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
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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
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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.
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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.
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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.
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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
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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
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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
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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
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-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
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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.
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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
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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
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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
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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
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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.
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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
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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.
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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.
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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
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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
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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.
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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 +
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(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
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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.
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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.
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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.
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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.
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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.
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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.
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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
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-------
EXHIBIT IV-4
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-------
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
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M
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-------
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:
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-------
EXHIBIT IV-7
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-------
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.
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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 - ' .'
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