching plants requiring no additional controls, two are
nonleaching plants requiring A controls, and one is a leaching plant
requiring C controls^ Age of plant, therefore, does not appear to
bfe significant in polluting practices.
GO Location
Approximately half of all cement produced in this country
came from six states in 1972, each representing a different EPA
region: California (IX), Pennsylvania (III), Texas (VI), Michigan
(V), New York (I), and Missouri (VIII). Approximately 11% of
total production was produced in California alone„
Of the 123 plants for which data are available, those 56
whose current discharges apparently already meet pollution control
standards may generally be characterized as being widely dispersed
throughout the United States, as indicated by the letter X in
Figure 20 For the most part,, these plants are within 300 miles of
the more important regional (metropolitan) markets in the nation,
A moderate concentration of 11 plants may be found in the Maryland-
Philadelphia-Hudson River Valley region,,
The 54 nonleaching plants that will require installation of
a cooling tower or spray pond and containment of dust-pile runoff
by 1977 are^ as in the case of the nonpolluters, highly dispersed
in the nation, too. These are characterized by the letter AB Many
of these„ with the exception of four or five in the Northwest, are
within 300 miles of nonpolluters„ The high-volume eastern half of
the nation^ especially, is marked by considerable mixing of the
nonpolluters and the A-type plantsn
The 11 (of the 13) leaching plants that have not met water
pollution control standards for 1977 are to be found, for the most
part, inland in the eastern half of the nation,, with a concentration
of four of these (including one now closed) in the Detroit region„
These 11 plants are characterized by the letter C and generally are
located within 200 miles of plants that apparently do not pollute.
The two leaching plants that may require electrodialysis or another
process to meet 1983 standards are characterized by the letter D0
One plant is located in Michigan and the other in Tennessee0
-------
Figure 2
Disper sion of Cement Plants by Water Pollution Status9
X No current water pollution ,,.,,.
A Nonleaching, polluting plants (1977)
c Leaching plants _(1977)
C(A) or (H) Leaching plants with
limited pollution
D Leaching plants (1983)
I
to
Ul
I
a. Prepared by Southern Research Institute from map published by the
Portland Cement Association, SXokie, 1972.
-------
-26-
Thus, most of the 67 plants in pollution categories A, Cf
and D, with relatively significant pollution problems are within
competititive marketing reach of those with either no or relatively
limited pollution problems. As a consequence, any tendency toward
increased prices following from increases in costs required to
curtail pollution may tend to be mitigated; any reductions in out-
put that may ensue among so-called pollsters should generally be
matched by increases in output and sales of nearby nonpolluters.
d. Level of technology
The state of the art in cement making has been undergoing
some change in recent years, with much of the impact visible in
terms of efficiency, or increased output per worker, or relatively
reduced costs per unit of output„ Many improvements have been
directed toward two major objectives, labor savings and, more
recently, fuel and energy economy. The labor savings have often
resulted in, or allowed, greater economies with increased scale of
operations. The fuel and energy savings, as we understand the case,
have not necessarily benefitted large-scale plants more than small-
scale and small-scale plants may well have an edge in this matter
at present.
The techniques of quarrying raw materials do not vary too
much for most plants and have been improved primarily with the use
of high-speed drills and large-capacity cranes and trucks. The
mining of oyster shells does constitute a difference in technique.
Oyster shells are normally dredged from lakes and bays, rather than
excavated.
The transportation of raw materials to plant exhibits some
differences among plants, depending upon location of the quarry and
access to intervening types of transportation. Some transportation
techniques are: hauling by truckt barge, or railroad car; and
transport by conveyor belt or cable-drawn gondolas on tracks„ The
use of trucks, barges, and railroad cars has been affected by
increases in container capacity and loading-unloading techniques,
with opportunities for reductions in costs per unit of output. The
conveyor belts and cable-drawn gondolas have also contributed to
economies„
In crushing and grinding operations, techniques have under-
gone relatively little change, the major changes being in improved
construction materials for reduced wear and down time and increased
capacities for economies of scale0
-------
-27-
Kilns constitute the most significant area of change in cement
plants. Kilns have achieved increases in length and, to a lesser
extent, diameter over the years, allowing for increases in capacity.
They have also experienced modifications for reasons of fuel
efficiency, as in the case of suspension preheaters in older, shorter
kilns. This allows utilization of waste heat for significantly
warming the raw mix before being fed to the kiln. Another change
of this type has involved the use of new heat-exchange equipment
within the kiln (new chain designs and materials and circular or
radial heat exchangers). Kiln design has also been affected by
changes in shapes and materials.
Finishing equipment (grinders and cement coolers) have changed
relatively little, much of it in the same manner as crushing and
grinding equipment used in preparing the raw materials.
Water management has improved through the use of lagoons,
cooling towers, and ponds and efficient water management practices
have increased over the years as the real cost of water has
increased. Overall plant control and operations have tended to be
improved with the use of electronic information and control systems.
Detailed information on these changes or improvements has
not been tallied by plant or company. However, it is presupposed
that the effects of the changes or improvements will be manifest
largely in greater output per worker, or in lower relative average
total costs per unit of output. In the case of fuel and energy,
to the extent these costs have been rising, economies in fuel and
energy consumption should tend to result in relatively stabilized
average total costs per unit of output.
e. Efficiency
Efficiency of operation in cement plants, measured by pro-
duction per man/day, has been computed for the 105 plants for which
data on production in tons per day and number of production workers
are available. These efficiency or productivity ratios, as
indicated in Table 8, are the mean or average for each group of
plants, segmented by EPA district and pollution control category.
Average cement production in 105 plants is approximately
8.9 tons per day per production worker. This productivity ratio
is highest in EPA district V and lowest in District I, where only
one plant is located. Nonleaching plants requiring A pollution
controls are only slightly more productive on average than non-
polluting, nonleaching plants, although their average size, as
indicated in Tables 6 and 7, was considerably larger0 Leaching
plants in all pollution control categories are well above average
in productivity ratios. It may be recalled that capacity for
leaching plants in the C category was well below average. The data
-------
Table 8
Cement Plants by Location, Productivity Ratio Averages, and Pollution Control Categories3
Nonleaching plants
EPA
District
I
II
III
IV
V
VI
VII
VIII
IX
X
Total
Total
plants
1
10
13b
18b
14b
18b
12b
6
9
4b
105
Average
tons pro-
duced per No. of
man/day plants
6.0
8.3 3
9.6 7b
8.4 7b
10.3 5b
8.8 8b
8.8 3b
8.6 1
8.4 7
7.7 2
8.9 43
X
Average
tons pro-
duced per
man/day
7.1
8.8
8.2
10.3
8.7
7.3
11.3
8.5
7.6
8.6
No. of
plants
1
7
5
8b
5b
8
7
5
2
2b
50
Leaching plants
A C C(A) or (H) D
Average . Average Average Average
tons pro- tons pro- tons pro- tons pro-
duced per No. of duced per No. of duced per No. of duced per
man/day plants man/day plants man/day plants man/day
6.0
8.6
11.5 1 6.3
8.8 2 8.3 1 7.6
8.5 3b 20.1 1 13.6
8.9 1 6.0 1 12.3 £
8.2 2 13.4
8.2
8.3
7.9
8.7 7 10.4 3 13.1 2 11.5
a. Source: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and
visits to selected cement plants by staff of Southern Research Institute.
b. The 18 plants for which employment data were not available include 13 plants in the X category, four in the
A category, and one in the C category of pollution controls.
-------
-29-
suggest that there is no overall relationship between size of
plant and productivity measured by labor productivity in the cement
industry. Leaching plants, however, regardless of size, appear to
achieve higher productivity per worker than nonleaching plants.
The five plants with the highest productivity levels in the industry
produce from 21.5 to 29.4 tons/day per production worker. These
plants range from two to 46 years in age and have capacities of
from 3.8 to 7.7 million short tons annually. Two of these plants
are nonpolluting, nonleaching plants in the X category, two are
nonleaching, polluting plants in the A category, and one leaching
plant is in the C category of pollution controls.
f. Level of integration in production
Cement plants generally have their kilns and their grinding
and recycling facilities on their own premises and most quarry
their raw materials from nearby sites. As noted earlier, the
production process tends to be similar in all plants, depending on
whether the basic process is wet or dry, so that cement manufacturers
do not vary to any great extent in the levels to which their pro-
duction processes are integrated. Information on extent of
production integration by pollution status was not directly
available.
B. Number of Plants and Employees in Each Segment
Data on employment point up the differences between leaching and
nonleaching plants, but do not appear to be related to the impact of
pollution controls on the cement industry. As indicated in Table 9,
there are 18,635 employees in the 105 plants for which employment data
are available, or an average of 177 employees per plant. Average
employment per plant is highest in nonleaching, polluting plants
in the A category, followed by nonleaching plants in the X category,
and is lowest in leaching plants.
C. Percent of Total Industry in Each Segment
The cement industry has been segmented into five pollution
control categories, as described in Table 2, above. Of the 123
plants for which data were available, 56 plants are in the X category
of plants currently meeting 1977 pollution control standards and
two plants are in the D category of leaching plants currently
meeting 1977 standards that have until 1983 to meet the standard
of "essentially no discharges of pollutants".
One leaching plant in the C(H) pollution category can meet
1977 standards with an estimated maximum expenditure of $5,000 as
its pollutants are primarily in the form of excessive pH and its
dissolved solids are not expected to come under control until 1983„
-------
Table 9
Cement Plants by Location, Number of Employees, and Pollution Control Categories3
Number of
plants,
District total
I
II
III
IV
V
VI
VII
VIII
IX
X
Total
Average
per plant
1
10
13b
18b
14b
18b
12b
6
9
4b
105
Number of
employees ,
total
2
2
2
2
2
2
2
18
210
,257
,540
,710
,711
,383
,067
753
,629
375
,635
Nonleaching plants
Average
employees
per plant
210
226
195
150
194
132
172
126
292
94
177
Number of
plants
3
7°
7b
5b
8b
3"
1
7
2
43
X
Number of
employees
550
1,468
1,193
846
962
480
115
1,788
206
7,608
177
Number of
plants
i
7
5
8b
5^
8
7
5
2
2b
50
Leaching
plants
A C C(A) or (H) D
Number of Number of Number of Number of1
employees plants employees plants
210
1,707
892 1 180
1,161 2 233
1,445 3b 200
1,104 1 162 1
1,240 2
638
841
169
9,407 7 775 3
188 111
Number b£ number of Number of
employees plants employees
1 123
1 220
155
347
1
CO
o
1
50* 2 343
167 172
a. Sources: RAFF applications submitted by 88 cement plants to EPA and questionnaire responses, personal contacts, and visits to
selected cement plants by staff of Soutbern Research Institute.
b. The 18 plants for which employment data were not available include 13 plants in the X category, 4 in the A category, and 1
plant in the C category of pollution controls.
-------
-31-
The 56 nonleaching plants in the A pollution category and the two
leaching plants with thermal pollutants will require the installation
of a cooling tower or spray pond for control of solids and thermal
pollution. By 1977, each of these plants will require an investment
of up to $205,000, depending on the extent to which current equipment
can be utilized, and annual outlays of almost $80,000. The C
pollution category covers 8 plants that will require the same A
pollution control installation as nonleaching plants for their cement
manufacture operations because these plants discharge excessive
suspended, as well as dissolved, solids. Should these plants
abandon their leachate systems by 1977, or choose the E alternative,
the investment will be about the same as for A controls, but annual
operating costs may total about $245,000. If leachate systems are
retained, then C controls for the neutralization and settling of
the leachate will be required, in addition to A controls, by 1977,
at an additional capital cost of approximately $220,000 for each
plant and additional annual costs of about $50,000,
1. Number of plants as percent of total
A summary of the data presented above on capacity, production,
employment, and average productivity ratios for cement plants
segmented by pollution control categories reveals a certain con-
sistency that may be of some significance in establishing pollution
standards. As indicated in Table 10, nonleaching plants in
Category X, or those that are currently meeting 1977 pollution
control standards, and leaching plants in Category C, or plants that.
will require the most extensive pollution controls by 1977, have
one thing in common. Both groups of plants account for a higher
proportion of total plants than is accounted for by their proportion
of total capacity, production, or employment. In contrast, leaching
plants in Category D that will require no additional controls in
1977, leaching plants in Category C(H) that will require minimal
controls in 1977, and leaching and nonleaching plants in Categories
C(A) and A that will require A controls by 1977 account for a higher
proportion of total capacity, production, or employment than
indicated by their proportions of total plants. Average productivity
per worker, however, is lower for both categories of nonleaching
plants than for any category of leaching plants.
If, as the data indicate, nonleaching plants tend to have
lower productivity per worker than leaching plants, one conclusion
might be that leaching plants will be better able to cope with the
greater costs of instituting pollution controls in 1977 and in 1983.
A smilar inference might be derived from the average productivity
ratios for polluting and nonpolluting nonleaching plants, but the
difference is too small to be conclusive. It is, of course, also
possible that the generally larger size of polluting plants may be
attributable to modernization programs that the plants have insti-
tuted from funds not available to nonpolluting plants because of
their capital and operating expenditures for pollution controls,.
-------
Table 10
Cement Industry by Number of Plants, Capacity, Production, Employment, and
Productivity Rates, Distributed by Pollution Control Categories3
Pollution control categories
Number of plants, total
Percent of total plants
Capacity in thousands of tons,
total
Percent of total capacity
Production in tons/day, total
Percent of total production
^
Number of employees, total
Percent of total employment
Annual average production per
man/dayc
Total
123
100.0
70,079
100.0
187,509
100.0
18,635
100.0
Nonleaching plants
X A
56
45.5
30,009
42.8
81,277
43.3
7,608
40.8
54
43*9
33,270
47.5
86,992
46.4
9,407
50.5
C
8
6.5
3,160
4.5
8,741
4.7
775
4.2
Leaching plants
C(A) or (H)
3
2.4
2,210
2.2
6,559
3.5
502
2.7
D
2
1.6
1,430
2.0
3,940
2.1
343
1,9
1
to
to
1
8.9
8.6
8.7
10.4
13.1
11.5
a. Sources: RAPP applications submitted by 88 cement plants to EPA and questionnaire responses,
personal contacts, and visits to selected cement plants by staff of Southern Research Institute.
b. Percentages do not add to 100.0% because of rounding.
c . Only 105 plants reported.
-------
-33-
20 Production_ _a_n_d employment as percents of totals
The percentages of the total industry represented by pro-
duction and employment in the 123 plants under review,are presented
in Table 10 and discussed in the previous section„ Detailed data
on production and employment in plants grouped by location in EPA
districts and segmented by pollution control categories are pre-
sented in Tables 7 and 9.
D° Significantly Impacted Segments of the Cement Industry
The segments of the cement industry affected most severely by
pollution control standards are 1) companies with the greatest
number of plants in the A and C pollution categories, but with a
relatively strong financial base, and 2) companies with plants in
the A and C pollution categories, but with relatively limited
financial resources. This statement is based on a number of
qualifying assumptions. The first is that the estimated investment
and annual costs of reducing pollutant discharges are approximately
equal for all nonleaching plants in the A pollution control category
Plants reported to be recycling or reusing water, or with wastewater
treatment facilities, may have already installed at least part of
the equipment required for pollution control and, as a result, the
additional costs required may vary considerably.
Another assumption is that companies with leaching plants in
the C and D pollution control categories will choose to retain
their leachate systems rather than convert to nonleaching plants by
adopting Alternative E, Operating expenses for leaching plants
selecting Alternative E are approximately three times ($244,900) the
estimated operating costs for nonleaching plants in the A category
($79,900). Leaching plants that choose to retain their leachate
systems and invest an additional $220,000 for neutralization and
settling of the leachate (C) over and above the $205,000 required
to install A controls may anticipate an additional expenditure of
approximately $220,000 by 1983 to achieve the ultimate goal of
eliminating all pollutant discharges (D)„ Only two leaching plants
are reported to meet all 1977 requirements at the present time.
The decision on whether to abandon leachate systems will
depend on the ability of the companies with leaching plants to
invest the initial capital required for the C alternative by 1977,,
Those plants that are able to retain the systems will incur lower
operating expenses, as well as the benefits of dust recovery, at a
considerably lower total cost than those that choose Alternative
E, or abandonment. The differences in operating costs of the two
alternatives, in fact, will cover the installation of pollution
controls to eliminate dissolved solids (D) by 1983, and the higher
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-34-
operating costs involved in later years, but still be lower for
plants that retain the leachate systems than for those that abandon
them. As indicated on Table 11, total costs for both alternatives
will be approximately equal in 1978 and higher each year thereafter
for plants abandoning their leaching systems0
If it is assumed that A and C pollution controls will be
implemented by 1977 and D controls by 1983, then those companies
having the largest number of polluting plants will require the most
sizable investments for pollution control. Companies with fewer
polluting plants, however, generally lack the financial resources
of the larger firms and may experience just as much difficulty in
obtaining the necessary funds, despite the smaller amounts required.
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-35-
Table 11
Total Estimated Cumulative Capital and Operating Costs
for Leaching Plants under Pollution Control
Alternatives C and E, 1977-1983a
Retaining Abandoning
leaching system leaching system
1977 Capital (C) $ 425,000 $ 205,000
Operating (C) 129,500 244,900
554,500 449,900
1978 Operating (C) 129,500 244,900
684,000 694,800
1979- Operating (C) 518,000 979,600
1982 1,202,000 1,674,400
1983 Capital (D) 220,000
1,422,000 1,674,400
Operating (D) 224,500 244,900
$1,646,500 $1,919.300
Derived from estimates provided in Development Document
for Effluent Limitations Guidelines and Standards of
Performance; Cement Manufacturing Industry, report
prepared by Southern Research Institute, Birmingham,
June 21, 1973.
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III. Financial Profiles
Cement companies, given the limitations of the financial data
available for 1972 and assuming a relatively strong demand for cement
during the coming decade, should generally experience relatively little
difficulty in meeting pollution control standards set for 1977 and
1983. Just as previous sections of this report indicated that
polluting plants tend to be among the largest and most productive
in the industry, data presented in this section suggest that companies
with polluting plants also tend to be among the most profitable.
Cement represents the total product of comparatively few
companies in the cement industry. The only data generally available
on the role of cement in these companies is the proportion of total
sales accounted for by cement sales. This proportion of total sales
was used to estimate the amount that cement plants contribute to t
their parent companies in total profits before taxes, in cash flow,
and in current assets. The amounts attributable to cement were then
divided by the total number of cement plants operated by each company
to estimate the amount that might be allocated to each plant.
Sources consulted for readily available information on financial
structure included Dun and Bradstreet directories, Standard & Poor
company stock reports, and annual reports published by companies
engaged in cement manufacture„ The available data covered 19 of the
35 companies for which plant data were available and 114 of their
plants, 93 of which are reported by pollution control requirements.
There appears to be an adequate sampling of companies by number of
plants in all pollution categories, except for one-plant companies,
only one of which is included in the financial profiles. The
paucity of data for the other 10 one-plant companies is especially
unfortunate because this one company with the highest per-plant
profits before taxes, current assets, and cash flow of any cement
plant is not considered to be characteristic of other one-plant
companies. Its outstanding performance was attributable to the
gain from the sale of one of its plants in 1972.
A. Plants in Each Segment
The summary of plants for which financial data are available,
as indicated in Table 12, indicates that the average nonleaching
plant in the A pollution control category was more profitable, gen-
erated a greater cash flow, and had greater current assets than average
nonleaching, nonpolluting plants in the X category. The average
leaching plant in the C category of plants requiring the most
extensive pollution controls in 1977 was less profitable, generated
a smaller cash flow, and had fewer current assets than the average
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Table 12
Estimated Total and Average-Per-Plant Net Profits before Taxes, Cash Flow, and
Value of Current Assests, of Selected Cement Companies and Plants by Pollution Control Categories'
Pollution control category
Number of plants per category
Net profits before taxes, total
Average per plant
Estimated cash flow, total
Average per plant
Value of current assets, total
Average per plant
Total
114
Not
known
21
Nonleaching
plants
X
38
A
44
Leacl
C
7
ling plants
C(A)
or (H)
3
D
1
(in millions of dollars)
143.2
1.3
159.5
1.4
490.3
4.3
26.2
1.2
37.2
1.8
86.8
4.1
41.5
1.1
44.7
1.2
153.0
4.0
62.3
1.4
62.9
1.4
203.7
4.6
6.8
1.0
6.8
1.0
31.0
4.4
6.2
2.1
5.7
1.9
13.1
4.4
0.2
0.2
2.3
2.3
2.8
2.8
I
u>
I
a. Derived from company annual reports and Standard & Poor's stock reports, 1972,
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leaching plant in the C(A) or (H) categories that require only
limited controls in 1977. Both groups of average plants in the
C category, however, were more profitable and had greater assets
but generated a smaller cash flow than the average leaching
plant in the D category, which requires no controls until 1983.
The data for leaching plants are inconclusive because so few
plants are involved.
1. Annual profits before taxes
All cement companies for which financial data were
available were profitable in 1972. As indicated in Table 13,
however, estimated average net profits per plant were highest
for companies with three plants, and the highest per-plant
profits were experienced by a company with two plants (if the
profits of the one-plant company are disregarded as not being
representative of other one-plant companies). It may be re-
called that companies with two or three plants also had a
higher proportion of polluting plants than companies with
either fewer or more plants. There does not appear to be any
particular relationship between pollution category and net
profits in companies with five or more plants. However,
profit data do suggest that many of the cement companies with
polluting plants are also among the most profitable and are
apparently financially capable of meeting pollution control
requirements.
2. Annual cash flow
Cash flow was computed by adding depreciation allowances
to profits after taxes and subtracting an estimate of interest
paid on long-term debt at a flat rate of eight percent, except
when more precise debt and interest information was provided.
Although the company generating the largest cash flow in 1972
per plant was also the company with the highest per-plant pro-
fits before taxes for its two cement plants, companies with
six plants tended to have higher cash flows than any other
group of companies with more or less plants.
3. Market value of current assets
All of the cement companies for which data are available
appear to have substantial current salvage assets per plant, but
no consistent pattern is evident. The value of current assets
per plant tends to vary as much by companies with different
numbers of plants as it does for pollution control categories.
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Table 13
Estimated Per-Plant Net Profits before Taxes, Cash Flow, and Value of Current Assets
in 19 Cement Companies, 1972, by Pollution Control Categories3
Giant Portland Cement Co.
OKC Corporation
Puerto Rican Cement Co., Inc.
National Gypsum Company
Missouri Portland Cement Co.
Oregon Portland Cement Co.
Louisville Cement Company
The Flintkote Company
Kaiser Cement & Gypsum Corp.
Alpha Portland Industries
Medusa Corporation
Lehigh Portland Cement Co.
Penn-Dixie Cement Corporation
Amcord, Inc.
Martin Marietta Corp.
General Portland, Inc.
Lone Star Industries, inc.
Marguette Cement Mfg. Company
Ideal Basic Industries, Inc.
1 IX
2 1A
2 2A
2 2A
3 IX,1C(A),1C(H)
3 IX,2A
3 1A
5 5X
5 3A
6 2X,3A
6 4A
6 2X,3A
7 IX, ID
7 3X,1A,3C
9 6X,3A
9 5A
11 7X,4A
12 6X,4A,2C
15 3X,6A,2C,1C(A)
Estimated
net profits
before taxes
per plant
Estimated
cash flow
per plant
Estimated
value of
current
assets per
plant
(in millions of dollars)
7.1
1.4
0.7
4.2
2.0
2.5
2.9
0.4
1.4
0.4
1.2
1.8
0.2
0.8
1.1
1.4
1.0
0.2
2.1
4.7
0.3
1.1
3.3
1.9
n.a.
2.2
0.6
1.4
2.8
1.6
2.1
2.3
0.6
1.0
1.1
1.0
0.5
1.9
18.4
3.2
8.5
1.7
4.8
2.6
5.5
2.5
6.4
2.8
4.6
6.4
2.8
6.2
4.7
4.3
4.7
2.6
3.5
I
U)
vo
I
Derived from company annual reports and Standard and Poor's stock reports, 1972.
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4. Cost structure
Data on fixed and variable assets are not available in
published form. Cost data for average cement plants were provided
by Jo D. Wilson in the aforementioned report on effluent limitation
guidelines,'
B. Distribution of Plants by Pollution Categories
The distribution of cement plants by pollution categories
was presented in Tables 12 and 13, The available financial data
suggest that all of the cement companies are capable of meeting
the pollution standards set for 1977 and 1983. As indicated, the
polluting companies with the lowest average net profits before
taxes and cash flow per plant are the companies with the lowest
pollution control expenditures required per plant. The nonpolluting
companies are not generally in as favorable a position in terms of
profits as the polluting companies, but will also not be as directly
affected by pollution control requirements. As discussed later in
this report, the three companies with plants in both the A and C
categories that did not generate sufficient cash flow or profits
in 1972 alone to cover the total investment for pollution controls
required by 1977 were those undertaking ambitious modernization
programs.
C. Constraints in Financing
The constraints in financing pollution control installations
in cement companies are not likely to be too stringent. As indicated
above f/ almost all the cement companies surveyed appear to be finan-
cially able to meet investment costs just from the profits and cash
flows experienced in 19'2, let alone from profits and cash flow of
the next few years, and no diminution of the demand for cement is
anticipated, at least before 1977- As indicated in the following
section on prices, estimated annual costs for water pollution abate-
ment are likely to be relatively minor in most instances, when
computed on the basis of production per ton of cement.
1. op. cit.
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IV. PRICE DETERMINATION
A. How Prices are Determined in the Cement Industry
Because cement is a dense, bulky commodity, the cement
industry is highly localized. Cement mills are often located close
to quarries, from which raw materials are obtained, and the mills
serve markets that are often less than 300 miles in radius. The
industry in each marketing region can be characterized as oligo-
polistic, or dominated by relatively few producers, each of whom
sells a largely undifferentiated product. The probability is that
plants or firms with a relatively large market share in a. given
region, and located close to raw material reserves, as v/eli as
to the market, play a significant role in establishing price,
Price, at least in an initial sense, is likely to be based
on a "cost plus" mechanism. According to this mechanism, for a
1.3vel of output at or above the breakeven point, average direct
cost per ton of cement is estimated and a given percentage of
direct cost is added to direct cost to cover both fixed cost per
ton and desired profit margin per ton. The price based on this
formula may be called the normal price. The actual price per ton
that a firm seeks to charge in a given location is the normal
price, plus the published freight charge per ton from the mill to
the given customer location, minus any discounts and allowances.
Hence, the actual price (including freight) that a firm seeks to
charge in a given location varies according to the customer location
relative to the mill.
The firm that ordinarily sets the price as price leader
usually has a cost advantage based on location and scale and is
usually large in terms of local market share. Other firms that
have less of a cost advantage and produce lower volumes of output
will charge an actual price close to that of the actual price
charged by the price leader. The normal price determined by the
price leader in a given location is the price at which it pre-
sumably maximizes its profits (or minimizes its losses).
The process by which price determination is achieved by
the price leader is graphically suggested in Figure 3, according
to the comments of F. M. Sherer,' but this diagram has not been
substantiated by detailed supporting data during the course of this
study.
1. "Conditions Facilitating Oligopolistic Coordination", Industrial
Market Structure and Economic Performance, F.M. Sherer,
Rand McNally & Company, Chicago, 1970.
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Figure 3
Equilibrium Under Dominant Firm Price Leadership
0)
o
-H
H
PU
X
Quantity
-------
-43-
Cement is a homogeneous product and there are often both
large and small firms producing cement in a given market area.
The dominant firm supplies a major portion of the market and the
fringe of competitive firms supply the rest. The fringe of com-
petitive firms is hypothesized to take the announced price of the
dominant firm and produce a level of output at which marginal
revenue (MR) and marginal cost (MC) are equal, whereupon short-run
marginal cost rises to equality with price. The overall market
demand curve in a given location is D'D. The supply cur.ve for all
the members of the competitive fringe, except the price leader, is
S'S. At the price OS1 that may be set by the dominant firm, the
supply of output by the fringe of competitive firms, according to
Sherer, is zero. At price OG, the competitive fringe supplies all
the output demanded in the market with no output left over for the
dominant firm. At price OS1 the entire market is held by the
dominant firm. Hence, the effective demand curve of the dominant
firm (residual demand curve) is a kinked demand curve, GBD. The
marginal revenue curve of the dominant firm is GMR. The price
announced by the dominant firm is OP, at which the dominant firm
maximizes its profits (MR=MC). The output produced and sold by the
dominant firm is OX=PZ and the output produced by the fringe of
competitive firms is ZA=PT. The total output supplied in the
market is PA= (PZ + PT) and the overall local market is in
equilibrium (supply=demand).
Although the dominant firm in practice may not exactly follow
a path as illustrated in the graph, the dominant firm periodically
revises its price and such price revision is generally followed
by the fringe of competitive firms.
The leader and its fringe of competitors generally serve a
market within a radius of about 200 miles, although large-scale
plants often serve markets within about 300 miles. Prices do vary
from small area to small area because, apart from varying raw
material conditions and processing differences, freight charges
are added to the normal price. The dominant firm may serve a
market beyond 200 miles, thus encroaching upon markets in other
locations. In such case, the dominant firm may absorb part of
the profit to achieve penetration; may give discounts or easy
credit; may provide retail distribution facilities, or may give
any other non-price benefit to the customer. The cement firms
in a given location may also ship to other distant locations in
which there is short-run excess demand over supply.
B. Likelihood of Price Changes and Possible Secondary Effects
According to the distribution of cement plants by water
pollution status, it is clear that in most local geographic markets
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-44-
th ere are cement plants both with and without water pollution
problems. Of all the alternative pollution control methods,
Alternative E has the highest estimated additional annual cost
of implementing water pollution control. Extra annual costs of
implementing alternative pollution control methods are given below:
Alternative Pollution Control Methods
A C D E
Extra annual average cost
per short ton $0.24 $0.40 $0.69 $0.75
These figures are arrived at by dividing the estimated incremental
total annual costs per plant for each alternative by average output.
The average cost per short ton was estimated as $15.91. Average
mill prices1 per short ton, average city prices, and average area
prices in the United States are about $24.28, $26.00, and $27.90,
respectively (see Figure 4). The difference between the average
mill price and the city or area price is presumed to be reflective
of freight, storage, and related charges. The average estimated
additional cost for Alternative A (installation of cooling tower
or spray pond and containment of runoff from dust piles is $0.24 per
short ton; for Alternative C (recycle and reuse) it is $0.40;
for Alternative D (same as C, plus electrodialysis of leachate to
reduce TDS and recycling of leachate) it is $0.69; and for
Alternative E (abandonment of dust leaching) it is $0.75.
Whether or not the demand curve shifts upwards, the primary
impact of implementing water pollution control methods is most
likely to be an increase in prices, however limited these in-
creases may be and however these increases may vary from one local
market to the next. The reasoning relative to the increase in
prices is illustrated graphically in Figure 5.
Suppose the price leader has a plant without water
pollution control problems and suppose one or all the competi-
tive fringe firms in a given market area have to implement water
pollution control methods. Then the supply curve of the competi-
tive fringe will be shifted downwards from S;S;l to S2S2 and,
hence, the demand curve of the price leader and marginal revenue
of the price leader will be shifted upwards. The result will be
an increase in price charged by the price leader and the other
firms. The price increase is most likely to occur, however,
when the price leader has to implement water pollution control
methods.
1. Engineering News Record, "Monthly Market Quotation,"
August 9, 1973.
-------
Figure 4
Selected Prices of Bulk Cen.ent0
(in dollars per CWT)
a. Engineering News Record/ McGraw-Hill Publishing Co., High stown, August 9, 1973.
Prices are quoted after deduction for discounts and incli-.de city, mill, and area
averages.
01
i
-------
-46-
Figure 5
Under Dominant Firm Price Leadership
Before and After Cost Increases of Competitive Fringe Firms
G2
G1
O
X1 X2
Quantity
-------
-47-
Although the extent of the price increases cannot be pre-
dicted accurately, such increases, in terms of average current
area prices in the United States for alternate pollution control
categories, are estimated as 0.86 percent for the A category;
1.43 percent for C; 2.47 percent for D; and 2.68 percent for E.
The number of plants in category A (54) is similar to the
number of plants (56) without water pollution problems. The
number of plants in categories C, D, and E is small. Hence,
the increase in overall price because of the implementation
of water pollution problems appears to be insignificant.
As a result, meaningful secondary effects in the industry
are likely to be rather limited.
To the extent that some polluting plants experience an
increase in variable costs, however minor, their preferred level
of output will decline. But that decline in output (and sales),
should it occur, is likely to be matched by an increase in
output (and sales) of nonpolluters. Thus, some changes in
factor employment or utilization may take place. If small
plants lose sales to larger, more efficient plants, some small
net loss in employment may ensue in a local market.
To the extent that costs of some polluting plants in-
crease and if those plants choose to absorb the increase and
not seek to raise prices, a decline in profits may then follow.
This should be followed in turn by a reduction, however small,
in state and federal corporate income taxes. To the extent
that increased depreciation is involved as a result of in-
stalling new pollution control facilities, a decline in profits
should be partially offset by increased cash flow.
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V ASSESSMENT OF ECONOMIC IMPACT OF POLLUTION CONTROL
REQUIREMENTS_ON THE CEMENT INDUSTRY
A. Best Practicable ControlTechnology Currently Available
The technology for implementing pollution control standards
in the cement industry by 1977 is not only available and practicable,
but is already operating in approximately half the 123 cement plants
for which data are available-. The 44 plants which have not been
reviewed are also plants that have not applied for RAPP applications,
suggesting that they may in fact not be discharging pollutants at
this timeu
Ba Best Available Control Technology Economically Achievable
The most economically achievable technology for achieving
essentially no discharge of pollutants in cement plants with leaching
systems has not yet been determined. An electrodialysis process has
been suggestedf but its suitability for cement plants has not been
tested. All cement plants with leaching systems, however, can at
about the same level of additional capital expenditures as nonleaching
plants, achieve no discharge of pollutants by abandoning their
leaching systems and instituting the same pollution control pro-
cedures as nonleaching plants^ This, however, will result in
increased annual costs. Only two leaching plants have achieved the
maximum level of pollution control attainable by technology currently
available and these plants may also achieve a nonpolluting status in
1977 by abandoning their leachate systems, at least until such time
as economically achievable control technology is developed.
Co New Source Standards
Standards for new sources of effluent discharges into navi-
gable streams apparently need only be set at 1977 levels to insure
that all new cement plants achieve essentially no discharge of
pollutants by avoiding the use of leaching systems. Should new
plants with leachate systems be built,, they would have to meet the
standards in effect at the time of construction.
D. New Source Pretreatment Standards
Pretreatment standards for new sources discharging process
wastes into municipal sewer systems should be basically similar to
the standards set for new sources discharging into navigable streams„
Inasmuch as these municipal water treatment facilities have their
own guidelines or limitations on allowable discharges, and few
currently permit any cement plant discharges except sanitary wastes
into their systems, the issue may be academic0
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VI. IMPACT ANALYSIS
The economic impact of pollution control standards on the
cement industry, based on data available for 35 companies and
123 plants, will involve a strain on the internal financial re-
sources of some companies with polluting cement plants and only
negligible increases in cement prices in most sections of the
country. No general curtailments of production and no general
manpower layoffs are anticipated as a direct result of pollution
control requirements. Should the demand for cement soften
relative to supply, however, a few of the more inefficient and
financially weak polluting plants located close to ncnpolluting
plants may be among the first to be abandoned.
In the light of recent trends in the cement industry, dt
is unlikely that new cement plants will be built, especially new
plants with leaching systems. Should new plants be built, however,
they could and should be obliged to meet 1977 or 1983 standards.
For that reason, new source pretreatment standards (Levels III and
IV), will be unnecessary.
A. Price Effects
It has already been established in the preceding section
on prices that the annual average increase in operating costs per
ton resulting from pollution control installation is estimated
at $0.24 per ton for the 54 nonleaching plants in the A catergory,
and $0.40 per ton for the 11 leaching plants in the C category.
The annual average operating costs for all plants in the C
category and the two leaching plants currently meeting 1977
standards, it was estimated, will increase to $0.69 per ton at
the time the 1983 standards for no discharge of pollutants are im-
plemented.
1. Price increase
All other things remaining the same, these increased annual
average costs, including interest and depreciation, allowances,
as was pointed out, may generally be expected to result in
average cement price increases of less than 1% (0.86) for plants in
the A category, of less than 1.5% (1.43) for plants in the C
category, and less than 2.5% (2.47) for leaching plants meeting
1983 standards. Leaching plants choosing to abandon leachate
systems may anticipate additional annual average costs of $0.75
per ton, requiring average cement price increases of a little
less than 2.75% (2.68).
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-50-
Estimated increases in operating expenditures as a result
of pollution control requirements, however, may not, as suggested,
actually result in increased prices to consumers. Part of the
cost increases arising from water pollution control efforts may
be absorbed in whole or in part in numerous markets across the
country by cement plants located in close proximity to nonpolluting
plants, if the polluting plants choose to retain their competitive
market sales position. On the other hand, the domination of any
local market area by polluting companies may be reflected in
slightly higher prices by all cement plants, as the nonpolluting
companies may also choose to raise their prices to the same level
as polluting companies, especially in the face of strong demand,
and increase their profits, rather than attempt to encroach on
the market held by the dominant companies,
2. Secondary effects
The full range of secondary effects from price increases
arising from increased costs due to pollution control efforts
may include changes in the following: market share of competitors
in close proximity to each other; production and employment in
the various competitive plants; scale of operations of either
polluters or nearby nonpolluters; profits and internal cash
generation; and consumption of cement and its substitutes.
To the extent that plants experiencing such cost increases
operate in local markets where nonpolluters are also located, as
is the case in many areas across the nation, price increases
may be forestalled, as already pointed out, and the polluting
firms may be obliged to absorb such increased costs, thus sharing
those increased costs between themselves and income tax collecting
agencies- A rise in depreciation expenses should tend to mitigate
somewhat a decline in cash flow, Should these firms choose to
curtail their own production and employment and thus avoid some
part of the increase in costs, that part of demand not satisfied
would likely be transferred to other firms, which in turn will
face the option of increasing their capacity and improving their
production, thus experiencing at least a relative decline in
their costs and prices0
The polluting companies, however, are often those with
modernized plants and relatively high productivity. Faced with
the prospect of rising short-run average total costs for pollution
control in a period of relatively strong demand, these polluting
firms may choose to expand their capacity and improve their
productivity even further, thus protecting their shares of the
market and their profitability,,
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If a transfer of output does occur from low-productivity to
high-productivity plants in given local markets as a result of
increases in average total costs arising from pollution control
efforts, there may follow a minor reduction in overall employ-
ment.
To the extent that price increases arising from pollution
control efforts remain negligible or, at worst, minor, resulting
changes in the amount of cement consumed, in the amount of cement
substitutes consumed, and in the volume of construction, should
likewise be negligible or minor. Imposition of pollution controls
on industries producing cement substitutes should serve to
minimize further the extent of change in employment, output, and
use of cement arising from the imposition of water pollution con-
trols in the cement industry.
B. Financial Effects
The financial data covered in this report are all as of
1972, a year in which demand for cement was relatively strong,
plants tended to operate at or near capacity, and profits
apparently were generally high. The demand for cement from 1970
to 1980 has been estimated to increase at a 3% annual rate in
Rock Products1, and at a 3.3% annual rate in Predicasts2.
Engineering News Record3has forecast an increase of 6% in profits
before taxes for the cement industry as a whole between 1972 and
1973. Thus, 1972 may be considered a representative year for the
decade of the 1970's for the cement industry.
1. Rock Products, McLean-Hunter Publishing Company, Chicago,
December, 1972, p 68.
2. Predicasts, Predicasts, Inc., Cleveland, April 27, 1973,
p A-17.
3. Engineering News Record, McGraw-Hill Publishing Company,
Hightstown, March 15, 1973, p 61.
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1. Profitability
Profit data available for 19 of the 35 companies with
cement plants suggest that all cement companies experienced sub-
stantial profits in 1972. The proportion of total company profits
before taxes attributed to cement plants only has been estimated
on the basis of the proportion of cement sales to total company
sales, rather than to the actual contribution of cement plants
to net profits. This proportion is, therefore, only a rough
approximation based on limited data about the larger companies,
but represents the only data generally available. Percentages
based on sales may even be somewhat conservative because, for
the two companies for which the proportion of cement net profits
to total net profits was also reported, one was higher (by 10%)
and one was lower (by 0.3%) than the percentages based on sales.
As indicated in Table 14, all companies for which data
are presented and which operate cement plants experienced a
profit in 1972, although estimated average net profit before
taxes per cement plant varied from $0.16 million per plant for
a company with 12 plants to $4.19 million for a company with
two plants. The one-plant company with net profits after taxes
of $7.1 million is not considered representative of other one-
plant companies, as explained earlier in this report.
Net profits before taxes from cement operations totaled
an estimated $145.0 million in 1972 for the 19 companies for
which data were available. Annual operating costs for pollution
controls, including the costs of capital, operation and mainte-
nance, energy and power, and depreciation, were estimated to
total $4.7 for these companies in 1977, or 3.3% of cement plant
profits in 1972, and $6.0 million, or 4.2% of 1972 profits in
1983. These annual costs constitute a relatively small per-
centage of annual profits in most companies reported and should
not adversely affect profitability to any great extent.
On a per-plant basis, however, one company is estimated
to require a greater amount for annual operating expenses for
pollution controls in 1977 than its estimated profits before
taxes per cement plant in 1972. This same firm recently abandoned
one nonleaching plant, but the plant was not discharging pollutants,
It may, however, have contributed to the company's relatively poor
profits in 1972.
The 19 companies for which financial data are provided
account for approximately 86% of the.total annual expenditures
estimated for the entire industry, as summarized in Table 15,
and for approximately 75% of the total estimated capital in-
vestment required in 1977 for pollution controls. Although the
financial data presented in this study are limited to about
half of all the companies in the industry, annual reports re-
ceived from almost every company with cement plants indicated
that cement operations were profitable in 1972.
-------
Ta,,ie 14
Estimated Profitability and Annual Water Pollution Control Costs for Cement Plants by Company"
Company
Alpha Portland Industries/ Inc.
Amcord, Inc.
The Flintkote Company
General Portland* Inc.
Giant Portland Cement Co.
Ideal Basic Industries , Inc.
Raise: Cement & Gypsum Corp.
Lehig:, Portland Cement Co.
Lone Star Industries , Inc .
Louisville Cement Company
Marquette Cement Mfg. Co,
Martin Marietta Corp.
(Cement and Lime Division)
Medusa Corporation
Missouri Portland Cement Co.
National Gypsum Company
OKC Corporation
Oregon Portland Cement Co.
Penn-Dixie Cement Corp.
Puerto Kican Cement Co., Inc.
Reported
total
net profits
before taxes
(in millions
of dollars)
6.3
7.4
24.0
19.2
7.1
36.4
13.0
12.6
35.8
8.6
1.9
86.7
10.9
7.6
55.9
8.6C
7.6
7.4
1.8
Cement
sales as a
percentage
of total
company sales
33.6
71.1
9.0
63.7
100.0
86.4
55.2
8.6. Ob
32.0
100.0
loo.o
11.0
66.0
80.0
15.0
33.0
100.0
23.0
79.0
Estimated net
profits before
taxes of
cement plants
(in millions
of dollars)
2.1
5.3
2.2
12.2
7.1
31.4
7.2
10. 8b
11.5
8.6
1.9
9.5
7.2
6.1
8.4
2.8C
7.6
1.7
1.4
Total
Number
Estimated Estimated
Number of average annual operating
cement plants net profits costs for
reported by before taxes per water pollution
water pollu- cement plant controls, 1977
tion control (in millions (in millions
of plants category
6
7
S
9
1
15
5
6
11
3
12
9
6
3
2
2
3
7
2
2X,3A
3X,1A,3C
5X
5A
IX
3X,6A,2C,1C (A)
3A
2X,3A
7X,4A
1A
6X,4A,2C
6X,3A
4A
IX, 1C (A), 1C (H)
2A
1A
IX, 2A
IX, ID
2A
of dollars)
0.35
0.75
0.43
1.36
7.10
2.10
1.44
1.81b
1.04
2.87
0.16
1.06
1.20
2.03
4.19
1.42C
2.53
0.24
0.71
of dollars)
0.24
0.47
-
0.40
-
0.82
0.24
0.24
0.32
0.08
0.58
0.24
0.32
0.08
0.16
0.08
0.16
0.13
0.16
Estimated
annual operating
costs for
water pollution
controls, 1983
(in millions
of dollars)
0.24
0.75
_
0.40
-
1.15
0.24
0.24
0.32
0.08
0.77
0.24
0.32
0.45
0.16
0.08
0.16
0.22
0.16
I
Ul
CO
I
a. Financial data were derived from company annual reports and Standard & Poor's stock reports, 1972. Estimates 01
annual costs were derived from Development Document for Effluent Limitations Guidelines and Standards of
Performance, report prepared by Southern Research Institute, Birmingham, June 21, 1973.
b. Includes sales of all construction materials.
c. Excludes extraordinary items.
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-54-
Table 15
Costs of Meeting Pollution Control Requirements in the
Cement Industry in 1977 and 1983a
Investment
Number of
plants
56
54
8
2
1
2
Total 123
Pollution
control
category
X
A
C
C(A)
C(H)
D
Per plant
-
$205,000
425,000
205,000
5,000
220,000
Total
1977
-
$11,070,000
3,400,000 $1
410,000
5,000
—
$14,885,000 $2
1983
-
-
,760,000
440,000
220,000
440,000
,860,000
Annual operating costs
56
54
8
2
1
___2
Total 123
a. Development
Standards of
X
A
C
C(A)
C(H)
D
Document for
Performance
-
$ 79,900
129,500
79,900
_
224,500
-
$ 4,314,600 $4
1,036,000 1
159,800
-
—
-
,314,600
,796,000
449,000
224,500
449,000
$ 5,510,400 $7,233,100
Effluent Limitations Guidelines and
: Cement
Manufacturing Industry, repi
prepared for U.S. Environmental Protection Agency by Southern
Research Institute, June 21, 1973.
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-55-
2. Capital availability
Cash flow represents the internal generation of funds, or,
as defined in earlier sections of this report, the sum of net
income after taxes and depreciation less interest payments. The
ease with which companies may raise funds from outside sources,
particularly in periods of high interest rates and limited
availability of funds, is an aspect of capital availability that
has been omitted from this study.
As indicated on Table 16, the estimated average cash flow
generated in 1972 per cement plant for companies for which selected
data are available is less than the estimated required capital
expenditures for pollution control in 1977 in the three companies
with the greatest number of polluting plants. Noting that there
are four years remaining to 1977, all of these three companies
can readily generate sufficient internal funds to pay for these
pollution control investments, but obviously, this may impinge
on other necessary investments and distributions. These com-
panies, however, all have substantial resources and, in the
expectation of a continued strong demand for cement are engaged
in or planning to increase capacity, rather than to shut down
operations.
One of these companies has been undergoing a major manage-
ment reorganization and two of its leading plants are temporarily
closed for repairs and modernization. Nevertheless/ the company
was able to negotiate a bank loan for $20 million in 1972 for
consolidation of its debts, suggesting that its operations are
basically solvent. Another had been financing capital outlays
through internally generated funds until 1972, but anticipates
having to borrow to finance estimated capital outlays of $37
million in 1973. Some part of these outlays may well be for
pollution controls. The third company has been actively engaged
in enlarging capacity in its plants in recent years, using both
internally generated and borrowed funds. Only one nonpolluting,
nonleaching plant was abandoned in the process (in 1973). The
rest of its plants are far more likely to be modernized in its
continuing program of increasing capacity than to be closed.
C. Production Effects
As indicated above, expansion, rather than curtailment,
of productive facilities has been the goal of cement companies,
especially in more recent years, and this process is expected
to be continued for the rest of this decade. Although cement
production is apparently currently profitable, companies are
building few new facilities, but rather are modernizing older
plants in their effort to increase capacity and ostensibly im-
prove their cost standing. In a general sense, capital expendi-
tures for required water pollution controls appear to be almost
negligible when compared with outlays for larger kilns, for
-------
Table 16
Companies by Number of Plants and Estimated Capital Costs for Pollution Controls, 1977 and 1983a
Company*1
Number of cement plants by
pollution control category
Estimated capital
costs, 1977, for
pollution control
(in thousands
of dollars)
Dundee Cement Company
Penn-Dixie Cement Corporation
Atlantic Cement Company
California Portland Cement
Company
Columbia Cement Company
Louisville Cement Company
Mississippi Valley Portland
Cement Company
OKC Corporation
South Dakota Cement Plant
Missouri Portland Cement
Company
Ash Grove Cement Company
National Gypsum Company
Puerto Rican Cement Company, ii
Oregon Portland Cement
Company
National Portland Cement
Company
Alpha Portland
Industries, Inc.
Kaiser Cement and Gypsum Corp.
Lehigh Portland Cement Company
Martin Marietta Corporation
Universal-Atlas Cement Div.
Medusa Corporation
Lone Star Industries, Inc.
General Portland, Inc.
Amcord, Inc.
Marquette Cement Mfg. Company
Ideal Basic Industries, Inc.
Total
IX
IX
1C.
IX
2X
2X
6X
7X
7X
3X
6X
3X
39Xb
ID
ID
1A
1A
1A
1A
1A
1A
1A
1C (A) 1C(H)
2A
2A
2A •
2A
1C
3A
3A
3A
3A
3A
4A
4A
5A
1A 3C
4A 2C
6 A 2C 1C (A)
54A 8C 2C(A) 1C(H) 2D
205
205
205
205
205
205
205
210
410
410
410
410
425
615
615
615
615
615
820
820
1,025
1,670
1,480
2,285
14,885
Estimated capital
costs, 1983, for
pollution control
(in thousands
of dollars)
220
220
440
220
660
440
660
2,860
Estimated
net profits
per plant
before taxes,
(in millions
of dollars)
0.24
2.87
1.09
2.03
4.19
0.71
2.53
0.35
1.44
1.31
1.06
20
04
1.36
0.75
0.16
2.10
Estimated
annual
cash flow
per plant
(in millions
of dollars)
2.27
2.23
0.30
1.89
3.33
1.05
N/A
2.75
1.41
2.13
0.96
1.56
0.97
1.11
0.64
0.51
1.93
CTi
I
a. Financial data were derived from company annual reports and Standard & Poor's stock reports, 1972. Estimates of
capital costs were derived from Development Document for Effluent Limitations Guidelines and Standards of
Performance, report prepared by Southern Research Institute, Birmingham, June 21, 1973.
b. The other 9 companies and 17 plants currently meeting 1977 pollution standards include Flintkote and Southwestern
with 5 plants each and Giant, Gulf Coast, Monarch, National Cement, San Juan, Santee, and Whitehall with one plant
each.
-------
-57-
example. Annual operating costs for water pollution control are
similarly minor compared to annual profitability. Pollution
control standards, if enforced during a period of strong demand
for cement, are not likely to have a serious negative economic
impact on the cement industry, so far as can be determined.
Should the demand for cement decrease after 1977, as it did
during the 1960's, the only plants not pollutant free at that
time will be those with leaching systems, which represent a
minor percentage of total plants and capacity in the industry.
D. Employment Effects
Given these findings, there is little reason to expect
significant adverse effects on employment in the cement industry
nationally as a result of the imposition of water pollution con-
trol standards. As suggested above, in the discussion of secondary
effects of price increases, the probability is that adverse effects
on production and employment, to the extent they may occur are
likely to be highly localized in nature, as well as limited in
effect.
To provide a more detailed market-by-market analysis of
production and employment effects would require far greater
data than was obtained for this study on individual plant scale,
economics, and finances.
E. Re s uItant C ommun i tyEf f ec t s
As indicated above, the major community effects will be
clean water and its attendant benefits, as neither plant closings
nor unemployment are likely to result per se from the imposition
of water pollution control requirements.
F. Effects on International Trade
Portland cement is neither imported nor exported in
sufficient quantity to affect in any meaningful way our balance
of payments situation. Although the quantity of cement imported
has increased every year since 1968, imports in 1972 amounted
to less than five million tons, or 5.3% of domestic output.
This quantity was valued at less than one million dollars.
Exports have not exceeded 200,000 tons annually for at least
the past five years.
These increases in imports, although very likely concen-
trated in water oriented markets, suggest that tightness of
local supply relative to growing demand may have been the pri-
mary factor at work. Satisfying water pollution abatement re-
quirements, it has been suggested earlier in this report, is
not likely to result in curtailment of supply in local markets,
nor is it likely to result in significantly increased prices.
Thus, there is relatively little likelihood that disproportionate
increases in imports of cement are likely to occur as a result
of meeting water pollution abatement requirements.
-------
-58-
VII. LIMITS OF THE ANALYSIS AND IDENTITY OF
MAJOR INFORMATION SOURCES
This study covers only 123, or 73% of the 167 plants
and an estimated 80% of the total capacity and production in
the cement industry. The 123 plants that are analyzed in-
clude 88 plants with RAPP applications in 1970 or 1971 and 35
plants surveyed by Southern Research Institute through question-
naires and plant visits during the spring of 1973. Information
on the cement industry as a whole was obtained from the published
sources listed in the Bibliography. The major sources for
company financial data were publications of Dun and Bradstreet
and Standard & Poor and annual reports of cement-producing
companies, as well as trade journals. Cement price information
was also obtained by telephone contacts with a limited number
of personnel of companies involved in the cement industry.
A. Accuracy
Verification by spot checks of the data reported by
plants in questionnaire responses and RAPP applications re-
vealed a number of minor discrepancies in the technical report
that have been corrected for this report. Most of these
errors involved changes of 10 tons more or less in capacity
and daily production. More significantly, two plants,
originally classified as nonleaching plants have been re-
classified as leaching plants because they use a wet-scrubber
process. As a result, all references in this economic impact
report to plants by pollution categories are deemed to be
correct. None of these revisions, however, substantially
affected the conclusions reached in this study.
B. Range of Error
There are two major possible sources of error that
could not be avoided within the time and cost limitations
of this study. One is the use of price information as of
a specific date. Current prices, as reported in Engineering
News Record vary by locality from month to month. One
month prices, whether reported as FOB city, by mill, or
by area, may reflect only a temporary local situation. The
-------
-59-
use of an average price, however, whether by locality or over
time, would tend to distort regional prices or conceal price
trends. The decision to use the latest available prices was
considered to be the most expedient method of resolving the
issue.
The second significant source of error arises from the
technique used to estimate the proportion of a company's net
profits before taxes, value of current assets, and cash flow that
might be allocated to cement plants by pollution categories. Some
companies make no distinction between cement and other operations,
some do not separate cement from other construction materials, and
a few report net profits, as well as net sales, from their cement
plants. The majority, however, report revenues from cement sales,
either by amount, or as a percentage, of total sales. This per-
centage was applied to the net profits, current assets, and cash
flow of companies to determine the amount that might be allocable
to cement operations. The amount computed was then divided by the
total number of cement plants owned by a company to obtain an admittedly
rough estimate of the average finances per plant in that company.
This methodology is simple, but the explicit use of sales as a
measure of the contribution of cement activities to the overall
financial structure should be subjected to further validation.
C. Critical Assumptions - Sensitivity to Overall Conclusions
The critical assumptions in this study, to which the con-
clusions of this study are tied, involve the following points:
- nature of effluent discharges, nature of requirements
for achieving essentially no discharge of pollutants,
and nature of control technologies.
- costs, both capital and annual, for controlling
pollutants for attaining essentially no discharge of
pollutants; such costs are implicitly dependent on the
available technology
- local or regional nature of cement markets and dispersion
of polluting and nonpolluting cement plants in many local
or regional markets across the nation
- oligopolistic nature of, including product homogeneity
and, in most local or regional markets, the proba-
bility of price leadership
- high frequency of polluters among moderate and large-
-------
-60-
size companies that are apparently enjoying fairly
good profits and cash flow
- relatively strong demand for cement compared to supply
in the nation and in many local or regional markets
currently, a condition that is expected to continue for
some time
- proclivity of cement companies to modernize and expand
capacity, rather than build new plants
Taken together, these points and the introduction of
quantifying and qualifying facts about them, lead to the con-
clusion that generally, across the nation, the economic impact
of costs for achieving water pollution control standards will
tend to be negligible, and that problems that do arise will tend
to be minor in their effects and highly localized. A relaxation
of the assumptions will necessarily force changes in the con-
clusions .
D. Unanswered Questions
The primary unanswered questions pertain to the following:
- the actual additional costs that are likely to be
experienced by individual plants in their effort to
meet standards
- the specific economic character, including price levels,
of the many local cement markets and the actual role of
polluting and nonpolluting plants in these markets
- the actual financial status of the various polluting
plants and their parent companies
The nature of the information available thus far and presented
in this report, however, leads to the conclusion that the con-
clusions about the economic impact of water pollution standards
are reasonable and defensible.
-------
-61-
BIBLIOGRAPHY
1. American Cement Directory 1972, Bradley Pulverizer Company,
April, 1972.
2. The Cement Industry; Economic Impact of Pollution Control Costs,
prepared by the Boston Consulting Group for the U. S~.Environ-
ment Protection Agency, November, 1971.
3. Commodity Data Summaries, Bureau of Mines, U. S0 Department of
the interior, January, 1973, pp 114-115.
4. Development of Data and Recommendations for Industrial Effluent
Limitations Guidelines and Standards of Performance; Cement~
Manufacturing Industry, prepared by Southern Research Institute
Institute for the U.S. Environmental Protection Agency,
June 21, 1973.
5. Dun and Bradstreets Million Dollar Directory, Dun and Bradstreet,
Inc., New York, 1973.
6. Engineering News Record, "Monthly Market Quotations by ENR
Field Reporters", McGraw-Hill Publishing Company, Hightstown,
January-August, 1973.
_, "Industry Looks for Heftier Profits", March 15,
1973, p 61.
8. F. M. Sherer, Industrial Market Structure and Economic Per-
formance" , Conditions Facilitating Oliogopolistic Coordination",
Rand McNally S, Company, Chicago, 1970.
9. Industry Week, "Low Profits, Pollution Costs to Bring More
Cement Shortages", Penton Publishing Company, Cleveland,
May 21, 1973, p 67.
10. Predicasts, Predicasts, Inc., Cleveland, April 27, 1973, pp 17-18
11. Rock Products, "Cement Today", Maclean-Hunter Publishing
Corporation, Chicago, Vol 76, No. 5, May, 1973, p 75.
12. , "The Year Ahead", Vol 75, No. 5, December, 1972,
pTT:
13. U. S. Industrial Outlook 1972 with Projections to 1980, Bureau
of Domestic Commerce, U. S. Department of Commerce, 19*73.
-------
-62-
BIBLIOLGRAPHY (Cont'd)
14. Standard and Poor Company Stock Reports (no annual report
available):
Amcord, Inc.
California Portland Cement Company
15. 1972 Annual Reports:
Alpha Portland Industries, Inc.
Centex Cement Corporation
Coplay Cement Manufacturing Co.
The Flintkoke Company
General Portland, Inc0
Giant Portland Cement Company
Gifford-Hill and Company, Inc.
Gulf Coast (McDonough Co.)
Ideal Basic Industries, Inc.
Kaiser Cement & Gypsum Corporation
Keystone Portland Cement Company
Lehigh Portland Cement Company
Louisville Cement Company
Lone Star Industries
Marquette Cement Manufacturing Company
Martin Marietta Corporation
Medusa Corporation
Missouri Portland Cement Company
National Cement Company (The Mead Corp.)
National Gypsum Company
OKC Corporation
Oregon Portland Cement Comapny
Penn-Dixie Cement Corporation
Puerto Rican Cement Co0, Inc.
Southwestern Portland Cement Co. (Southdown)
Universal-Atlas Division, United States
Steel Corporation
-------
BIBLIOGRAPHIC DATA '• Report No. 2.
SHEET EPA-230/1-7 3-004
1. Title and Subtitle
Economic Analysis of Proposed Effluent Guidelines:
Cement Industry
7. Author(s)
Sheldon Schaffer and Pearl Tropper
9. Performing Organization, Name and Address
Economic Research and Planning Section
Southern Research Institute
2000 Ninth Avenue, South
Birmingham, Alabama 35205
12. Sponsoring Organization Name and Address
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D. C. 20400
3. Recipient's Accession No.
5* Report Date
August 1973
6.
8. Performing Organization Kept.
No- 3131
10. Project/Task/Work Unit No.
11. Contract/Grant No.
68-01-1571
13. Type of Report & Period
Covered
Final
14.
15. Supplementary Notes
16. Abstracts
This report assesses the economic impact of estimated costs for water
pollution controls on the cement industry. The analysis is based on
a segmentation of cement plants by the alternative controls required
to achieve essentially pollutant-free effluent discharges by 1977 or
1983, and on the financial ability of companies with polluting plants
to meet the proposed standards. The conclusions reached, based on
the data available, are that the imposition of pollution controls may
strain the internal financial resources of some companies and will
probably result in very limited increases in cement prices, but will
not lead to plant shut-downs or increases in unemployment provided
the demand for cement continues at present levels.
17. Key Words and Document Analysis. 17o. Descriptors
cement
economic impact
leaching cement plants
nonleaching cement plants
water pollution controls
17b. Identifiers /Open-Ended Terms
17e. COSAT1 Field/Group
18. Availability Statement
National Technical Information Service
Springfield, Virginia 22151
19. Security Class (This
Report )
I'NCl ASSlKirO
20. So-uriiy I lass ( 1 Ins
Pa^c
UNri.ASSIKII 1)
21. No. of Paiji-s
62
22. Price
FORM NTIS-35 (HEV.
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