EPA-230/1-73-DE1
AUGUST 1973
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE INDUSTRIAL PHOSPHATE INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
\
UJ
O
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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, D. C. 20460.
The document will subsequently be available through the
National Technical Information Service, Springfield, Virginia
22151.
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ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE INDUSTRIAL PHOSPHATE INDUSTRY
August 1973
EPA-230/1 73-021
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This report lias 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
constitute endorsement 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 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 sec-
tions 304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document") sup-
porting the issuance of proposed regulations under sections 304(b) and 306. The Develop-
ment 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 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 ot 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 eltects.
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 Task Order No. 7,
Contract 68-01-1541 by Arthur D. Little, Inc. Work was completed as of August 1073.
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 KPA 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 regulations. Prior to final promulgation of regulations, the accompanying
study shall have standing in any EPA proceeding or court proceeding only to the extent that
it represents the views of the contractor who studied the subject industry. It cannot be
cited, referenced, or represented in any respect in any such proceeding as a statement of
EPA's views regarding the subject industry.
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TABLE OF CONTENTS
Page
List of Tables iv
SECTION I SUMMARY 1
I. SCOPE 1
II. SEGMENTATION 2
III. COSTS 3
IV. IMPACT ANALYSIS METHODOLOGY 4
V. ECONOMIC IMPACT ANALYSIS 5
SECTION II DESCRIPTION OF INDUSTRIAL PHOSPHATE INDUSTRY 6
I. OVERALL INDUSTRY 6
A. SEGMENTATION 7
B. RELATIVE IMPORTANCE OF EACH SEGMENT 9
C. TYPES OF FIRMS 9
D. TYPES OF PLANTS 11
E. FINANCIAL CONSIDERATIONS 11
II. PHOSPHORUS 13
A. SEGMENT DESCRIPTION 13
B. PLANTS AND COMPANIES 13
C. FINANCIAL PROFILE 15
D. PRICES AND MARKETS 18
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TABLE OF CONTENTS (Continued)
Page
III. FURNACE PHOSPHORIC ACID 21
A. SEGMENT DESCRIPTION 21
B. PLANTS AND COMPANIES 21
C. FINANCIAL PROFILE 23
D. PRICING 24
IV. DERIVATIVES OF ELEMENTAL PHOSPHORUS 27
A. SEGMENT DESCRIPTION 27
B. COMPANIES AND PLANTS 27
C. FINANCIAL PROFILE 28
D. PRICE EFFECTS 33
V. DERIVATIVES OF PHOSPHORIC ACID 34
A. SEGMENT DESCRIPTION 34
B. PRODUCING COMPANIES AND PLANTS 34
C. FINANCIAL PROFILE 36
D. PRICE EFFECTS 41
SECTION III ECONOMIC IMPACT ANALYSIS 43
I. INTRODUCTION 43
II. IMPACT ANALYSIS 44
A. WATER POLLUTION CONTROL COSTS 44
B. IMPACT ON PRICES 47
III. LIMITS OF THE ANALYSIS 50
iii
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LIST OF TABLES
Table No. Page
1 Cost of Achieving Zero Discharge 3
2 Price Increases Related to GTC Proposed Costs of
Achieving Zero Discharge 4
3 Producers of Phosphate Products 8
4 Company Data 10
5 Phosphorus Producers 14
6 Estimated Cost of Elemental Phosphorus Manufacture 17
7 Sensitivity of Phosphorus Profitability 19
8 Recent Phosphorus Prices 19
9 Location of Furnace Acid Plants 22
10 Estimated Cost of Manufacturing Phosphoric Acid From
Elemental Phosphorus 25
11 Estimated Cost of Manufacturing Phosphorus Oxychloride 29
12 Estimated Cost of Manufacturing Phosphorus Pentasulfide 30
13 Estimated Cost of Manufacturing Phosphorus Pentoxide 31
14 Estimated Cost of Manufacturing Phosphorus Trichloride 32
15 U.S. Producers of STPP 35
16 U.S. Producers of Calcium Phosphates 36
17 Estimated Cost of Manufacturing Sodium Tripolyphosphate 37
18 Estimated Cost of Manufacturing Dicalcium Phosphate 39
19 Estimated Cost of Manufacturing Dicalcium Phosphate
Dihydrate 40
IV
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LIST OF TABLES (Continued)
Table No. Page
20 Plant Location Sites - Phosphoric Acid Derivatives 46
21 Price Increases Related to GTC Proposed Costs of
Achieving Zero Discharge 48
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SECTION I SUMMARY
I. SCOPE
The purpose of this report is to assess the economic impact of the 1972
Federal Water Pollution Control Amendments on the industrial phosphate indus-
try. The specific products analyzed are as follows:
Phosphorus
Phosphoric acid produced from phosphorus
Phosphorus pentoxide
Phosphorus trichloride
Phosphorus oxychloride
Phosphorus pentasulfide
Sodium tripolyphosphate (STPP)
Calcium phosphates (excluding fertilizers, and defluorinated phosphates)
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II. SEGMENTATION
The industry producing the products listed above was segmented for analysis
on the basis of process similarity. This was considered a more valid basis than
geographic location, age or size of plant, or other possible criteria.
The four segments selected were as follows:
1. Elemental phosphorus
2. Phosphoric acid
3. Anhydrous derivatives of phosphorus (phosphorus pentoxide,
pentasulfide, trichloride, and oxychloride)
4. Derivatives of phosphoric acid (STPP and calcium phosphates)
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III. COSTS
Manufacturing costs were estimated for each of the products under consider-
ation, based on available information on investment and operating costs for plants
producing each of the products. Representative plant sizes were selected on the
basis of typical plants currently operating, but it was also realized that substantial
variation in costs do exist, depending not only on plant size and age, but also on
other factors, such as whether or not the production units are included in large
multiproduct complexes, or operated independently.
The costs of water pollution control were taken, at the request of EPA, from
an effluent guideline development document prepared for that agency.1 It was
not within the scope of this impact analysis study to confirm or modify the water
pollution control costs presented in the effluent guidelines development
document.
It was concluded in the guideline document that for all
products under consideration, it was possible to achieve zero
discharge on the basis of best practicable control technology
currently available. These two products — phosphorus
oxichloride and pentoxide — however, are required to achieve
zero water discharge by 1983. For the purpose of analysis,
these two products were analyzed for the impact of zero
discharge, realizing that the actual cost for 1977 will be
lower.
The costs to achieve zero discharge, as presented in
the effluent guideline development document, are summarized
in Table 1.
TABLE 1
COST OF ACHIEVING ZERO DISCHARGE
Product Cost
($/ton)
Phosphorus $4.60
Phosphoric Acid (75%) 0.65
Phosphorus Pentoxide 1.40
Phosphorus Pentasulfide 1.70
Phosphorus Trichloride 1.40
Phosphorus Oxychloride 1.25
STPP 0
Dicalcium phosphate (animal feed) 1.40
Dicalcium phosphate (food grade) 1.50
I.Cosf Information for the Waterborne Wastes in the Non-Fertilizer Phosphorus Chemicals
Industry, Supplement A, prepared by General Technologies Corporation.
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IV. IMPACT ANALYSIS METHODOLOGY
In assessing the economic impact of the zero discharge costs, as presented in
the effluent guideline development document, we took into consideration the fact
that some of the products were raw materials for the manufacture of other
products covered in this report. Therefore, we included not only the zero
discharge costs associated directly with the production of each chemical, but also
those arising from zero discharge costs for those raw materials used to make
derivative products, where they were included in the list of chemicals covered in
this report.
For example, food-grade calcium phosphate is produced from phosphoric
acid, in turn manufactured from elemental phosphorus. Thus, we considered the
total cost increases arising from the cost of achieving zero discharge in the
production of calcium phosphate, in the production of phosphoric acid, and in
the production of phosphorus, in analyzing the economic impact of zero dis-
charge on calcium phosphate.
The total costs of achieving zero discharge for each of the products, based on
the costs presented in the effluent guideline development document, are sum-
marized in Table 2. Also included in this table is a calculation showing the
relation of zero-discharge costs, to current sales prices, for each of the chemicals.
TABLE 2
PRICE INCREASES RELATED TO GTC PROPOSED COSTS
OF ACHIEVING ZERO DISCHARGE
Product
Pollution Raw Material^
Control Cost Cost Increase
Phosphorus
Furnace Acid
Phos. Pentoxide
Phos. Trichloride
Phos. Oxychloride
Phos. Pentasulfide
STPP
Feed-grade Dical
Food-grade Dical
($/ton)
4.60
0.65
1.40
1.40
1.25
1.70
—
1.40
1.50
($/ton)
—
1.10
1.09
1.09
1.83
1.32
1.90
—
1.35
Total Cost
I ncrease
($/ton)
4.60
1.75
2.49
2.49
3.08
3.02
1.90
1.40
2.85
Current
Price
($/ton)
1
1. Prices based on Chemical Marketing Reporter, 7/23/73.
2. Based on following usages:
0.24 tons phos/ton acid 1.09 tons acid/ton STPP
0.24 tons phos/ton pentoxide 0.77 tons acid/ton food-grade dical
0.24 tons phos/ton trichloride 0.29 tons phos/ton pentasulfide
0.19 tons pentoxide + 0.55 tons trichloride/ton oxychloride
Percentage
Increase
380
168
400
,220
245
267
162
87
257
1.2
1.0
0.6
1.1
1.2
1.1
1.2
1.6
1.1
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V. ECONOMIC IMPACT ANALYSIS
Based on the fact that the costs of achieving zero discharge, as presented in
the effluent guideline document, are relatively insignificant in relation to selling
price — in no case more than 1.6% of selling price — we conclude that cost
increase of this magnitude would have no measurable impact on the production of
any of the products covered in this report.
However, one product - STPP - faces the prospect of a substantial decline
in market volume, as the use of this product in detergent formulations appears
likely to continue to decline. Therefore it is likely that some reduction in
productive capacity will take place, primarily due to reduction in demand, that
may result in some plant closings. Decisions regarding such plant closings may be
influenced by investments that are necessary to achieve zero discharge.
While the effluent guideline development document indicates no net increase
in operating cost for achieving zero discharge in the production of STPP, it does
assume that some new investment may be necessary, which would be offset over a
period of time by recovery of a salable product. Faced with declining markets,
certain STPP producers may be reluctant to make this mandatory investment, and
this may influence decisions regarding plant shutdowns.
Apart from this factor, the costs presented in the effluent guideline develop-
ment document would not appear to have any significant economic impact on
any of the products covered. Cost increases of this magnitude will either be
absorbed, or, more likely, passed on to consumers through price increases. The
products covered in this report have rather specific use requirements based on
their chemical properties, and are not easily susceptible to replacement or substi-
tution by other products.
If actual costs to achieve zero discharge are significantly higher than indi-
cated in the effluent guideline development document, as a number of producers
believe to be the case, significant economic impacts may be felt. However, based
on zero-discharge costs used for this report, we do not expect them to cause
directly any plant closings, to lead to unemployment in any of the segments
examined, or to have any significant impact on communities where production
facilities are located.
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SECTION II. DESCRIPTION OF INDUSTRIAL PHOSPHATE INDUSTRY
I. OVERALL INDUSTRY
That sector of the phosphate industry which is covered by this study
generally consists of phosphorus and its principal nonfertilizer derivatives. Specifi-
cally, the products include the following, grouped into the four segments we have
selected:
1. Phosphorus (P4 )
2. Anhydrous Derivatives of Phosphorus
a. Phosphorus Pentoxide (P2 O5)
b. Phosphorus Trichloride (PC13)
c. Phosphorus Oxychloride (POC13)
d. Phosphorus Pentasulfide (P4 S, 0)
e. Ferrophosphorus
3. Phosphoric Acid Derived from Phosphorus (Furnace Acid)
4. Major Derivatives of Furnace Acid
a. Sodium Tripolyphosphate (STPP)
b. Calcium Phosphates (excluding fertilizers, and
defluorinated phosphates).
The sector of the chemical industry producing these products has the
following significant characteristics:
• For the most part, the derivatives of phosphorus are manufactured
by the same companies that produce elemental phosphorus.
• The producers of elemental phosphorus are, with two exceptions,
large chemical or petroleum companies for whom phosphorus and
derivatives represent only a small percentage of total sales.
• A large proportion of the products in this sector are used intern-
ally within the producing company for the production of other
products and are not sold on the open market.
This last factor — the largely internal use of many of the products in
this sector — makes it difficult to estimate the specific profitability of individual
products, even for the companies producing them. They are generally included in
a much larger range of products grouped together as a profit center and individual
profitabilities are often not calculated for these specific products in this sector.
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To give some perspective to the industrial phosphate sector, we have pre-
pared a company - product matrix, in Table 3.
A. SEGMENTATION
Primarily because of similar technology, we have broken down the industry
sector which is the subject of this proposal into four segments, by product
groupings. They are as follows:
1. Phosphorus
This is produced in an electric furnace operation. Except for size, there is
relatively little difference among the several furnaces operating in Florida, in
Tennessee, and in the western United States.
2. Anhydrous Phosphorus Derivatives
The technology for producing phosphorus pentoxide, phosphorus tri-
chloride, phosphorus oxychloride, and phosphorus pentasulfide, is generally simi-
lar in that all involve reaction with other chemicals under anhydrous conditions.
The volumes involved in the production of these products are comparatively small
in relation to other chemicals examined.
3. Furnace Phosphoric Acid
This is by far the largest volume use for elemental phosphorus. The produc-
tion of acid involves an oxidation and absorption step. Plants for producing
furnace acid are fairly standard and similar.
4! Derivatives of Furnace Acid
The production of sodium tripolyphosphate, and of the various calcium
phosphates, are generally similar and involve the aqueous reaction of phosphoric
acid with inorganic chemicals such as soda ash or lime. With the exception of one
plant using wet process acid, all STPP is manufactured from furnace acid. Most
feed-grade dicalcium phosphate is manufactured from wet process acid, while
most technical calcium phosphates and all food grades are produced from furnace
acid.
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TABLE 3
PRODUCERS OF PHOSPHATE PRODUCTS
Phosphorus Phosphorus Phosphorus Phosphorus Furnace
Phosphorus Pentoxide Trichloride Oxychloride Pentasulfide Acid
Feedstock Technical
Sodium Dicalcium Calcium
Tripolyphosphate Phosphate Phosphate
Holmes Company
FMC Corporation
Mobil Corporation
Monsanto Company
Occidental Petroleum Corp.
Stauffer Chemical
TVA
oo Olin Corporation
Goodpasture, Inc.
American Cyanamid Co.
Borden, Inc.
Eastman Kodak Co.
Farmland Industries
International Minerals & Chemical Corp.
Knox Gelatine, Inc.
Richardson-Merrell, Inc.
0
0
0
0
0 0
0 0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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B. RELATIVE IMPORTANCE OF EACH SEGMENT
The following table gives some perspective on the relative production capac-
ity for each of the major segments and products as well as the number of plants in
operation.
Product Volume
Product Segment Approximate Production, 1971 Number of Plants
(000/tons)
Phosphorus 545 10
Furnace Acid 954 21
Anhydrous Derivatives 151 20
Furnace Acid Derivatives
STPP 1040 15
Feed-Grade
Dicalcium Phosphate 592 8
Technical Calcium
Phosphates 50 6
It should be noted that there is some duplication in the location of plants, in
that many of these products are produced in integrated chemical complexes
which in many instances produce more than one of the products listed above.
Therefore, in terms of plant locations, there are fewer than would be indicated by
simply adding the number of plants for the product segments included above.
C. TYPES OF FIRMS
For the most part, the products included in this section of the phosphate
industry are produced by divisions of large chemical or oil companies. The
principal companies involved in the manufacture of most of these products are
characterized in Table 4, in terms of annual sales, total number of plants,
indicative estimate of the number of major products produced, and the number of
employees. It can be appreciated that the products involved in this sector in the
case of all of these companies represent only a small fraction of their total
manufacturing operations.
We discuss in the following section individual characteristics of each of the
four segments chosen. However, it should be appreciated that there is an unusu-
ally close interrelationship between the segments. There may be production
facilities for products from two or three of the segments in a single chemical
complex.
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Furthermore, a very large part of the production of the chemicals included is
used by a single producing company for the production of other of the chemicals
discussed. Therefore, a major volume of the product is transferred internally
within a single company rather than being sold commercially on a company to
company basis.
TABLE 4
COMPANY DATA
No. of Products
1972 Sates No. of Plants
($ million)
No. of Employees
FMC
Mobil
Monsanto
Occidental
Stauffer
Olin
Cyanamid
Borden
IMC
1,497.7
10,295.1
2,225.4
2,720.8
544.2
1,098.3
1,358.9
2,192.9
491.2
85
120'
85
92'
103
80
109
147
71
220 major products 46,000
More than 200 major products, 75,600
plus a full line of petroleum products
71 major products 63,000
92* More than 200 major products, 33,000
plus a full line of petroleum products.
62 major products 10,300
300 major products 29,000
120 major products 41,400
200 brands 48,000
60 principal products 7,000
'Excluding pipeline and drilling facilities.
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These two facts make it particularly difficult to determine individual
product profitabilities. This is true not only because it is impossible to determine
individual companies transfer pricing policies but also because the companies
themselves in many instances do not look at the individual products as separate
profit centers, and do not attempt to calculate or keep track of the profitability
of the individual product or product segment.
Nevertheless, we have presented indicative cost data in the following sections
to give an approximate idea of the economics of manufacture and sale of the
specific products.
It should be pointed out that we have not discussed ferrophosphorus as an
individual product. This is a by-product in the manufacture of elemental phos-
phorus. According to information from the producers, there are no water pollu-
tion problems uniquely associated with ferrophosphorus since no water is
involved in its recovery or handling. The general aspects relating to the use and
disposal of water in electric furnace operations are discussed under Phosphorus.
D. TYPES OF PLANTS
For the most part, the types of plants operated in each of the four segments
discussed in this report are generally similar from company to company with
principal variations occurring in size of plant, and age. More specific character-
istics of the plants are discussed under the individual segment sections.
The one major exception to the generally uniform nature of plants is the fact
that one plant, that operated by Olin Corporation, produces sodium tripoly-
phosphate from wet process acid rather than from furnace acid. The use of the
wet process for producing phosphoric acid in this plant, presents quite a different
range of water pollution problems, compared to a plant for producing phosphoric
acid from phosphorus.
We have discussed the number of employees involved in each segment
section. For this overall sector of the industry, it seems clear that the number of
employees in the phosphorus segment is an order of magnitude higher than the
employees involved in the production of the other three product segments. Total
employment in the phosphorus segment may exceed 3,000 employees, while
employment in each of the other segments is estimated to be substantially
under 1,000.
E. FINANCIAL CONSIDERATIONS
It is important to note the highly integrated nature of that sector of the
industry in which these four product segments are involved. The high degree of
interrelationship between the various product segments makes a profitability
analysis of any one segment difficult.
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Sensitivity to price increases arising from water pollution control costs
would have two major aspects. The first would be the differential increases among
individual companies. Companies with above average pollution control costs
would be put at a competitive disadvantage to those companies with lower costs.
The second aspect to price sensitivity would relate to the vulnerability of the
specific products or class of plants to substitutable materials. In almost all cases,
there is a very specific requirement for the final derivatives covered in this report,
and it is unlikely that there would be direct substitution by alternate products.
However, there is the possibility that some of these products could be produced
in new plants from wet process acid at prices that would be competitive with
furnace acid, particularly if there are substantial cost increases arising from
pollution control measures.
There is only one plant in the United States producing industrial phosphates
from wet process acid - the plant of Olin at Joliet, Illinois. This plant is about 40
years old and uses a rather conventional series of crystallization and filtration
steps to produce products of a desired purity.
An alternative type of process has been under consideration by a number of
companies. This involves the purification of wet process acid via the solvent
extraction route. There are indications that these processes, which are still under
development, may permit the production of the industrial phosphates at costs
competitive with productions from furnace acid. Interest in these processes would
be greatly stimulated if there were indications that the cost of products produced
via the furnace acid route were to increase substantially because of pollution
control measures.
However, since these processes are still under development and are of a
highly proprietary and confidential nature, it is difficult to get information with
any precision on the costs of this alternate route to the derivatives with which we
are concerned in this report.
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II. PHOSPHORUS
A. SEGMENT DESCRIPTION
Phosphorus is universally produced in an electric furnace operation, from
phosphate rock. Phosphate rock, sometimes processed into nodules, is blended
with coke and occasionally with silica. This mixture is then added to the electric
furnace. Electric power is introduced through vertical electrodes and serves to
provide the heat necessary for the reaction to take place. The coke reduces the
phosphate content of the phosphate rock to elemental phosphorus which passes
from the furnace as a gas along with carbon monoxide. Phosphorus is condensed
by cooling, is filtered, and stored. Because it oxidizes on contact with the air,
phosphorus is generally stored and transported under a water blanket.
A small amount of iron is contained in the phosphate rock, and combines
with phosphorus to form ferrophosphorus. This sinks to the bottom of the
furnace crucible and is tapped periodically as a molten material. It solidifies, is
cleaned, graded, and stored for future shipment.
A slag forms in the process, consisting of the non-phosphatic components of
the phosphate rock, and silica. This is also tapped as a liquid, cooled and broken
up by water cooling, and used as a construction aggregate material.
Phosphorus is used entirely for the production of various phosphate chemi-
cals, most of which are included in the other segments of this report.
Phosphorus is a solid at normal temperatures but is readily liquefied by
heating to approximately 45° centigrade.
Phosphorus furnaces in the United States are generally of quite similar design
although they range in size from smaller units with a capacity of approximately
10,000 tons of phosphorus per year, to the larger furnaces producing as much as
45,000 tons per year. In many instances several phosphorus furnaces are grouped
together in a production complex although single furnace installations are in
operation.
B. PLANTS AND COMPANIES
There are six companies producing phosphorus in the United States. In
addition, the Tennessee Valley Authority (TVA) an agency of the U.S. Govern-
ment is also a major producer.
Table 5 lists those companies producing phosphorus, together with the
number of furnaces estimated in operation together with their capacity.
13
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TABLE 5
PHOSPHORUS PRODUCERS
Number Operating Furnace
Company Location Operating Furnaces Capacity, Tons P4
Holmes Company Pierce, Florida 2 20,000
FMC Corporation Pocatello, Idaho 4 145,000
Mobil Chemical Nichols, Florida 1 5,000
Monsanto Company Soda Springs, Idaho 3 110,000
Columbia, Tennessee 6 135,000
Hooker Chemical Columbia, Tennessee 3 60,000
Stauffer Chemical Silver Bow, Montana 2 42,000
Tarpon Springs, Florida 1 23,000
Mt. Pleasant, Tennessee 3 45,000
TVA Muscle Shoals, Alabama 3 40,000
658,000
It can be seen that phosphorus production is concentrated in three general
areas, associated with the nearby availability of phosphate rock. These are in
Florida, in Tennessee, and in the Idaho-Montana area.
Because phosphorus plants are generally located because of raw material
considerations rather than market locations, and because phosphorus is the most
economic form in which to transport phosphate values, production of the deriva-
tives of phosphate is generally undertaken at locations other than where the
electric furances are located. The exceptions to this are Stauffer Chemical Com-
pany at Silver Bow, Montana, Occidental at Columbia, Tennessee, and the TVA at
Muscle Shoals, Alabama. At these locations, phosphoric acid is also produced.
However, as shown in the company-product matrix in the previous section,
five of the six companies producing phosphorus also produce at other locations
phosphoric acid, sodium tripolyphosphate, and certain of the anhydrous phos-
phorus derivatives. The Holmes Company, which acquired their phosphorus
furnace from Continental Oil, is the only company which produces only phospho-
rus and no derivatives.
It is important to note that because of this configuration of the industry,
most elemental phosphorus is shipped substantial distances after manufacture to
locations where it is processed into derivatives. As mentioned, it must be shipped
under a blanket of water. The volume of water which is used to blanket the
phosphorus both in transportation and handling becomes contaminated with
phosphorus, and is therefore one aspect of water pollution concern which must be
kept in mind.
14
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In the manufacture of phosphorus, there appear to be two general water
pollution problems. The first involves so called "phossy" water — water con-
taining suspended phosphorus. Several water streams in the plant that pick up
phosphorus are combined and generally treated by means of settling ponds.
A more serious problem in the production of phosphorus relates to the water
treatment effluent both from the burden preparation facilities and also from
water scrubbing of the effluent gases. Fluorides are a particular problem. The
incoming phosphate ore contains about 3% fluoride. Approximately 20% of this is
volatilized both in the burden preparation and in the furnace itself, and ends up in
the waste treatment water. The remaining 80% of the fluorine is contained in the
by-product slag. It is believed that there are some plants which have a total
recycle for the scrubber water whereas others may go only part way and may be
in fact discharging some fluorine.
It is difficult to generalize on the types of firms or plants that would be
particularly affected by water pollution control measures. With the exception of
the Holmes Company in Florida, phosphorus is manufactured as a minor portion
of much larger enterprises and thus corporate characteristics would have little
relevance to water pollution control impact.
As to the location of the phosphorus furnaces — generally concentrated in
Florida, Tennessee, and the Idaho-Montana regions - it is also difficult to identify
one area or another that would expect a moderately different impact from water
pollution control measures. It is true that phosphate rock mined in Tennessee is
generally beneficiated by washing, and effluent wash water has been identified as
a major pollutant. However, these mining operations are generally quite separate
from production of phosphorus, and do not lie within the scope of this segment.
The labor force in a phosphorus furnace operation is relatively high per unit
of product, compared with other operations in the chemical industry. It appears
that the labor force at a typical multifurnace phosphate operation will range from
250 to 600. Preliminary estimates would indicate that at the 10 locations where
phosphorus is produced, involving some 26 furnaces, somewhere in the neighbor-
hood of 3,000 men might be employed directly associated with the production of
phosphorus, but not including mining operations. This would appear to be the
largest labor force by far of the four segments included in this study.
C. FINANCIAL PROFILE
Since phosphorus is produced at locations where, with one exception, no
other products are manufactured, the complications of attempting to allocate
costs to calculate profits in a large multiproduct complex are not a factor in
examining the financial profile for phosphorus. However, a very large proportion
15
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of phosphorus produced is consumed at other locations by the same company.
Therefore, the profitability of phosphorus production in these instances should
probably be judged by examining the transfer price, which generally is not
available for individual companies. The proportion being sold on the open market
is sufficiently small that it does not represent a meaningful indication of the
average income being received by the phosphorus producing unit. However,
lacking other data, this is probably the best available measure of income for a
phosphorus production unit.
As a preliminary indication of the financial profile for the production of
phosphorus we present in Table 6, an estimate of the cost of manufacturing
phosphorus in Tennessee including depreciation, and typical input costs.
There is a fairly wide range in cost of the major variable costs for phosphorus
production particularly regarding electric power. These range from 2.3 mills per
kwh for power from the Bonneville Power Administration in Montana to an
estimated 7.26 mills for power supplied by the Tampa Electric Company to some
of the operations in Florida. This difference of 4.93 mills per kwh is equivalent to
about $59.00/ton of phosphorus.
The cost of phosphate rock is another cost which varies substantially
between one operation and another. This cost is much more difficult to ascertain
because for the most part phosphate rock is mined by the phosphorus producer
and transferred at an unknown price to the phosphorus furnace operation.
There is less variation in the cost of coke, but this again will lead to some
variation in the cost of production. Producers in the Tennessee and Florida area
are believed to be paying around $23.00 to $26.00 per ton of coke delivered.
Producers in Idaho and Montana are paying an estimated $35.00 per ton,
currently.
The price of phosphorus is obviously the most important single item
affecting profitability. Factors affecting price will be discussed in more detail in
the following section. However, the fact that over 90% of phosphorus produced is
transferred within the producing company to other chemical manufacturing
facilities, makes it extremely difficult to ascertain what in effect was the net
income for the individual plants.
The Department of Commerce, in its statistics on inorganic chemical produc-
tion, permits calculation of an average annual f.o.b. price tor phosphorus. This is
probably the best indication of price, but still leaves the possibility open that the
transfer prices established by the companies on the one hand might be somewhat
arbitrary and artificial in nature.
16
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TABLE 6
ESTIMATED COST OF ELEMENTAL PHOSPHORUS MANUFACTURE
Basis: Three (3) electric furnaces rated at 35,000 KW each,
producing a total of 72,700 tons of P4 per year
Location: Tennessee
Capital Investment: $45 million
Manufacturing Cost
Cost Item Units Units/Ton P4 Cost/Unit Cost($)/Ton P4
Raw Materials:
Tennessee matrix tons 10.0 5.20 52.00
(26%P205)
Silica tons 0.45 1.98 0.89
Coke tons 1.42 25.00 35.50
Electrodes Ibs .42 0.32 13.44
Utilities:
Electricity
Water
Fuel
kwh
Mgal
MSCF
12,500
20
12
0.0068
0.05
0.23
85.43
1.00
2.76
Salaries, Wages, and Overhead
Operating Supplies
Maintenance
Taxes and Insurance (2% of investment)
Depreciation (6.67% per year)
Total
By-products credits
Net manufacturing cost
Cost($)/Year
3,500,000
400,000
4,000,000
900,000
3,001,500
Cost($)/Ton P4
48.14
5.50
55.02
12.38
41.29
353.35
-19.00
334.35
17
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Using the cost figure indicated above, plus an arbitrary charge forGS&A of
$35.00/ton the profitability can be estimated for various phosphorus prices. This
is presented in Table 7. This shows that with an average cost of $370 per ton of
phosphorus as a manufacturing cost, including GS&A, the profitability after taxes
ranges from $5 with a $380/ton phosphorus price, f.o.b. plant, to $25/ton at a
$420/ton selling price. Using an estimated fixed investment of $620/ton, the
after-tax return, as a percentage of fixed assets, ranges from 0.8% at $380 phos-
phorus, to 4.0% at $420 phosphorus.
This table is useful only to indicate the sensitivity of profitability to price of
phosphorus. Our estimates of the cost of manufacture have been for one specific
hypothetical furnace operation in Tennessee, and wide variations between plants
can be expected on the basis of increases in power costs, coke costs, phosphate
rock costs, operating rate, etc. This table is not in any sense to be taken as a
representative estimate of the profitability of the phosphorus industry.
As an indication of the wide swings which prices have taken in recent years,
we present in Table 8 the average value of phosphorus shipment as reported by
the U.S. Department of Commerce in their publication, "Current Industrial
Reports — Inorganic Chemicals," series M28 A-14.
More recent trade information indicates that phosphorus prices have risen
sharply recently. Current commercial sales are reportedly being made at a level of
2\i per pound, equivalent to $420.00/ton.
As can be seen from the figures in Table 6, raw material and utility cost present
about 57% of the total direct manufacturing costs for phosphorus. This means
that the portion of total costs which would be affected by added water pollution
costs would be less than 50% of the total. Thus, the leverage on total manufac-
turing costs of added investment and operating costs necessary for water pollution
control would be less than in processes where the raw materials were not such a
major factor in manufacturing costs.
The salvage value of a phosphorus installation is likely to be negative — that
is, the cost of dismantling and disposing of the facilities would probably be
greater than any credits for equipment re-use or resale.
D. PRICES AND MARKETS
It is important in examining the pricing situation regarding phosphorus to
appreciate the largely captive nature of phosphorus movements. Over 90% of the
phosphorus produced by the six companies, and the TVA, is used within the
producing organization (although generally at other locations) for the production
of phosphoric acid and phosphorus derivatives.
18
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TABLE 7
SENSITIVITY OF PHOSPHORUS PROFITABILITY
(dollars per ton)
Price of Phosphorus/Ton $380 $400 $420
Cost of Manufacture
Direct Cost $335.00
GS&A 35.00
370 370 370
Profit Before Taxes 10 30 50
Prof it After Tax 5 15 25
After Tax Return 0.8 2.4 4.0
(% on assets)1
1. Basis: $620/annual ton
TABLE 8
RECENT PHOSPHORUS PRICES
($/ton f .o.b. plant)
All Shipments1 Commercial Shipments2
1968 $336 $300
1969 356 329
1970 358 287
1971 381 356
1. Both intracompany and intercompany.
2. Intercompany only.
Source: U.S. Department of Commerce "Current Industrial Reports -
Inorganic Chemicals," Series M28A-14.
19
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The Department of Commerce in its Bulletin M28-14, reports monthly and
annual movements of phosphorus both in total, and for commercial sales alone.
These have been presented earlier in Table 8. Along with tonnages, total values are
indicated. This is generally considered a good measure of the actual prices at
which phosphorus does move.
In Table 8, we have listed the average value per ton of phosphorus for the
period from 1968 to 1971 for both total shipments and for commercial sales. It is
interesting to note that the value of commercial sales has been consistently below
the value of total shipments. Since 90% of the total is represented by intra-
company shipments, the value for total movements is very close to that of
intra-company movements.
Because they represent only a small portion - less than 10% — of total
phosphorus production — commercial sales can expect to show, fairly wtde
fluctuation in prices since this small sector of the total production would be
expected to reflect any overall supply/demand imbalance that might develop. In
other words in periods of over-capacity, prices on the open market would be
expected to drop substantially and in periods of shortages to rise significantly.
The prices for intra-company shipments as in most internal transfer situa-
tions, is arbitrary to a degree. Often such transfer prices particularly between
separate divisions of a company, are set by policy at the prevailing price in the
open market. However, this does not appear to be the case in phosphorus since
intra-company shipments have consistently been substantially higher than open
market prices.
Because of the somewhat arbitrary nature of intra-plant transfer values, it
will be difficult to assess the effect of water pollution control costs on this
particular price. Increases in costs will undoubtedly be reflected in increased
prices of the ultimate derivatives, although not necessarily properly reflected in
the reported transfer prices, as in the Department of Commerce Series M28 A-14.
There is no alternative to phosphorus in the production of its derivatives.
Therefore, there is no sensitivity to price in the direct demand for phosphorus
itself. There may however, be some sensitivity to price in the demand for some if
its derivatives, and this will be reflected ultimately in the demand for phosphorus.
20
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TABLE 7
SENSITIVITY OF PHOSPHORUS PROFITABILITY
(dollars per ton)
Price of Phosphorus/Ton $380 $400 $420
Cost of Manufacture
Direct Cost $335.00
GS&A 35.00
370 370 370
Prof it Before Taxes 10 30 50
Prof it After Tax 5 15 25
After Tax Return 0.8 2.4 4.0
(% on assets)1
1. Basis: $620/annual ton
TABLE 8
RECENT PHOSPHORUS PRICES
($/ton f .o.b. plant)
All Shipments' Commercial Shipments2
1968 $336 $300
1969 356 329
1970 358 287
1971 381 356
1. Both intracompany and intercompany.
2. Intercompany only.
Source: U.S. Department of Commerce "Current Industrial Reports —
Inorganic Chemicals," Series M28A-14.
19
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The Department of Commerce in its Bulletin M28-14, reports monthly and
annual movements of phosphorus both in total, and for commercial sales alone.
These have been presented earlier in Table 8. Along with tonnages, total values are
indicated. This is generally considered a good measure of the actual prices at
which phosphorus does move.
In Table 8, we have listed the average value per ton of phosphorus for the
period from 1968 to 1971 for both total shipments and for commercial sales. It is
interesting to note that the value of commercial sales has been consistently below
the value of total shipments. Since 90% of the total is represented by intra-
company shipments, the value for total movements is very close to that of
intra-company movements.
Because they represent only a small portion — less than 10% — of total
phosphorus production — commercial sales can expect to show fairly wide
fluctuation in prices since this small sector of the total production would be
expected to reflect any overall supply/demand imbalance that might develop. In
other words in periods of over-capacity, prices on the open market would be
expected to drop substantially and in periods of shortages to rise significantly.
The prices for intra-company shipments as in most internal transfer situa-
tions, is arbitrary to a degree. Often such transfer prices particularly between
separate divisions of a company, are set by policy at the prevailing price in the
open market. However, this does not appear to be the case in phosphorus since
intra-company shipments have consistently been substantially higher than open
market prices.
Because of the somewhat arbitrary nature of intra-plant transfer values, it
will be difficult to assess the effect of water pollution control costs on this
particular price. Increases in costs will undoubtedly be reflected in increased
prices of the ultimate derivatives, although not necessarily properly reflected in
the reported transfer prices, as in the Department of Commerce Series M28 A-14.
There is no alternative to phosphorus in the production of its derivatives.
Therefore, there is no Sensitivity to price in the direct demand for phosphorus
itself. There may however, be some sensitivity to price in the demand for some if
its derivatives, and this will be reflected ultimately in the demand for phosphorus.
20
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III. FURNACE PHOSPHORIC ACID
A. SEGMENT DESCRIPTION
Phosphoric acid can be produced by two quite different processes. The first
- the "wet process" route - involves the treatment of phosphate rock with
sulfuric acid and the subsequent filtration of solid gypsum, to produce a relatively
crude phosphoric acid. The second route, which produces a purer acid, involves
burning elemental phosphorus to form phosphorus pentoxide, and then absorbing
this in water to form phosphoric acid.
With minor exceptions, wet process acid is generally used for the production
of various liquid and solid fertilizer materials while phosphoric acid produced
from phosphorus or "furnace acid" is predominantly used for the production of
various industrial phosphate products. Nevertheless, there is one plant in the
United States producing industrial phosphates from wet process acid, and some
small use of furnace acid in liquid mixed fertilizers.
Almost all of the furnace acid produced in the United States is manufactured
by the producers of phosphorus. All producers except the Holmes Company also
produce furnace acid and other derivatives.
Furnace acid is used primarily for the production of a wide variety of
phosphate chemicals, principally salts of sodium, potassium, and calcium. The
material produced in largest volume from furnace acid is sodium tripolyphos-
phate, for the detergent market. Its production and that of other calcium
phosphates is covered in the fourth segment of this industry sector.
Only two furnace acid plants are located adjacent to a phosphorus furnace;
that of Stauffer in Silver Bow, Montana, and Occidental's plant at Columbia,
Tennessee. All other phosphorus production used to make acid is shipped to other
locations.
B. PLANTS AND COMPANIES
There are estimated to be 23 furnace acid plants in the United States.
Twenty-one of these are operated by basic phosphorus producers. One plant in
Texas uses purchased phosphorus. Acid plants are listed in Table 9 with their
locations, and total company capacity. Individual plant capacities were not
available at the time of writing this draft.
As in the case of phosphorus, it is difficult to identify types of firms or types
of plants, involved in the production of furnace acid, that would be impacted to a
greater or lesser degree by water pollution control measures. Furnace acid plants
21
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Producers
FMC Corporation
TABLE 9
LOCATION OF FURNACE ACID PLANTS
Plant Location
Mobil Oil Corporation
Monsanto Company
Occidental Petroleum Corp.
Stauffer Chemical Company
TVA
Goodpasture, Inc.
Total
Carteret, New Jersey
Lawrence, Kansas
Newark, California
Green River, Wyoming
Carteret, New Jersey
Fernald, Ohio
Augusta, Georgia
Carondolet, Missouri
Kearny, New Jersey
Long Beach, California
Trenton, Michigan
Dallas, Texas
Jeffersonville, Indiana
Columbia, Tennessee
Chicago, Illinois
Chicago Heights, Illinois
Morrisville, Pennsylvania
Nashville, Tennessee
Richmond, California
Silver Bow, Montana
South Gate, California
Muscle Shoals, Alabama
Brownfield, Texas
Grouped Company
Capacity
(tonsP2O5)
340,000
115,000
455,000
85,000
250,000
75,000
45.000
1,365,000
22
-------
are generally located close to concentrated markets and thus tend to be placed in
more densely populated areas than phosphorus furnaces for example.
The labor force for an individual furnace acid plant is not large. If operated
as an independent unit and not as part of a complex, the labor force for a furnace
acid plant might vary from 20 to 40 people depending on size. If included in a
complex of several plants, the labor component might be significantly less.
Assuming an average of 30 men per plant, with some 20 furnace acid plants in
operation, a total industry force in this segment of some 600 could be approxi-
mated.
The technology is generally quite similar for all of the furnace acid plants
with the major difference lying in the lining of the furnace in which phosphorus is
burned to phosphorus pentoxide. In the older plants, these were lined with
carbon bricks, which were cooled by dribbling cooling water over them. This led
to some pickup of the phosphorus pentoxide in this cooling water resulting in
contamination of this water with phosphoric acid.
All of the more recent plants that have been built substituted a stainless steel
water cooled jacket for the carbon brick, and cut down to a very high degree on
this contamination of the cooling water. In all other aspects we believe that all of
the furnace acid plants are generally quite similar.
C. FINANCIAL PROFILE
As pointed out previously, in the entire group of phosphorus based products
being examined in this report, there is a great deal of vertical integration with
most products being produced by companies that either manufacture the basic
raw materials or consume the products themselves in the further manufacture of
other derivatives. (Thus, we are faced with the problem of estimating or ascer-
taining intra-company transfer values rather than examining open market prices.)
This is particularly confusing in the case of the products like furnace acid, where
both the raw material input — in this case phosphorus — and the final product -
furnace acid — are generally transferred on an intra-company basis.
On the other hand, the financial analysis of furnace acid manufacture is
greatly simplified by the fact the cost of the basic raw material — phosphorus —
the overwhelmingly most important cost component in the overall manufacturing
cost of furnace acid, comprises approximately 94% of the final cost. Thus, any
increases in process costs that might arise because of water pollution control
measures, even if relatively substantial, would have only a minor effect on the
overall cost of manufacturing furnace acid.
23
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We show in Table 10 the representative breakdown of the cost of making
furnace acid. We have used the current list price for open market purchases of
phosphorus of $380.00 per ton although we believe that current spot sales are
actually being made substantially above this.
Prices for furnace acid currently are well below this calculated cost of
manufacture and have been for recent years. This suggests that phosphorus is
being transferred into the furnace acid plants at substantially below the list price,
although the Department of Commerce figures for intra-company do seem to
indicate the transfer at essentially list. This would indicate that the furnace acid
plants are operating at or below the manufacturing cost on this transfer basis.
D. PRICING
As in the case of phosphorus, only a small percentage of furnace acid
produced is sold on the open market to other companies. Almost all is used
internally by the producer for the manufacture of other derivatives. Furthermore,
only about 25% of production is shipped from the point of production to another
plant. It is only this portion that is reported by the Department of Commerce in a
way in which its value f.o.b. plant can be calculated. However, we have extracted
these figures for the years of 1968 to 1971, summarized below:
Furnace Acid Values
($/tonP2Os, f.o.b. plant)
Value per Ton P2O5
1968 142.00
1969 165.00
1970 156.00
1971 168.00
It is interesting to note that all of these prices are substantially below the
direct manufacturing cost of furnace acid, calculated from a typical recent
transfer value of phosphorus of $380.00. This underlines again, the somewhat
arbitrary and unreliable nature of the reported intracompany transfer figures as a
reflection of true price and realistic profitability.
For two reasons, it is unlikely that the effects of water pollution control
costs will be major or significant in terms of furnace phosphoric acid. In the first
place, over 90% of the cost of furnace acid, as mentioned above, consists of the
cost of phosphorus and the effect of major changes of water pollution control
costs associated directly with the manufacture of acid would not be particularly
significant. Furthermore, since most of furnace phosphoric acid involves
24
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TABLE 10
ESTIMATED COST OF MANUFACTURING PHOSPHORIC ACID
FROM ELEMENTAL PHOSPHORUS
Basis: 54%P2O5 Phosphoric acid equivalent to
45,000 tons/year of P2 05
Plant located in Midwestern U.S.A.
Phosphorus cost (f.o.b. furnace plant) at
$380.00 per ton P4; freight, $5.00 per ton P4
Capital Investment: $1 million (includes storage for 3,000 tons P2OS;
no P4 storage)
Manufacturing Cost
Cost Item
Utilities
Electricity
Water
Units Units/Ton P2O5 Cost/Unit Cost($)/Ton P2O5
Raw Materials and Freight:
Phosphorus Tons P4
Freight Tons P4
Kwh
Mgal
0.44
0.44
60
23
380.00
5.00
0.0068
0.05
167.20
2.20
0.41
1.15
Salaries, Wages, and Overhead
Operating Supplies
Maintenance (4% of investment)
Taxes and Insurance (2% of investment)
Depreciation (6.67% per year)
Cost($)/Year
180,000
5,000
40,000
20,000
67,000
Cost($)/TonP2O5
4.00
0.10
0.89
0.45
1.48
177.88
25
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intra-company transfers of both raw material and finished product, its pricing is
somewhat academic.
As in the case of phosphorus with only a small portion of total production
moving in open market sales, it is likely that there would be relatively wide
fluctuation in the price of this small open market segment reflecting changing
supply/demand conditions. As has happened in the past, when there have been
substantial surpluses of furnace phosphoric acid, these have moved at relatively
low prices primarily into the liquid fertilizer market, to maintain capacity opera-
tion at phosphorus furnaces, where costs are quite sensitive to the operating rate.
In the same vein, during periods of short supply, quantities available on the open
market would be limited and would undoubtedly rise sharply in price. Thus, price
fluctuations in open market phosphoric acid are much more likely to depend on
the factors related to the supply/demand situation, than on water pollution
control costs associated with the acid manufacture.
26
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IV. DERIVATIVES OF ELEMENTAL PHOSPHORUS
A. SEGMENT DESCRIPTION
Four of the products comprising this segment are produced from elemental
phosphorus (POC13, PaS5, P2O5, and PC13). The fifth, ferrophosphorus, is a
by-product of the phosphorus furnace. In fact, ferrophosphorus is not impacted
by water pollution abatement considerations and may be appropriately excluded
from this segment.1 The first four derivatives, however, do merit common
consideration as a segment because all four are produced under anhydrous
conditions and are similarly impacted to the extent that any water pollution
aspect exists. Further community of consideration is warranted because several of
the four elemental phosphorus derivatives are frequently produced at a common
site for both merchant sale or further processing as chemical intermediates.
B. COMPANIES AND PLANTS
The primary producers of the elemental phosphorus derivatives are major
components of the U.S. chemical industry, namely FMC Corporation, Hooker
Chemical Corporation (subsidiary of Occidental Petroleum Corporation), Mobil
Chemical Company (subsidiary of Mobil Oil Company), Monsanto Company, and
Stauffer Chemical Company. All of these are integrated back to production of
elemental phosphorus. In general these producers are also integrated forward,
with the derivatives as intermediates, for synthesis of such end products as
pesticides, plasticizers, lube oil additives, flotation agents, and surfactants.
There are also several small specialty chemical producers of the products,
primarily for electronic markets, but these represent such a minor part of the
segment that their separate consideration is unwarranted.
Two of the five integrated producers of elemental phosphorus derivatives
have a single producing location. The others have multiplant locations for the
derivatives but may produce only one of the derivatives at a given location. Of the
four derivatives considered (POC13 , P2 S5, P2 Os, and PC13 ), both Hooker Chemi-
cal Company and Stauffer Chemical produce all four. The other major producers
manufacture one to three of them.
The primary plant sites are Nitro, West Virginia; Niagara Falls, New York;
Sauget, Illinois; Anniston, Alabama; Charleston, South Carolina; Morrisville,
Pennsylvania; Mt. Pleasant, Tennessee; Nashville, Tennessee; and Cold Creek,
Alabama.
1. Ferrophosphorus is drawn off before the slag and it is important that it not come into
contact with water with which it may react explosively at this point in the furnace
production cycle.
27
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Derivatives Manufactured
Producing Company PQC13 P2SSP2O5 PC13
FMC X X
Hooker X X X X
Mobil X
Monsanto XX X
Stauffer X X X X
Because most of the plant sites are large multiproduct, integrated operations
producing fifty or a hundred individual chemical products, the derivatives of
elemental phosphorus within the sector constitute only a small fraction of the
plant site output, plant site employment, or plant site water pollution impact.
Furthermore, this segment represents only about 5% of the total tonnage of the
nonfertilizer phosphate industry which is analyzed in this report.
C. FINANCIAL PROFILE
Because industry manufacturing costs were not made available to us on the
derivatives of elemental phosphorus, these were calculated based primarily on our
internal engineering estimates. As such, they are presented in the following
Tables 11 through 14 for POC13, P2SS, P2OS, and PC13. It is important to note
that for production of PzSs, P2OS, and PC13, the phosphorus is introduced into
the reaction at a market price of $380 per ton delivered. In the case of POC13, the
two phosphorus derived raw materials are also introduced at the published market
prices, i.e., $400 per ton P2OS and $220 per ton for PC13. It is assumed that both
these raw materials for POC13 are produced at the same plant as the POC13 and no
freight costs are involved.
. Using current published selling prices for the four derivatives of elemental
phosphorus considered herein, the following estimated plant cash flows may be
developed in cents per pound at the plant site.
POC13 P2S5 P2O5 PC13
Selling Price 12.25* 14.20** 20.00** 11.00*
Plant Cost 12.70 10.30 9.90 9.20
Plant Margin (0.45) 3.90 10.10 1.80
Depreciation 4.10 3.41 4.55 2.53
Plant Cash Flow 3.65 7.31 14.65 4.33
*in bulk
**in carloads of drums.
28
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TABLE 11
ESTIMATED COST OF MANUFACTURING PHOSPHORUS OXYCHLORIDE
Variable Costs
Phosphorus Pentoxide
Phosphorus Trichloride
Chlorine
Power
Cooling Water
Steam
Operating Supplies
Plant Location
Annual Production
Fixed Investment
Quantity
0.189 T
0.548 T
0.283 T
25kwh
11.1 Mgal
0.73 M Ibs
Eastern United States
10,000 tons
$900,000'
$/Unit
$/Ton
400
220
70
0.01
0.03
1.40
75.60
120.56
19.81
0.25
0.33
1.02
0.50
218.07
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
2 men/shift 4.50/hr
1/2 of 4 foremen 13,000/yr
1/2 of 1 super. 17,000/yr
71/z% of Investment/yr
30% of Op. Labor and Supervision
7.88
2.60
0.88
3.75
3.41
18.52
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
T/2% of Investment/yr
7.95
8.19
1.35
17.49
Total Cost of Manufacture, Bulk Liquid
254.08
1. Assumes part of complex receiving cooling water, steam, services, etc. from central facility.
29
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TABLE 12
ESTIMATED COST OF MANUFACTURING PHOSPHORUS PENTASULFIDE
Plant Location East Coast
Annual Production 10,000 tons
Fixed Investment $750,000*
Variable Costs
Phosphorus
Sulfur
Power
Water
Steam
Operating Supplies
Drums, 450 Ib ea.
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
Quantity
0.287 T
0.736 T
7.8 kwh
1.95Mgal
0.08 M Ibs
4.45
3 men/shift
2 men days
1/2 of 4 foremen
1/2 of 1 super.
8% of Investment/yr
30% of Op. Labor and Supervision
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.4% of Investment/yr
$/Unit
$/Ton
380
35
0.01
0.03
1.40
5.73
109.06
25.76
0.08
0.06
0.11
0.50
25.46
161.03
4.50/hr
4.50/hr
13,000/yr
17,500/yr
11.83
1.87
2.60
0.87
3.20
5.15
Total Cost of Manufacture, 450 Ib drums
25.52
12.02
6.83
1.13
19.98
206.53
1. Assumes plant part of complex with steam, water and other services supplied from central
facilities.
30
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TABLE 13
ESTIMATED COST OF MANUFACTURING PHOSPHORUS PENTOXIDE
Variable Costs
Phosphorus
Steel Cans
Power
Water
Steam
Operating Supplies
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
Plant Location
Annual Production
Fixed Investment
Quantity
0.237 T
6.15
85kwh
0.6 M gal
nil
Eastern United States
5,000 tons
$500,000
S/Unit
380
5.40
0.01
0.03
1.40
2 men/shift
5 men, 200 days
1/2 of 4 foremen
1/2 of 1 super.
7% of Investment/yr
30% of Op. Labor and Supervision
4.50/hr
3.00/hr
13,000/yr
17,500/yr
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
$/Ton
90.06
33.21
0.85
0.02
0.50
124.64
15.77
4.80
5.20
1.75
7.00
8.26
42.78
19.26
9.10
1.50
29.86
Total Cost of Manufacture, Drums
197.28
31
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TABLE 14
ESTIMATED COST OF MANUFACTURING PHOSPHORUS TRICHLORIDE
Plant Location Eastern United States
Annual Production 9,000 tons
Fixed Investment $500,000'
Variable Costs
Phosphorus
Chlorine
Power
Cooling Water
Steam
Operating Supplies
Quantity
0.237 T
0.815 T
24.5 kwh
22.6 M gal
0.76 M Ibs
$/Unit
380
70
0.01
0.03
1.40
$/Ton
90.06
57.05
0.25
0.68
1.06
0,30
149.40
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
2 men/shift 4.50/hr
1/2 of 4 foremen 13,000/yr
1/2 of 1 super. 17,500/yr
71/2% of Investment/yr
30% of Op. Labor and Supervision
8.26
2.89
0.97
4.17
3.64
19.93
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
11/2% of Investment/yr
Total Cost of Manufacture, Bulk
8.48
8.48
5.06
0.83
14.37
183.70
1. Assumes plant part of complex receiving cooling water, steam, services, etc., from central
facility.
32
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Actual salvage values of the assets of these plants were not determined. It
may be expected that specific items such as pumps, piping, centrifugal equipment,
etc., will have some salvage value. In general, however, we expect that such salvage
value will be less than 25% of capital cost, and frequently much less than 25%.
D. PRICE EFFECTS
The published prices of P2 S5 and PC13 have remained stable for the past five
years. Those of POC13 and P2 O5 have risen in the past 2-3 years. The published
price of POC13 increased about 15% in 1972; that of P2O5 about 25%over the
longer period of 1971-1973.
While LCL transactions tend to be at published prices, it can be expected
that larger volumes are sold at negotiated contract prices covering extended
periods of time. Because much of the industry has an internal requirement for
part of its capacity to produce the elemental phosphorus derivatives, merchant
contract sales may be more advantageous to one seller than another at any given
time depending upon that seller's internal requirements. So in general the prices
of significant volumes are negotiated prices while lesser volumes are published
price transactions.
Published price increases are usually initiated by a major producer and either
followed or not by the other producers. If price changes are not followed, the
initiator rescinds the price. Because the elemental phosphorus derivatives are
produced in large integrated chemical plants where the impact of water pollution
control is not readily isolated on a product-by-product basis, the cost of pollution
control will result in price increases for selected products only where the general
competitive situation permits such increases. Over extended periods increased
manufacturing costs of any type generally exert an upward pressure on chemical
prices, but changes take place only at those points in time when the competitive
aspects permit. In the case of the derivatives of elemental phosphorus, specific
price increases directly attributable to pollution control are not expected.
33
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V. DERIVATIVES OF PHOSPHORIC ACID
A. SEGMENT DESCRIPTION
The segment is restricted to (1) the largest volume sodium salt of phosphoric
acid, sodium tripolyphosphate, and (2) those calcium phosphates used industrially
or in the manufacture of animal feeds.1 The phosphoric acid from which these
derivatives are made can be of either furnace or wet process origin.
Sodium tripolyphosphate (STPP) is generally produced from furnace grade
phosphoric acid because of the improved color of its salts. However, there is one
major producer, Olin Corporation, which uses wet process acid to produce STPP.
For the production of feed-grade dicalcium phosphates, the general practice
is to use wet process phosphoric acid and limestone as the primary reactants.
Dentifrice and food-grade calcium phosphates generally use furnace acid.
The traditional market for STPP has been as a detergent builder. Historically,
the detergent manufacturers have been responsible for 90% of the STPP con-
sumed in the United States, most of it in household laundry formulations. This
market is now threatened by various state and local legislative measures designed
to restrict the phosphate content of detergent formulations.
In the case of the calcium phosphates considered within the definition of
this segment more than 90% of the consumption is for animal feeds. In addition
there are specialty grades suitable for use in dentifrices and as leavening agents in
baking.
B. PRODUCING COMPANIES AND PLANTS
1. Sodium Tripolyphosphate (STPP)
Table 15 indicates the manufacturers, their plant locations, and estimated
plant capacities for STPP production.
With the exception of the Olin plant at Joliet, Illinois, each of these
locations is also a location for furnace acid production. Thus the plants may be
considered as integrated operations. The plant locations are determined to a major
degree by the amount of freight equalization required to be paid on shipments to
major detergent producing plants. Thus the freight on STPP tends to associate
1. Specifically excluded are fertilizer grades of calcium phosphate and defluorinated phosphate
rock.
34
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specific STPP producing locations with specific detergent plants. In fact proxim-
ity to the market is the most important factor in determining the location for a
furnace acid and STPP complex.
TABLE 15
U.S. PRODUCERS OF STPP
Company Plant Location Capacity1
(thousands ST/yr)
FMC Carteret, New Jersey 100
FMC Green River, Wyoming 75
FMC Newark, California 50
FMC Lawrence, Kansas 75
Mobil Fernald, Ohio 50
Monsanto Augusta, Georgia 50
Monsanto Kearny, New Jersey 125
Monsanto Long Beach, California 75
Monsanto Trenton, Michigan 75
Monsanto Carondelet, Missouri 100
Occidental Dallas, Texas 35
Occidental Jeffersonville, Indiana 100
Olin Joliet, Illinois 150
Stauffer Chicago, Illinois 40
Stauffer Morrisville, Pennsylvania 75
1175
1. Subject to significant variation, depending on grades produced.
There is a significant water pollution aspect to the production of STPP
because of the wet scrubbing of the dust at various points in the process. To the
extent that such water is returned to the system, water pollution is minimized. To
the extent which it is not, lime precipitation and clarifiers are required.
2. Calcium Phosphates
Among the nonfertilizer types, dicalcium phosphate, primarily used for
animal feed, predominates. Table 16 identifies major producing locations, most of
which are located in proximity to either a wet phosphoric acid producing location
or the primary feed markets. Capacities are not readily identified because part of
the plant capacity in some cases can be utilized for fertilizer grades of calcium
phosphate.
The water pollution aspects of feed grade dicalcium phosphate are similar to
those of STPP for which wet scrubbing operations are required. Where wet
process acid has not been defluorinated there is the additional problem of
35
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fluorsilicate disposal. With purified grades for dentifrice and human consump-
tion, the impact is amplified by larger water requirements for manufacture and in
the case of anhydrous product, the dewatering process.
TABLE 16
U.S. PRODUCERS OF CALCIUM PHOSPHATES
Company Plant Location
Cyanamid Weeping Water, Nebraska
Cyanamid Alden, Iowa
Cyanamid Hannibal, Missouri
Borden Plant City, Florida
Central States* Weeping Water, Nebraska
Eastman Kodak Peabody, Massachusetts
Farmland Hannibal, Missouri
IMC Bonnie, Florida
Monsanto Carondelet, Missouri
Occidental Davenport, Iowa
Occidental White Springs, Florida
Stauffer Chicago Heights, Illinois
Stauffer Nashville, Tennessee
'destroyed by fire but currently being rebuilt.
C. FINANCIAL PROFILE
Because industry manufacturing costs were not made available to us for
either STPP or feed grade dicalcium phosphate, these have been calculated on the
basis of our internal knowledge of the production costs involved.
1. Sodium Tripolyphosphate (STPP)
Table 17 establishes a manufacturing cost of $224 per ton for an STPP plant
operating at a production rate of 50,000 tons per year utilizing furnace acid
produced at the same site. The acid transfer price as indicated is $ 149 per ton. On
this cost basis and using a published selling price of $ 162 per ton and $3 of freight
equalization, the estimated plant cash flow is as follows:
Selling Price 159 $/ton
Plant Cost 224 $/ton
Plant Margin (65) $/ton
Depreciation 4 $/ton
Plant Cash Flow (61)$/ton
36
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TABLE 17
ESTIMATED COST OF MANUFACTURING SODIUM TRIPOLYPHOSPHATE
Variable Costs
Phosphoric acid, 75%
Soda Ash
Operating Supplies
Power
Fuel
Plant Location
Plant Capacity
Annual Production
Fixed Investment
Quantity/Ton
1.087T
0.735 T
38.9 kwh
13.9 MM Btu
Midwest
150 T/SD
50,000 T
$2,440,000
$/Unit
$/Ton
149.00'
44.502
0.01
0.80
161.96
32.71
0.50
0.39
11.12
206.68
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
4 men/shift 4.50/hr
4 foremen 13,000/yr
1 super. 17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
3.15
1.04
0.35
2.44
1.36
8.34
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
Total Cost of Manufacture
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
3.18
4.44
0.73
8.35
223.37
1. FOB plant value, assumes STPP plant at same site as acid plant.
2. $35.50 FOB plant plus $9.00 freight.
37
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However, if the phosphoric acid made in the same plant is transferred at
cost, or $96 per ton, a plant cash flow close to breakeven results.
Selling Price 159 $/ton
Plant Cost 165 $/ton
Plant Margin (6) $/ton
Depreciation 4 $/ton
Plant Cash Flow (2) $/ton
If a reasonable GS&A charge of $3.50 per ton is applied, there is a net loss
before taxes of $10 per ton. Furthermore, the bulk of the sales to the large
household detergent producers are generally made below list. For these a net back
after freight equalization of $153 is more realistic than $159. Under such
conditions the net loss before taxes becomes $7-8 per ton.
Actual salvage values of the STPP were not determined. In general, however,
we expect that such salvage value will be less than 25% of capital cost, and
frequently much less than 25%.
2. Calcium Phosphates
Table 18 develops the manufacturing cost of a plant manufacturing 65,000
tons per year of feed grade (18.5% P) dicalcium phosphate. Currently this product
is in short supply and from Midwest manufacturing locations is priced at $87.25
per ton in bulk, freight equalized with competitive locations. In order to calculate
a typical plant cash flow and profit before tax we have taken $4.25 as typical
freight equalization with a net back to the plant of $83 per ton. The plant cash
flow then becomes:
Selling Price $83 per ton
Plant Cost 70 per ton
Plant Margin 13 per ton
Depreciation 2 per ton
Plant Cash Flow 15 per ton
If the GS&A allowance is $3 per ton, the profit before tax is $ 10 per ton.
Table 19 similarly develops the manufacturing cost for dicalcium phosphate
dihydrate which is one of the refined grades. This and other refined grades serve
the dentifrice and human food markets. The plant cash flow for dicalcium
phosphate dihydrate is characteristically higher than for feed grade dicalcium
phosphate.
38
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TABLE 18
ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE
(Feed Grade 18.5% P)
Plant Location Midwest
Annual Production 65,000 T
Fixed Investment $1,200,000
Variable Costs
Defluorinated Phosphoric
Acid, PjOs basis
Ground Limestone
Power
Water
Fuel
Operating Supplies
Quantity
0.458 T
.728 T
18.2 kwh
0.06 Mgal
0.1 MM Btu
$/Unit
$/Ton
1 25.00 '
9.002
0.01
0.05
0.80
54.59
6.55
0.18
—
0.08
0.10
61.50
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
2 men/shift 4.50/hr
2 men days 4.50/hr
4 foremen 13,000/yr
1 superintendent 17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
1.21
0.29
0.80
0.26
0.92
0.77
4.25
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost of Manufacture, Bulk
1.79
1.68
0.28
3.75
69.50
T. $V10/TPjO5 plus $15 freight
2. $4/ton plus $5 freight.
39
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TABLE 19
ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE DIHYDRATE
Plant Location Midwest
Annual Production 20,000 tons
Fixed Investment $730,000
Variable Costs
Hydrated Lime
Phosphoric Acid 75%
Cooling Water
Power
Water, Process
Fuel
Operating Supplies
Bags
Quantity
0.453 T
0.774 T
2.3 Mgal
37kwh
1.25 Mgal
1.1 MM Btu
20.1
$/Unit
$/Ton
28.00'
159.002
0.03
0.01
0.03
0.80
0.20
12.68
123.07
0.07
0.37
0.04
0.88
0.50
4.02
141.63
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
Fixed Costs
3 men/shift 4.50/hr
5 men, 250 days 4.00/hr
4 foremen 13,000/yr
1 superintendent 17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
5.91
2.00
2.60
0.88
1.83
3.42
16.64
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost.bf Manufacture, Bagged
7.97
3.32
0.55
11.84
170.11
1. $22 fob plus $6.00 freight
2. $149 fob plus $10.00 freight
40
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TABLE 18
ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE
(Feed Grade 18.5% P)
Plant Location Midwest
Annual Production 65,000 T
Fixed Investment $1,200,000
Variable Costs Quantity
Defluorinated Phosphoric
Acid, P2 05 basis 0.458 T
Ground Limestone .728 T
Power 18.2 kwh
Water 0.06 Mgal
Fuel 0.1 MM Btu
Operating Supplies
$/Unit
$/Ton
125.00'
9.002
0.01
0.05
0.80
54.59
6.55
0.18
—
0.08
0.10
61.50
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
Fixed Costs
2 men/shift
2 men days
4 foremen
1 superintendent
5% of Investment/yr
30% of Op. Labor and Supervision
4.50/hr
4.50/hr
13,000/yr
17,500/yr
1.21
0.29
0.80
0.26
0.92
0.77
4.25
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost of Manufacture, Bulk
1.79
1.68
0.28
3.75
69.50
1. $110/T P2OS plus $15 freight
2. $4/ton plus $5 freight.
39
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TABLE 19
ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE DIHYDRATE
Plant Location Midwest
Annual Production 20,000 tons
Fixed Investment $730,000
Variable Costs
Hydrated Lime
Phosphoric Acid 75%
Cooling Water
Power
Water, Process
Fuel
Operating Supplies
Bags
Semi-Variable Costs
Operating Labor
Supervision
Maintenance
Labor Overhead
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
Quantity
0.453 T
0.774 T
2.3 Mgal
37kwh
1.25 Mgal
1.1 MMBtu
20.1
S/Unit
3 men/shift
5 men, 250 days
4 foremen
1 superintendent
5% of Investment/yr
30% of Op. Labor and Supervision
4.50/hr
4.00/hr
13,000/yr
17,500/yr
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
$/Ton
28.00'
159.002
0.03
0.01
0.03
0.80
0.20
12.68
123.07
0.07
0.37
0.04
0.88
0.50
4.02
Total Cost of Manufacture, Bagged
141.63
5.91
2.00
2.60
0.88
1.83
3.42
16.64
7.97
3.32
0.55
11.84
170.11
1. $22 fob plus $6.00 freight
2. $149 fob plus $10.00 freight
40
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Selling Price $230 per ton
Plant Cost 170 per ton
Plant Margin 60 per ton
Depreciation 3 per ton
Plant Cash Flow 63 per ton
With GS&A costs of $30 per ton the profit before tax is $33 per ton.
D. PRICE EFFECTS
The published prices of STPP as sold in bulk and shipped in hopper cars,
freight equalized with competitive locations, have increased from $135 per ton in
1967 to $152 per ton in 1972 to a current level of $162. Over this same period
the major detergent producers have generally paid $140-$ 155. With freight
equalization and a generally low level of profitability, most producing plants rely
on one or two major volume detergent plants for a majority of their STPP sales
and these one or two plants are those for which freight equalization is minimal.
Prices for STPP have been traditionally established by highly competitive
bidding for the large annual requirements of such major detergent plants. This
bidding process has resulted in low margins and a reluctance on the part of the
producers to expand capacity. Currently STPP is in short supply, but because of
price controls cannot rise to levels where return on investment is adequate to
stimulate expanded production.
If pollution considerations significantly reduce the use of STPP in deter-
gents, the current tight supply situation would be alleviated, and excess capacity
might appear. This would produce a downward pressure on prices.
The pricing of calcium phosphates for feed use is complex with major
differentials based on geographic location and freight equalization. Thus for the
producing point of Bonnie, Florida, which is distant from the major Midwest
markets, the price of feed grade dicalcium phosphate is $74.00 per ton freight
equalized. Similarly, at Weeping Water, Nebraska, for a plant much closer to the
major markets the price is $87.25 per ton freight equalized. This combination of
price differentials and freight equalization permits a high degree of market
selectivity.
The purified dentifrice and human food grades of calcium phosphates, which
are more costly to produce, command premiums ranging from $140 to $170 per
ton over feed grades.
The prices of the calcium phosphates, when not in short supply, are deter-
mined by competitive processes in the marketplace. Currently, however, they are
in short supply and would rise if there were no controls.
41
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Because of the low margins of profit currently generated by STPP, it can be
expected that producers will attempt to pass on any cost increases that result
from water pollution control measures. This is also probable with feed grade
dicalcium phosphate, but the results will be somewhat dependent upon the
supply-demand situation at the time of increased costs.
42
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SECTION III
ECONOMIC IMPACT ANALYSIS
I. INTRODUCTION
This section assesses the economic impact of water pollution control costs
on the production of the following nonfertilizer phosphate products:
Phosphorus
Phosphoric Acid produced from phosphorus
Phosphorus Pentoxide
Phosphorus Trichloride
Phosphorus Oxychloride
Phosphorus Pentasulfide
Sodium Tripolyphosphate
Calcium Phosphates (except defluorinated phosphate
and fertilizer phosphate).
As requested by EPA, this impact analysis is confined to those water
pollution control costs submitted to EPA in Supplement A of a report entitled
"Cost Information for the Water-borne Wastes in the Nonfertilizer Phosphorus
Chemicals Industry" prepared by General Technologies Corporation, referred to as
the effluent guideline development document. In this report, it was concluded
that zero discharge is a reasonable and achievable goal, and it was recommended
that this guideline be established for all of the products covered in this report.
At the same time, the effluent guideline development document acknowl-
edges that there may be substantial variation from the costs presented in their
report, to achieve zero discharge for individual plants in the industry. That such
variations are likely was confirmed in our discussions with some of the major
producers of several of the products in this category. If such variations from the
costs presented in the effluent guideline development document are significant for
individual plants, then the impact of water pollution control costs to achieve
discharge may be significantly different than those presented in this analysis.
Because we were unable to quantify the variations for individual plants, we
did confine ourselves, as requested by EPA, to assessing the impact of the costs
presented in the effluent guideline development document. It was not within the
scope of our assignment to evaluate or confirm the validity of the technical and
economic information presented in this document.
43
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II. IMPACT ANALYSIS
A. WATER POLLUTION CONTROL COSTS
The effluent guideline development document states that zero water dis-
charge is either being currently achieved, or could be achieved with little diffi-
culty, in exemplary plants now operating in each product category, and therefore
have recommended that this be established as the pollution guideline. The
technology proposed by the effluent guideline development document for each
product segment, and the estimated costs, are presented below.
1. Phosphorus
Three companies are producing phosphorus in separate locations in Florida
with a total of four furnaces, three companies are operating in Tennessee with a
total of ten furnaces, and three companies are operating in Idaho and Montana
with a total of nine furnaces. In addition the TVA operates three furnaces in
Alabama.
There is at least one existing plant that is reported in the effluent guideline
development document to achieve zero discharge by using complete recycle of
phossy water, evaporation of some process water, lime treatment and sedimenta-
tion of remaining process water prior to discharge. Other plants were estimated to
be able to achieve 100% recycle of process waste water back to the head end of
the plant by installing pumps, piping, and appropriate controls.
The cost of achieving zero discharge through installation of the equipment
described above is estimated in the effluent guideline development document to
be $4.60 per ton of phosphorus.
2. Furnace Phosphoric Acid
There are an estimated 21 plants producing furnace phosphoric acid from
phosphorus, operated by six companies, and the TVA. Many of these have
associated with them units for the production of various sodium and potassium
phosphates. A number of these are in urban areas; their location, particularly
when associated with the production of sodium tripolyphosphate, has been
dictated by proximity to major detergent factories.
The measures necessary to achieve zero discharge at furnace acid plants,
according to the effluent guideline development document, are generally asso-
ciated with improved housekeeping and maintenance. Costs included construction
of dikes and dams around pipes, valves, tanks, etc., the provision of sumps and
sump pumps, and treatment with lime. The resultant sludge is used for landfill.
44
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In the effluent guideline development document, it is estimated that the cost
of achieving zero discharge in furnace acid plants is $0.65 per ton of 75%
phosphoric acid.
3. Anhydrous Derivatives of Elemental Phosphorus
The four derivatives comprising this segment are phosphorus oxychloride,
phosphorus pentasulfide, phosphorus pentoxide, and phosphorus trichloride. All
four are produced under anhydrous conditions and the water pollution aspects are
limited to disposal of water used for wet scrubbing of air emissions. However, the
disposal of such water is critical because there is no remedy available through
return of this water to the reaction process because of the anhydrous conditions
of manufacture.
The primary plant sites are Nitro, West Virginia; Niagara Falls, New York;
Sauget, Illinois; Anniston, Alabama; Charleston, South Carolina; Morrisville,
Pennsylvania; Mt. Pleasant, Tennessee; Nashville, Tennessee; and Cold Creek,
Alabama. In general these are large multiproduct, integrated operations producing
dozens of individual chemical products of which the volume represented by the
derivatives of elemental phosphorus may be only a portion of the chemical output
of the site.
In general the process water used for wet scrubbing of air emissions is
commingled with plant effluent water and not treated separately to remove
dissolved or participate impurities. In some cases water from the wet scrubbing
may be used as process water in other processes where such opportunities are
available but this is not a practical general solution.
In the case of the four derivatives of elemental phosphorus, the effluent
guideline development document recommends the attainment of zero discharge
via (1) concentration of impurities through reuse of wet scrubbing effluent by
return to the wet scrubbing process; (2) lime treatment of concentrated effluent;
(3) settling tanks; and (4) land fill of sludge.
The costs presented in the effluent guideline development document for
total treatment of effluent to achieve zero discharge are as follows, on the basis of
$/per ton of product manufactured.
Product Zero Discharge Cost
Phosphorus oxychloride $ 1.25/ton
Phosphorus pentasulfide 1.70/ton
Phosphorus pentoxide 1.40/ton
Phosphorus trichloride 1.40/ton
45
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4. Derivatives of Phosphoric Acid
This segment is restricted to sodium tripolyphosphate (STPP) and those
calcium phosphates used industrially or in the manufacture of animal feeds. The
latter category of calcium phosphates, i.e., those used for the manufacture of
animal feeds, accounts for more than 90% of the calcium phosphates included in
the segment. Excluded from the segment is fertilizer consumption of calcium
phosphate.
The primary plant sites are indicated in Table 20. The STPP locations and
several of the calcium phosphate locations are large multiproduct integrated
operations producing a number of individual chemical products. This is less
typical of the feed grade calcium phosphate plants which are sited for either
proximity to wet process acid or the animal feed compounders representing the
market.
TABLE 20
PLANT LOCATION SITES - PHOSPHORIC ACID DERIVATIVES
STPP Calcium Phosphates
Carteret, New Jersey Weeping Water,* Nebraska
Green River, Wyoming Alden, Iowa
Newark, California Hannibal,* Missouri
Lawrence, Kansas Plant City, Florida
Fernald, Ohio Peabody, Massachusetts
Augusta, Georgia Bonnie, Florida
Kearny, New Jersey Carondelet, Missouri
Long Beach, California Davenport, Iowa
Trenton, Michigan White Springs, Florida
Carondelet, Missouri Chicago Heights, Illinois
Dallas, Texas Nashville, Tennessee
Jeffersonville, Indiana
Joliet, Illinois
Chicago, Illinois
Morrisville, Pennsylvania
* Location of more than one plant.
To a considerable degree the water used for wet scrubbing of dust at various
points in the process is returned to process. Where such return to process is not
readily accommodated, lime precipitation and clarification are required. The
purified grades of calcium phosphates in particular require large volumes of
process water. Special problems relate to the disposal of water removed from
anhydrous calcium phosphate and the disposal of fluosilicates from those calcium
phosphate plants using wet process acid which has not been defluorinated.
46
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In the case of the derivatives of phosphoric acid only the calcium phosphates
have costs associated with the achievement of zero discharge as reported in the
effluent guideline development document. This asserts that dry dust collection
filters constitute an investment which obviates water pollution in the case of
STPP and the investment per se is compensated for by savings in product
recovery.
In the case of dicalcium phosphate manufacture, the costs associated with
zero discharge are generally related to (1) lime treatment, (2) settling or filtration,
(3) recycle of clarified water to the process, and (4) land fill of sludge or
filter cake.
The costs presented in the effluent guideline development document for
total treatment of effluent to achieve zero discharge are as follows on the basis of
dollars per ton of product manufactured.
Product Zero Discharge Cost
($/ton)
STPP
Dicalcium phosphate - Feed Grade 1.40
Dicalcium Phosphate -Food Grade 1.50
B. IMPACT ON PRICES
We have summarized in Table 21 the increases in prices that would result
from the costs of achieving zero discharge that are presented in the effluent
guideline development document. It should be noted that we have included not
only the costs of water pollution control for individual products, but also the
increases in the costs of the raw materials covered in this segment which are used
for the production of derivatives, arising from the same water pollution control
considerations. For example, the overall increase in prices for Food Grade calcium
phosphate would result not only from the cost of water pollution control in the
dicalcium phosphate plant, but also the increase in the cost of furnace grade
phosphoric acid arising from water pollution control considerations in that plant,
and also the increase in cost of phosphorus used to make the furnace acid, arising
from water pollution control considerations in the phosphorus plant.
The price increases that would result from passing on the cost of achieving
zero discharge, as presented in the effluent guideline development document, are
of such small magnitude that we do not believe there will be any significant
impact on profitability arising from these increases. The maximum increase as a
percent of current selling price was 1.6% for Feed Grade Dicalcium Phosphate. All
other increases were 1.2% of sales price or less. Incidentally, we have used in these
calculations the current list prices for the various products, realizing that in some
47
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instances actual sales are being made at somewhat different prices. However, for
the purposes of relating the magnitude of the cost increases arising from achieving
zero discharge, the use of the list prices is not significantly in error.
TABLE 21
PRICE INCREASES RELATED TO GTC PROPOSED COSTS
OF ACHIEVING ZERO DISCHARGE
Product
Phosphorus
Furnace Acid
Phosphorus Pentoxide
Phosphorus Trichloride
Phosphorus Oxychloride
Phosphorus Pentasulfide
STPP
Feed-grade Dical
Food-grade Dical
Pollution
Control
Cost
($/ton)
4.60
0.65
1.40
1.40
1.25
1.70
1.40
1.50
Raw Material
Cost Increase
($/ton)
1.10
1.09
1.09
1.83
1.32
1.90
1.35
Total Cost
Increase
($/ton)
4.60
1.75
2.49
2.49
3.08
3.02
1.90
1.40
2.85
Current1
Price
($/ton)
380
168
400
220
245
267
162
87
257
Percentage
Increase
1.2
1.0
0.6
1.1
1.2
1.1
1.2
1.6
1.1
1. Prices based on Chemical Marketing Reporter, 7/23/73.
2. Based on following usages:
0.24 tons phos/ton acid 1.09 tons acid/ton STPP
0.24 tons phos/ton pentoxide 0.77 tons acid/ton food grade dical
0.24 tons phos/ton trichloride 0.29 tons phos/ton pentasulfide
0.19 tons pentoxide + 0.55 tons trichloride/ton oxychloride.
Our conclusion that the cost increases of the magnitude indicated in the
effluent guideline development document would be of insignificant consequence,
is further supported by the nature of the markets for the products in question.
The uses of the products in this segment are such that there is little if any ability
to substitute other products, should price increases so suggest. Because of the
specific requirements for the individual products in this segment, it is almost
certain that the price increases, particularly of the small magnitude which appar-
ently would result, would be passed on to the ultimate consumer.
The one possible exception is Feed Grade Dicalcium Phosphate, where there
is a possibility of substituting other phosphate materials without too much
difficulty, if the price increase in the dicalcium phosphate were substantial. Such
materials as defluorinated phosphate rock could be used although there are
specific advantages which the dicalcium phosphate does have for certain feed
48
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formulations. Even in the case of this product, however, the price increase is so
small that we do not foresee any impact of a major nature on profitability.
If the premise is accepted that the costs of achieving zero discharge as
presented in the effluent guideline development document would have a negligible
effect on profitability, then it follows that no production curtailments or plant
closings would be foreseen for any of these products nor would there be
restrictions on industry growth, as a direct result of the cost increases for
achieving zero discharge.
No significant impact would then be expected on employment in the plant
producing these products or on the communities in which they are located, as a
result of the cost increases to achieve zero discharge.
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III. LIMITS OF THE ANALYSIS
The cost increases for achieving zero discharge, as presented in the effluent
guideline development document, have been shown to be relatively small in
relation to current sales prices - in no case more than 1.6%. This order of
magnitude of cost increase is substantially below the variations which we believe
exist among the individual plants producing these products, in their cost of
manufacture, and also less than the cyclical variation in prices which may be
expected as market conditions change. Therefore the range of error in the
conclusions drawn from the cost presented is believed to be small and would be
overshadowed by uncertainties in the estimates of the cost of manufacturing, and
in the variation in manufacturing costs from plant to plant.
The critical question concerning these conclusions is of course the extent to
which the costs presented in the effluent guideline development document can be
realistically used as a basis for estimating the costs that will be incurred by
specific individual plants within the industry. In several cases, producers felt that
the costs presented in the effluent guideline development document were unreal-
istically low, and also that in certain cases, the technology to achieve zero
discharge was of questionable validity. Preliminary contacts with major producers
of several of the products examined have confirmed that major variations do
occur among individual plants regarding the applicability of both the technology,
and the cost estimates as presented in the effluent guideline development docu-
ment. It was not within the scope of our report to evaluate or confirm the validity
of either the technology or of the estimates of the investment and operating costs
to achieve zero discharge, which were presented in the effluent guideline develop-
ment document.
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II CIINK AI Kl I'OKI
DA I A 1'AC.I
I Report No
EPA-230/1-73-021
•4 I III, .liid Siililillc
Economic Analysis of Proposed Effluent Guidelines
Industrial Phosphate Industry
1 ') IVi Inn mil-' OrjMMiAition N.imc and Address
\ Arthur D. Little, Inc.
j Acorn Park
, Cambridge, Massachusetts 02140
i
! 12. S|».iisorinj; Oij;ani/ation Name and Addiess
j Office of Planning and Evaluation
' Environmental Protection Agency
! Washington, B.C. 20460
. Recipient's Accession No.
5 Report IXile
August 1973
6.
8. Performing Organization Kepi. No.
C-75906
10. Project/'l ask/Work Unit No
Task Order No. 7
II. C'ontruct/Crant No.
68-01-1541
13. Type ol Report & Period C ou-ieii
Final
14
Sui'i'leiiu-ntary Notes
Id Ahstr.Kls
An initial analysis of the economic impact of proposed water effluent guidelines
upon certain products in the industrial phosphate industry. This analysis was base
on abatement cost data supplied by the EPA. The products covered included phos-
phorous, phosphoric acid produced from phosphorous, and anhydrous phosphorous
derivatives, and certain derivatives of phosphoric acid but not including fertilize
The effluent guideline development document supplying the abatement costs used
in this analysis indicated that zero discharge was a practical goal and that the
cost of achieving zero discharge did not exceed 1.6% of the selling price of any
of the products studied. On the basis of these costs, it was concluded that there
would be no significant economic impact on the products studied.
17. Key Words .ind Ooumicnt Analysis. I7a. Descriptors
Economic Analysis
Effluent Guidelines
Industrial Phosphates
Phosphorous
Phosphoric Acid
Industrial Phosphate Industry
17b. Identifiers/Open-Knded Terms
I7i- COSAI1 I ield/Croup
IK. Availability Stulfincnl
Limited availability through U.S. Environmental!
Protection Agency Information Center; Room
W-327, Waterside Mall, Washington, D.C. 20460
L. _
19. Security Class (I his
II I)
20. Souintt ( l.iss t This
llM'l \SSII II I)
2], No.ol
55
2 2 Price
IORM N11S XS (RI-V V72)
USCOMM-IK- I4952P7>
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