EPA 230/1-73-009
AUGUST.1973
        ECONOMIC ANALYSIS
                 OF
  PROPOSED EFFLUENT GUIDELINES


THE  FERROALLOYS 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, B.C.   20460
        The document will subsequently be available
     through the National Technical Information Service,
                Springfield, Virginia 22151

-------
EPA-230/1-73-009
                      ECONOMIC ANALYSIS
                             OF
              THE PROPOSED EFFLUENT GUIDELINES
                             FOR
                  THE FERROALLOYS  INDUSTRY
                       SEPTEMBER,  1973
              OFFICE OF PLANNING AND EVALUATION
               ENVIRONMENTAL PROTECTION AGENCY
                  WASHINGTON,  D.C.   20460
                   CONTRACT NO.  68-01-1545
                        U.S.

-------
                      EPA REVIEW NOTICE





     This report has been reviewed by the Office of Planning



and Evaluation of 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 constitute endorse-



ment or recommendation for use.

-------
                           PREFACE


     The attached document is a contractors' study prepared for
the Office of Planning and Evaluation of the Environmental Pro-
tection 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 per-
formance 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 Development
Document") supporting the issuance of proposed regulations under
sections 304(b) and 306.  The Development Document surveys exist-
ing and potential waste treatment control methods and technology
within particular industrial source categories and supports pro-
mulgation 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
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 produce 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 review
of the Office of Planning and Evaluation of EPA.  This report was
submitted in fulfillment of Contract No. 68-01-1545 by A. T.
Kearney, Inc.   Work was completed as of September, 1973.

     This report is being released and circulated at approximately
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 publication.  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 proceed-
ings 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 repre-
sented in any respect in any such proceeding as a statement of
EPA's views regarding the subject industry.

-------
              ENVIRONMENTAL PROTECTION AGENCY

             ECONOMIC ANALYSIS OF THE PROPOSED
      EFFLUENT GUIDELINES FOR THE FERROALLOYS INDUSTRY
                     TABLE OF CONTENTS
Section                    Title                          Page
          EPA Review Notice
          Preface
          Executive Summary
    I     INTRODUCTION

              Statement of the Problem                   I  -  1
              Nature of the Problem                      1-2
              Scope of Work                              1-2
              Method of Approach                         1-3


   II     GENERAL INDUSTRY DESCRIPTION

              Use of Ferroalloys                        II  -  1
              Description of the Manufacturing
                Process                                 II  -  3
              Sources of Water Pollutants                II  -  8
              Ferroalloy Shipments                       II  -  10
              Forecasted Growth                         II  -  14
  III     PHYSICAL CHARACTERISTICS  OF  THE  INDUSTRY

              General Background                        III  -  1
              Types of Firras                            III  -  1
              Types of Plants                           III  -  5


  IV      FINANCIAL CHARACTERISTICS  OF THE INDUSTRY

              Sizes of Companies                        IV  -  2
              Profitability and Capital Availability    IV  -  4
              Cost Structure                            IV  -  8
              Salvage Value of Assets                   IV  -  9

-------
                                                        -ii-
Section                     Title

    V     PRICE EFFECTS
   VI     METHODOLOGY OF IMPACT ASSESSMENT
  VII     IMPACT ANALYSIS

              Investment and Operating Costs            VII  -  1
              Current Industry Facilities               VII  -  2
              Industry Cost Requirements                VII  -  4
              Industry Price Effects                    VII  -  6
              Secondary Price Effects                   VII  -  8
              Financial Effects                        VII  -  9
              Production,  Employment and
                Community  Effects                       VII  -  13
              New Source Standards                      VII  -  15
 VIII     LIMITS  OF THE  ANALYSIS

              Accuracy                                VIII  -  1
              Critical Assumptions                     VIII  -  3
              Impact on  Individual  Companies           VIII  -  4

-------
                                                        -iii-
                      LIST OF EXHIBITS
Exhibit
Number                      Title

   1-1     List of Reference Sources

   1-2     Producers of All Types of Ferroalloys in the
          United States by Product and Manufacturing Process


 II-1     Simple Diagram of Submerged-Arc Furnace

 II-2     Cross Section of an Open Furnace

 II-3     Flow Diagram of Typical Wastewater Treatment
          Facility

 II-4     U.S. Consumption of: Selected Ferroalloys -
          1961 to 1972

 II-5     Production of Raw Steel in the United States, by
          Type - 1962 to 1972

 II-6     Consumption of Ferroalloys and Production of
          Raw Steel, by Year - 1967 to 1972

 II-7     U.S. Exports of Ferroalloys

 II-8     U.S. Imports of Selected Ferroalloys, 1967
          to 1972

 II-9     U.S. Shipments of Ferroalloys for U.S. Con-
          sumption


III-l     Companies Manufacturing Selected Ferroalloys -
          1973

III-2     Analysis of Manufacturers of Selected Ferroal-
          loys by Corporate Size

III-3     Analysis of Manufacturers of Selected Ferroal-
          loys by Number of Plants  per Company

III-4     Analysis of Manufacturers of Selected Ferroal-
          loys by Number of Ferroalloys Produced

III-5     Analysis of Manufacturers of Selected Ferroal-
          loys by Level of Diversification

-------
                                                       -iv-
Exhibit
Number                      Title

III-6     Analysis of Manufacturers of Selected Ferroal-
          loys by Type of Air Pollution Control System

III-7     Analysis of Plants Manufacturing Selected
          Ferroalloys by Plant Size

III-8     Analysis of Plants Manufacturing Selected
          Ferroalloys by Location

III-9     Location of Ferroalloy Plants Producing FeMn,
          FeSi, FeCr, and SiMn in the United States

111-10    Analysis of Plants Manufacturing Selected Fer-
          roalloys by Furnace Type and Air Pollution
          Control System
 IV-1     Size of Companies in the Ferroalloys  Industry
          by Dollar Sales

 IV-2     Degree of Diversification of Companies  in the
          Ferroalloys Industry by Estimated Percentages
          of Sales in Selected Ferroalloys

 IV-3     Profit Ratios by Size of Company in the Ferro-
          alloys Industry

 IV-4     Profit Ratios of Companies by Degree  of Diver-
          sification in the Ferroalloys Industry

 IV-5     Sales and Gross Earnings Relationships  of
          Diversified Companies

 IV-6     Development of Profit Ratios for Highly Special-
          ized Ferroalloys Producers

 IV-7     Capital Structure by Size of Company  in Dollar
          Sales

 IV-8     Capital Structure by Degree of Specializa-
          tion of the Companies in the Ferroalloys
          Industry


VII-1     Cost of Wastewater Treatment - 1977 Require-
          ments, Ferroalloys Industry

VII-2     Cost of Wastewater Treatment - 1983 Require-
          ments, Ferroalloys Industry

-------
                                                        -V-
Exhibit
Number                      Title

VII-3     Cost of Wastewater Treatment - New Source
          Requirements, Ferroalloys Industry

VII-4     Effect of Water Pollution Control Costs on
          Prices

VII-5     Estimated Pro Forms, Industry Profitability

VII-6     Ferroalloys Consumption by End Use - 1971

VII-7     Impact on Ferroalloys Price Increase on Steel
          Prices

VII-8     Effect of Water Pollution Control Costs on
          Industry Profitability

-------
               ENVIRONMENTAL PROTECTION AGENCY



         ECONOMIC ANALYSIS OF THE PROPOSED EFFLUENT

           GUIDELINES FOR THE FERROALLOYS INDUSTRY
                      EXECUTIVE SUMMARY






INTRODUCTION
	"-  • "  ••• "-                                              *


     It was the objective of this study to determine the impact



of the costs of water pollution abatement on the ferroalloys



industry.  The study was restricted in scope to an analysis of



the four major ferroalloys:  FeMn, FeSi, FeCr, and SiMn.  The



scope was also limited to products which are produced in elec-



tric furnaces.  This limited scope represents about 85% of the



industry's annual production.





     We would like to acknowledge the participation of J. E.



Allen & Associates in the technical aspects of this study, as



well as the cooperation of the Ferroalloys Association in the



supply of data and information relevant to the study.





THE INDUSTRY



     (a)  Ferroalloys

          Production
     Industry shipments of all types of ferroalloys totaled



over 2.3 million gross tons in 1971, with a value of $558 mil-



lion.  The total industry has shown little or no growth as seen



in Table 1 on the following page.

-------
                                                     - 2 -
                           Table 1
                  Shipments of Ferroalloys
                        (Gross Tons)
                  Year        Tons Shipped

1967
1968
1969
1970
1971
(MM)
2.5
2.4
2.6
2.5
2.3
     The four ferroalloys specifically studied have shown a
similar growth pattern.  This is seen in Table 2.
                           Table 2
        U.S. Consumption and Production of Noncaptive
            FeMn.-FeSi. FeCr and SiMn. 1967-1972

Year

1967
1968
1969
1970
1971
1972 (P)
(Tons of Contained Elemei
U.S. Consumption U.S.
(000)
999
1,071
1,109
1,015
972
1,039
it)
Production
(000)
756
838
800
745
697
626
     Note that industry consumption has remained at a relatively
constant level.  Production in the United States has been de-
clining in the face of increasing imports, particularly FeMn

-------
                                                      - 3 -
and FeCr.  Industry shipments in 1972, of these four ferroalloys,
were estimated to be valued at $425 million.

     The primary markets for ferroalloys are the iron and steel
industry.  Consumption of ferroalloys in the United States can
be expected to follow trends in domestic production of raw steel,
and future U.S. production of ferroalloys will be subject to
the impact of imported ferroalloys.

     (b)  Industry
     	Manufac turer s
     There are only nine companies, operating 22 plants, each
currently producing at least one of the four major ferroalloys.
These firms range in size from about $20 million to over $3 bil-
lion in total annual sales.  The diversity of products manufac-
tured by these companies ranges widely.  Some are highly spe-
cialized, producing only ferroalloys, while, for others, ferro-
alloys shipments represent less than 5% of total annual sales.

     (c)  Status of
     	the Industry
     The ferroalloys industry is presently operating at capacity
due to the current high level of steel production.  However, in
1972, the industry's shipments and profitability were severely
affected by the high level of imported ferroalloys.  In addi-
tion, air pollution control requirements now under development
are of major concern to the industry.

     Imports and air pollution control costs are expected to

-------
                                                       . 4 -
have a greater impact on the industry than the anticipated costs
of water pollution abatement, which were felt to be minor.
Based on this and a preliminary analysis of the data, it was
agreed that the original scope of the study could be reduced
and still provide the required information.

     (d)  Scope of
     	the Study
     With only nine companies; and a minimal expected economic
impact, the scope of the study was revised to include an analy-
sis of the industry as a whole rather than a detailed study of
industry segments.  This proved to be sufficient for the de-
velopment of meaningful conclusions regarding the economic im-
pact on this industry.

METHODOLOGY OF IMPACT
  ASSESSMENT	
     The following methodology was used in assessing the economic
impact of the cost of water pollution control on the ferroalloys
industry:
          1.  The financial Impact on the industry as a whole
was measured in terms of the effect on the industry's average
profit before taxes as a percent of sales and the effect on
average profit before taxes as a percent of total assets.
          2.  The same analyses were performed on groups of com-
panies with various levels of usage of wet air pollution control
equipment.
          3.  The impact on prices of ferroalloys was determined
based on the projected maintenance of the industry's historical

-------
                                                       - 5 -
average level of profitability before taxes.  This was done for
three measures of profitability:
              (a)  Maintenance of the same dollar value
                   of profits before taxes.
              (b)  Maintenance of the same profit level
                   before taxes measured in terms of
                   "profit as a percent of sales."
              (c)  Maintenance of the same profit level
                   before taxes measured in terms of
                   "profit as a percent of total assets."
          4.  The impact on production curtailment, plant closing,
etc. was based on:
              (a)  Judgmental assessment of the expected
                   f inane ia1 impac t.
              (b)  Interviews with industry sources.

SEGMENTATION
     Segments of the industry were analyzed in considerable
detail in Sections III and IV of the report.  The only segmen-
tation which resulted in a significantly different economic
impact was by the type of system used to control air pollution,
since there are two primary sources of water pollutants:
          1.  Process water used in wet-type air pollution con-
trol equipment.
          2.  Furnace cooling water (all plants).
     Since dry air pollution control systems use no water, the
only source of water pollution for plants using such a system
is the cooling water.

     It was found:
          1.  That 32% of the industry capacity is controlled

-------
                                                      - 6 -
by wet-type air pollution control systems.
          2.  That 38% of the industry is controlled by dry-
type air pollution control systems.
          3.  That 30% of the industry capacity currently has
no air pollution control system, but will probably install dry
systems.

     The impact due to water pollution abatement costs on those
plants which utilize wet-type air pollution control systems
will be much greater than the impact on plants which do not.

COST OF WATER
  POLLUTION CONTROL
     The cost data were supplied by Datagraphics, Inc.  Costs
regarding investment requirements were developed on a "per mega-
watt of capacity" basis.  Ownership and operating costs were
based on "per megawatt-day" of operation.

     The cost data for 1977, 1983, and new source requirements
are summarized in Table 3 and were the basis for the economic
impact analysis.

-------
                                               Table 3

                                    Cost of Wastewater Treatment
                                        Ferroalloys Industry
Type of Furnace
and Air Pollution
Control System

Open Furnace -
Wet A/P System
Closed Furnace -
Wet A/P System
1977 Standards (1)
Ownership and
Investment Operating Cost
(per Mw) (per Mw-Day)
$18,409 $21.01
23,488 27.11
1983 Standards(2)
Ownership and
Investment Operating Cost
(per Mw) (per Mw-Day)
$29,507 $37.62
35,747 45.11
New Source
Ownership and
Investment Operating Cost
(per Mw) (per Mw-Day)
- (3) - (3)
$35,747 $45.11
Open or Closed
  Furnace - Dry
  A/P System           1,266         0.40         8,444         12.29        8,444        12.29

Notes:  (1)  Best available technology (BAT).
        (2)  Best practicable technology (BPT).
        (3)  An open furnace with a wet air system would not be
             considered for new sources.

Source:   Datagraphics,  Inc.
                                                                                                    •vl

                                                                                                    I

-------
                                                       - 8 -
 FINANCIAL
   PROFILE

      Financial  data  on  individual  plants and/or  ferroalloys

 operations  of large  companies were not available.  However,

 the  limited published data provide an estimated  financial  pro-

 file  of  this industry.  The following table  is based on current

 estimated sales and  "typical" profitability.

                           Te.ble 4

          Estimated Pro  Forma Industry Profitability

          Sales  (000)                    $425,000

          Profits before Taxes (000)       38,760(1)

          Total Assets (000)              404,000(2)


          Profits as  a Percent of:

            Sales                              9.12%

            Total Assets                       9.59%

 Notes:   (I)  Profits are based on the reported industry average
             as stated by the Ferroalloys Association.  The
             1972 profits were not used as it was obviously a
             nontypical year.  The 1967-1971 average profit
             after taxes was 4.56%.  This is approximately
             9.12% before taxes.

         (2)  The ratio .of total assets to- sales was estimated
             to be the same for the industry as  for the com-
             bined data of three companies whose financial
             statements are published.
          i
Sources:  Field interviews, published data, and A. T. Kearney,
          Inc.  estimates.


     With an estimated before-tax profit on sales of 9.1270, the

ferroalloys industry is slightly better than the return for all

manufacturing firms  in general.

-------
                                                      -  9 ~
IMPACT
  ANALYSIS

     It was found that 14 of the 22 plants, representing over

70% of the industry's capacity, already have in operation the

equipment necessary to meet 1977 standards and will require

only a small investment to meet the 1983 standards.  It has

been assumed, based on interviews with industry manufacturers,

that all uncontrolled plants will install dry air pollution

control systems.  Therefore, the standards will impose additional

costs on the industry for only about 30% of its total capacity.


     (a)  1977 Standards
          (Best Available
     	Technology)(BAT)
     The investment costs for the industry required to meet the

1977 standards are $9.5 million.  When divided among the eight

plants requiring some additional facilities, this is an average

of $1.2 million per plant.  The annual operating cost increase

is expected to amount to $4.0 million, or an average of $500,000

for each of the eight plants.  It is projected that prices will

be increased 1.16%.  This will maintain the industry current re-

turn on total assets.


     (b)  1983 Standards
          (Best Practicable
     	Technology)(BPT)
     The industry is projected to require an additional invest-

ment of $6.2 million in order to meet the proposed 1983 stan-

dards.  The additional annual costs (versus current costs) of

operation are estimated to be $8.2 million, or 1.94% of total

industry sales.

-------
                                                      - 10 -


     It is believed that these costs will be passed on in the
form of price increases.  If the industry increases prices to a
level which will maintain the present estimated average return
on total assets, the price increase would amount to 2.29%.

     This increase would have virtually no secondary effect on
prices of goods such as steel.  The steel industry would require
a price increase of less than 0.03% in order to totally pass on
the added cost of ferroalloys and maintain the existing profit
level in the industry.

     (c)  Plant
     	Closings
     Based on the data analyzed and interviews with ferroalloy
manufacturers, it is believed that the proposed water pollution
control standards will have no significant effect on production
levels or plant closings.  Thus, there will be little effect on
industry employment and no impact on local communities due to
plant closings.

     (d)  New Source
     	Standards
     While new source standard costs are the same as those for
the 1983 standards, it is difficult to evaluate the impact
these standards will impose on this industry.  Some of the rea-
sons for this are:
          1.  Industry furnace capacity has not grown in recent
years.  About two new furnaces have been installed each year as

-------
                                                       - 11 -
replacements for older furnaces.  It is possible to install a
new furnace without adding any major costs for water pollution
control, so the effect may be zero.
          2.  If an existing furnace with a wet scrubber system
is replaced by a new furnace with a dry baghouse system, the
annual costs would be reduced by $599,000 for 50 megawatts of
capacity.
          3.  The replacement of a dry system with a wet system
would add about $599,000 in annual costs, based on the conver-
sion of 50 megawatts of furnace capacity.

     No data were available regarding furnaces which are candi-
dates for replacement.  Because of this, it was assumed that
the new source standards would have very little, if any, impact
on industry profitability or growth.

     (e)  Other
     	Considerations
     It must be remembered that this industry is under economic
pressure due to several other factors:
          1.  Annual air pollution control costs, preliminarily,
are estimated to range from two to five times more than the
cost of water pollution control.  The air pollution problem is
of much greater concern to the industry than water pollution
control.
          2.  Imports have increased considerably in recent
years.   Ferromanganese imports amounted to 26% of consumption

-------
                                                      - 12 -

in 1971 and nearly 4070 in 1972.  Ferrochromium imports also
were high, accounting for over 44% of consumption in 1972.
The result has been a severe profit squeeze for the industry,
since foreign-produced ferroalloys have been delivered at lower
prices than domestically produced ferroalloys.  There is some
indication in 1973 that this price differential has been nar-
rowed .
          3.  The cyclical nature of the steel industry in the
United States greatly affects the demand for ferroalloys.  Since
there is little product differentiation, competition is keen
during low periods of the cycle.

     These considerations are expected to have a much greater
economic impact on this industry than water pollution control
costs.
     It is felt that the industry will be affected by all of
these considerations as follows:
          1.  Of the 22 plants covered by this study, 2 are
converting to the production of silicon metal, a product not
included in this study.
          2.  Two plant closings have been announced for  1973,
although the current high level of demand for ferroalloys may
keep these open for another year.
          3.  Three additional plants may close because of a
combination of financial problems, air pollution control costs,
and other factors.

-------
                                                      - 13 -



     In total, by  1983, it is our opinion that the producers of

the 4 ferroalloys  covered by this study may consist of 8 com-

panies operating a total of 15 plants.  The reduction from the

present level of 22 plants is not expected to have been a result

of added water pollution control costs.


LIMITS OF THE
  ANALYSIS

     (a)  Accuracy

     The accuracy  of this study depends upon the accuracy of:

          1.  Published indusitry data.

          2.  Unpublished information supplied by knowledgeable

industry personnel.

          3.  Cost data developed separately from this analysis

by Datagraphics, Inc.

          4.  Estimates by A.  T. Kearney consultants.


     The published data consisted of industry shipments and

limited financial data.  While conflicts were present in var-

ious shipment data sources, these data were judged to be rea-

sonably accurate for a study of this nature.


     The information suppliec  by industry manufacturers was as-

sumed to be accurate, and the  cost data provided by Datagraphics,

Inc. were used as supplied.


     Estimates by A.  T. Kearr.ey of individual plant shipments

and sales by company have an accuracy of +20%.  However, the

total industry data and grouped plant or company data have an

estimated accuracy of +5% to +

-------
                                                      - 14 -

     (b)  Critical
     	Assumptions
     The assumptions which directly affect the findings and con-
clusions of this study are listed below.
          1.  It was assumed that the industry's average profit-
ability as a percent of sales would continue to be equal to the
average for the 1967-1971 period.
          The assumption was based on the fact that the devalued
U.S. dollar has narrowed the price gap between imported and U.S.-
produced ferroalloys in 1973.
          If imports can sustain lower price levels than domes-
tically produced ferroalloys, the impact of water pollution
control costs and air pollution control costs will be greater.
          2.  A second assumption bearing upon the impact of
water pollution control costs on this industry is the continued
trend to dry air pollution control systems.
          Industry sources concur with this trend to dry systems,
but pending air pollution control restrictions may have an effect
on whether wet or dry systems are used.
          If the one-third of the industry operating with no
air pollution control devices adds wet air pollution control
systems, the additional investment required to conform to 1983
standards would be over $9 million.

     (c)  Impact on Individ-
          ual Companies	
     Obviously the economic impact on individual companies or

-------
                                                      - 15 -

plants will not be equal.  With only nine industry manufacturers,
however, it is impossible to discuss these cases without dis-
closing information which was obtained under promise of con-
fidentiality.

     Even a general discussion of these companies would reveal
the identities to knowledgeable industry personnel.  Therefore,
no discussion which contained data gathered from confidential
sources and could identify individual firms was presented in
this report.

-------
                      I - INTRODUCTION
STATEMENT OF THE
  PROBLEM	
     The 1972 amendments to the Federal Water Pollution Control
Act have required the Environmental Protection Agency to estab-
lish effluent limitations for most major industries which are
sources of water pollution.  Studies are now under way to estab-
lish these limitations in some 28 industries.  These effluent
limitations will apply to existing and new plants, and at legis-
lated dates, progressively mere restrictive limitations will be
imposed.  Specifically, by July, 1977, effluent requirements
will be in effect that require application of the best practical
control technology currently available.  By July, 1983, a more
restrictive set of limitations will be exacted that require the
application of the best available technology economically achiev-
able; by 1985, if possible, techniques and systems that enable
the industries to effect a zero level of discharge will come into
effect.
     The tremendous effort which has been expended by the EPA
and its predecessor agencies in the technical development of the
nature of the pollution problem and its solutions has resulted
in a multiplicity of programs  which have begun to bring the pollu-
tion problem under control.  The establishment of timetables
has put time parameters on these control efforts, requiring the
expenditure of vast sums of money by all types and levels of
industry to meet these deadlines by installation of pollution
controls.

-------
                                                      1-2
NATURE OF THE
  PROBLEM
     In recent years a recognition of the potential economic
problems facing industry in meeting the control requirements
has resulted in study programs in which the economic impact of
the costs of pollution control on American industry and on the
economy in general has been analyzed.  These culminated in the
Economic Impact Studies sponsored by the Council for Environ-
mental Quality and the EPA in 1971 and 1972, in which 11 indus-
tries were studied.

     The EPA is now increasing the number of industries which
are being studied and expanding the scope of previous studies
by authorizing the current series of Economic Impact Studies
which are specifically aimed at analyzing the economic impact
of the costs of water pollution abatement requirements under
the Federal Water Pollution Control Amendments of 1972.

SCOPE OF WORK
     The industry which is covered by this study is the ferro-
alloys industry, generally defined by SIC 3313.  This code in-
cludes electrometallurgical production of all grades of ferro-
alloys.  However, the scope of this study has been limited by
the Statement of Work to ferrochromium, ferromanganese, ferro-
silicon, and silicomanganese produced by submerged-arc furnace
processes.

-------
                                                       1-3
METHOD OF
  APPROACH
     This study was conducted in three phases.  Phase I developed
a physical and financial profile of this industry.  Phase II an-
alyzed the economic impact of water pollution control costs on
the industry, and Phase III was the preparation of the final
report.

     The method used in conducting this study is discussed in
the following paragraphs.

     (a)  Phase I
          1.  Collected and reviewed all published data and
information which could be found in trade journals, government
sources and A. T. Kearney files.
          2.  Reviewed the data and information being prepared
for the joint EPA/Ferroalloys Association study of air pollu-
tion in the ferroalloys industry.
          3.  Met with the following in order to gather any
additional information:
              (a)  National Industrial Pollution Control
                   Council, U.S. Department of Commerce
              (b)  Bureau of Competitive Assessment and
                   Business Policy, U.S.  Department of
                   Commerce
              (c)  Ferroalloys Association
              (d)  Datagraphics, Inc.
              (e)  Environmental Protection Agency
          4.   Met with the Contracting Officer to redefine the
scope  of the study.

-------
                                                        1-4
          5.  Conducted telephone interviews with each of the
nine manufacturers to obtain additional necessary information,
          6.  Analyzed all of the data collected.  A list of
reference sources used in this study is given, in Exhibit 1-1*.
In addition, Exhibit 1-2 summarizes all ferroalloys producers,
including companies and plants which were not in the scope of
the study.
          7.  Prepared a draft report covering the findings of
Phase I.
          8.  Reviewed Phase I findings and conclusions with
the EPA.  The results reported in Phase I indicated that the
economic impact of water pollution control costs would be mini-
mal for this industry.  It was therefore decided by A. T. Kearney
and the EPA that a general analysis of the industry, rather than
a detailed analysis of industry segments, would be sufficient
to provide the assessment of the impact on the ferroalloys in-
dustry.
     (b)  Phase II
          1.  Analyzed the data developed by Datagraphics, Inc.
with respect to the projected costs of water pollution control.
          2.  Revised some of the data collected in Phase I due
to the availability of additional information.
          3.  Analyzed all data collected and developed conclu-
sions based on this analysis.
* All exhibits are located at the end of the section in which
  they are discussed.

-------
                                                        1-5
          4.  Prepared a draft report covering the findings and
conclusions of Phase II.

     (c)  Phase III
     The draft reports covering the results of Phase I and
Phase II were combined into a single report, finalized and sub-
mitted to the EPA.

-------
                                                  EXHIBIT 1-1
                                                  Page 1 of 2
                ENVIRONMENTAL PROTECTION AGENCY

                  LIST OF REFERENCE SOURCES


SECONDARY SOURCES

          Annual financial reports of all ferroalloys manu-
            facturers

          Annual Statistical Reports, American Iron and
            Steel Institute

          Annual Survey of Manufactures - 1971, U.S.
            Department of Commerce

          Blast Furnace and Steel Plant

          Census of Manufactures - 1967,  U.S. Department of
            Commerce

          Development Document for Effluent Limitations
            Guidelines and Standards of Performance -
            Ferroalloys Industry, Datagraphics, Inc.

          Dun & Bradstreet reports

          EPA/Ferroalloys Association - Joint Industry
            Air Pollution Control Study - Draft

          Iron and Steel Engineer

          Journal of Metals

          Metal Statistics 1972, American Metal Market

          Minerals Yearbook - 1971, Bureau of Mines, U.S.
            Department of the Interior

          Moody's Industrial Manual

          Statement for Relief from Excessive Import - 1973,
            The Ferroalloys Association

          33 Magazine


PERSONAL INTERVIEWS

     (a)  Manufacturers

          Airco,  Inc., Airco Alloys Div.
          Niagara Falls, New York

-------
                                             EXHIBIT  1-1
                                             rage 2 of 2
      Chromium Mining & Smelting Company, Ltd.
      Montreal, Quebec, Canada

      Foote Mineral Company
      Exton, Pennsylvania

      Interlake, Inc., Globe Metallurgical Div
      Cleveland, Ohio

      IU International Corp., Tennessee Alloys Div
     Memphis, Tennessee

     Mead Corporation,  Woodward Div.
     Woodward, Alabama

     Ohio Ferroalloys Corp.
     Canton, Ohio

     Sandgate Corp.,  Tenn-Tex Alloy Div.
     Houston,  Texas

     Union Carbide Corp.,  Ferroalloys  Div.
     Niagara Falls, New York
(b)   Other
     J.  E. Allen  & Associates,  Inc.
     Chicago,  Illinois

     Bureau  of Competitive Assessment and Business
      Policy, U.S. Department  of Commerce
     Washington,  D.C.

     Datagraphics, Inc.
     Pittsburgh,  Pennsylvania

     Environmental Protection Agency, Effluent
      Guidelines Division
    Washington, D.C.

    The Ferroalloys Association
    Washington, D.C.

    National Industrial Pollution Control Council
      U.S.  Department of Commerce
    Washington, D.C.

-------
                                                               ENVIRONMENTAL PROTECTION AGENCY

                                                 PRODUCERS  OF ALL  TYPES  OF  FERROALLOYS  IN  THE UNITED  STATES
                                                            BY  PRODUCT AND  MANUFACTURING PROCESS
                                                                                                                                                EXHIBIT 1-2


Company
Agrico Chemical Company
Airco, Inc.



Bethlehem Steel Corporation
Chromium Mining 6t Smelting Corp.
Climax Molybdenum Company
Diamond Shamrock Corporation
FMC Corporation ,
Foote Mineral Company^)



Hanna Furnace Corporation
Hanna Nickel Smelting Company
Hooker Chemical Corporation
Interlake, Inc.

Kawecki Chemical Company
Mobil Chemical Company
Molybdenum Corp. of America
Monsanto Chemical Company

NL Industries, Inc.
New Jersey Zinc Company . .
Ohio Ferro-Alloys Corporation'-1)


Reading Alloys
Shield Alloy Corporation
Stauffer Chemical Company

Tennessee Alloy, Subs, of I.U.
International Corporation

Tenn- Tex Alloys, Subs, of Sandgate
Corporation
Tennessee Valley Authority
Union Carbide Corporation")





United States Steel Corporation

Woodward Co., Subs, of Mead Corp.



Plant
Pierce, Fla.
Calvert City, Ky.
Charleston, S.C.
Mobile, Ala.
Niagara Falls, N.Y.
Johnstown, Pa.
Woodstock, Tenn.
Langecloth, Pa.
Kingwood, W. Va.
Pocatello, Ida.
Graham, W. Va.
Keokuk, la.
Steubenville , Ohio
Wanatchee, Wash.
Buffalo, N.Y.
Riddle, Ore.
Columbia, Tenn.
Beverly , Ohio
Selma, Ala.
Easton, Pa.
Nichols, Fla.
Washington, Pa.
Columbia, Tenn.
Soda Springs, Ida.
Niagara Falls, N.Y.
Palmerton, Pa.
Brilliant, Ohio
Philo, Ohio
Powhatan Point, Ohio
Robesonia, Pa.
Newfield, N.J.
Mt. Pleasant, Tenn.
Silver Bow, Montana

Bridgeport, Ala.
Kimball, Tenn.

Houston, Texas
Muscle Shoals, Ala.
Alloy, W. Va.
Ashtabula, Ohio
Marietta, Ohio
Niagara Falls, N.Y.I4
Portland, Oregon
Sheffield, Ala.
Clairton, Pa.
McKeesport, Pa.
Woodward , Ala .
Rockwood, Tenn.
Notes: (1) Abbreviations: A, aluminothermic process;
(2) Also produces FeB, Fe(
(3) Also produces FeB and
:b, Fell, FeV and other
some other alloys in s
Plants
Included
in Study FeMn

X E
X
X E
X
B
X

C
X

X
X



X
X







X
X E






X
X

X E
X E
X
X E
)
X
X
B
B
X
X E
B, blast furnace
ferroalloys in
ome , or all, of
(4) Types of products manufactured are unknown.

Silvery
SiMn FeSi FeCr Spin. FeP FeMo FeNi FeTi Few FeV FeB FeCb Iron
E
E E
E
E
E E

E
A

E
E
E
E
E
B
E
E
E E E
E
A
E
A E E E
E
E
E
E
E
E E

A A
A A A A
E
E

E
E

E
E
E E E
E
E E E

E E
E


E
E
; C, electrolytic process; E, electric furnace.
some, or all, of the company's plants.
the company's plants.



Other


















A




E



E

A





















Sources:  1971 Minerals Yearbook and field interviews.

-------
              II - GENERAL INDUSTRY DESCRIPTION

     This section provides some general insight into the opera-
tions of the ferroalloys industry.  Included is a brief descrip-
tion of:
          -  Use of ferroalloys
          -  Description of the manufacturing process
             Sources of water pollutants
             Ferroalloy shipments
             Forecasted growth.

USE OF
  FERROALLOYS
     More than 50 different alloys and metals, in hundreds of
various compositions and sizes, are produced by the ferroalloys
industry for use in the manufacture of steel, iron and nonferrous
metals.  The term ferroalloy is defined as a crude alloy of iron
with some other metal, used for deoxidizing molten steel and for
making alloy steels.  In practice, however, the term is used
loosely to include alloys or compounds containing little or no
iron, and even relatively pure metals, employed to introduce ad-
ditive or alloying elements in the production of steel.  "Addi-
tion agent" is perhaps a more correct terminology.

     The demand for ferroalloys is governed to a large extent
by the requirements of the iron and steel industry.  Ferroalloys
are used to produce steels of greater strength and corrosion
resistance.  Basic to both higher strength and greater corrosion

-------
                                                      II - 2

resistance in steel is the deliberate adjustment of the iron
and carbon content of the steel and the addition of other metals.
These other metals are added in the form of the ferroalloys.  Al-
though there are approximately 20 different types of ferroalloys
produced by several processes, this study was limited to the
submerged-arc furnace production of the four most important fer-
roalloys:  ferromanganese, ferrosilicon, ferrochromium, and
silicomanganese.

     Manganese, which is used in the production of nearly every
grade of steel, generally is supplied in the form of ferroman-
ganese or silicomanganese.  The function of manganese in steel
is threefold:
          1.  It acts as a deoxidizer and cleanser of the molten
steel.
          2.  It combines with sulfur, thereby greatly improving
the hot-working properties of the steel.
          3.  It acts as an alloying element to improve the
strength, toughness, and response to heat treatment of various
structural and engineering steels.

     Ferrosilicon is used in the steel, foundry and nonferrous
metal industries.  Various grades of ferrosilicon are used by
the steel and foundry industries as deoxidizers and alloying
elements.  Silicon metal is used in the aluminum industry as
an alloying agent and in the chemical industry for producing
silicones.  Silicon is used in manufacturing steel sheets for

-------
                                                       II - 3

electrical apparatus such as transformers, motors, generators,
and electromagnets.  The silicon content in the steel is im-
portant because it decreases the electrical energy loss from
magnetization.

     Ferrochromium is one of the important ferroalloys in modern
iron and steel metallurgy.  The well-known "stainless" and "heat-
resistant" steels resist corrosion and oxidation at high tempera-
tures because substantial percentages of chromium are present.
Improved mechanical properties and increased susceptibility to
heat treatment are imparted to engineering steels by adding 1.0%
to 3.5% chromium.

DESCRIPTION OF THE
  MANUFACTURING PROCESS
     Ferroalloys are produced in several ways.  These include
electric furnace submerged-arc smelting, alumino/silico thermic
process, vacuum furnaces, and the electrolytic production of
some relatively pure metals.  Certain grades are also produced
in the blast furnace.

     Listed on the following page are the processes and the
product groups  manufactured by each process.

-------
                                                       II - 4
       Process
Submerged-arc furnace
           Product Group
Exothermic



Electrolytic


Vacuum furnace

Induction furnace


Blast furnace
Silvery iron
f)070 Ferrosilicon
6570-757o Ferrosilicon
Silicon metal
Silicon-manganese-zirconium  (SiMnZr)
High-carbon (HC) ferromanganese
Silicomanganese
Ferromanganese silicon
Ferrochrome
HC ferrochrome
Ferrochrome-silicon
Calcium carbide

Low-carbon (LC) ferrochrome
LC ferromanganese
Medium-carbon  (MC) ferromanganese

Chromium metal
Manganese metal

LC ferrochrome

Magnesium ferrosilicon
Ferrotitanium

Ferromanganese
Ferrosilicon
     As is seen from this list, the submerged-arc electric fur-

nace is the most versatile.  This process is the most commonly

used method in this industry and the scope of this study was

limited to products manufactured by this process.


     (a)  Furnace
     	Description

     The general design of submerged-arc furnaces is basically

the same throughout the industry.  A schematic diagram is shown

in Exhibit II-l.  The steel furnace shell is normally cylindrical

with a flat bottom and is supported on an open foundation that

permits air-cooling and heat dissipation.  The bottom interior

-------
                                                        II - 5

 of  the steel  shell is  lined with two or more layers of carbon
 blocks sealed with mortar.  The furnace shell's interior walls
 are lined with refractory or carbon brick.  One or more tapholes
 for removing  slag and  metal are provided through the furnace
 shell at the  hearth  level.  In some cases, the furnace is design-
 ed  to rotate.

     The furnace process is continuous.  Power is continuously
 applied to the electrodes, and feed materials that consist mostly
 of  reducing material (coal or coke), iron and steel borings and
 turnings, and ores may be charged to the furnace on either a
 continuous or an intermittent basis.  Normally three electrodes
 are used and  are suspended over the furnace hearth in a delta
 formation.  They protrude into the furnace charge to a depth of
 three to five feet.  This electrode depth is continually varied
 by  mechanical or hydraulic means to maintain a constant electri-
 cal load.  The trend is to the use of self-baking Soderberg
 electrodes.   The major smelting reactions occur at "reaction
 zones" near the electrode tips.  This smelting generates hot
 reaction gases (mostly carbon monoxide) and fumes of super-
 heated metal  that pass upward through the furnace charge and
 entrain particulate matter.  Some heat from the hot gases is
 transferred to the charge and partially reduces the charge ore.

     Originally, submerged-arc furnaces in the United States
were open-top furnaces that were sometimes equipped with canopy
 hoods.  In this configuration, gases from the furnace "reaction

-------
                                                       II - 6

zone" rise through the charge, are diluted and burned with in-
rushing air at the charge surface, and are then discharged
through stacks to the atmosphere.  Because the furnace has an
open top, furnace equipment such as electrode holders, electrode
hangers, current conductors, and charging equipment is exposed
to the radiant heat and hot furnace gases.  These components
must be cooled by water that is circulated through interior pas-
sages in the metal parts.  Exhibit II-2 shows a cross-section
of a typical open furnace and some accessory equipment.

     In sealed or covered furnaces, water-cooled covers collect
the uncombusted CO and other emissions.  This greatly reduced
the volume of emission gases which must be treated since no air
is added at the surface.  The concentration of pollutants in
gases from these furnaces is much greater than for open furnaces.

     Submerged-arc furnaces generally operate continuously ex-
cept for periods of power interruption or mechanical breakdown
of components.  Operating time averages 90%-9870.  Currently,
the industry is operating at capacity.

     (b)  Raw
     	Materials
     Most ores come to the market in the dressed state and are
sold based on their content of the desired metal oxide, i.e.,
manganese oxide, chromium oxide, etc.  In general, ores contain-
ing high percentages of metal oxides are easier to process and
result in lower production costs than ores with lower percent-
ages of metal oxides.

-------
                                                       II - 7

     The United States depends almost entirely upon foreign
 sources of manganese and chromium ores.  These ores are import-
 ed mainly from South America., Africa, Turkey, India, and Russia.
 Ferroalloy plants maintain substantial stocks of manganese and
 chromium ores.  Silicon, however, is in plentiful supply within
 the United States, as it is throughout the world.

     Shipments of ore, plus the required quartzes or quartzites,
 lime, scrap iron and steel turnings and borings, and reducing
 agents, are generally transported to plants by rail or river
 barge.  Ores are unloaded by traveling cranes or railroad-car
 dumpers and moved with belt conveyors to storage areas.  The
 quantities stored depend on the furnace capacity, marketing sit-
 uation and storage capacity of the plant.

     The furnace charge must be carefully prepared to manufacture
 a specific ferroalloy.  Free moisture in the raw materials ranges
 from 1070 to 20%.   In some plants, raw materials are dried be-
 fore they are fed to the furnaces.

     Size of the ore is important; it should be neither too
 large nor too small.  Oversize ores and steel turnings must be
crushed to a suitable size.   Fine ores,  such as flotation con-
centrates,  cannot be charged directly into a submerged-arc fur-
nace because they lack porosity and do not allow the release of
reaction gases.   Dust losses when charging fine ores into a
submerged-arc furnace may be as high as  15?0 of the ore charged.

-------
                                                        II - 8

     After preparation, the raw materials are conveyed to a mix
house where they are weighed and blended.  The weighed mix is
then moved by conveyors, buckets, skip hoists, or cars to the
hoppers above the furnaces, where it may flow by gravity through
chutes to the furnaces.

     (c)  Finished
     	Goods
     Ferroalloy products are marketed in a broad range of sizes
depending on final usage, from pieces weighing 75 pounds to gran-
ules of 100 mesh or finer.  Ferroalloys are intermediate products,
and are usually melted and blended with molten metal.  For this
reason, the ferroalloy product size is important.

     Molten ferroalloys from the submerged-arc furnaces are
generally tapped into refractory-lined ladles or into molds or
chills for cooling.  The chills are low, flat, iron or steel
pans that allow heat to radiate rapidly from the molten metal.
After the ferroalloy has cooled to a workable temperature, it
is cleaned of adhering slag and sized to market specifications.
     Sizing consists of breaking the large chills by drop weights
or hammers, followed by crushing (with large jaw crushers, roll
mills, or grinders) and screening.  Conveyors and elevators move
the product between the crushing and screening operations.  Stor-
age bins hold the finished or intermediate products.

SOURCES OF WATER
  POLLUTANTS
     Large quantities of water are used in the cooling of

-------
                                                       II - 9

ferroalloy furnaces and also in wet-type air pollution control
devices  (scrubbers and electrostatic precipitators).

     Furnace cooling requires by far the largest portion of the
water used in ferroalloy manufacturing processes.  From 700 to
2,500 gallons per minute may be needed to cool the furnace and
certain components of the electrical conductors.  Additional
water is, of course, required for wet-type air pollution control
devices, and approximately one-third of the furnaces in the
ferroalloy industry use such devices.  The remaining two-thirds
either use air pollution control devices which do not require
the use of water or currently have none at all.

     Water quantity needed for furnace cooling ranges from 3,000
to 10,000 gallons per megawatt-hour.  For scrubbers, usage ranges
from 500 to 3,500 gallons per megawatt-hour.  Since each ferro-
alloy plant may differ in its water needs, typical water require-
ments are difficult to establish.  Water use may range from 0.5
million gallons per day for a small plant to 100 million gallons
per day for a large plant.
     Treatment facilities for the scrubber water differ, depend-
ing on the product being made and the type of scrubber system
used.  Water pollutants from a ferroalloy plant include suspend-
ed insoluble metal compounds, soluble metal compounds, cyanides,
acid or basic effluents, tars, and thermal pollution.  Chemical
and physical treatment of the waste streams are usually suffi-
cient; biological treatment irethods are not normally considered
necessary.

-------
                                                       II - 10

     Scrubber water is always clarified to remove the dust
scrubbed from the ferroalloy furnace fumes.  The scrubber water
also dissolves contaminants in the vapor phase, including cyanide
and carbon monoxide.

     Cyanides are found in the water from scrubber systems serv-
ing closed and covered furnaces and are extremely toxic, espe-
cially at low pH.

     Exhibit II-3 shows a flow diagram of a typical wastewater
treatment facility.  Because cyanide is not always present in
the effluent, the cyanide removal part of this system is shown
by broken lines.

     In summary, it can be seen that there are two sources of
water pollution with which this study is concerned:
          1.  Water used for furnace cooling purposes in all
furnaces.
          2.  Water used in connection with air pollution con-
trol devices in approximately one-third of the furnaces.

FERROALLOY
  SHIPMENTS
     Data reflecting the position of the ferroalloys industry
are available in many forms.  The most meaningful data seem to
be those developed by the Ferroalloys Association, based on
information supplied by its members and on data collected by
the Bureau of Mines.  These data are discussed in the following
paragraphs.

-------
                                                      II - 11

      (a)  U.S. Manganese
          Ferroalloys
     	Consumption
     Manganese ferroalloys represent the largest ferroalloy group
in terms of tonnage.  This includes silicomanganese and ferro-
manganese.  Consumption of these alloys is shown in Exhibit II-4.
This exhibit shows that consumption of ferromanganese and sili-
comanganese totaled an estimated 825,000 tons in 1972.  This is
up 4.6% from 1971, but is 12.4% below 1969's peak of 942,400
tons and 6.0% below 1967.

     The consumption pattern follows the pattern for steel pro-
duction in the United States as shown in Exhibits II-5 and II-6.
Consumption of ferromanganese, which is used in virtually all
grades of steel, most closely parallels total raw steel ship-
ments .

     (b)  U.S. Ferrosilicon
     	Alloy Consumption
     Consumption of the various grades of ferrosilicon are also
shown in Exhibit II-4.  This group of ferroalloys has shown the
greatest increase in consumption, 30.6% from 1967 to 1972.  This
is an average compounded growth rate of 5.5% per year.

     The consumption of ferrosilicon totaled nearly 280,000 tons
of contained silicon in 1972.  This is about 436,000 tons of gross
alloy.  The 50% FeSi alloy is the largest segment of this group,
accounting for 64.5% of total ferrosilicon consumption, based
on contained Si0

-------
                                                       II  -  12

      (c)  U.S. Ferrochromium
     	Alloys Consumption
     The growth in ferrochroraium alloy consumption is closely
related to the production of stainless steel.  This is shown in
Exhibit II-6.

     Exhibit II-4 shows that 203,300 tons of contained chromium
were consumed in 1972.  This is an increase of only 7.6% over
consumption in 1967.

     (d)  Imports/Exports
     	of Ferroalloys
     As in the case with steel, the ferroalloys industry is a
world market, with conditions in one country affecting those in
others.  Since the United States depends upon imports of the
ores required to produce ferromanganese and ferrochromium, it
is not surprising that foreign sources have turned to producing
these ferroalloys themselves for export to the United States.

     As can be seen in Exhibit II-7, exports of U.S. ferroalloys
are small and have little effect on the world market.   However,
U.S. imports of ferroalloys have a significant impact on the
domestic industry and its markets as shown in Exhibit II-8.
The following should be noted, from this exhibit:
          1.  Imports in 1972 increased substantially from 1971,
both in quantity and in percent of total consumption.
          2.  Ferrochromium imports have shown the greatest im-
pact, with 1971 imports accounting for 32% of consumption and
1972 imports for 44% of consumption.

-------
                                                       II - 13

          3.  With the exception of 1972, ferromanganese imports,
including silicomanganese, have ranged between 19% and 27% of
consumption since 1967.
          4.  Ferrosilicon imports are relatively unimportant,
typically accounting for less than 6% of consumption.  This is
because of the available domestic supply of silicon.

     It is seen from this exhibit that imported ferroalloys
represent significant shares of U.S. consumption.  This is due
largely to the lower cost of imported products.  Depending upon
the alloys and the year, prices of ferroalloy imports were re-
ported to range from 5% to 15% less than quoted U.S. prices.

     The effect of ferroalloy imports on the production of U.S.
manufacturers is demonstrated in Exhibit II-9.  This exhibit
was derived from the data in Exhibits II-4 and II-8, which were
used to calculate the apparent domestically supplied ferroalloys
for domestic consumption.  The data in Exhibit II-9 show for
U.S. producers of ferroalloys that:
          1.  Shipments of manganese alloys have been declining
since 1968.   Noncaptive shipments in 1971 are 17.4% less than
the level in 1967 and showed a further decline in 1972 of 23.7%
versus 1971.
          2.  Ferrosilicon shipments have been increasing.
Shipments in 1971 were 23.3% higher than in 1967 and 1972 showed
a further increase of 4.2%.
          3.  Shipments of ferrochromium alloys remained steady

-------
                                                      II - 14

from 1967 to 1970 at about 150,000 to 160,000 tons of contained
chromium per year.  The level in 1971 and 1972 has declined to
around 113,000 to 114,000 tons.  This decrease was largely due
to increased imports.

     These data combine to show that the ferroalloys industry
in the United States has not been growing.  The only products
of those being studied which have shown an increase in shipments
have been the ferrosilicons.  These alloys can be supplied from
domestic raw materials and electrical power represents a larger
share of the cost per ton of product than the other ferroalloys.

     There is some indication that the dollar devaluation has
lessened the effect of imports and that the industry is return-
ing to more normal levels in 1973.  Imports will continue to be
a major factor in the U.S. market for ferroalloys.

FORECASTED
  GROWTH
     The growth of ferroalloys consumption will parallel the
growth of the steel industry.  U.S. raw steel production is
projected to reach 180 million tons by 1982.  This is a pro-
jected average annual compounded growth rate of 2.570 per year.

     The consumption of ferroalloys is projected to show a sim-
ilar rate of growth.  However, the domestic industry has shown
little or no growth in recent years.  It is expected that the
growth of U.S. production will be less than 2.5% due to the
continued impact of imported ferroalloys.

-------
                   ENVIRONMENTAL  PROTECTION AGENCY
               SIMPLE  DIAGRAM OF  SUBMERGED-ARC  FURNACE
                                                                 EXFPIBIT IT-1
           REACTION
            GASES
CRUCIBLE
                            ELECTRODES
                          /          \
          t
O';'«::.
                       MOLTEN FERROALLOY
m
_*--
V.

J
                        CHARGE
                        MATERIAL
                            CARBON HEARTH
            ..
            4 ^™^«™»»———™»i«™-..»—^—••—.^—w^—^—fc—^—^—^—•—«—i^^—«"^^—«^^—i^—^^»« •.
                                                             REFRACTORY
                                                             LINING
                                                                  LADLE


-------
                                                         EXHIBIT II-2
                ENVIRONMENTAL PROTECTION AGENCY
                CROSS  SECTION OF AN OPEN FURNACE
     CRANE FOR PASTE
     CASTING HANDLING^
                                           TRAM
                                           CAR
                                                    CIRCULAR MIX CAR
                                                    FLOOR

                                                    ELECTRODE CASING
                                                    PLATFORM

                                                         GAS OFFTAKE

                                                       SUPERSTRUCTURE
                                                       FLOOR
HOT METAL CRANE
  TAPPING
C  FLOOR
                                                               OPER FL.
                                                               CAPACITOR
                                                                RACKS
                                                             GRADE
                            FCE & ELECT^
                              GROUP

-------
                                                       EXHIBIT II-3
              ENVIRONMENTAL PROTECTION AGENCY
   FLOW DIAGRAM OF TYPICAL WASTEWATER TREATMENT FACILITY
                         POLYELECTROLYTES (FLOCCULENTS)

                              -LIME


                             - pH ADJUSTMENT
   EFFLUENT
SCRUBBER WATER
^-
OR --



x
i

RAK
CLA
                         1' \'\
    LIFT
   STATION
      TAR SKIMMINGS
       CLARIFIED    CHLORINE
       EFFLUENT    COMPOUNDS
        J_
_3%  to  5
    SOLIDS
      PONDS  OR DRYING BEDS
   VACUUM
   FILTER
               FURNACE COOLING WATER  *.
               RECYCLE
    1
    I

"CYANIDE"!
                                    STREAM

-------
                                                ENVIRONMENTAL PROTECTION AGENCY
                                            U.S. CONSUMPTION OF SELECTED FERROALLOYS
                                                          1961 TO 1972
	Type of Ferroalloy	

Manganese Alloys
  High-Carbon Ferromanganese-Total
                            -Noncaptive
  Medium- and Low-Carbon Ferromanganese
  S i1icomanganese

    Subtotal-All Usage

            -Noncapt ive

Ferrosilicon Alloys
  507, FeSi
  60%-807. FeSi
  807=-95% FeSi

    Subtotal

Ferrochromium Alloys
  High-Carbon Ferrochrome
  Low-Carbon Ferrochrome

    S ub t o t a 1
Source:  The Ferroalloys Association.
U.S. Consumption in Thousands of Short Tons of
Contained Element
1961-1966
Average
670
402
66
102
838
570
127
59,
11,
198.
74.
92.
166.
.0
.0
.6
. 1
.7
.7
.3
.7
.5
.5
. 1
,4
£
1967
664
382
108
.2
.0
.6
105.5
878
596
153.
51.

214.
88.
100.
188.
.3
.1
.9
.1
,2
.2
9
.0
9
1968
707.6
417.6
90.7
108.7
907.0
617.0
171.7
66.7
10.4
248. g
90.0
104.9
194.9
1969
735
425
106
100
942
631
188,
72.
12.
273.
93.
109.
203.
.5
.0
.3
.6
.4
.9
, 5
, 5
,7
7
5
7
?
1970
679.5
393.5
107.5
91.4
878.4
592.4
156.0
73.0
12.2
241.2
76.7
105.1
181.8
1971
601
356
106
81
789
543
172,
71.
15.
259.
81.
87.
168.
.5
.0
.5
.1
.1
.6
.5
.4
.2
,1
.7
9
9
Preliminary
1972
627
358
117
80
825
555
179
90
9
279
121
82
203
.8
.3
.3
.3
.4
.9
.8
.9
.0
.7
.1
.2
.3
 Percent Change
1967 to    1971 to
 1971       1972
 -9.47
 -6.8
 -1.9
-22.5

-10.2

 -8.8
 12.1
 39.7
 65.2

 21.0
 -8.1
-12.8

-10.6
 4.47=
 0.6
10.1
-1.0

 4.6

 2.3
27.3
 2.2

 8.0
                                                                                                                                    x
                                                                                                                                    a:
                                                                                                                                    CC

-------
                                                 ENVIRONMENTAL PROTECTION AGENCY

                                                  PRODUCTION OF RAW STEEL IN THE
                                                UNITED STATES. BY TYPE. 1962 TO 1972
      Year
      1962
      1963
      1964
      1966
      1967
      1968
      1969
      1970

      1971
      1972

Percent Increase
 or Decrease in
  Production _

  1962 to 1967
  1967 to 1971
  1971 to 1972
Raw Steel Production h\ Type, in the United States
Net Tons (000)
Carbon

89,160
98,714
114,442
116.651
118,732
113. 190
116,269
124,832
117,411
107,007
117,698
Alloy

8.083
9,343
11, 191
13.318
13.718
12,572
13,761
14,861
12,824
12,173
13,979
Stainless

1.085
1.204
1 ,443
1,493
1,651
1,451
1,432
1,569
1.279
1,263
1,564
Tot

98
109
127.
131
134
127
131
141
131
120.
1 13

.al

.328
,261
,076
.462
. 101
,213
.462
.262
. 514
,443
.241

Carbon

90.7 i
90.3
90. 1
88.8
88.5
89.0
88.4
88.4
89.3
88.8
88.3
Percent
Allov

8
8.
8.
10.
10,
9
10
10.
9.
10,
10

.2;
.6
.8
. 1
9
'.9
. 5
. 5
.7
. 1
. 5
of Total
Stainless

1
1
1,
1,
1
1
1
1
1
1
1

. 17
. 1
. 1
. 1
.3
. 1
. 1
. 1
.0
.1
2
Total

100
100
100,
100,
100
100
100
100,
100,
100
100,

.07
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
World I
.'.S. Production
Production as a Percent of
(All
(000
394
422
479
503
519
547
582
632
654
639
691
Types) World Production
Tons)
,056
,239
,025
,083
,124
,600
,548
,010
,184
,907
,081

25
25
26.
26.
25.
23
22.
22 ,
26!
18,
19

.07,
.9
. 5
.1
.8
.2
.6
.4
.1
.8
.3
27.07
-5.5
10.0
55.57
-3.2
14.8
 33.77
-13.0
 23.8
29.4/
-5.3
10.6
39.07
16.9
 8.0
Source:  American Iron and Steel Institute 1971 Annual Statistical Report.
w
X
                                                                                                                                     03
                                                                                                                                     I—I
                                                                                                                                     H

-------
                             ENVIRONMENTAL  PROTECTION AGENCY
                                CONSUMPTION OF FERROALLOYS
                                   AND PRODUCTION OF
                                  RAW STEEL - BY YEAR
                                        1967-1972
                                                                                              EXHIBIT  II
                                                                            __
                                                                     (Millions of  Tons)
Consumption of
Ferroalloys
 ('000 tons')
 1,000 -i
   900 -
   800  -
   700 -
   600 -
   500 -
   400
   300
    200
    100
                                                                              - 150
                                                                              - 140
                                                                              - 130
                                                                              - 120
                                                                              - 110
                                                                              - 100
                                                                               - 20
                                                                               - 10
                —I	1	1	

                 1967      1968       1969
1970
          —l	

          1971
1972

-------
                                                     EXHIBIT II-7
               ENVIRONMENTAL PROTECTION AGENCY
                 U.S. EXPORTS OF FERROALLOYS

                      Exports-Contained
                           Element
                     (Thousands of Tons)
Exports as a Percent
of U.S. Consumption
Year
1967
1968
1969
1970
1971
1972
1967-1972 Average
FeMn
1.5
3.0
1.4
17.4
3.6
5.5

FeSi
7.1
11.0
3.9
26.8
15.3
4.4

FeCr
9.0
18.2
16.5
19.0
6.1
8.6

FeMn
0.2%
0.3
0.1
2.0
0.5
0.7
0.6%
FeSi
3.3%
4.4
1.4
11.1
5.9
1.6
4 .-6%
FeCr
4.8%
9.3
8.1
10.5
3.6
4.2
6.8%
Source:  The Ferroalloys Association,  based on gross weight
         plus estimated contained elements as follows:

              Mn - 80%
              Si - 60%
              Cr - 67%

-------
                                                    ENVIRONMENTAL PROTECTION AGENCY

                                                 L'.S. IMPORTS OF SELECTED FERROALLOYS
                                                             1967 TO  1972
Thousands
Type of Ferroalloy
Manganese Alloys
High -Carbon FeMn
Medium- and Low-Carbon FeMn
SiMn
Subtotal
Ferrosilicon Alloys
507 FeSi
6 07,- 807, FeSi
807-957 FeSi
Subtotal
Ferrochromium Alloys
High-Carbon FeCr
Low-Carbon FeCr
Subtotal
1967

145
22
23
190

1
11
0
13

5
32,
38.

2
.3
.4
.9

,9
.5
7
.6

.7
.8
5
1968

140.
17.
16.
175.

2.
5 .
0.
8.

5.
34.
40.
L'.S. Imports in
of Short Tons of Contained
1969

8
5
9
2

0
7
3
0

2
8
0

203
31
21
255

2
10
0
12

10
30,
41,

.0
.5
.3
.8

.0
.3
.1
.4

.7
.7
.4
1970

207
19
9
236,

1.
6,
0,
8.

7.
18.
26.

.9
. 1
.6
.6

.9
. 3
.1
,3

,6
,4
0
197;

16]
2~,
19
208

2
8
0
11,

27.
27,
54.
1

.3
.9
.6
.8

7
.9
.1
.7

.0
,0
,0
Element
Imports as a Percent of Consumption
Based on Contained Element
Preliminary
1972

227.
47.
25.
300.

3.
18.
_
22.

44.
46.
90.

1
6
9
6

8
9

0

0
3
3
1967

21
20
22
21

1,
99
1
6,

6.
32.
20,

.97
.5
7
.7

.2
.4
.7
.3

,4
.8
.4
1968

20.
19.
15.
19.

1.
8.
2.
3.

5.
34.
20.

07
3
5
3

9
6
8
9

8
1
5
1969

27.
29.
21.
27.

1.
14.
0.
4.

11.
28.
70

67,
6
9
1

1
2
8
5

5
0
4
1970

30.67-
17.8
10.5
26.9

1.2
8.7
0.7
3.4

9.9
17.5
14.3
19

26
26
24
26

i
12
0
4

33
31
1?
71

.87,
.2
. 1
.5

.6
.4
.4
.5

.0
.0
.0
Preliminary
1972

36.
40.
32.
36.

9
20.
_
7.

36.
56.
>>L

27,
6
3
4

1
0

9

3
3
L
Source:  The Ferroalloys Association.
EC
M
CO

-------
                                    ENVIRONMENTAL PROTECTION AGENCY
u.
S. SHIPMENTS OF FERROALLOY FOR U,
Thousands
Type of Ferroalloy
Manganese Alloys
High- Carbon FeMn- Captive
-Noncaptive
Medium- and Low- Carbon FeMn
SiMn
Subtotal-All Usage
-Noncaptive
Ferrosilicon Alloys
50% FeSi
607.- 807. FeSi
80%- 9 5% FeSi
Subtotal
Ferrochrotnium Alloys
High- Carbon FeCr
Low- Carbon FeCr
Subtotal
1967
282.2
236.8
86.3
82.1
687.4
405.2
152.0
39.6
9.0
200.6
83.2
67.2
150.4
1968
290.0
276.8
73.2
91.8
731.8
441.8
169.7
61.0
10.1
240.8
84.8
70.1
154.9
.S. CONSUMPTION
Shipments in
of Short Tons of Contained Element
1969
310.5
222.3
74.8
79.3
686.9
376.4
186.5
62.2
12.6
261.3
82.8
79.0
161.8
1970
286.0
185.6
88.4
81.8
641.8
355.8
154.1
66.7
12.1
232.9
69.1
86.7
155.8
1971
245.5
194.7
78.6
61.5
580.3
334.8
169.8
62.5
15.1
247.4
54.7
60.2
114.9
Preliminary
1972
269.5
131.2
69.7
54.4
524.8
255.3
176.0
72.7
9.0
257.7
77.1
35.9
113.0
                                                                                       Percent Change
                                                                                      1967 to   1971 to
                                                                                       1971      1972
-13.0%
-17.8
 -8.9
-25.1

-15.6

-17.4
                                                                                       11.7
                                                                                       57.8
                                                                                       67.8

                                                                                       23.3
                                                                                      -34.3
                                                                                      -10.4

                                                                                      -23.6
                                                                                                  9.8%
                                                                                                -32.6
                                                                                                -11.3
                                                                                                -11.5

                                                                                                 -9.6

                                                                                                -23.7
            3.7
           16.3
            4.2
           41.0
          -40.4

           -1.7
Sources:  Exhibits II-4 and II-8.
                     tn
                     x

-------
              Ill - PHYSICAL CHARACTERISTICS OF
              	THE INDUSTRY	


     This section provides a profile of the firms and plants in

the ferroalloys industry with respect to the physical character-

istics of this industry.


GENERAL
  BACKGROUND

     Currently there are only 9 companies in the industry operat-

ing 22 plants which conform to the parameters of the study's

scope, i.e., which produce at least one of the four ferroalloys

being studied and use the electrometallurgical process.  These

companies are listed in Exhibit III-l.


     The companies range in annual sales from about $20 million

to $3 billion and many are widely diversified.  The 1972 esti-

mated industry shipments of these four ferroalloys is $425 mil-

lion.  Based on data gathered, 8,117 employees are involved in

the production of ferroalloys.


TYPES OF
  FIRMS

     (a)  Size

     The companies were grouped according to size in Exhibit III-2

It is seen from this exhibit that:

          1.  There are three firms with total sales greater

than $1 billion annually.  These companies operate 9 of the 22

plants and account for about 56% of the total employees in this

-------
                                                       Ill - 2

industry.  They further account for an estimated $178 million in
ferroalloy sales which is 41.9% of total industry sales.
          2.  There are two companies whose total annual sales
are between $100 million and $1 billion.  These companies, col-
lectively, operate 6 plants whose work force of 1,681 employees
accounts for 20.7% of the industry's total.  The companies ac-
counted for $132 million in sales of ferroalloys, or about 31%
of total industry sales.
          3.  There are four firms whose annual corporate sales
are less than $100 million.  These companies operate 7 plants
with 1,899 employees and produced 1972 shipments of about $115
million, 27% of the industry.

     These data indicate that this industry is not concentrated
in companies of any particular size group, but is broadly dis-
tributed among companies of all sizes.

     (b)  Number of
          Plants
     Exhibit III-3 shows the breakdown of the number of plants
per firm.
          1.  Two companies each have a single plant while four
firms operate two plants.  These 6 companies together employ
nearly 30% of the industry's work force and produce about 38%
of total shipments.
          2.  The remaining three companies operate three, four,
and five plants, respectively.  These 3 companies (12 plants)

-------
                                                      Ill - 3

employ  5,697, which  is  70.2% of the industry, and account for
1972 shipments of $265 million, or 62.4% of the total.

     These data have been grouped to preserve the confidentiality
of the  data collected in this study.  However, it is clear that
three multi-plant companies account for about two-thirds of the
industry's output and work force.

     (c)  Ferroalloy
          Products
     Exhibit III-4 shows that, currently, one company produces
only one of the products studied, three produce two of the four
products, three produce three products, and two companies pro-
duce all four.

     It must be kept in mind that the manufacturing facilities
have the flexibility to produce nearly all grades of all four
products, and this product mix is changing constantly.  The
data presented represent the existing situation only.

     (d)  Diversification
     These nine companies vary widely in terms of the diversi-
fication of their products.  The degree of diversification, in
this case, has been defined as the percentage that ferroalloys'
sales represent of total company sales.  This analysis is shown
in Exhibit III-5.

     Shipments of ferroalloys amount to over 90%, of total sales
for two of the nine companies.  These 2 companies have a combined

-------
                                                       Ill - 4

ferroalloys employment of 1,080 and combined 1972 sales of $72
million.  This represents 13.3% and 16.9% of the industry, re-
spectively.

     Three companies with a diversification level between 20%
and 90% operate 8 plants, employ a work force of 2,070 and ship-
ped $135 million in ferroalloys products in 1972, which is about
22% of the total combined sales of these 3 companies.

     Four companies are included in the "less than 20%" level of
diversification group.  These 4 companies currently are operat-
ing 11 plants which employ 61.2% of the total industry and ac-
count for $218 million in shipments, 51.3% of the industry.
Ferroalloy shipments of these companies average less than 4%
of their combined total sales.

     (e)  Air Pollution
     	Control System
     The nine companies producing ferroalloy products have vary-
ing air pollution control problems and equipment.  Preliminary
findings of the effluent guidelines study of this industry in-
dicated that the type of air pollution system used had a definite
impact on water pollution requirements and costs.

     Two basic systems are employed.  One uses water in some
type of scrubbing operations.  The other uses no water, relying
primarily on baghouse filters for particulate removal.

     Any water used in air pollution control systems must sub-
sequently be treated.  Exhibit III-6 lists the nine companies,

-------
                                                       Ill - 5

in coded form, and the degree to which each type of system is
being used.

     Based on furnace capacity, 32% of the industry as a group
utilize a wet system, 38% a dry system, and 30% currently have
no air pollution control equipment.

     Three companies have over 50% of their individual capaci-
ties controlled by wet systems which require water treatment.
Two of these are using wet systems for their entire capacities.
Four of the nine firms have 50% or more of their capacities
operating on an untreated basis.

     This indicates that the cost burden relating to water pollu-
tion control will differ among companies due to the use of wet
versus dry systems.

TYPES OF
  PLANTS
     The types of plants were analyzed in terms of their size,
locations, and air pollution control systems.

     (a)  Plant
          Size
     The best measure of plant size in this industry is the
capacity of the furnace(s)  in megawatts.  The available power
governs the maximum output of various products.  Exhibit III-7
shows the number, of plants, employment, capacity, and shipments
for plants in each of three size categories.  It demonstrates

-------
                                                     Ill - 6

that the industry is dominated by a few large plants.
          1.  Total industry capacity for these 22 plants is
estimated to be 1,437 megawatts (Mw) or about 1.4 million kilo-
watts.  Nearly 60% of this total is in the 6 largest plants.
          2.  Seven plants have total capacities of less than
25 Mw.  These 7 plants employ 15.2% of the work force and pro-
duced 11.5% of total industry shipments in 1972.  The average
capacity of plants in this group is 17 Mw; the smallest is 8 Mw.
          3.  The 9 plants which range in capacity from 25 Mw
to 75 Mw collectively employ 1,849 workers, 22.8% of the total,
and accounted for 33.7% of total industry shipments in 1972.
The average capacity for these 9 plants is 54 Mw.
          4.  The average capacity for the 6 largest plants is
estimated to be 138 Mw.  Sixty-two percent of the industry's
employees and 55% of shipments are accounted for by this group.

     (b)  Location
     Exhibit III-8 summarizes plant data by state.  Some of
these data have been combined to avoid disclosure of individual
plant data.  In addition, Exhibit III-9 pictorially shows the
locations of the 22 plants studied.  These exhibits show that:
          1.  These 22 plants are located in 10 states, although
16 are concentrated in 4 states.
          2.  Six plants are located in Ohio.  These plants
produced $143 million in sales in 1972, 33.6% of the industry.
The employees of these plants represent 42.4%, of the industry.
The average plant in Ohio shipped $24 million of ferroalloys.

-------
                                                      Ill - 7



          3.  Alabama has the second greatest number of plants,

five.  These plants are much smaller than those in Ohio and,

combined, employ only 6.6% of the industry.  Ferroalloy ship-

ments totaled $51 million in 1972, or 12.070 of the industry.

This is an average of about $10 million per plant.

          4.  Of the remaining eight states, only West Virginia

and Tennessee have more than one plant.


     (c)  Air Pollution
     	Control Systems

     The type of air pollution control systems in use is analyzed

by plant in Exhibit 111-10.  This provides some insight into the

impact of water pollution control costs on individual plants.


     Nine plants are using, wot systems for controlling air pol-

lution for at least part of their capacities„  The plant total

is greater than 22 since one plant often has a combination of

the systems shown.  These nine plants require water pollution

control for treatment of the scrubber water effluent.  The total

capacity of these 9 plants is 575 Mw and the capacity controlled

by air pollution systems using water is 463 Mw.  This latter

capacity is 32.2% of the total industry and about 80% of the

combined capacity of these 9 plants.

-------
                                                   EXHIBIT III-l
               ENVIRONMENTAL PROTECTION AGENCY
              Companies Manufacturing Selected
              	Ferroalloys - 1973	
        Company
Airco, Inc.
Chromium Mining and
  Smelting Company, Ltd.
Foote Mineral Company
Interlake, Inc.
IU International Corp.
Mead Corporation
Ohio Ferroalloys Corp.
Sandgate Corporation
Union Carbide Corp.
     Total
        Division
 Number of
Ferroalloy
  Plants
Airco Alloy Div.


Ferroalloys Div.
Globe Metallurgical Div.
Tennessee Alloys Corp.
Woodward Company

Tenn-Tex Alloy Corporation
Ferroalloys Div.
Sources:  Trade journals.
          Dun & Bradstreet.
          Moody's annual reports.
          Field interviews.
     1
     3
     2
     2
     2
     2
     1
    _5
    22

-------
                             ENVIRONMENTAL PROTECTION AGENCY
                    ANALYSIS OF MANUFACTURERS OF SELECTED FERROALLOYS
                    _________ _ BY CORPORATE SIZE
Corporate Size
                          Firms
        Percent
          of
Number   Total
    Plants
 Manufacturing
   Selected
  Ferroalloys
        Percent
          of
Number   Total
   Employees
Associated with
  Ferroalloys
 Manufac tu ring
        Percent
          of
Number   Total
  Estimated
 Shipments of
   Selected  . .
 Ferroalloys'1-'
     1972
       Percent
         of
Value   Total
(?MM)
Above $1,000
         33.3%
         40.9%    4,537    55.9%    $178    41.9%
$100 - $999
         22.2
         27.3     1,681    20.7      132    31.1
Less than $100
         44.5
  __7     31.8     1,899    23.4      115    27.0
     Total
  _9    100.0%      22_    100.0%    8,117   100.0%    $425   100.0%
Note:   (1)  Includes only FeMn, SiMn, FeSi, and FeCr.

Sources:  Field interviews.
          A. T. Kearney, Inc. estimates.
                                                                                               I
                                                                                               ?sJ

-------
                             ENVIRONMENTAL PROTECTION AGENCY

                    ANALYSIS OF MANUFACTURERS OF SELECTED FERROALLOYS^
                             BY NUMBER OF PLANTS PER COMPANY
Number of Ferroalloys
   Plants per Firm
          1

          2

          3

          4

          5
Firms
Number
2
4
1
1
1
Percent
of
Total
22.2%
44.5
11.1
11.1
11.1
                       Employees
                    Associated with
                      Ferroalloys
                     Manufacturing
                            Percent
                              of
                    Number   Total
                    2,420    29.8%
                    5,697    70.2
                                         Estimated
                                        Shipments  of
                                          Selected f .
                                        Ferroalloys^1-'
                                            1972
                                              Percent
                                               of
                                       Value   Total
                                       $160    37.6%
                                        265    62.4
     Total
9
100.0%
8,117   100.0%
$425   100.0%
Note:   (1)  Includes only FeMn, FeSi, SiMn, and FeCr.

Sources:  Field interviews.
          A. T. Kearney, Inc. estimates.
                                                                                                I
                                                                                                U)

-------
ENVIRONMENTAL PROTECTION AGENCY
ANALYSIS OF MANUFACTURERS OF SELECTED FERROALLOYS^
BY NUMBER OF FERROALLOYS PRODUCED
Estimated
Plants Employees Shipments of
Manufacturing Associated with Selected ,, v
Selected Ferroalloys Ferroalloys^ '
Firms Ferroalloys Manufacturing 1972
Number of Products
Produced by
Each







Comp any ^ ' Numbe r

1 1

2 3
3 3

4 2
Total 9

Note:
Sources



Percent
of
Total Number

11.1% 1

33.3 6
33.3 6

22.3 9
100.0% 22

(1) Includes only FeMn, FeSi, SiMn, and
: Field interviews.
A., T. Kearney, Inc


. estimates.

Percent Percent Percent
of of of
Total Number Total Value Total
($MM)
4.5% \
J 1,229 15.1% $ 78 18.4%
27.3 )
27.3 |
> 6,888 84.9 347 81.6
40.9 j
100.0% 8,117 100.0% $425 100.0%

FeCr.














M
X
tfl
M
H
M
M
I

-------
                             ENVIRONMENTAL PROTECTION AGENCY

                    ANALYSIS OF MANUFACTURERS  OF SELECTED FERROALLOYS^
                    	BY LEVEL OF DIVERSIFICATION	


                                                                            Estimated
                                           Plants          Employees       Shipments of
                                        Manufacturing     Associated with       Selected
                                          Selected         Ferroalloys       Ferroalloys(1)
                     	Firms	     Ferroalloys       Manufactur ing    	1972	
                             Percent           Percent           Percent           Percent
Level of Company,«>>            of                of               of              of
 Diversification^  Number   Total    Number    Total     Number    Total    Value   Total
                                                                           ($MM)


Greater than 90%        2     22.2%       3     13.6%     1,080    13.3%     $ 72     16.9%
20% - 89%               3     33.3        8     36.4     2,070     25.5       135    31.8



Less than 20%          _4_     44.5       H     50.0     4,967     61.2       218    51.3
     Total              9    100.0%      22    100 . 0%    8.117   100 . 0%    $425   100.0%
Notes:  (1}  Includes only FeMn, FeSi,  SiMn,  and FeCr.
        (2)  Shipments of ferroalloys as a percent of total
             corporate sales.

Sources:  Field interviews.
          A. T. Kearney, Inc. estimates.

-------
                                                  EXHIBIT III-6
               ENVIRONMENTAL PROTECTION AGENCY
ANALYSIS OF MANUFACTURERS OF SELECTED FERROALLOYS ( 1)
BY TYPE OF AIR POLLUTION CONTROL SYSTEM
Type of Air Pollution Control System
as a Percent of Furnace Capacity
Firm Wet
A 16%
B
C
D 34
E
F 53
G 100
H
I 100
Industry Total 32
Dry
557o
50
90
7
18
47
-
-
-
38
None
2970
50
10
59
82
-
-
100
-
30
Total
100%
100
100
100
100
100
100
100
100
100
Note:  (1)  Includes only FeMn,  FeSi,  SiMn,  and FeCr.

Sources:   Field interviews.
          Trade sources.
          A. T. Kearney,  Inc.  estimates.

-------
           ENVIRONMENTAL PROTECTION AGENCY

ANALYSIS OF PLANTS MANUFACTURING SELECTED FERROALLOYS
                    BY PLANT SIZE
(1)




Total Plant
Furnace Capacity

Less
25 to
More

Note:
(Mw)
than 25
75
than 75
Total
Plants
Manufacturing
Selected
Ferroalloys
Percent
of
Number Total

7 31.8%
9 40.9
6 27.3
22 100.0%
(1) Includes only FeMn, FeSi
Sources: Field












interviews and A. T.






Estimated
Employees Shipments of
Associated with Selected
Capacity in Ferroalloys Ferroalloys (1)
Megawatts Manufacturing 1972
Percent Percent Percent
of of of
Mw Total Number Total Value Total
($MM)
121 8.4% 1,230 15.2% $ 49 11.5%
490 34.1 1,849 22.8 143 33.7
826 57.5 5,038 62.0 233 54.8
1,437 100.0% 8,117 100.0% $425 100.0%
, SiMn, and FeCr.
Kearney, Inc. estimates.

















M
X
PC
W
M
H
M
M
M

-------
                             ENVIRONMENTAL PROTECTION AGENCY
ANALYSIS OF PLANTS MANUFACTURING
BY LOCATION


Plants
Manufacturing
Selected ,,x
Ferroalloys^ '


Number

6
5
I
I }
1
1
2
1
1 )
22
Percent
of
Total

27.3%
22.7
18.2


. 31.8


100 . 0%
SELECTED FERROALLOYS <1

Employees
Associated with
Ferroalloys
Manufacturing
Percent
of
Number Total

3,439 42.4%
539 6.6
1,559 19.2


2,580 31.8


8jll7 100.0%
)
Estimated
Shipments of
Selected
Ferroalloys
1972
Percent
of
Value Total
(?MM)
$143 33.6%
51 12.0
96 22.6


135 31.8


$425 100.0%
   Location


Ohio

Alabama

Kentucky
Tennessee

New York
South Carolina
Texas
West Virginia
Oregon
Washington


     Total
Note:  (1)  Includes only FeMn, FeSi,  SiMn,  and FeCr.

Sources:  Field interviews and A.  T.  Kearney,  Inc.  estimates.
X
X
(—I
Cd
M
H
                                                                                              I
                                                                                              00

-------
  ENVIRONMENTAL PROTECTCM A&ENC/
LOCATIONS  OF FERROALLOY  PLANTS PR3PUCIMG
    FeMn,  Fe£l, FeO,  AMP 6lMn  IN
          THF UNtTEP  SttflFfi
                         ,-i-.'i^l ;5  :^f ^iSj--   >. '	^—J^Tr"^^"-• ii-'^.t^ - —v-A
                         >-  •-'.  '-i^Lj^L^^^^^^T^^u^  "-*"-°-rI^ -"•"«> .•'•"M
                         HToin/^^
                            RAND M^NALLY
                                 22 x 17
                           COUNTY OUTLINE MAP
                                  Of
                           UNITED STATES

-------
                             ENVIRONMENTAL PROTECTION AGENCY
                  ANALYSIS OF PLANTS MANUFACTURING SELECTED FERROALLOYS
                    BY FURNACE TYPE AND AIR POLLUTION CONTROL SYSTEM
    Type of Furnace and
Air Pollution Control System

Open Furnace - Wet
  A/P System

Closed Furnace - Wet
  A/P System

Open or Closed - Dry
  A/P System

Open or Closed - No
  A/P System
     Total
    Plants
 Manufacturing
   Selected
  Ferroalloys
        Percent

Number^2) Total
         10.7%
   6
  10
21.4
35.7
         32.2
                                                        Estimated
                                                         Furnace
                                                        Capacity
          Megawatts
                       463
542
              432
        'ercent
         of
        Total
                      32.2%
37.7
        30.1
          Number of Firms
             with This
          Type  of  System
  28<2)  100.0%
            1.376     100.0%
 6


_5


18
Notes:  (1)  Includes only FeMn,  FeSi,  SiMn,  and FeCr.

        (2)  Total is greater than  22  since one plant may have more than one system.

Sources:  Field interviews and A. T. Kearney,  Inc. estimates.
                                                                                               I
                                                                                               M^
                                                                                               o

-------
               IV - FINANCIAL CHARACTERISTICS
               	OF THE INDUSTRY	

     Financial data on individual plants of the ferroalloys in-
dustry are extremely limited due to the fact that:
          1.  A large number of ferroalloy plants are operated
by divisions of widely diversified companies which do not pro-
vide either divisional or individual plant data.
          2.  Firms with a higher degree of specialization oper-
ate numerous plants on which only consolidated data are published,
          3.  Trade literature and relevant statistics provide
rather sketchy or obsolete data on individual plants.

     As a result, it is not possible to establish valid and
meaningful financial profiles for individual plants in the
ferroalloys industry.  Relevant insights into the financial
background of the industry may be gained, however, by analyzing
the available data of the companies as provided in their annual
reports and in other sources.  This information should be suffi-
cient to judge the profitability and financial strength of the
companies involved and therefore their capability to finance
investments necessary for the abatement of water pollution.
     The topics listed on the following page are described in
this section,  based on data obtained from company annual reports,
from Moody's Industrial Manual and from sources within indivi-
dual companies:
             Sizes of compani.es
          -  Profitability and capital availability

-------
                                                       IV - 2

          -  Cost structure
          -  Salvage value of assets.

     Cash flow, although specified in Task Order No. WA-73X-415,
will not be discussed because it has not been possible to obtain
the necessary data.

SIZES OF
  COMPANIES
     Exhibit IV-1 shows the broad range in size of the companies
producing and selling selected ferroalloys in terms of net sales
volume of all products being produced and sold by these companies.
This exhibit demonstrates the following:
          1.  Three companies each had total sales in excess
of $1 billion and in combination had total sales in excess of
$5 billion.
          2.  Two companies in the medium total sales bracket
($100 to $999 million) had combined sales of $763 and $880 million
in 1971 and 1972, respectively.
          3.  Four companies, each with total sales under $100
million, had combined sales of $197 and $182 million in 1971 and
1972, respectively.
          4.  About the same relationship shown for combined
net sales exists for the value of total assets controlled by each
of the three groups of compar.ies.

     Exhibit IV-2 shows that there is a wide range in the degree
of diversification between the nine companies producing selected
ferroalloys.  It also shows the  following:
          1.  There are only two companies  which specialize in

-------
                                                     IV  - 3

 ferroalloy  production  and  have  over  90% of sales dollars in
 this market.  Their conbined  sales in  1972 amounted to about
 $72 million, which represents about  17% of the estimated total
 market volume of  $425  million served by the domestic industry.
          2.  Three less specialized firms have combined ferro-
 alloy sales in the range of 2070-9070  of total  sales.  Their com-
 bined ferroalloy  sales amounted to about $135 million in 1972.
 This represents about  32%  of  the estimated total market  served
 by the domestic industry,  and about  2270 of their combined total
 sales.  This Latter percentage  is not  shown in Exhibit IV-2,
 but was derived from a separate analysis.
          3.  The group of four diversified corporations has
 the dominant share of  the  market served by domestic producers
 of selected ferroalloys, about  51%,  but this amounts to only
 about 4% of their combined net  sales in all products.
          4.  In combination, the seven companies which are
 diversified controlled in  1972  over  83% of the market of select-
 ed ferroalloys served  by domestic manufacturers, but this, on
 the average, amounted  to only a small  part of their combined
 total net sales.
          5.  The combined assets of the four most highly diver-
 sified large companies were almost $6.2 billion in 1971.  This
 is over 100 times greater  than  those of the specialized firms
 and 8 times greater than those  of the middle group.

     The data in Exhibits IV-1 and IV-2 have demonstrated wide
ranges in total size and in degree of diversification for the nine

-------
                                                        IV - 4

companies producing the selected ferroalloy products.  There
may be similar differences in the way in which they may view
the capital expenditures for water pollution control equipment:
          1.  For the smaller, highly specialized companies
this might be a question of being able to stay in business.
          2.  For the larger, highly diversified corporations
it might be a question of carrying on a line of business which
eventually would not meet their goals of return on sales and
investment.

PROFITABILITY AND
  CAPITAL AVAILABILITY
     (a)  Profitability
     Exhibit IV-3 presents the profit ratios achieved by the
companies grouped according to their amount of total net sales,
which is the same grouping used in Exhibit IV-1.
          1.  Return on sales and on assets after taxes were
highest for the large companies in 1971 and 1972, and lowest
for the small companies.  The differences in these ratios are
substantial.  Return on sales in 1972 for the large company
group was almost 200% above that for the medium-size companies,
while the small company group operated at a loss.  Results in
1971 show the small companies operating at a low rate of return
on sales and still far behind the two large company groups.
Similar comments also apply to return on assets.
          2.  The return on shareholders' equity after taxes
follows a similar pattern to returns on sales and assets.  In

-------
                                                        IV  - 5

 1972,  the  large  company  group achieved a return equal  to the
 average  shown  in Fortune's  listing of the  industry medians of
 the  "first  500."(1)  However, the medium-sized company group
 showed a poorer  performance and the grouping of small  companies
 suffered a  negative return on equity.
           3.   The  profit ratios after taxes for the group  of
 medium-sized companies were distinctly lower in 1972 than  in
 1971,  while the  group of small companies incurred a loss in
 1972 versus small  profits in 1971.  This development can be
 attributed  partially to the price cutting  in 1972 which took
 place  in response  to increased volume of imported ferroalloy
 products.

     Compared  to the results listed by Fortune for the  "first
 500,"  the return on sales for the group of large-sized  companies
would, in 1971,  fit somewhat above the middle of the listed
 industries  and in  1972 just at the bottom of the top one-third.
The highest returns on sales in 1971 and 1972 were achieved by
 the mining  industry, 12.8% and 11.6% respectively.  The lowest
returns were reported by the food industry, 2.2% and 2.5%, re-
spectively.

     While Exhibit IV-3 shows that the larger corporations
achieve better profit ratios than the smaller ones, this cannot
be generalized as typical for all of the smaller companies.
Exhibit IV-4 shows the distribution of profit ratios in the
(1)  "Who Did Best (and Worst) Among the 500," Fortune. May,
     1973, page 244.

-------
                                                     IV - 6

various groups according to their degree of diversification.
This is the same grouping used in Exhibit IV-2.  In 1971, the
group of specialized producers, which are also smaller compan-
ies, achieved remarkably better results than the two groups of
diversified companies.  For instance, in 1971 the ratio of net
return to net sales for the specialized companies was about 2070
above that of the highly diversified companies and somewhat more
than 40% above the ratio of the medium group.

     As shown in Exhibit IV-4, however, the profit ratios for
the group of specialized firms declined significantly in 1972
and the medium group even incurred a loss.  This is mainly
the result of the problems the industry went through with rising
ferroalloy imports in 1972.  This brought about price competi-
tion and under-utilized production capacities.

     This is substantiated by Exhibit IV-5 which shows for each
of three diversified companies the following data for 1970, 1971
and 1972:
          1.  Sales of ferroalloys as a percentage of total sales
of all products remained nearly constant.
          2.  Gross earnings for ferroalloys as a percentage of
gross earnings for all products dropped sharply in 1972.
          3.  Gross earnings from ferroalloy products as a per-
centage of ferroalloy sales also dropped sharply in 1972.

     Exhibit IV-6 shows, on the other hand, that the profit
decline in 1972 was a rather unique experience for the highly

-------
                                                     IV  -  7

 specialized  producers  in  the  ferroalloy  industry.  While returns
 on net  sales, on assets and on  shareholders' equity were fluctuat-
 ing  somewhat between 1963 and 1971, there was a major decrease
 in 1972.  This exhibit also shows remarkable differences in re-
 turn between one company which  is diversified to a certain de-
 gree and two companies with practically  all of their sales in
 ferroalloys.  In 1971, the latter two companies were ahead of
 the  industry medians as listed  in Fortune's "Second 500."(^
 They dropped into the  lower third of the  listing in 1972.  The
 somewhat more diversified company was in  the second third  in
 1971 and dropped to the bottom  in 1972.

     From the foregoing, it may be concluded that profit char-
 acteristics and profit developments of the companies involved
 in the production and sales of  ferroalloys indicate:
          1.  Profits have not been specifically depressed with-
 in the industry, except in 1972, and should usually be at  least
 as high as the average profit ratios for all U.S. industry.
          2.  Profits vary according to  level of ferroalloy im-
 ports.  A high level of imports results in price competition,
which, in turn,  results in lower profits.
          3.  Profits vary significantly with the variations
 in rate of capacity utilization.
     (b)  Capital
          Availability
     Exhibits IV-7 and IV-8 show the current ratios (current
(1)  "Who Did Best (and Worst) Among the Second 500," Fortune,
     June, 1973, p. 176.

-------
                                                        IV - 8

assets to current liabilities) and the ratios for current liabil-
ities and for long-term debt to equity for groups of companies
again arranged according to sales volume and degree of diversi-
fication.  These data may give some impression of capital struc-
ture and capital availability but offer little insight into the
financial strengths or weaknesses of the individual operating
units since they are derived from consolidated balance sheets.
On the other hand, providing equipment for the abatement and
control of water pollution alone, if it has not been installed
already, is expected by the industry to require only a moderate
capital investment.  Thus, the amounts involved are not expected
to pose a question of capital availability for any one of the
companies involved in this study.

COST STRUCTURE
     Exact data necessary to analyze the cost structure of in-
dividual plants or companies are not available.  An analysis of
the cost structure is complicated, not only by the lack of data,
but also by the complex nature of most companies whose sales in
ferroalloys are only a minor part of their total sales.

     Field sources generally stated the following rough structure
of operating costs as being fairly representative for the indus-
try:
          -  Labor about 1870-2270.
          -  Power about 2070-2570.
          -  Supplies and raw materials about 6070.
The main bulk of operating costs, therefore, is connected with

-------
                                                      IV - 9

the costs of ore and other supplies.  This is followed by the
cost of power, which in some instances has risen considerably
in recent years.  Labor costs are third, about equal to or some-
what lower than the cost of power.

     The percentage figures cited for the operating costs will
vary with the kind of products produced and the size and type
of equipment used.  However, they may serve as a helpful device
for assessing the economic impacts of costs for the abatement
and control of water pollution.

SALVAGE VALUE
  OF ASSETS
     Reliable estimates of the market or salvage value of fixed
assets of individual plants could not be obtained.  These values
would have mainly a theoretical importance, since, according to
field sources, no plant would be closed because of the costs in-
volved with the abatement of water pollution alone.

     Generally, the salvage value of assets can be estimated at
least as the working capital required to operate the plant, which
should be totally recoverable, and the site value.  The plant
equipment itself is highly specialized for the technical process
of producing ferroalloys, so that only a fractional part (that
is, the scrap value) of the capital value could be realized on
the market.   Office buildings and warehouses are more easily
and profitably sold, depending on their age, location and equip-
ment.

-------
                                                             ENVIRONMENTAL PROTECTION ACENCY


SIZE
OF COMPANIES IN THE FERROALLOYS INDUSTRY BY DOLLAR SAI
.ES(l)

A 1 1 Products
Value of
Net Sales Year
($MM)
Above $1,000 1971
1972
S100 - $999 1971
1972
Under $100 1971
1972
Number
of Companies
(SMM)
3
3
9
2
4
4
Comb ined
Net Sales
(SMM)
55,159
5,582
763
880
197(5)
182(&>
Combinec
Assets
(SMM)
55,830
6,113
932
959
212
Combined
Profits
before Taxes
($MM)
496")
53
A9(4)
13(3)(4)
(3) (8)
Comb i ned
Profits
after Taxes
(SMM)
S228
280
32
15
5
1972 Total
Est imated
of Selected
Value (2)
(SMM1)
n. a.
SI 78
n . a .
132
n.a.
(S) III
Shipment s
Ferroalloys
Percentage
n.a.
41.9"
n.a.
31.1
n.a.
27.0
100.0"
Sale of Selected
Ferroalloys as Percentage
of Tot a I Sales
n.a.
3.r
n.a.
14.8
n.a.
65.-
Notes:  (1)  Balance and  income sheet data  from annual reports and Moodv' s.
        (2)  Estimated value of shipments.
        (3)  For one company, the data are  estimated.
        (4)  For one company, extraordinary  item  is omitted.
        (5)  For one company, sales of foreign holding coirpan\ are included.   For  another  connanx .  rental revenues are included.
        (6)  Excluding foreign holding company of one company, includnm  rental  revenues of one  cor-pans .
        (7)  For one company the data are not available, for comparative  purposes,  1971  figure  is  included.
        (8)  Profits of one company are not  available.  Loss occurred rainlv  outside  the ferroalloys.

-------
                                                             ENVIRONMENTAL PROTECTION AGENCY
                                            DEGREE OF DIVERSIFICATION OF COMPANIES IN THE FERROALLOYS INDUSTRY
                                                     BY ESTIMATED PERCENTAGES OF SALES IN SELECTED FERROALLOYS(1)
     Degree of
  Diversification
by Sales of Selected
Ferroalloys as Per-
         f All Sales
          Above 90%
          Under 20%
Year


1971

1972


1971

1972


1971

1972
All Products
Number
of
Companies
2
2

3
3

4
4
1972 Totals

Shipments
Value
($MM)
n.a.
$ 72

n.a.
135

n.a.
218
$425
Estimated
in Selected Ferroalloys
Percentage
n.a.
16.9%

n.a.
31.8

n.a.
51.3
100%

Combined
Net Sales
(SMM)
$ 76(2)
72
(5)
532k ;
609(5)

5,511
5,970


Combined
Assets
(SMM)
$ 59(2)
41(4)

731
743

6,179
6,465

Combined Combined
Profits Profits
before Taxes after Taxes
(SMM) T5MM)
$ 8(2)(3) $ 4(2)
{[, \ (l+ )
(o / C-^y

23(?) (9)
(3)
42r ' 241
518^ 293

 Notes:   (1)   Balance and income sheet data from annual  reports  and  Moody's.
         (2)   For one company,  data of foreign holding company are  inclxided.
         (3)   For one company,  data are estimated.
         (4)   Data for one company are not available.
         (5)   Rental  revenues  for one company are included.
         (6)   For one company,  profit from rental revenue  is  included;  for  a  second  company,
              profits are estimated.
         (7)   For one company,  extraordinary item is  omitted.
                                                                                                                       ra
                                                                                                                      IX

-------
ENVIRONMENTAL PROTECTION AGENCY
PROFIT RATIOS BY SIZE OF COMPANY IN THE FERROALLOYS INDUSTRY
Return on
Return on Return on Shareholders '
Number Sales Assets Eauitv
Value of of Before After Before After Before After
Net Sales Year Companies Taxes Taxes Taxes Taxes Taxes Taxes
($MM)
Above $

$100 -

Under $

Sources



1,000 1971 3 7
1972 3 8
$999 1971 2 6
1972 2 5
100 1971 4 6
1972 4 (1
: Exhibit IV-1, 19 annual r



.8% 4.4% 6.9% 3.9% 14.9% 8.5%
.9 5.0 8.1 4.6 17.7 10.0
.9 4.2 5.6 3.3 11.1 6.7
.6 1.7 5.1 1.6 10.5 3.2
.6 2.5 6.1 2.4 10.3 4.0
.7) (5.5) (1.5) (5.1) (2.7) (9.2)
eports and Moody ' s .










i
w
H
I
LO

-------
                 EXHIBIT  IV-4
CM
-
CO
d to
o cu
dr-l >
to O 4J
2« 3
cu to o
at cow
f-j
CO

J-< 01
cu cu
4J X
M-4 CC
s-s
m
•
o
< H .--

CU
M CO
o cu
ti i V
CU eg
pan

fr-S
0
•
i-4
CM



2;
0
M
H

M
M
C/3
(£
>* [>
CJ M
!Z O ^
W Od
O ftt H
<; o co

z wo
O W!Z
1— 1 PC< 1— 1
H O
O W CO
H* O
O ^ i-J
od m t— i
PL, ^j
CO O

^4 r-l 05
H Z W
£3 ^1 E
H p-i
•> • ^Fj ro
§ o 53
O OH
od

> O M
52
W CO
o
M
H

05

H
M
fn
O

P_i



C!
O co
d cu
to co
P CO
4J ^
CU
PiJ

to co
cu cu
4J X
U-4 eg
>,M-I
M -rl O. O
OO CO CO r-4
0) rl CUr-4 CU
Q CU i— 1 CO W
^ co O ctj
•H CO to 4J
Q V4 C
>>cu cu
42 ft, O











gsS
o
CT>

CU
g
,£)
S
O
CM

to
CU
•o
d
p




o
M-l
-o
CU
CO
J3

o
CO
r-l
cO

CU
j I
to

4-1
CO

^i
4J
•H
3
cr
cu

CM
|^^
fy\ *
. r-l CU
CU r-4
r-l CO 43
43- cO
i-4 C -rl
•rl CO (0
co a >
> e cd
CO 0
0 4J
CU 0
to cu d
co d
o cu
&*\ Vj
d to cO
CO CU
CX co cO
g 0 4J
O CX n5
CJ ^1 T3

CU CX4-»
C d
0 CU CU
> 0
^•rl CU
•— 4 4-1 V-l
d CO
O (-1 CU
cO O
^ a d
o E -H
M-i O co
o
cO CN
w nr-
fO O Ox
Q tH r-l


S~*
-------
                           ENVIRONMENTAL PROTECTION AGENCY

          SALES AND GROSS EARNINGS RPLATIONSHIPS OF DIVERSIFIED COMPANIES
                     Sales of Ferroalloys
                       as Percentage of
Company     Year     	All Sales	

   A        1970            n.a.
            1971             6.9%
            1972             6.0
                                  Gross  Earnings  in
                                  Ferroalloys  as
                                  Percentage  of All
                                  Gross Earnings

                                        n.a.
                                        17.1%
                                         5.0
                                         Gross Earnings
                                        as Percentage of
                                        Ferroalloys Sales

                                             n.a.
                                             18.5%
                                              5.8
   B
1970
1971
1972
n.a.
25.2
26.2
n.a.
27.0
 8.8
n.a.
12.5%
 3.0
            1970
            1971
            1972
                81.9
                81.6
                79.0
                        89.7
                        88.8
                        38.0
                     10.9%
                      9.0
                      1.6
Sources:  Annual company reports and Moody's.
                                                                                            X
                                                                                            ffi
                                                                                            M
                                                                                            w
                                                                                            M
                                                                                            H

-------
                                                           ENVIRONMENTAL PROTECTION AGENCY
DEVELOPMENT OF PROFIT RATIOS FOR HIGHLY SPECIALIZED FERROALLOYS PRODUCERS

Return on
Before Taxes
Net Sales
After Taxes
Company
A
5.9%
4.9
3.7
5.5
6.4
4.1
0.0
B C
n . a-, % n.a. 7
11.4 12.6
9.5 n.a.
11.5 n.a.
12.1 n.a.
10.6 9.2
2.7 n.a.
A
3.4%
3.1
3.5
3.2
3.8
0
(6.9)
Company
B C
n.a.% n.a.%
6.7 8.4
3.7 n.a.
5.6 n.a.
6.5 n.a.
5.8 5.4
1.9 n.a.
Return on Assets
Before Taxes

A
6.6%
3.8
2.7
4.6
5.6
3.3
0.0
Company
B C
n.a.% n . a . 7
16.1 18.3
12.9 n.a.
15.8 n.a.
18.0 n.a.
14.5 10.4
3.5 n.a.
Return on Shareholders'
After Taxes

A
3.9%
2.4
2.6
2.7
3.3
0
(6.5)
Company
B C
n.a. 7 11.1%
9.5 12.2
6.6 n.a.
7.8 n.a.
9.6 n.a.
7.9 6.1
2.5 n.a.
Before Taxes

A
6.6%
4.9
3.7
6.3
7.7
4.7
0.0
Company
B C
n.a.% n.a.%
19.8 30.5
16.1 n.a.
21.0 n.a.
23.7 n.a.
18.1 27.0
4.6 n.a.
Equity
After Taxes

A
3.9%
3.1
3.5
3.7
4.7
0
(8.7)
Company
B C
n . a . % n.a.%
11.7 20.2
8.2 n.a.
10.3 n.a.
12.7 n.a.
9.9 16.0
3.3 n.a.
Year


1963


1967


1968


1969


1970


1971


1972
Note:  Company A derives about 80% of  its revenue from the sales of ferroalloys. Company B  100%.  Data  for  Company  B  are  derived  from
       consolidated balance and  income  sheet data of foreign holding company which operates a wholly-owned  U.S.  subsidiary  and  produces
       mainly ferroalloys.  Profit before taxes for one company in 1972 excludes extraordinary  losses.



Sources:  Annual company reports and Moody's.
                                                                                                                                                          a:
                                                                                                                                                          hH
                                                                                                                                                          CO

-------
EXHIBIT IV-7
4->
XI
S>
4J
fi i-l
£ d
CU O
H W

M O
d W
3




5-2
t-l in P^ rH ON
• * • 9 O
C^J r^ 
XI 4J
CO -H
.,_! jj
^-i t-3 0
U Pn W
Z O 4J
W dO
O W CO CU 4-i
*** H 3 £4
23 CO < d
O CO U






6*^
i— 1 C^J O\ VO r-l
• o • o o
r^- 00 r-4 CN CN
on on CN on on



1— 1 >-"
H PQCtf
r A j*^ j»^»>.
t^ ^5
o p o o» i-i
ni E™( Ci i i 4-J
p . QJJ L4 05
PIZ5 dC*
^ pdM 0
i-i
CM i-i vo r- on
• • • o •
CN CM CO CN CN


H CO tH

£S i—5 ^ M-4 CO
g <; P-! o cu
Cr p| «3 i
o MO ^4 d
& fL, O Q) CO
M < XI g
Z 9 O
S ^ cj)



on on CM CN «d-


^

j_!
CO
CL'

i-l OM i-4 CM r-4

o^ o^ c^ o^ o^
r-4 i-l r-4 i-l r-4

ly*v
CO ClJ
 > o cu
^ 0 0 T>
X r-l d

cu
r4
S~^ CO
CN 4->
N-' CJ
r-. co
° V-i
m 4-»
CN d
o
CJ
cu
CO
CO
cu
r-l
CN CO
NMS CU
VO 'O
!-*(
• d
CM r-4
O
d
•r4

CO •
•r4 CO
XI (U
4J -H
d
>d" £*> *D
d ex
co 6
ex o
F. o
0
CJ CU
CN OJ
r-~ Q) r4
ON CX.
r-< O 4-i
O O



X-N/^X
rH CM
^ _s\. s

• •
CO
cu
4J
O
lz


























•
CO
>
0
O
S3

d
CO

CO
4-1
M
O
ex
cu

^i
d
CO
ex
P
o
0
i-4
CO
d
g
d
<3J


co
cu
o
V4
d
o
C/3

-------
                          ENVIRONMENTAL PROTECTION AGENCY

                   CAPITAL STRUCTURE BY DEGREE OF SPECIALIZATION
                    OF THE COMPANIES IN THE FERROALLOYS  INDUSTRY
                                                                          Long-Term Debt
                                                                            to  Equity

                                                                             16.8%

                                                                               4,


                                                                             62.4

                                                                             54.1


                                                                             60.1

                                                                             59.5


Notes:  (1)  Only one company.
        (2)  For one company  this includes lease contracts, revenue  equipment.
        (3)  Only  two  companies.

Sources:  Annual company report and Moody's.
                                                                                         w
*.r

Degree of Diversifi-
cation by Sales of
Ferroalloys as Per-
centage of All Sales Year Companies
Above 90% 1971
1972
20% - 90% 1971
1972
Under 20% 1971
1972
2
2
3
3
4
4


Current Current Liabilities
Ratio to Eauitv
2.0
2.7)
21.9
33.3(3)
36.2
37.6

-------
                      V - PRICE EFFECTS

     The ferroalloys industry is highly competitive both domes-
tically and internationally.  There is also very little product
differentiation among manufacturers, and ferroalloys are treated
as a commodity.  Prices are therefore determined largely by
market conditions.  For example, in 1972, imported ferroalloys
increased substantially, resulting in a severe decline in prices
of these products in the United States.  The effect was seen in
the decline of profitability of the industry as a whole and in-
dividual companies, where data were available.

     With a market like this, it is unlikely that prices can be
increased, in the short-range, to cover the pollution control
costs.  In the long-range, if these costs are significant, it
is likely that they will in part be passed on in the form of
price increases.

-------
            VI - METHODOLOGY OF IMPACT ASSESSMENT

     The following methodology was used in assessing the eco-
nomic impact of the cost of water pollution control on the
ferroalloys industry:
          1.  The analysis was based on the 1972 industry level
of sales.  This is reasonable since:
              (a)  Historical industry growth has been
                   minimal.
              (b)  The relationship of additional costs
                   to additional sales will be relatively
                   constant.
          2.  The cost data used, supplied by Datagraphics, Inc.
are based on August, 1971 cost levels.
          3.  The financial impact on the industry as a whole
was measured in terms of the effect on the industry's average
profit before taxes as a percent of sales and the effect on
average profit before taxes as a percent of total assets.
          4.  The same analyses were performed on groups of
companies with various levels of usage of wet air pollution
control equipment.
          5.  The impact on prices of ferroalloys was determined
based on maintaining the industry's historical average level of
profitability before taxes.  This was done for three measures
of profitability:
              (a)   Maintenance of the same dollar value
                   of profits before taxes.
              (b)   Maintenance of the same profit level
                   before taxes measured in terms of "profit
                   as a percent of sales."

-------
                                                      VI  -  2
              (c)   Maintenance of the same  profit  level
                   before taxes measured in terms  of
                   "profit as  a percent of  total assets."

          6.   The  impact on production curtailment,  plant clos

ings, etc. was based on:

              (a)   Judgmental  assessment of the expected
                   financial impact.

              (b)   Interviews  with industry sources.

              (c)   Evaluation  of the  level  of additional
                   investment  required by company.

-------
                    VII  -  IMPACT ANALYSIS


     The  data  presented  in preceding  sections indicate that

 the  impact  of  water pollution control costs will be minimal for

 this industry.  Of greater importance to the industry is the im-

 pact of air pollution control costs and imports, which have

 seriously affected both  the industry's growth and profitability

 in recent years.


     Because of this limited impact,  it was decided by A. T.

 Kearney and the EPA that a general analysis of the industry,

 rather than a  detailed analysis of industry segments, would be

 sufficient  to  provide the  assessment of the impact on the ferro-

 alloys industry.


 INVESTMENT  AND
  OPERATING COSTS

     Cost data reported in August, 1971 dollars for various

 treatment levels were developed by Datagraphics, Inc. as part

 of an analysis of the industry's effluent requirements.  These

 data are  summarised in Exhibits VII-1, VII-2, and VII-3.  These

 exhibits  show the investment requirements for water pollution

 abatement per megawatt of  furnace capacity and the related oper-

 ating costs per megawatt per day.  Exhibit VII-1 contains the

data regarding equipment necessary to meet the 1977 standards

 (BAT);  Exhibit VII-2,  the 1983 standards (BPT);  and Exhibit VII-3,

new source standards.


     The industry costs developed in the remainder of this report

-------
                                                      VII  -  2



 are  based  on  these  data.  Note  that  the new  source  requirements

 call for new  plants with  open furnaces to utilize a dry air

 pollution  control system.  Closed  furnaces may use  either  a

 wet  or  a dry  system.


 CURRENT INDUSTRY
  FACILITIES

      The projected  impact on the ferroalloys  industry is re-

 lated to the  type of air  pollution control systems  in use  and

 the  amount of water treatment equipment already  installed.


      (a)  Type of Air
      	  Pollution System
     It has been shown that the two sources of water pollution

are furnace cooling water 'and water used in wet-type air pollu-

tion control systems.  Table VII-1 shows that, currently, 32.21

of the industry's furnace capacity is equipped with wet-type air

pollution systems.

                         Table VII-1

          Existing Air Pollution Control Facilities
          	in tha Ferroalloys Industry	

                               Furnace     Percent
           Type of System      Capacity    of Total
                                 (Mw)

          Wet Air Pollution
         *   Cr-rir-rol Systems       463        32.27,

          Dry Air Pollution
            Control Systems       542        37.7

          No Air Pollution
            Control Systems       432        30.1

               Total            1,437       100.0%

Source:  Exhibit III-10.

-------
                                                       VII - 3



     As was shown in Exhibit VII-1, the investment cost for

water pollution control to meet the 1977 standards was esti-

mated to be $18,409 per megawatt for an open furnace with a wet

air pollution control system, $23,488 per megawatt for a closed

furnace with a wet system, and $1,266 per megawatt for dry air

pollution systems.  In 1983, the requirements are $29,507 per

megawatt for an open furnace with a wet system, $35,747 for a

closed furnace with a wet system and $8,444 for dry systems.


     It is significant that the industry is currently using wet

air pollution control systems for only 32.2% of its capacity,

since the investment costs associated with these systems are

about four times as great as those for the dry air pollution

control systems.  Because of this, manufacturers in this indus-

try who currently have no air pollution control (30.1% of in-

dustry capacity) are planning to install dry systems.


     (b)  Existing Waste-
          water Treatment
          Facilities
     The 1983 standards require the recirculation of furnace

cooling water through cooling towers plus treatment of the blow-

down.  Many plants already are using cooling towers for the re-

circulation of this cooling water but are not treating the blow-

down in accordance with the proposed standards.  If these plants

also have dry air pollution control systems, these existing

facilities will meet 1977 standards.  The additional investment

required to meet 1983 standards will be $1,333 per megawatt.

-------
                                                      VII - 4



This is projected to result in additional annual operating costs

of $4.66 per megawatt-day.


     The following table shows the extent to which existing

facilities already meet the 1977 standards, (BAT).

                         Table VII-2
Existing Industry
Meets All 1977 Require-
ments
Requires Additional
Facilities To Meet
1983 Requirements
Total
Wastewater Treatment

Number
14
8
22
Plants
Percent
of Total
63.6%
36.4
100.0%
Facilities
Furnace
Mw
1,012
425
1,437
Capacity
Percent
of Total
70.4%
29.6
100 . 0%
     Fourteen of the 22 plants, representing over 70% of the

industry's capacity, already have in operation the equipment

necessary to meet the 1977 standards.  It has been assumed,

based on interviews with industry manufacturers, that all un-

controlled plants will install dry air pollution control sys-

tems.  Therefore, the 1977 standards will impose additional

costs on the industry for only about 30% of its total capacity,

The total costs to the industry are discussed in the following

paragraphs.


INDUSTRY COST
  REQUIREMENTS

     (a)  Investment
          Costs
     Table VII-3 on the following page shows the additional

-------
                                                     VII - 5




investment required for the industry to meet the effluent stan-


dards for 1977 and 1983:  $9.5 million and $6.2 million, re-


spectively, for a total of $15.7 million.   It is estimated that


industry total assets are currently about  $404 million.  Thus,


the additional investment required by 1983 to meet water pollu-


tion control standards is estimated to be  about 3.9% of the
                                            i

industry's present total assets.


                         Table VII-3
Additional Investment Required To Meet
1977 and 1983 Effluent Standards
Number of
Plants
14
8
Total _22
(b)
Additional Investment
Capacity
(Mw)
1,012
425
1.437
Annual Ownership
and Operating Cost
1977
(000)
-0-
$9,489
$9,489
1983
(000)
$1,201
5,041
$6,242
Total
(000)
$ 1,201
14,530
$15,731

     Table VII-4 shows the total industry annual cost increase


due to the addition of the equipment required to meet the pro-


posed 1977 water pollution standards.


                         Table VII-4


          Increase in Ownership and Operating Costs
             1977 Standards versus Current Costs
Number of
Plants
14
8
Capacity
(Mw)
1,012
425
Annual Cost
Increase
(000)
-0-
$4,034
     Total   22            1^437           $4,034

-------
                                                     VII - 6

     The total for the industry is estimated to be about $4.0
million, but 14 plants will have no cost increase at all.  This
cost increase represents 0.95% of current industry sales ($425
million).

     Table VII-5 shows that the 1983 standards will impose addi-
tional costs on the industry.  The costs are projected to be
$8.2 million greater than current industry costs, or 1.94% of
current industry sales.
                         Table VII-5
Increase in Ownership and Operating Costs
1983 Standards versus Current Costs
Number of
Plants
14
8
Total _22
INDUSTRY PRICE
EFFECTS
Capacity
. (Mw)
1,012
425
1.437
Annual Cost
Increase
(000)
$1,532
6,694
$8,226
     This section discusses the impact these added costs will
have on the price of ferroalloys.  In Section V it was reported
that:
          1.  The ferroalloys industry is very competitive.
          2.  Ferroalloys are commodity-type products with
little production differentiation.
          3.  Imports are significant and have a major impact
on prices.

-------
                                                     VII - 7

     Because of these facts, market conditions are the major
determinants of prices in this industry.  Annual price fluctua-
tions can amount to 5% or more of the average.  It will be shown
that the added costs for water pollution control are relatively
small.  Although it is unlikely that these cost increases can
be immediately passed on in the form of price increases, it is
expected that these costs will eventually be recovered through
increased prices.

     The projected cost increases for 1977 and 1983 are reviewed
in the following paragraphs.

     (a)  1977 Standards (BAT)
     Exhibit VII-4 shows that the total industry costs for water
pollution control, based on 1977 requirements, amount to about
$4.0 million annually.  If the industry attempts to maintain
the same profit level, in dollars, a 0.95% price increase will
be required.  If the industry attempts to maintain its histori-
cal profit as a percent of sales, prices must be increased 1.04%,
If the same return on total assets is to be maintained, a price
increase of 1.16% is necessary.

     (b)  1983 Standards (BPT)
     Exhibit VII-4 also shows the total price increase neces-
sary to meet 1983 water pollution control standards in terms of
maintaining the current dollar level of profit, maintaining the
historical profitability as a percent of sales, and maintaining
the return on total assets.  The required price increases are
1.94%, 2.13%, and 2.29%, respectively.

-------
Projected Price Increases due to the
Added Cost of Water Pollution Control
Current Price
(per Ton)
$200.00
311.00
210.00
175.00
Projected
1977
Cper Ton)
$202.32
314.61
212.44
177.03
Prices
1983
(per Ton)
$204.58
318.12
214.81
179.01
                                                      VII - 8



     The maximum price increases based on maintaining the aver-

age industry return on total assets are shown in the following

table.

                         Table VII-6
 Type of
Ferroalloy
HC FeMn

HC FeCr

SiMn

FeSi-50%


     The data in this table confirm that the price increases

would be smaller than historical fluctuations in prices due to

changing market conditions.


SECONDARY PRICE
  EFFECTS	

     In Section II it was mentioned that the primary markets

for ferroalloys are the iron, steel and foundry industries.

This is confirmed by data presented in Exhibit VII-6 and sum-

marized in the following table.

                         Table VII-7

                 Use of Selected Ferroalloys

                           Cast     All
            Type   Steel   Iron    Other   Total

            FeMn   94.0%    2.2%    3.8%   100.0%
            SiMn   90.3     2.9     6.8    100.0
            FeSi   42.6    44.4    13.0    100.0
            FeCr   88.7     2.5     8.8    100.0

-------
                                                     VII - 9





     This  table clearly shows that the steel industry is the


 primary user of ferroalloys, although use of ferrosilicon is


 split between  steel and cast iron.




     The effect that ferroalloy price increases will have on


 steel prices,  if the increases shown in Exhibit VII-4 are passed
              #

 on  to steel users, is shown in Exhibit VII-7.  This exhibit shows


 that the average price of steel per ton is approximately $203,


 based on current prices.  It is further estimated that the current


 value of ferroalloys per ton of steel averages $2.62, or approxi-


 mately 24  gross pounds of ferroalloys.  An increase of 1.16% in


 the price  of ferroalloys raises the cost of steel by $0.03 per


 net ton.  An increase of 2.29% raises the cost of steel by $0.06.




     To maintain the existing level of before-tax profits, the


 steel producer must raise his price by $0.03 and $0.06, respec-


 tively, in 1977 and 1983.  This is an increase of less than


 0.03% of existing prices.




     The average automobile contains approximately 3,600 pounds


 of steel.  The average increase in cost per car to an automobile


manufacturer would be about 5C4£ in 1977 and 10.8c in 1983.




     It can be concluded that the secondary price impact will


be minor.




FINANCIAL

  EFFECTS


     (a)   Profitability


     Exhibit VII-8 provides an analysis of the projected impact

-------
                                                       VII - 10

that water pollution control costs are expected to have on in-
dustry profitability.  Since insufficient data were available
regarding the profitability of ferroalloys for individual com-
panies, each group was assumed, initially, to be equally profit-
able as a percent of sales.  However, investment and operating
costs were adjusted to reflect the differences between those
                                              *
companies which are currently operating cooling towers and those
which are not.

     Table VII-8, summarized from Exhibit VII-8, shows the im-
pact on profitability if all costs are absorbed without increas-
ing prices.  This table shows that:
          1.  The average industry return on sales is projected
to decline from the current 9.12% to 8.19% in 1977 and 7.20% in
1983.
          2.  The average return on total assets is projected to
decline from 9.59% to 8.42% and 7.29%, respectively, in 1977 and
1983.
          3.  The four companies which currently have some wet-
type air pollution control systems in operation will be affected
the most.  The return on sales for these companies, as a group,
is expected to decline from 9.17% to 6.59% by 1983.  This repre-
sents a drop of 28%.  The return on total assets will decline
32% from 9.67% to 6.58%.
          4.  The average of the five companies with no wet-type
air pollution control systems is expected to show a decline of
6% in both the return on sales and the return on total assets.

-------
                                                     VII - 11

                         Table VII-8
Effects of Water
on Profitability

Pollution Control Costs
- No Increase in Prices
Use
of Wet Air

Pollution
Control Systems
Number of Firms
Percent of Total Industry
Sales
Profit (before taxes)
as a Percent of Sales :
Current
1977
1983
Profit (before taxes)
as a Percent of
Total Assets:
Current
1977
1983
None
5
32%

9.04%
9.04
8.52


9.46%
9.46
8.88
Some
4
68%

9.17%
7.79
6.59


9.67%
7.94
6.58
Total
Industry
9
100%

9.12%
8.19
7.20


9.59%
8.42
7.29
     Table VII-9 summarizes the pro forma profitability of the
industry if prices are increased an amount equivalent to main-
taining the current industry average return on total assets,
9.59%.

-------
                                                      VII - 12
                        Table VII-9
           Effect of Water Pollution Control Costs
                on Industry Profitability -
                    with Price Increases
Use of Wet Air
Pollution
Control Systems
'irms
Total
Sales
None
5
32%
Some
4
68%
Total
Industry
9
100%
Profit  (before taxes) as
  a Percent of Sales :
    Current
    1977
    1983
Profit  (before taxes) as
  a Percent of Total Assets
    Current
    1977
    1983
9 . 04%
10.10
10.57
9.17%
8.83
8.66
9 . 12%
9.23
9.27
 9.46%
10.71
11.27
9.67%
9.10
8.86
9.59%
9.60
9.60
     This table shows that the profitability, measured as a
return on sales, of the industry as a whole is projected to
show a slight increase, from 9.12% to 9.27%.  However, the
group of companies using some wet air pollution control sys-
tems is still projected to show a decline in profitability.
The return on sales will decline 5.6% and the return on total
assets, 8.4%.

-------
                                                     VII -  13



      (b)   Capital
           Availability

      Exhibit VII-8 also shows the additional  investment required,

For meeting 1977 standards, the  industry must spend $9.5 mil-

lion.  An  additional  $6.2 million is required to meet the 1983

requirements.  The total of $15.7 million required for the  in-

dustry is  3.9% of the current estimated industry assets of  $404

million.   The four companies which are affected the most require

an estimated increase in assets  of 5.5%, or $15.1 million.


      These latter companies are  broadly diversified, so that

this  $15.1 million in additional assets employed in ferroalloys

manufacturing is quite small when compared to their total cor-

porate assets.


PRODUCTION, EMPLOYMENT
  AND COMMUNITY EFFECTS

      Based on the data analyzed and interviews with ferroalloy

manufacturers, it is believed that the proposed water pollution

control standards will have no significant effect on production

levels or plant closing.  Thu.s,  there will bo little effect on

industry employment and no impact on local communities due to

plant closings.


     It must be remembered that  this industry is under economic

pressure due to several other factors:

          1.   Air Pollution Control Costs.   Annual air pollu-

tion control costs,  preliminarily,  are  estimated to range from

-------
                                                      VII - 14







two to five times more than the cost of water pollution control.



The air pollution problem is of much greater concern to the in-



dustry than water pollution control.



          2.  Imports.  Imports have increased considerably in



recent years.  Ferromanganese imports amounted to 26% of con-



sumption in 1971 and nearly 40% in 1972.  Ferrochromium imports



also were high, accounting for over 4470 of consumption in 1972 .



          The result h^ been a severe profit squeeze for the
                                          i


industry, since foreign-produced ferroalloys have been delivered



at lower prices than domestically-produced ferroalloys.  There



is some indication in 1973 that this price differential has been



narrowed.



          3.  Industry Cycles.  The cyclical nature of the steel



industry in the United States greatly affects the demand for



ferroalloys.  Since there is little product differentiation,



competition is keen during low periods of the cycle.





     The U.S. ferroalloys industry has exhibited very little



growth during the past five years.  Bureau of Mines data show



the following total shipments of all ferroalloys since 1967:



               Year     All Ferroalloy Shipments

                        (Millions of1 Gross Tons)



               1967               2.5



               1968               2.4



               1969               2.6



               1970               2.5



               1971               2.3





     In addition, industry sources have indicated that total

-------
                                                     VII - 15



 furnace capacity of the  industry has remained at a constant

 level.  Any new furnace  installations have generally been to

 replace existing capacity.


     For  the four ferroalloys covered by this study, there are

 currently 9 manufacturers operating 22 plants.  Of this total,

 two  plants are converting to the production of silicon metal.


     Two  plant closings  have been announced for 1973, although

 the  current high level of demand for ferroalloys may keep these

 open for  another year.   There is a likelihood that three addi-

 tional plants may close  because of a combination of financial

 problems, air pollution  control costs, and other factors.


     In total, by 1983,  it is our opinion that the producers of

 the  4 ferroalloys covered by this study may consist of 8 com-

 panies operating a total of 15 plants.  The reduction from the

 present level of 22 plants is not expected to have been a re-

 sult of added water pollution control costs.


 NEW SOURCE
  STANDARDS

     While new source standard costs are the same as those for

 the  1983 standards, it is difficult to evaluate what impact

 these standards will impose on this industry.   Some of the rea-

 sons for this are:

          1.   Industry furnace capacity has not grown in recent

years.   About two new furnaces have been installed each year as

-------
                                                     VII - 16






replacements for existing furnaces.  It is possible to install


a new furnace without adding any major costs for water pollu-


tion control, so the effect may be zero.



          2.  If an existing furnace with a wet scrubber sys-


tem is replaced by a new furnace with a dry baghouse system,


the annual costs would be reduced by $599,000 for 50 megawatts


of capacity.



          3.  The replacement of a dry system with a wet system
                                          *

would add about $599,000 in annual costs, based on the conver-


sion of 50 megawatts of furnace capacity.




     No data were available regarding furnaces which are candi-


dates for replacement.   Because of this, it was assumed that


the new source standards would have very little, if any, impact



on industry profitability,  industry growth,  or balance of pay-


ments .

-------
                            ENVIRONMENTAL  PROTECTION AGENCY
COST OF WASTEWATER TREATMENT
FERROALLOYS
Type of Furnace
and Air Pollution
Control System
Open Furnaces with
Wet Air Pollution
Control Devices
Air Pollution Water
Treatment
Furnace Cooling
Water Treatment
Total
Closed Furnaces with
Wet Air Pollution
Control Devices
Air Pollution Water
Treatment
Furnace Cooling
Water Treatment
Total
Open or Closed
Furnaces with
Dry Air Pollution
Control Devices
Furnace Cooling
Water Treatment
Ownership
Investment Capital
(Dollars per Mw)
$17,143 $2.48
1,266 0.17
$18,409 $2.65
$22,222 $3.21
1,266 0.17
$2.3,488 $3.38
$1,266 $0.17
- 1977 REQUIREMENTS
INDUSTRY
and Operating
Depreciation
. $3.30
0.23
$3.53
$4.27
0.23
$4.50
$0.23
Cost
Power
$0.29
0
$0.29
$0.38
0
$0.38
$0
(BAT)
in Dollars per
Other
Operating
$14.54
0
$14.54
$18.85
0
$18.85
$0
Mw-Day
Total
$20.61
0.40
$21.01
$26.71
0.40
$27.11
$0.40
                                                                                                 w
                                                                                                 s
Source:  Effluent Limitations Guidelines and Standards  of Performance  -  Ferroalloys
         Industry, Datagraphics,  Inc.,  June, 1973.

-------
                              ENVIRONMENTAL PROTECTION AGENCY
COST OF WASTEWATER TREATMENT - 1983 REQUIREMENTS (BPT)
FERROALLOYS INDUSTRY
Type of Furnace
and Air Pollution
Control System
Open Furnaces with
Wet Air Pollution
Control Devices
Air Pollution Water
Treatment
Furnace Cooling
Water Treatment
Total
Closed Furnaces with
Wet Air Pollution
Control Devices
Air Pollution Water
Treatment
Furnace Cooling
Water Treatment
Total
Investment
(Dollars per Mw)
$21,063
8,444
$29,507
$27,303
8,444
$35,747
Ownership
Capital
$3.05
1.17
$4.22
$3.95
1.17
$5.12
and Operating
Depreciation
$4.05
1.56
$5.61
$5.25
1.56
$6.81
Cost
Power
$0.36
1.06
$1.42
$0.46
1.06
$1.52
in Dollars
Other
Operating
$17.87
8.50
$26.37
$23.16
8.50
$31.66
per Mw-Day
Total
$25.33
12.29
$37.62
$32.82
12.29
$45.11
Open or Closed
  Furnaces with
  Dry Air Pollution
  Control Devices

Furnace Cooling
  Water Treatment
$ 8,444
$1.17
$1.56
$1.06
$8.50
$12.29
Source:  Effluent Limitations Guidelines  and Standards  of Performance  -  Ferroalloys
         Industry, Datagraphics,  Inc.,  June,  1973.
X

M



<
M

 I

-------
                                 ENVIRONMENTAL  PROTECTION  AGENCY

                      COST OF WASTEWATER TREATMENT -  NEW SOURCE REQUIREMENTS
                      	FERROALLOYS INDUSTRY	


  Type of Furnace                     Ownership and Operating  Cost  in  Dollars  per Mw-Day
 and Air Pollution                                                    Other
  Control System        Investment     Capital  Depreciation  Power   Operating    Total
                     (Dollars per Mw)

Closed Furnaces with
  Wet Air Pollution
  Control Devices

Air Pollution Water
  Treatment             $27,303        $3.95      $5.25     $0.46     $23.16     $32.82
Furnace Cooling
  Water Treatment         8,444         1.17    .   1.56       1.06       8.50       12.29

     Total              $35,747        $5.12      _$6.81     $1.52     _$31._66     $45.11

Open or Closed
  Furnaces with
  Dry Air Pollution
  Control Devices

Furnace Cooling
  Water Treatment       $ 8,444        JlllZ      H-_5J     $1.06     J8^_50     $12.29


Source:  Effluent Limitations Guidelines and Standards of  Performance  -  Ferroalloys
         Industry, Datagraphics,  Inc., June, 1973.
                                                                                                 X

-------
                                                      EXHIBIT VII-4
                 ENVIRONMENTAL PROTECTION AGENCY

       EFFECT OF WATER POLLUTION CONTROL COSTS  ON  PRICES
    Standards
 Additional
   Annual
Industry Cost
    (000)
 1977 Requirements (BAT)

Maintain Same Actual
  Dollar Earnings,
  before Taxes            $4,034

Maintain Same Earnings
  as a Percent of Sales,
  before Taxes             4,034

Maintain Same Earnings
  as a Percent of Total
  Assets, before Taxes     4,034
   Total Industry
   Price Increase
Versus Current Prices
              Percent
              of Sales
Dollars
                   $4,034
                    4,439
                    4,928
                0.95%
                1.04
                1.16
 1983 Requirements (BPTj

Maintain Same Actual
  Dollar Earnings,
  before Taxes            $8,226

Maintain Same Earnings
  as a Percent of Sales,
  before Taxes             8,226

Maintain Same Earnings
  as a Percent of Total
  Assets, before Taxes     8,226
                   $8,226
                    9,051
                    9,718
                1.94%
                2.13
                2.29
Sources:  Tables VII-3, VII-4 and VII-5 and Exhibit VII-5.

-------
                                                         EXHIBIT VII-5
                   ENVIRONMENTAL PROTECTION AGENCY

              ESTIMATED PRO FORMA INDUSTRY PROFITABILITY
Sales '(000)                                          $425,000

Profits before Taxes (000)                           $ 38,760(1)
                                                             ( 2^
Total Assets (000)                                   $404,000V '
                                             t

Profit as a Percent of;

   Sales                                               9.12%

   Total Assets                                        9.59%
Notes:  (1)  Profits are based on the reported industry
             average as stated by the Ferroalloys Association.
             The 1972 profits were not used as it was obviously
             a non-typical year.  The 1967-1971 average profit
             after taxes was 4.56%.  This is approximately 9.12%
             before taxes.
        (2)  The ratio of total assets to sales was estimated
             to be the same for the industry as for the com-
             bined data of three companies whose financial
             statements are published.

Sources;  Field interviews, published data, and A. T. Kearney, Inc
          estimates.

-------
                                        ENVIRONMENTAL PROTECTION  AGENCY
FERROALLOYS CONSUMPTION BY END USE
Consumption of Selected Ferroalloys by

Type
Ferromanganese
High Carbon(l)
Low and Medium Carbon
Total
Silicomanganese
Ferrosilicon - 5070
- 567»-707o
- 717o-807=
- 817o-907o
Total
Ferrochromium
Low Carbon
High Carbon
Ferrochromium- silicon
Other
Total

Total

770.7
128.1
898 . 8
122.3
351.8
29.1
70.0
17.4
468^3

127.1
126.1
57.8
11.7
322A7

Carbon

615.4
87.0
702,4
74.2
93.0
_
16.0
_
109 _. 0

1.5
3.9
.7

6,1
- 1971
End Use in
Steel
Stainless Alloy

2.1
5.2
7.3
6.2
13.0
.1
4.7
.1
17.9

94.7
69.7
49.1
.2
213 . 7

103.9
30.8
134.7
30.5
41.1
1.9
25.1
1.3
69.4

16.7
37.6
6.8
2.8
63.9
Tool

0.8
.1
0.9
_
2.8
-
.5
-
3.3

.5
1.7
.2
-
2.4

Thousands of Gross Tons




Cast Iron Super Alloys Alloys Other

17.
2.
19.
3.
179.

22.
5.
207 .

^
6.
m
m
8,

7
1
8
5
1
-
8
8
7

7
9
1
5
2

0

0

0



0

7
1

1
11

.3
-
.3
_
.2
-
-
-
.2

.9
.2
.7
.9
.7

5.2
1.3
6.5
2.3
3.1
-
0.2
-
3.3

1.5
1.7
-
1.8
5.0

25.3
1.6
26.9
6.1
19.5
27 . 1
0.7
10.2
57.5

3.6
3.4
. 2
4.5
11.7
Note;  (1)  Includes blast-furnace-produced ferromanganese.
Source:  1971 Minerals Yearbook.
                                                                                                          in
                                                                                                          x
                                                                                                          a:

-------
               ENVIRONMENTAL PROTECTION AGENCY

                 IMPACT OF FERROALLOYS PRICE
                  INCREASES ON STEEL PRICES
                                                      EXHIBIT VII-7
Average Price of
  Steel per Ton
  Dollars

  Percent of Sales
                          Current
                                        Projected
                              1977
1983
                         .(1)
                                               Percent Increase
                                                Versus Current
Average Value of     ,~^
  Ferroalloys per Ton*-2'     2.62

Estimated Average
  Profit(3) of Steel
  per Ton	
                               2.65
1977
 2.68    1.16
                     8.61      8.61     8.61    0

                     4.24%(4)   4.24%    4.24%   0
1983
                  $203.00   $203.03  $203.06    0.01%    0.03%
         2.29
                  0

                  0
Notes:
(1)  Based on the average of the following current
     quoted prices:
        (2)
        (3)
        (4)
                 Cold Rolled Sheet
                 Cold Finished Bar
                 Hot Rolled Carbon
                   Bar
                           - $201.50/ton
                           -  240000/ton

                           -  167.50/ton
         Average             $203.00/ton
     Based on A0 T.  Kearney estimates of 14 pounds
     FeMn, 3.3 pounds FeSi, 4.7 pounds FeCr,  and
     1.9 pounds SiMn per ton of steel.
     Before taxes.
     Average of 1970-1972 profit for the primary
     iron and steel  industry.
Sources:  Metalworking News and Quarterly Financial Reports for
          J4anufac tur ing Co rporations .

-------
No Price Increase;

  Firms with No Wet-Type
    Air Pollution Control

  Firms with Some Wet-Type
    Air Pollution Control
                                                                                       ENVIRONMENTAL PROTECTION AGENCY
                                                                                      EFFECT OF WATER POLLUTION CONTROL
                                                                                       COSTS ON INDUSTRY PROFITABILITY
                                                                                                                                                                         EXHIBIT VII-8
Estimated Current Industry Position

Number of
Companies (3)

5
4
9

alloys
Sales (1)
(MM)
$135.0
290.0
$425.0

alloys
Assets
(MM)
$128.9(4)
275.1(4)
$404.0

betore Total
Taxes (2) Sales Assets
(MM)
$12.2(4) 9.047. 9.467.
26.6(4) 9.17 9.67
$38.8 9.12 9.59
Pro Forma 1977

alloys
Sales(l)
(MM)
$135.0
290.0
$425.0

alloys
Assets
(MM)
$128.9
284.6
$413.5
Industry Position
Pro Forma 1983
Profit as a
before Total
Taxes Sales
(MM)
$12.2 9.047.
22.6 7.79
$34.8 8.19
Assets

9.467.
7.94
8.42
alloys
Sales(l)
(MM)
$135.0
290.0
$425.0
alloys
Assets
(MM)
$129.5
290.2
$419.7
Industry

before
Taxes
(MM)
$11.5
19.1
$30.6
Position
Profit as a
Total
Sales Assets

8.527. 8.887.
6.59 6.58
7.20 7.29
Price Increase of
  1.16% in 1977 and
  2.29% in 1983

  Firms with No Wet-Type
    Air Pollution Control

  Firms with Some Wet-Type
    Air Pollution Control
5          $135.0  $128.9(4)   $12.2(4)   9.04     9.467,     $136.6     $128.9     $13.8   10.101    10.71%


A           290.0   275.1(4)    26.6(4)   9.17     9.67        293.3      284.6       25.9   8.83     9.10


9          $425.0  $404.0     $38.8      9,12     9.59
                                                                                           $429.9    $413.5     $39.7   9.23
                                                                                                                                 9.60
$138.1    $129.5   $14.6    10.57%    11.27%


 296.6     290.2    25.7     8.66      8.86


$434,7    $419.7   $40.3     9.27      9.60
        (1)  Based on estimated 1972 sales  level.
        (2}  Based on the average industry  profit  for the 1967-1971 period as reported by the Ferroalloys Association.
        (3)  One company which has 100% of  its  capacity  treated by a wet air pollution control system is included with "dry" group since it already has a water treatment
             system which meets the 1983 effluent  requirements.
        (4)  These data were adjusted to reflect the difference from the industry average in costs between those companies operating cooling towers currently and those
             whiqh are not.

-------
                VIII  - LIMITS OF THE ANALYSIS


      In  this  section  the accuracy of the analysis and the major

 assumptions inherent  in the conclusions are discussed.


 ACCURACY

      The accuracy of  this study depends upon the accuracy of:

           1.  Published industry data.

           2.  Unpublished information supplied by knowledgeable

 industry personnel.

           3.  Cost data developed separately from this analysis

 by Datagraphics, Inc.

           4.  Estimates by A. T. Kearney consultants.


      (a)   Published
           Data
          1.  Production and Shipments.  The published data

provided by the U.S. Bureau of Mines and that collected from

industry manufacturers by the Ferroalloys Association have

some areas of conflict.  In general, however, the data were

felt to be sufficiently accurate to be used as an indicator

of the relative size and growth of this industry.

          2-  Profitability.  Little financial data were avail-

able regarding the profitability of ferroalloys for the nine

companies analyzed.  Therefore, much of the profitability data

was calculated based on industry average data published by the

Ferroalloys Association and A. T. Kearney, Inc. estimates.  No

financial data were available for individual plants.

-------
                                                     VIII - 2



      (b)  Unpublished Data
     	and Information

     AIL industry manufacturers were personally contacted to

determine plant capacities, type of air and water pollution

control facilities in existence, type of furnaces installed,

operating data, and plans for future growth and development.


     These data have been treated on a confidential basis and

are assumed to be accurate.  However, not all respondents would,

or could, supply the desired information.  Thus, some data had

to be estimated to provide a complete analysis.  The result is

that total industry data are felt to be more accurate than data

on individual plants.


     (c)  Cost Data

     The cost data provided were used as supplied.  No effort

was made to audit these data, but the order of magnitude of

costs seemed to be in line with industry expectations.


     (d)  A. T.  Kearney,
          Inc. Estimates
           some data were treated as proprietary by industry

sources, or unavailable, it was occasionally necessary to esti-

mate some industry data.  Examples of such estimates are:

          1.  Sales by company.

          2.  Individual plant's shipments.

          3.  Assets employed in ferroalloys manufacturing.


     While some of these data were not specifically published

-------
                                                      VIII - 3



in the report, they were a necessary step in the analysis.

They were not presented due to the confidentiality of the data.


CRITICAL
  ASSUMPTIONS

     The assumptions which directly affect the findings and

conclusions of this study are discussed in the following para-

graphs.


     (a)  Industry
          Profitability

     It was assumed that the industry's average profitability

as a percent of sales would continue to be equal to the average

for the 1967-1971 period.  (See Exhibit VII-5.)


     The assumption was based on the fact that the devalued

U.S. dollar has narrowed the price gap between imported and

U.S.-produced ferroalloys in 1973.


     If imports can sustain lower price levels than domestically

produced ferroalloys, the impact of water pollution control costs

and air pollution controls costs will be much greater.


     (b)  Continued Use of
          Dry Air Pollution
     	Control Systems

     A second assumption bearing upon the impact of water pollu-

tion control costs on this industry is the continued trend to

dry air pollution control systems.


     Industry sources concur with this trend to dry systems,

-------
                                                      VIII - 4



 but  pending  air  pollution control restrictions may have an ef-

 fect on whether  wet or dry systems are used.


      If the  one-third of the  industry operating with no air

 pollution control devices adds wet air pollution control systems,

 the  additional investment required to conform to 1983 standards

 would be over $9 million.


 IMPACT ON INDIVIDUAL
   COMPANIES	

      Obviously the economic impact on individual companies will

 not  be equal.  With only nine industry manufacturers, however,

 it is impossible to discuss these cases without disclosing in-

 formation which  was obtained under promise of confidentiality.


      Even a  general discussion of these companies would reveal

 the  identities to knowledgeable industry personnel.  Therefore,

 no discussion which contained data gathered from confidential

 sources and  could identify individual firms was presented in

.this  report.

-------
  BIBLIOGRAPHIC DATA
  iHEET
EPA-230/1-73-009
                                          3. Recipient's Accession No.
 4. I It'.L' jri- iUL! lllc
     Economic Analysis of  the Proposed Effluent
     Guidelines  for the Ferroalloys  Industry
                                          5. Report Date
                                          September,  1973
                                          6.
 7. Authuc'.s)
                                          8. Performing Ot^ani.' JL ion i\epc.
                                           No.
 9. Performing Organization Name and Address
          A. T.  Kearney,  Inc.
          100 S. Wacker Drive
          Chicago,  Illinois  60606
                                          10, Project.' Task./Uo:*. Lmt "V
                                          1 1. Coi tract/Crane t\o.

                                             68-01-1545
 12. Sponsoring Organization Name 3na Address
          Office  of Planning and Evaluation
          Environmental Protection Agency
          Washington, D.C.   20460
                                          13- Type ut Report & I'cri
                                            Covered

                                            Final Report
                                          14.
 15. Supplementary Notes
  5. Abstracts
          The report summarizes the  economic  impact of  water pollution
     abatement on  the ferroalloys industry.   Discussed are the  industry
     structure,  financial  profile,  sources of water  pollution,  projected
     costs  and price increases, and the effects on production,  plant
     closings, and local communities.
 17. Key U'ords and Doc ament Analysis. 17a. Descriptors
          Economic  factors,  steel industry, ferroalloys  industry,
     pollution, industrial waste treatment, water pollution, ecology
 7b. Ucntifiers/Cpen-I.nded Terms
          Ferroalloys  industry,  water pollution  economics,  economic
     impact
 7c. COSATI F.e
                                                   19. >fi ur it v C las.s ( 1 hi

                                                       f •* r t i •-  tJllM
                                                   20. >i, in i- v > . i •••• i J in
                                                     l'a,-c-
                                                       ! M I J.^'-!l I! H
                                                  21. .\o. oi r ,.-, .
                                                     120
                                                  22. 1-M.
K O H M N r I S- 1 "> { H ( V . 1 - ' .'

-------