EPA-230/1-73-011
AUGUST 1973
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
INSULATION FIBERGLASS INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
\
\
lU
o
PRCftf
-------
This document is available in limited
quantities through the U.S. Environmental
Protection Agency, Information Center, Room W-327
Waterside Mall, Washington, D. C. 20460.
The document will subsequently be
available through the National Technical
Information Service, Springfield, Virginia
22151.
-------
EPA - 230/1 - 73-011
ECONOMIC ANALYSIS
OF THE
PROPOSED EFFLUENT GUIDELINES
FOR THE
INSULATION FIBERGLASS INDUSTRY
August 1973
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D. C. 20460
on Agency
Begion 5,
230 r
CM: '--•
-------
This report has been reviewed by the Office of
Planning and Evaluation, EPA, and approved for
publication. Approval does not signify that the
contents necessarily reflect the views and policies
of the Environmental Protection Agency, nor does
mention of trade names or commercial products con-
stitute endorsement or recommendation or use.
-------
PREFACE
The attached document is a contractors' study prepared for the Office of
Planning and Evaluation of the Environmental Protection Agency ("EPA"). The
purpose of the study is to analyze the economic impact which could result
from the application of alternative effluent limitation guidelines and
standards of performance to be established under sections 304(b) and 306 of
the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development
Document") supporting the issuance of proposed regulations under sections
304(b) and 306. The Development Document surveys existing and potential
waste treatment control methods and technology within particular industrial
source categories and supports promulgation of certain effluent limitation
guidelines and standards of performance based upon an analysis of the feasi-
bility 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 continued 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, covering the insula-
tion wool fiber glass industry, was excerpted from a report entitled
"Initial Economic Impact Analysis of Water Pollution Control Costs Upon the
Fiber Glass Industry." The aforementioned report included textile fiber
glass industry in addition to the insulation wool fiber glass industry, and
was submitted in fulfillment of contract no. 68-01-0767 by Arthur D. Little,
Inc.; Cambridge, Massachusetts. Work was completed as of December 1972.
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 proceedings necessary to establish final regula-
tions. Prior to final promulgation of regulations, the accompanying study shall
have standing in any EPA proceeding or court proceeding only to the extent that
it represents the views of the contractor who studied the subject industry. It
cannot be cited, referenced, or represented in any respect in any such proceeding
as a statement of EPA's views regarding the subject industry.
ii
-------
TABLE OF CONTENTS
Page
List of Tables v
List of Figures vi
PART ONE - EXECUTIVE SUMMARY
I. INTRODUCTION 1
II. CONCLUSIONS 3
PART TWO - IMPACT ANALYSIS
I. INDUSTRY SEGMENTS 7
II. PRICE EFFECTS 11
A. PRICE DETERMINATION IN THE FIBER GLASS INDUSTRY 11
B. PRICE TRENDS 12
C. ANTICIPATED PRICE CHANGES DUE TO POLLUTION
CONTROL REQUIREMENTS 13
III. FINANCIAL PROFILES 14
IV. POLLUTION CONTROL REQUIREMENTS IN THE FIBER GLASS
INDUSTRY . 15
V. IMPACT 17
A. FINANCIAL EFFECTS 17
B. PRODUCTION EFFECTS 22
C. EMPLOYMENT EFFECTS 23
D. COMMUNITY EFFECTS 23
E. BALANCE OF PAYMENT EFFECTS 23
VI. LIMITS OF THE ANALYSIS 24
iii
-------
TABLES OF CONTENTS (Cont.)
Page
PART THREE - APPENDIX
VII. INDUSTRY DESCRIPTION 26
A. DEMAND FOR GLASS FIBERS ' 26
1. Wool Glass Markets 29
2. Textile Glass Fibers 30
B. SUPPLY 31
1. Industry Structure 31
2. Technology Trends 44
3. Capacity Utilization 44
4. Degree of Competition and Competitive
Practices 45
5. Government Influence on the Supply of
Glass Fiber 45
iv
-------
LIST OF TABLES
Table No. Page
S-I Summary of Water Pollution Control Capital Invest-
ment and Operating Cost for Fiber Glass Plants 4
I Estimated Cost of Waste Water Treatment for
Insulaning Fiber Glass Wool Manufacture 16
II Summary of Capital and Opeaating Cost Effects:
Wool Glass Fiber 18
III Effects on ROI: Wool Glass Fiber 19
IV Capital Expenditures by Major Corporations, 1969-1971 21
V U.S. Shipments and Value of Wool Glass Fiber,
1964-1971 27
VI U.S. Exports of Glass Fiber, 1969-1971 28
VII Fiber Glass Plants by Company and Location 37
-------
LIST OF FIGURES
Figure No.
1 Effect of Plant Size on Cost of Water Recycling in
Wool Plants 9
2 Process Diagram - Glass Wool 32
3 Distribution of Glass Wool Plants In the United
States 36
4 Size Distribution of Glass Wool Industry 38
5 Number of Employees in the Glass Wool Industry 40
6 Location of Textile Glass Fiber Plants in the
United States 41
7 Distribution of Textile Glass Fiber Plants 42
8 Number of Production Workers for Textile Glass Plants 43
vi
-------
PART ONE
EXECUTIVE SUMMARY
-------
EXECUTIVE SUMMARY
I. INTRODUCTION
The objective of this study is to provide an analysis of the economic
impact of the water pollution control requirements anticipated for
July 1977 on the wool fiber glass industry (SIC #3296). Specifically,
the economic impacts analyzed are:
• Price
• Profitability, growth and capital availability
• Plant shutdowns or production curtailment
• Employment
• Communi ty
• Balance of Payment
• Related Industries
The information and data base for carrying out this analysis were de-
veloped principally from two sources: (1) our background and knowledge
of and experience with the fiber glass industry, and (2) the assistance
and cooperation of certain participating companies in the industry.
The present fiber glass industry was surveyed to establish the number,
size and location of plants, as well as the specifics of the production
technology. The present status of the industry in terms of markets,
recent growth trends, future supply and demand and profitability levels
were evaluated for each segment. The nature, type and degree of parti-
cipation of the producing companies were also examined.
We then evaluated the estimated pollution abatement cost against the
current prices and expected profitability of plants in
the wool fiber glass industry. Correlating these effects
with current performance and the future supply/demand projections, we
analyzed the industry in order to identify if and where plant shutdowns
and production curtailments might occur. The impacts on employment,
community and such factors as balance of payments were also considered.
-------
During our analysis we contacted several producers, both large and
small, for information and concerns related to their experience in
water treatment and opinions about the impact of the controls on
the business. Again, at the conclusion of the analysis, we dis-
cussed the major conclusions and significant findings with some of
the industries' executives.
We believe the information and data developed and the conclusions
drawn represent a reasonably accurate picture of the economic effect
of water treatment cost on the fiber glass industry. However, the
many assumptions made in our analysis, although reasonable at this
point in time, may not necessarily be valid for specific plant situa-
tions.
Because of the limitations of time and information available, this
study is not to be considered definitive. It was intended to pro-
vide an indication of the kinds of impacts to be expected, and to
highlight possible problem areas.
-------
II. CONCLUSIONS
1. Financial Effects
• Incremental Cost and Investment
The cost of water pollution control (zero discharge - water recycle) in
the wool fiber glass plant varies from 0.18 to 1.15c/lb of glass wool
produced. These costs are sensitive to the plant capacity and are of
considerably greater significance for the smaller plant. The capital
and operating cost effects for wool glass plants are summarized in
Table S-I. The incremental cost as a percent of selling price spans a
range of 0.65 to 3.8% for the range of existing plant sizes. The incre-
mental capital investment cost of water pollution control is 1 to 3.8%
of current plant investment.
• Prices
The incremental increase in cost due to water pollution control for glass
wool products will be modest. It is unlikely that these increases in cost
will be passed on independently in the form of price increases. However,
if other operating costs increase concurrently, the cumulative total might
become significant. Historically, the industry has offset cost increases
by increased productivity.
• Profitability
The relative effects on company and plant profitability as a result of
incremental cost increases due to water pollution abatement control are
expected to be small. Assuming no price increase, those plants with
-------
TABLE S-I
SUM1ARY OF WATER POLLUTION CONTROL CAPITAL INVESTMENTS AND OPERATING COST FOR FIBER GLASS PLANTS
Wool Fiber Glass
Plant Characteristics
Plant Capacity, MM Ib/yr
Plant Output @ 80% Utilization
MM Ib
Net Revenues , $MM
Current Fixed Capital Investment,
$MM
Water Pollution Control Cost
Incremental Investment $MM
Incremental Investment as % of
Current Investment
Incremental Annual Operating
Cost,
-------
current return on investment of 10-15% or greater will continue to enjoy
good returns. Plants of any size with current ROI's of 5% or less would
become marginal as the ROI's decrease below this level. However, we do
not believe that any wool plants fall into this latter category.
• Capital Availability
The incremental investment cost for water pollution control, i.e., recycle,
in wool glass plants is 1.25 - 3.75% of current plant investment and this
amount will be expended over three years. Thus annual expenditures for
water treatment and recycle are modest and will not have any significant
effect on the normal capital expenditures of the major companies. The
aggregate capital needs of the wool glass segment of the industry are es-
timated to be about $10 million, assuming that there are presently no
treatment facilities. (However, 40% of the plants have in fact imple-
mented water recycle treatment.)
The demands for capital expenditures within a company cannot be evaluated;
however, we believe that the participating companies are committed to the
fiber glass industry and that capital for water pollution control will be
provided.
2. Production Effects
Presently, the wool glass industry is fully utilizing its capacity, and
supply/demand projections (8%/yr) indicate that this will continue. The
incremental operating and investment cost for recycling of machine clean-
ing, binder make-up and cooling tower blowdown is not of sufficient
magnitude to affect production in the face of the present and future
demands. Although the smallest wool plant (5MM Ib/yr) would face signifi-
cant increased cost (3-4% of selling price), this particular facility is
one of nine plants operated by the company and has a specialized function
within the group. We conclude that no plant shutdown or production cur-
tailment is likely to occur. In fact, there are plans by one major
producer to increase capacities in spite of additional pollution cost.
-------
3. Balance of Payment Effects
Exports of glass wool represent about 2% of domestic wool production and
there are no reported imports. It is highly unlikely that this situation
will change and certainly the small cost effect of pollution control will
not influence import/export markets in any way. By and large, the export
market is determined by a company's desire to develop a local market
situation before building foreign plants to serve these markets.
4. Other Effects^
Since there are no marginal operations in this industry segment that
might be subject to shutdown or production curtailment, no effects on un-
employment in the industry or secondary effects on communities or suppliers
or customers are expected.
-------
I. INDUSTRY SEGMENTS
In testing the sensitivity of the industry to the impact of water abate-
ment treatment we have examined factors which differentiate plants in
this industry segment. Such factors as production technology, plant size,
location and age and product may influence the overall impact that might
occur.
For this industry segment we have used as a guideline the complete re-
cycling of process water by July 1977. Although two treatment proceses
are now in use in the industry, both meet the guidelines and are not
significantly different in cost or performance.
1. Technology
Basically, the production of glass wool involves the melting of the raw
materials batch to form a homogeneous glass, fiberizing the molten glass
stream and forming a random mat of fine fibers bonded together with a
thermosetting phenolic binder. The resin is cured in low-temperature
ovens and cut and packaged into the various product forms. (The tech-
nology of wool glass manufacture is described in the Appendix.)
In the wool glass industry there are different schemes for melting and
feeding of glass (direct melt vs marble process) and alternative approaches
to the fiberizing process (flame attenuation vs rotary spinning). Although
there is some cost differential in the specific melting and fiber forming
scheme utilized, some of these economics are offset by the product
flexibility and speed. In general, there is a trend toward more use of
direct melt process and rotary spinning fiber forming.
There are, however, no important ways in which the specific production
technology employed in a plant influences either the rate and composition
of plant waste water or the associated cost.
-------
PART TWO
IMPACT ANALYSIS
-------
2. Plant Size
There is a wide range of capacities among the present glass wool fiber
plants. There is a factor of about 80 between the largest (440MM Ib/yr)
to the smallest (5MM Ib/yr). The largest number of plants (12) have cap-
acities of 25-100MM Ib/yr. The majority of plants are multiproduct
operations producing home insulation, pipe duct, wool products, industrial
insulation, etc. A relatively small number of plants produce a narrow
product line, i.e., high-volume products, principally home insulation.
The major effect of plant size is the relationship of size to the incre-
mental cost of water pollution control. Since these costs are not directly
related to the capacity of the plant, smaller plants will bear a propor-
tionally higher operating cost for abatement treatment than larger plants.
The effect of plant size on the cost of water recycling is plotted in
Figure 1. The spread reflects slightly different recycling systems. One
plant has a rated capacity of <10MM Ib/yr.
3. Plant Age
Wool plants span an age of from 2 years to more than 2.5 years since plant
start up. About 30% of the plants are 10-15 years old while 25% are less
than 10 years old, but time since start up is not necessarily a good guide
to plant efficiency or profitability. All plants have undergone considerable
upgrading of the production process and in many cases facilities have been
expanded with installation of state-of-the-art processes. Any effects of
plant age will be of more significance in the cost of installing water
recycling systems. The situations are such that in specific plants changes
in piping and construction are more difficult to undertake. These costs are
difficult to generalize since each plant presents different problems in the
location of treatment facilities and the exact new construction required.
-------
2.0
1.0
0.5
0.2
01
o
o
oo
a
CO
V4
0)
cfl
!
o.i
10
100
100
Plant Capacity (MM Ib/yr)
FIGURE 1 EFFECT OF PLANT SIZE ON COST OF WATER RECYCLING
IN WOOL PLANTS
-------
If we assume that the additional installation costs might be increased by
50% to cover additional construction and piping cost, we find that the
effect is to increase the water recycling cost per pound of product in
the older plants by 28% for the largest plant and by 18% for the smallest.
4. Plant Location
Glass wool plants in the United States are largely located near principal
markets. Regional plants serve the principal population centers of the
country, since the shipment of insulation would be a significant cost
factor. There are no major changes in the market which appear to dictate
that any of these plants are threatened because of shifts in the market.
Rather, we would expect that new capacities would be located to take up
any growth in specific areas, as illustrated by the location of the most
recent plants in the Southeast and prior to that in the Southwest. In the
future, major changes may take place which might raise the question of the
viability of certain of these facilities; however, this is unlikely to
happen within the projected period of the next three years.
In the analysis of plant sensitivity to the economic impact of the addi-
tion of water treatment and recycling in the wool glass fiber segment of
the industry, we conclude that plant size and, to a lesser extent, plant
age may be viewed as presenting different sensitivities. However, these
differences appear to be relatively minor. In our discussions with the
management of the major producers these factors were recognized but not
seen as having any bearing on production or expansion.
Considerable progress has been made in installing recycling or machine
clean, binder and cullet quenching water in wool plants. Approximately
40% of the wool facilities have installed recycling water treatment
facilities. Another 20% of the plants are discharging into municipal
systems. We understand that the participating companies are committed
to the installation of water recycling systems in this latter 20%. These
two groups of plants produce more than 90% of the wool in the United
States.
10
-------
II. PRICE EFFECTS
A. Price Determination in the Fiber Glass Industry;
Pricing in this industry sector is different for each of the three basic
product groups, two of which are distinctly at variance with the textile
sector.
The three basic product groups are:
• Building Insulation
• Architectural Products
• Industrial Applications
An understanding of the basic marketing and distribution strategies for
each of these is required, as these strategies control and influence
price determination.
For building insulation, all distribution channels are used. Companies
will sell directly to major homebuilders, modular housing producers and
mobile home manufacturers; they will also market to mass merchandisers
and to building material wholesalers. Because of this variety of immedi-
ate customers, defining customer types and evaluating the qualifications
of each for the appropriate prices and discounts can be a serious problem.
Pricing in the building insulation sector is extremely competitive, is
determined on a regional basis, and is sensitive to plant locations and
resulting freight costs. There is little variation between the performance
of the products supplied by the four companies competing for this market
and, as fiber glass has largely been substituted for other types of minerals
insulation in all uses, pricing can be extremely keen and will exhibit
some elasticity.
Architectural markets, such as for roof insulation and acoustical ceiling
tiles, is frequently on a specification and bid basis. Interindustry
competition is greater than in most other glass fiber applications and
thus the manufacturers' architectural representatives have the continued
responsibility of maintaining contacts with the specifier and decision-
maker and giving whatever technical assistance is required. Free market
11
-------
pricing would naturally reflect these marketing costs but pricing decisions
are frequently on a project-by-project basis and the bid price will depend
on the amount of competition anticipated; sole source contracts are infre-
quent .
Industrial sales, such as for pipe, automotive and appliance insulations,
are similar to textile glass fiber marketing. In this case, large volumes
of material are involved and deliveries are required at a constant rate
and on a predetermined schedule. Selling prices are negotiated directly
between the two companies and will result in a contractual agreement
covering a period of time, perhaps one year.
B. Price Trends
Prices for both building insulation and for industrial, pipe and
equipment insulation have increased steadily over the past 10 years
and currently stand at all time highs. The strong showing of resi-
dential construction especially has put great pressures on the
availability of wool glass insulation and the industry has been
allocating shipments to its customers. We can speculate that, assum-
ing that no price controls had been in effect over the past 15 months,
prices would have increased during this period and would have been an
effective means of allocating available supplies.
12
-------
C. Anticipated Price Changes Due to
Pollution Control Requirements
Additional water pollution control costs may or may not be passed on to
the customer in the form of increased prices, but a company or an industry
is not likely to make such a decision in a vacuum. While additional costs
can be directly attributable to increases in capital investment and cost
of operations, the company must also consider its position relative to its
competitors, the interrelated effects of other types of pollution control
requirements and the economic environment in which it operates.
However, it is possible to make some preliminary estimates on operating
costs as a percentage of selling price due to water pollution control re-
quirements. These estimates must necessarily be approximate, as pollution
control cost information has not been available from the Environmental
Protection Agency.
For wool glass fiber, the following average increments apply:
Plant Capacity C/lb % of Selling Price
(MM Ib)
440 0.18 0.66
90 0.28 1.08
20 0.47 1.68
5 1.04 3.47
While there will be some variations in these values, depending on the type
of water treatment adopted, the variations are small enough for them to be
averaged. For a "typical" plant, the values will thus be 0.4c/lb, or 1.5%
on selling price. Again, it is unlikely that any but the smallest of
plants will pass on the increments in the form of price increases unless
other increases in operating costs are also involved.
13
-------
III. FINANCIAL PROFILES
Financial profiles for this industry are difficult to make, as almost all
of the major manufacturers are fully diversified corporations, involved
in a wide range of businesses and not willing to divulge confidential
financial data on specific parts of their aggregates. In addition, while
some reasonable attempts can be made to characterize the two principal
segments, it is difficult to do so on a plant-by-plant basis; there is a
wide range of sizes, ages, processes and product mixes.
Plant capacities in this sector range from 5 million pounds to 444 million
pounds annually. The median capacity is about 50 million pounds. Dollar
volume of sales ranges from approximately $1.2 million per plant to $110
million, with a median of about $15 million. Profits before tax on sales
for wool glass plants have been good relative to textile fibers; they
currently range from about 9% on sales before taxes to 20%, with a
median of 12%.
As a percentage of manufacturing costs, the fixed portion for a larger
plant is 60%, the variable, 40%. For a small plant, fixed costs repre-
sent 50%.
The actual investment required for an individual glass fiber facility will
depend very largely on what pollution abatement there is and what is avail-
able from the city/municipal system. These investment costs can typically
be amortized over a 10-year period before changes in technology demand a
revision of operating standards and methods.
Few old plants and little obsolete equipment are in use in wool
glass fiber production and therefore the industry participants
have valuable assets to protect, even if incremental investments are re-
quired. Whatever the amount, the smaller companies will find it a greater
burden. One-half million dollars per facility may be of little signifi-
cance to the larger companies, but one-hundred thousand may be a crippling
amount for the smallest. The likelihood is, however, that incremental
investments will be well within the financial capabilities of all
participants.
14
-------
IV. POLLUTION CONTROL REQUIREMENTS IN THE FIBER GLASS INDUSTRY
EPA suggested that the effluent guidelines for the insulating wool segment
of the fiber glass industry be "zero discharge" of waste water since the
technology for total water recycle does exist and two different types of
treatment systems (both allowing total water recycle) are in use by the
two major manufacturers of insulating fiber glass wool.
Our estimate of the capital investment and operating cost for wool glass
fiber is given in Table I. In estimating fixed capital investment, two
specific designs of the treatment system were selected and scaled to a
range of water flow rate spanning the plant sizes of interest. This data
compared favorably to the experience of two producers who had installed
similar systems. The operating costs were composed of estimates of oper-
ating and maintenance labor, chemicals and materials, and depreciation of
the capital investment over 10 years.
15
-------
TABLE I
ESTIMATED COST OF WASTE WATER TREATMENT FOR
INSULATING FIBER GLASS WOOL MANUFACTURE
Type Treatment System
(A) (B)
Coarse Filtration
Plant Coarse Filtration Flocculation
Capacity Fine Filtration Settling
(MM#/Yr) Water Recycle Water Recycle
440 Fixed Cap.Investment($1000) 2000 1050
Annual Operating Cost($1000) 610 680
90 Fixed Cap.Investment($1000) 800 4001•2
Annual Operating Cost($1000) 200 2003
20 Fixed Cap.Investment($1000) 3251 160
Annual Operating Cost($1000) 80 71
5 Fixed Cap.Investment($1000) 150 70
Annual Operating Cost($1000) 46 37
1. Based on Costs reported by the industry
2. Actual investment was closer,to $600,000 but the existing system
has more capacity than required
3. Reported cost was closer to 0.3c/lb, but reported treatment chemical
cost seems high
16
-------
V. IMPACT
A. Financial Effects
Table II summarizes the capital and operating cost effects of
pollution control requirements on the wool glass fiber sector. These
summaries are for selected plant capacities using estimates of revenues
at 80% capacity utilization at assumed selling prices and at estimated
current fixed capital investments. The incremental costs will, in general,
have only marginal effects on profitability and capital availability.
1. Profitability
The relative effects on company and plant pretax earnings, assuming no
price increases as a result of the incremental operating costs, will be
equal to the proportion of selling price represented by these costs. If
incremental costs are passed on, the current rate of profitability will
be maintained. As current returns on investment (ROI) are unknown for
individual plants, the relative effects on ROI can only be obtained by
assuming a certain level of profits on sales before taxes, and measuring
sensitivity at various levels of ROI.
For this analysis, we assume average pretax earnings to be 12% on
sales for wool glass fibers. The current ROl's tested are 5%, 10% and
15%.
For wool glass, a 1% increase in operating costs will reduce ROI's by 8.3%
of the current rate.
The actual effects for the various plant capacities and types of treatment
processes summarized in Table II is shown in Table III. Plants of any size
in either segment that currently have an ROI no better than 5% will become
marginal and could possibly cease production. However, we believe that no such
facilities exist. Plants operating at over 5% ROI will continue to enjoy
reasonable return.
17
-------
TABU. II
SUMMARY OF CAPITAL AND OPERATING COST EFFECTS: WOOL GLASS FIBER
Water Pollution Control Costs
Incremental
A Current Fixed Investment Incremental Incremental
Plant Plant Capital Incremental as % of Operating Operating Cost
Capacity Output Net Revenues Investment Investment Current Cost as % of Selling
(MM lb) Type of Treatment Process (MM Ib) ($MM) (?MM) ($MM) Investment (c/lb) Price
440 (A) Coarse and Fine **
Filtration 352 98.5 80 2.0 2.5 0.18 0.64
(B) Flocculation and
Settling 352 98.5 80 1.0 1.25 0.19 0.68
90 (A)
(B)
20 (A)
(B)
5 (A)
(B)
@ 80% Yield
**
@ 28c/lb
***
@ 26c/lb
****
(3 30e/lb
72
72
16
16
4
4
***
18.7
18.7 26
4.4** 10
4.4 10
****
1.2 4
1.2 4
0.
0.
0.
0,
0
0.
.8
.4
.325
.16
.15
.07
3.8
1.9
3.25
1.6
3.75
1.75
0.
0.
0.
0,
1
0.
.27
29
.50
.44
.15
.93
1.04
1. 11
1.78
1.57
3.83
3.10
18
-------
TABLE III
EFFECTS ON ROI: WOOL GLASS FIBER
Plant Size
(MM Ib/yr)
440
Waste Water
Treatment Type
A
B
Operating Cost
as % of
gelling Price
.64
.68
New ROI if Currently
5% 10% 15%
4.7
4.7
9.5
9.5
14.2
14.2
90
A
B
1.04
1.11
4.6
4.5
9.2
9.1
13.7
13.6
20
A
B
1.78
1.57
4.3
4.4
8.5
8.7
12.8
13.0
A
B
3.83
3.10
3.4
3.7
6.8
7.4
10.2
11.1
19
-------
For wool glass the aggregate range is from 1.25% to 3.8%, or an annual
average of 0.4% to 1.3% of current plant investments. However,
most of the wool glass facilities already have implemented much of
the required controls. Maximum expenditures will range from $70,000
to $2 million, with a median of approximately $450,000.
The question of whether sufficient capital will be available to meet the
timetable and requirements of water pollution control is basically one of
intra-company needs. Naturally, the exposure of the smaller companies,
will be greatest but it is unlikely that the aggregate capital needs by
the industry segments (about $10MM) will have any significant effect on
the normal capital expenditures of the major companies. (See Table IV.)
We estimate that the greatest capital requirement on an average annual
basis by any one of these five companies will be about $3 million, ranging
to a low of $150,000. On this basis, the proportion of normal capital ex-
penditures for the five major companies would range from 1% to 7% of 1971
expenditures annually for three years, and we believe this is not unreason-
able.
20
-------
TABLE IV
CAPITAL EXPENDITURES BY MAJOR CORPORATIONS, 1969 - 1971
($MM)
1969 1970 1971
PPG 110.7 153.2 123.5
OCF
JM
Ferro
C-T
Total ($MM) 234.4 246.6 229.8
Average Annual Expenditure $237 MM
Sources: Company Annual Reports
63.8
39.3
8.9
11.7
33.0
44.7
6.1
9.6
39.3
48.8
5.3
12.9
21
-------
However, such an evaluation cannot be truly made in ignorance of other
demands for capital expenditures within a company, and the final decision
will obviously depend on the degree of commitment each company has to the
glass fiber industry. According to our conversations with the executives
of many of the major companies, and also of the smaller ones, we understand
that there is such a commitment and that capital for water pollution control
requirements will be provided so that each company, at: the very least, will
continue its current level of involvement.
B. Production Effects
The economic impact of the cost of installing and operating complete re-
cycling systems for machine cleaning, binder make-up water and cooling
tower blowdown should not have a major effect on plant shutdown or produc-
tion curtailment. For all existing plants the additional cost of recycling
is less than about l£/lb of product; although for the smallest plant size
(5MM Ib/yr) the increased cost is 3-4% of the selling price. It appears
that the increase in cost of producing wool glass will be absorbed by the
producer without significant effects. In these computations of cost we
have not taken into account savings in binder cost due to recycling of
binder make-up water. The experience of the industry is varied; however,
any savings could only minimize this small cost increase. There is only
a single plant operating in the capacity range of <5MM Ib/yr and this
plant, one of nine plants operated by the company, is utilized for pilot
operation and specialty products. Because of this it is doubtful if the
cost of recycling waste water would precipitate shutdown. This particular
plant represents less than 0.3% of the industry capacity.
Presently, the wool glass industry is enjoying full utilization of its
capacity and it is likely that this trend will continue. The future market
projection indicates that the demand for glass wool products should grow at
about 8% per year for at least the next five years. In the face of this
market situation, it is highly unlikely that production will be curtailed
or plants will be shutdown due to the modest investment and cost of water
recycling.
22
-------
C. Employment Effects
It is anticipated that plant shutdown and production curtailment will
not result from the initiation of water pollution control in the wool
glass fiber industry. jn light of the projected market demand and
the high utilization of capacities, it is doubtful that there will be
unemployment in the industry. In fact, small increases in employment
by the industry might take place as markets grow and additional personnel
are required to operate water treatment facilities.
D. Community Effects
Based on the conclusion that no major plant shutdown, production curtail-
ment, or unemployment will result in the wool glass fiber industry, there
will be no effects on any community.
E. Balance of Payment Effects
U.S. exports and imports of glass fibers represent a very small portion of
the total shipments. Imports, all textile-grade yarn, are of relatively
little significance, and while exports have been as high as 7% of U.S. ship-
ments, there is little reason to expect any change. Wool glass exports
were less than 2% of wool production.
By and large, the imports-exports are not expected to change from recent
past years. Fiber glass is not a product that can generally be shipped
widely to meet local competition. Furthermore, we do not see that the
very modest increase in cost due to water pollution control could have
any impact on the export-import situation.
23
-------
VI. LIMITS OF THE ANALYSIS
In carrying out our analysis of the economic impact of water pollution
control on the fiber glass industry, we made some general assumptions
about the economy in general and specific assumptions about the industry
itself. For instance, we assumed that real growth in Gross National
Product will average about 4% per year between 1972 and 1976.
We believe that this analysis represents an accurate description of the
economic effect of the cost of pollution on this industry in terms of the
conclusions drawn. In detail, there are a number of factors such as
specific companies' commitments to the business which one must assume.
For both the wool fiber glass industry, the capital invest-
ment reported by the industry is 10-50% higher than we
have estimated. The main reason for this is the degree of modifications
required by these systems after they were first constructed. We believe
that if these systems were constructed today on the basis of the operational
data now available, the capital investment would be closer to our estimate.
We believe this is a valid rationale, since the impact of the pollution
abatement requirements will be most felt by those mills that do not have
adequate waste water treatment rather than those that do.
The effect of the higher capital investments (10-50%) would at most result
in a 10% increase in operating cost, not significant enought to affect our
conclusions.
There is a wide variation in labor and chemical costs reported by the
industry for waste water treatment; therefore, we were reluctant to use
24
-------
some of the figures reported by the industry as being representative.
Our estimates of total operating costs are lower — by as much as 30% —
than those reported by industry.
Our capital investment estimates (Section IV) pertain to the waste water
treatment system only, not to plant modifications required for the col-
lection of the waste water. In some cases, the cost of the additional
piping will run as high as 50% of the cost of the treatment system itself.
In cases where the waste water is only partially treated (e.g., by coagu-
lation and clarification with or without aerated lagoon treatment) and
discharged to a municipal sewerage system, the capital cost of tie-in can
run as high as the total cost of the preliminary treatment system at the
mill. However, the combination of pretreatment costs and sewerage charges
is not likely to run as high as total on-site treatment at the mill.
The conclusions of this study could be altered by interactions between
water pollution and other factors. If, for instance, in order to meet
effluent guidelines for air pollution the industry were forced to make
basic changes in its processing or treatment of the product, such
restraints could have major implications on the water treatment process
and cost. Under these circumstances the cost data used as a basis in this
study would no longer be viable and the conclusions could be quite different,
The same situation might occur if new products are developed which require
different coating systems and these systems might produce water pollution
problems not amenable to the treatment system presently being considered
for fiber glass plants.
Finally, the future situation regarding the availability of energy for
the industry might create a serious problem if energy sources become in
short supply. It is paramount to the operation of existing plants as well
as future expansion that adequate energy (electricity, oil and gas) are
available to maintain furnaces at operating temperatures.
25
-------
PART THREE
APPENDIX
-------
VII. APPENDIX - INDUSTRY DESCRIPTION
A. Demand for Glass Fibers
This section discusses the historic demand for glass fiber; the importance
of the export market; production applications; and the influence of govern-
ment on market demand. The methods of marketing and distribution,
important factors in product pricing, have been discussed earlier.
Table V shows U.S. shipments and value for wool glass fiber in the period
1964-1971. The growth of wool glass fibers has been at an annual rate of 7%
to 1518 million pounds, but sales have increased from $227 million to
$427 million in this period.
Wool glass fiber growth will average at least 8% annually to 1977, but
with batt insulation growing at 10% per year through 1974 and averaging
7% over the 5 years. Total shipments will thus be over 2.3 billion pounds
for wool glass.
Table VI shows the U.S. exports and imports of glass fiber in the years
1969 - 1971. It is evident that imports, restricted to textile grade
yarn and mostly from Japan, are insignificant and will not be stimulated
by any marginal changes in U.S. product selling prices resulting from the
implementation of water pollution control requirements.
26
-------
TABLE V
NJ
U.S. SHIPMENTS AND VALUE OF WOOL
isulation Use
:ructural Building
idus trial, Pipe &
Equipment
Total
.sulation Use
ructural Building
dus trial, Pipe &
Equipment
Total
MM Ib
368
570
938
MM Ib
557
567
1124
1964
$ MM
76
151
227
1968
$ MM
133
179
312
C/lb
20.7
26.5
24.2
C/lb
23.9
31.6
27.8
MM Ib
438
608
1046
MM Ib
627
675
1302
1965
$ MM
93
158
251
1969
$ MM
158
198
356
C/lb
21.1
26.
24.
0
0
C/lb
25.
29.
27.
2
3
3
GLASS FIBER 1964-1971
MM Ib
484
608
1072
MM Ib
644.8
541.5
1186.3
1966
$ MM
105
173
278
1970
$ MM
165.6
190.6
355.8
C/lb
22.6
28.5
25.9
C/lb
25.7
35.2
30.0
1967
MM Ib $ MM c/lb
484 109 22.5
554 170 30.7
1038 279 26.9
1971
MM Ib $ MM C/lb
—
— — —
1518.7 426.9 28.2
Note: Values are average manufacturers' net selling prices, f.o.b. plant, after discounts and allowances,
and excluding freight and excise taxes.
Source: Department of Commerce "Current Industrial Reports"
-------
TABLE VI
U. S. EXPORTS OF GLASS FIBER, 1969 - 1971
1969 1970 1971
Textile Grade
Yarn
Roving and Strand
Mats
Other
Total
Wool Grade - Total
Source: U.S. Department
MM Ib $MM MM Ib
5.0 3.0 11.8
6.1 2.2 15.9
1.2
1.3
8.7
7.4
of Commerce FT 610
$MM
5.8
5.0
1.4
1.3
13.5
7.2
MM Ib $MM
6.1 3.5
6.7 2.7
2.2
1.4
9.8
8.4
U. S. IMPORTS OF GLASS FIBER, 1969 - 1971
Textile Grade Yarn 1.4 0.4 0.7 0.6 1.8 0.7
Source: U.S.Department of Commerce FT 135
28
-------
1. Wool Glass Markets
Wool glass fiber is used primarily as a building insulation (in batt form
for frame house walls and roofs and as boards for flat roofed commercial
and industrial buildings) and also in acoustical ceiling tiles, heating
and cooling pipe and duct insulation, and in process equipment and appli-
ance insulations. No industry data of the breakdown in consumption exists
but we estimate the following for 1971 (MM Ib).
ESTIMATE OF U.S. CONSUMPTION OF
WOOL GLASS FIBER, 1971
Batt Insulation 1000
Acoustic Tiles 90
Board Insulation 175
Pipe, Appliance and Equipment 165
Miscellaneous 60
Total 1490 MM Ib
The major use of building insulation is in the residential sector in both
conventional construction and mobile homes. Here it competes against
other forms of mineral wool but has an estimated 90% of the insulation
market. Building insulation in board form competes against perlite and
an increasing amount of urethane and other foams, although the latter
products are still not cost competitive with fiber glass. In non-
residential construction (especially for roof decking) insulations can be
either glass fiber, wood fiberboard, Tectum, lightweight concrete or
gypsum, perlite board, foam glass and ceramic insulation materials. Fiber
glass thus receives much greater competition in the non-residential sector
than in housing construction and as a result has only a relatively small
market share.
Acoustical tile insulation is predominately aimed at the non-residential
sector, particularly for stores, classrooms, offices, laboratories and
government buildings. Roof tile, by tradition, has been made from wood
fiberboard although this market is seriously challenged by the fire
29
-------
problems associated with wood fiber. Increasingly, such products are
made from gypsum wallboard and, to a lesser extent, glass fiber.
Glass fiber use in industrial and equipment insulation includes the wrap-
ping of chemical and process piping, lining of the galvanized surfaces of
heating and air conditioning distribution ducts, insulation of water heaters
and many miscellaneous other applications. The principal competition facing
fiber glass is from urethane and styrene materials up to 250°F and calcium
silicate in the high temperature ranges.
Future growth of this product segment will be better than the growth rate
of U.S. building construction. Thus, the growth of products largely
serving the non-residential building sector (acoustic tiles, board insu-
lation, pipe, appliance and equipment insulation) will be at the average
rate of 5% to 6%. Batt insulation, the major product, will experience a
rate of growth of up to 10% per year for 1973 and 1974 due to the increased
demand brought about by changing insulation regulations and energy con-
servation policies (these are discussed later). This rate of growth is
considerably faster than that anticipated for residential construction
but will not be sustained beyond 1974. In fact, we forecast the average
rate of growth of batt insulation in the period 1971 to 1977 to be about
8%, as will be that of all wool glass fiber products.
2. Government Influence on Demand
The principal federal government influence on demand is brought about
through changes or modifications in building code requirements. Such a
change took place recently when the Department of Housing and Urban Devel-
opment, Federal Housing Administration, revised the Minimum Property
Standards for multi-family and single-family housing in order to fulfill
the Department's commitments to the National Energy Conservation policy.
The revisions, which took effect in July 1971 for single-family construc-
30
-------
tion and In June 1972 for multi-family construction, went into effect
immediately for all mortgage insurance projects for which a letter of
feasibility had not been issued and for low rent public housing projects
for which a program reservation had not been issued. This implementation
will definitely provide more economical operating costs for the heating
of residential units and will also conserve the nation's energy resources.
The effect of such a policy change is to increase considerably the use of
and demand for building insulations of all types but principally the glass
fiber batts. Quantification in terms of increases in usage rates is
difficult to make as it depends very largely on the part of the country in
which a particular structure is located, on the balance between federal
program housing and that privately financed in each locality, and on the
rate at which non-federal housing will follow suit at the urgence of
electrical utilities. However, we did estimate earlier the approximate
growth rate of demand resulting. This could be understated if, for
instance, tax incentives are given to improve building insulation and
conserve energy.
(A more which will have similar effect, although not resulting from the
direct influence of the Federal Government, is the change in mobile home
insulation requirements recently implemented by the Mobile Home Manu-
facturers' Association and will take effect in units shipped to 38 states
beginning the first quarter of 1973. This change is designed to improve
the insulation performance of mobile homes to match those of conventional
construction.)
B. Supply
1. Industry Structure^
a. Fiber Glass Wool
1) Production Technology
A flow sheet of an operation for the production of glass wool insulation
is shown in Figure 3. The basic raw material batch and melting is essen-
tially the same as the textile fiber glass industry. By and large the
melting technology has followed the same trends as the textile segment,
31
-------
u>
RAW PRODUCTS
1
Melting
Furnace
QUENCHING
WATER
FIBERIZER
L
GULLET
RESIN BINDER APPLICATION
CURING
COOLING
CUT
AND
TRIMMING
1
PACKAGING
FIGURE 2 PROCESS DIAGRAM - GLASS WOOL
-------
i.e., some operations use glass marbles formed in a marble machine to
feed the fiber making operation. In most cases marble feed operations
are limited to special products, i.e., battery separators and electrical
equipment insulation. Direct melt processes are used for high volume
production such as home insulation. In this latter case molten glass
from the furnace is fed to the fiber forming unit in a continuous stream.
There are a variety of fiber forming operations for glass wool. In all
cases a stream of molten glass is fiberized and attenuated to form dis-
continuous fine fibers which are collected on a moving conveyor belt in
a continuous mat. Phenolic binders are sprayed on the formed fibers
just prior to collection. The mat is then cured as the conveyor moves
through an oven. Fiber forming rates and chain speed determines the
density and thickness of individual products.
There are two principal fiber forming processes in use today. The first
method involves the forming of a large number of individual fibers from
a platinum bushing and the primary fibers are heated and attenuated by
high velocity gas burners. In the second process a single stream of
molten glass is fed into a rotating platinum distribution basket which
distributes the glass on an outer rotating spinner. The spinner contains
a large number of small holes arranged in rows in the wall. The molten
glass is forced through the holes forming fibers which are then attenuated
90° from their forming direction by high velocity gas burners. The output
of a single spinner may be 500-1000 Ib/hr and several spinners are used
to feed fiber to one line.
The discontinuous fibers are sprayed with a phenolic water binder and
drawn to suction onto the conveyor chain. The continuous mat is cured
in the in-line ovens and compressed, cut and packaged. The continuous
chain returns to the forming area. A single machine may have fiberizing
rates of 8,000-14,000 Ib/hr and conveyor speeds of 50-200 lineal ft/sec.
A description of glass wool products is given in Table XVI.
33
-------
TABLE VII
PRIMARY FIBROUS-GLASS-WOOL PRODUCTS
Product
Unbonded wool
("white")
Bonded wool
(molded)
Bonded wool
Bonded wool
Bonded wool
/
Bonded wool
(fine fiber)
Bonded wool
Bonded wool
(fine fiber)
Bonded wool
(fine fiber)
Basic fine
Fibers (bulk)
Hominal
Fiber
Diameter,
In.
0.0005
0.00038
0.00034
0.0005
0.0006
N
0.0006
0.00004
0.00008
0.00012
0.00012
0.00012
0.00017
0.00002
0.00012
(H-3 p)
Deruify
Range,
Ib per
Co Ft
1.5 up
(3.0 std)
1.5-3.75
2.0-3.75
6.0
2.0-12.0
0.6
0.5
0.75-2.0
0.75-2.0
0.3-0.5
0.75-2.0
Conductivity,
75°F, Mean,
Bfu/(HrJ(Sq Ft)
(°F)/(ln.)
0.30-0.27
0.25(5 100°F
mean
0.26-0.23
0.28-0.25
0.24
0.29-0.24
0.23
0.27-0.22
0.27-0.22
0.29-0.24
Binder
Oil only
Phenolic resin
Phenolic resin
Phenolic resin
Phenolic plus
high-temp
resins
Phenolic resin
Phenolic plus
high-temp
resins
Phenolic resin
Silicons oil
Phenolic plus
high-temp
resin
Phenolic resin
Phenolic resin
Silicons oil
Phenolic resin
Unbonded
Untubricated
Maximum*
Temper -
ofure
limit, °F
1000
400
400
400
600
400
600
600
400
400
Major
Applicotiont
Heated equipment and
appliances
Pipe insulation — low-
temperature and low-
pressure heated pipe
Appliance insulation
Appliance insulation
Duct insulation — fire-
barrier insulation
General purpose and
fabricated forms: rolls,
bafts, blocks, boards
(plain, faced, as-
phalted), metal-mevh
blankets; duct insula-
tion, pouring wool
Aircraft insulation
Flotation application
Wrapped- on -pipe
insulation
General-purpose insula-
tion — sound control —
shock cushioning
Clothing interl'mer
Seat cushioning
Railroad-cai, truck-
trailer, and furnace
insulation
Fibers for papermaking
* Maximum surface temperature in contact with insulation under most favorable conditions. Organic lubricants and
binders begin to oxidize from hot surface at 275°F. Actual loss of organic material depends on amount present,
occesi to oxyCen, and thickness and density of insulation. There is no low-temperotcre limitation so far discoverad
down to — 300°F.
34
-------
2) Number and Location of Firms and Plants
In the United States there are 19 plants producing glass wool products.
There are two major producers of glass wool, Owens-Corning Fiberglas and
Johns-Manville, and these two firms produce approximately 95% of the
production in fifteen plants. There are really no small producers of
glass wool since this is a high volume production operation, difficult
to scale down.
The location of the 19 plants are shown in Figure 4. The distribution
of plants is dictated by regional markets and plants must be near the
end-use market. It is evident from the map that plants are located near
major population centers to serve the building industry. The participating
companies and their plant locations are also given in Table XVII.
It is anticipated that new capacity will be added to the present wool
production in the near future. One firm, Johns-Manville, has announced
a program of plant expansion and new plant construction that might add as
much as 40% to the company's capacity.
3) Types of Firms
Glass wool production is also dominated by Owens-Corning, the leader in
textile glass as well. The remaining portion of the industry is shared
by Johns-Manville, Certain-Teed and PPG Industries. All these firms are
relatively large companies with integrated product lines. There are no
small producers of glass wool products.
4) Types of Plants
The distribution in sizes of glass wool plants are shown graphically in
Figure 9. The four plants with capacities greater than 100MM Ib/yr
account for ^70% of the production of wool and the largest number of plants
are clustered around the 50MM Ib/yr capacity. The larger plants tend to be
more efficient especially in the high volume products such as home insula-
tion. The industry is operating at 100% capacity at the present time and
these high operating rates are expected to continue.
Plants can be differentiated by the type of process. Ten of the 19 plants
utilize rotary spinners for fiber forming. In all these plants direct melt
-------
co
"ONM/vr — -,
N DAKOTA \
FIGURE 3 DISTRIBUTION OF GLASS WOOL PLANTS
IN THE UNITED STATES
N - %
N = Number of Plants in Area
% = % Total Capacity of Plants in Area
-------
TABLE VIII
FIBER GLASS PLANTS BY COMPANY AND LOCATION
Company Textile Fiber Plants
Owens-Corning Aiken, S.C.
Fiberglas,Inc. Anderson, S.C.
Ashton, R.I.
Huntingdon, Pa.
Jackson, Tenn.
Johns-Manville Waterville, Ohio
PPG Ind.
Certain-Teed
Lexington, N.C
Shelby, N.C.
Ferro Corp.
Kaiser,
Nashville, Tenn.
Irwindale, Cal.
(Modiglass Fibers)c ...
T> • t. i j ro. Bremer, Ohio
Reichold Chem.
Fiberglass Ind. Amsterdam, N.Y.
United Merchants Statesville, N.C.
Oliver Glass Farmingdale, N.Y.
Fiber
Wool Fiber Plants
Harrington, N.J.
Fairburn, Ga.
Kansas City, Kan.
Newark, Ohio
Santa Clara, Cal.
Waxahachie, Tex.
Cleburne, Tex.
Corona, Cal.
Defiance, Ohio (3)
Parkersburg, W.Va.
Penbyrn, N.J.
Richmond, Ind.
Wender, Ga.
Shelbyville, Ind.
Berlin, N.J.
Kansas City, Kan.
Mountaintop, Pa.
37
-------
10
8 -
s
U-l f
o b
4)
to E
CO 3
z:
4
2
•
•
Cxi
X
X
X
X
X
X
X
/
^
/
^f
y
;
X'
X
-
-
^•H
>
X
X
X
X
I
1
1013 200 300 400
Annual Capacity Ib/yr
FIGURE
SIZE DISTRIBUTION OF GLASS WOOL PLANTS
-------
techniques are used to supply the glass. Rotary or centrifugal process
accounts for ^ 80% of the glass wool. The remainder of the production
is produced by flame attenuated fiberizing fed by both direct melt and
marble techniques.
All indications are that the majority of plants are multi-product plants
manufacturing home insulation, roof insulation, pipe and duct, etc. Single
product plants are limited to one or two plants which produce a high
volume product — home insulation.
5) Number of Employees and Skill Level
The number of production employees from a cross-section of plants are
shown in Figure 6. The number of employees is surprisingly scaled to
the plant size. This is due to the line nature of the production process.
Plant capacity is related to the type and number of individual lines and
although there is a variation in product type at various plants most
operations are multi-product.
The degree of skilled labor required is high in the melting and forming
area; however, the large portion of the labor force in a wool plant does
not require a high level of skill.
39
-------
10,000
CO
-------
N DAKOTA \ —
-------
o
yo
m
W
o
•n
-9
tn
X
H
i — i
r1
tn
tn
•n
CD
tn
i
H
Number of Plants
U)
to
O
-P-
O
\\\\\ \ X\ X \ \ \ V
V\\\\\\\\\\\\\\\\\\\\l
\V\\V\VV\VVV\V\VV
00
o
o
M
•o
(11 M
o o
H- O
NJ
o
\\\\\\\\l
s\\\\\\M
-------
10,000
1,000 •
10
10
FIGURE 8
100 1000
Plant Capacity Ib/yr x 10~6
NUMBER OF PRODUCTION WORKERS FOR TEXTILE GLASS PLANTS
43
-------
2. Technology Trends !
i
a. Wool Segment i
!
f
Processing technology in the glass fiber wool industry is unlikely to ,
undergo any major changes. Improved throughput and high efficiency will j
no doubt result from more process control thereby reducing down time and j
improving quality control. New plants may well be single product opera- •
tions producing high volume products such as home insulation. Direct melt- -
rotary spinner process will no doubt be utilized more broadly in the
industry.
3. Capacity Utilization
Capacity Utilization in the wool glass industry is mostly sensitive to
the variable rate of building construction and thus has been at an all-
time high for the past 18 months. For example, it,is estimated that current
capacity utilization is close to maximum and that this condition will be
maintained over the next two years, despite probable plant additions and
expansions. Housing starts and the recent resurgency of nonresidential
construction has strengthened demand and the changing requirements for
insulation in mobile homes and conventional construction (referred to
earlier) will maintain this demand, despite a small anticipated drop in
housing starts in 1973.
44
-------
Av Degree of Competition and Competitive Practices
Despite the concentration of the glass fiber industry in the hands of
only a few companies, the degree of competition displayed is healthy,
The four companies offering wool insulation compete actively on price
and service and advertise widely and frequently. Basic profitability of
the wool fiber glass sector, however, indicates that pricing is not
entirely analogous to that for other commodity products responding to
competition and reasonable margins are still enjoyed in relatively poor
years.
5. Government Influence on the Supply of Glass Fiber
Two potential constraints on the supply of glass fiber exist: shortage
of wrapping paper for shipments and shortage of gas energy. The second
is potentially very serious and could limit production. The first con-
straint arises from the demise of many suppliers of these paper products
(mainly due to pollution control and resulting profit problems) and the
need of other suppliers to ration their producton. Although temporary,
their shortage could result in a search for substitute wrappings.
45
------- |