EPA-E30/1-73-OZ4
SEPTEMBER 1973
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE RUBBER PROCESSING INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
I
5
\
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 RUBBER PROCESSING INDUSTRY
September 1973
EPA-230-1-73-024
ov~i.--
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This report has been reviewed by the Office of
Planning and Evaluation, EPA, and approved for
publication. Approval does not signify that the
contents necessarily reflect the views and policies
of the Environmental Protection Agency, nor does
mention of trade names or commercial products
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 of alternative approaches in
terms of produce price increases, effects upon employment and the continued viability of
affected plants, effects upon foreign trade and other competitive effects.
The study has been prepared with the supervision and review of the Office of Planning
and Evaluation of EPA. This report was submitted in fulfillment of Task Order No. 3,
Contract 68-01-1541 by Arthur D. Little, Inc. Work was completed as of September 1973.
This report is being released and circulated at approximately the same time as
publication in the Federal Register of a notice of proposed rule making under sections
304(b) and 306 of the Act for the subject point source category. The study has not been
reviewed by EPA and is not an official EPA publication. The study will be considered along
with the information contained in the Development Document and any comments received
by EPA on either document before or during proposed rule making 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 jjj
List of Figures iv
EXECUTIVE SUMMARY 1
INDUSTRY SEGMENTATION 5
DESCRIPTION OF SYNTHETIC RUBBER INDUSTRY SEGMENTS 8
DESCRIPTION OF THE TIRE AND TUBE INDUSTRY 15
FINANCIAL PROFILES 17
WATER TREATMENT COSTS 21
ECONOMIC IMPACT ANALYSIS 30
APPENDIX A ESTIMATION OF PLANT COSTS FOR
EFFLUENT GUIDELINES 43
APPENDIX B -- SAMPLE CALCULATION OF SYNTHETIC
RUBBER PLANT POLLUTION CONTROL
COSTS 46
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LIST OF TABLES
Table No. Page
1 The Synthetic Rubber Industry 3
2 The Tire and Tube Industry 4
3 Comparison of Economic and Technical Segmentation 6
4 Markets 9
5 Capacity of U.S. Synthetic Rubber Plants 14
6 Tire Products and Plant Locations 16
7 1972 Profile - Synthetic Rubber 17
8 1972 Profile - Tires and Inner Tubes 18
9 Rubber and Plastics Products: Financial Ratios 1967-72 19
10 1972 Financial Profile for Segments 20
11 Water Effluent Guidelines Meeting 29
12 B.P.T. Costs 34
13 B.P.T. Costs 35
14 B.A.T. Costs 36
15 B.P.T. Costs and B.A.T. Costs 37
16 Synthetic Rubber Companies 38
17 Tires and Tubes Companies 38
18 Synthetic Rubber + Tires and Tubes 39
19 Synthetic Rubber (SIC 2822) 39
20 Tires and Inner Tubes (SIC 3011) 40
in
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LIST OF FIGURES
Figure No. Page
1 Location of Synthetic Rubber and Tire and Inner Tube
Plants (1972) 7
2 Emulsion Synthetic Rubber Plants; Water Treatment Costs
versus Waste Water Flow 25
3 Solution Synthetic Rubber Plants; Water Treatment Costs
versus Waste Water Flow 26
4 Latex Rubber Plants — Water Treatment Costs versus Waste
Water Flow 27
5 Tire Plants — Water Treatment Costs versus Waste Water Flow 28
6 Capital Cost versus Waste Water Flow 44
7 B.P.T. — Yearly Operational Costs versus Waste Water Flow 45
IV
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EXECUTIVE SUMMARY
Tliis final report is submitted in compliance with Phase HI of Contract No. 68-01-1541
with the Environmental Protection Agency on the "Economic Impact of Water Pollution
Control on the Rubber Processing Industry." Using the effluent guidelines development
document as prepared by Roy F. Western, Incorporated and supplied to us by EPA, we
evaluated the economic impact of pollution control costs on the synthetic rubber and tire
sectors of the rubber processing industry.
Methodology
In determining the effects of pollution control on the industry, an estimation was made
of the costs that would be likely to be incurred, based on the effluent guidelines document
and information received from the industry. Conclusions were drawn from an analysis of the
way in which these costs would affect prices, production, employment, profits and other
economic variables, based on a 70-100 percent coverage of the manufacturing facilities
associated with each category.
The Contractor assumed the increased costs will be passed on in the form of higher
prices to maintain the companies1 historical return on stockholders' equity. Most of the
plants were assumed to be working at their 1972 capacity, except EPDM, which will expand
to 80-85 percent of current 1972 capacity by 1977. The industry demand curves for these
products are assumed essentially inelastic; there are no substitutes (other than natural
rubber) for most of the rubber products.
Segmentation
The synthetic rubber industry has been segmented by product rather than by process,
and tires and tubes was considered as a separate segment. Because of market and price
considerations, this segmentation was more useful in considering economic impact.
Financial Considerations
The Contractor determined the costs associated with meeting the Best Practical
Technology and Best Available Technology Economically Achievable for the various seg-
ments of the industry. The investment, annualized costs and estimated price increases as a
percent of sales are summarized in Tables I and 2, averaged for the synthetic rubber and tire
and tube segments.
Impacts
The Contractor does not expect these additional costs to exert a significant impact on
the market and prices of the respective products. It is not expected that any plants will be
closed in either the synthetic rubber or tire and tube segments. There are, however, a small
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number of small latex plants that have not been covered in our analysis. Most currently
discharge into municipal systems and represent an insignificant portion of the industry.
Industry sources in the tire and tube segment of the study indicate there may be a
short period of plant shutdown, particularly in the older plants, while changes are made in
order to segregate their effluent lines. The Contractor has no way of evaluating the validity
of these statements or the magnitude of the economic consequences.
This analysis indicates no adverse effects on the growth of the industry due to B.P.T.,
B.A.T., and N.S.P.S. In addition, the costs should not significantly affect either the
domestic market competitiveness or the international market situation — the dollar deval-
uation far overshadows the insignificant price increases involved. However, it is impossible
to know what the strength of the United States dollar will be in 1977 and 1983.
Limitations
When interpreting the findings of this study, it is important to be aware of the
limitations of the cost data used for calculating investment and annual operating costs. The
Contractor has defined these as direct incremental investment and annual operating costs
required to achieve environmental standards. These costs were provided to the Contractor
by industry and the effluent guidelines development document, and thus the Contractor
cannot verify their accuracy. The scale-up factors used in estimating investment and
operating costs for those plants other than those considered in the guidelines are given in
Appendix A. The calculated price increases for pollution guidelines (B.A.T. and B.P.T.) are
maximum expected increases. Certain companies and certain plants meet B.A.T. guidelines
and may not increase their prices at all. Other companies may be constrained to follow suit.
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TABLE t
THE SYNTHETIC RUBBER INDUSTRY
(Butyl, EPDM, Neoprene, Nitrite, Polybutadiene,
Polyisoprene, SBR Emulsion + Solution)
SIC Code: 2822
No. of synthetic rubber operations specifically evaluated
for B.P.T. = 36 (90% of industry), for B.A.T. = 39 (98% of industry)
I mpacts
Costs
Investment
Total for segment
Per plant (average)
Percent of average annual
investment in segment
Annual
Total for segment
Per plant average
Percent of sales
Price increase
(varies from product
to product)
Plant closings
Percent of total in segment
Displaced workers
Percent of total in segment
Number of community impacts
Impact on industry growth
Direct balance of payment effects
B.P.T.
$22.5 x 106
$625,000
N.A.
$7.94 x 106
$221,000
0.8%
0-1.5%
B.A.T.
$9.90 x 106
$254,000
N.A.
$4.40x 106
$114,000
0.7%
0-1.5%
N.S.P.S.
0
0
0
0
0
None
None
0
0
0
0
0
None
None
-
-
-
None
None
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TABLE 2
THE TIRE AND TUBE INDUSTRY
SIC Code: 3011
Number of plants specifically evaluated:49
Percent of total plants: 88%
I mpacts
Cost
Investment
Total for segment
Per plant (average)
Percent of average annual
investment in segment
Annual
Total for segment
Per plant (average)
Percent of sales
Price increase
Plgnt closings
Percent of total in segment
Displaced workers
Percent of total in segment
Number of community impacts
B.A.T.
1977
Standards
B.P.T.
1983
Standards
N.S.P.S.
New Source
Standards
$31.5 x 106
$790,000
N.A.
$12.56 x 106
$310.000
0.3%
0-0.45%
0
0
0
0
impossible to evaluate
Impact on industry growth None
Direct balance of payments effects None
None
None
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INDUSTRY SEGMENTATION
The segmentation of the rubber proeessing industry used by the Contractor differs
from that described in the effluent guidelines development document. In the guidelines
document, industry segmentation was based on technical considerations such as the quan-
tity, characteristics, and applicability of control and treatment to the wastewater generated
by the specific plants. The technical segmentation of the synthetic rubber industry was
based on manufacturing processes. Basically, there are two processes in common use in the
industry: emulsion polymerization and solution polymerization. Emulsion polymerization is
used to produce both emulsion crumb rubber (dry form) and latex rubber (water-suspended
form). According to the effluent guideline development document, however, crumb and
latex production should be considered separately both from operational and wastewater
points of view. Solution polymerization plants are different from emulsion facilities not
only in terms of process, but also in terms of the quantity and character of the wastewater.
As a consequence, three segments based on manufacturing process variations were specified
in the guideline document: emulsion polymerization to form crumb rubber, solution
polymerization to form crumb rubber, and emulsion polymerization to form latex.
For the tire and inner tube industry, the guidelines document used age of the
production facility as the basis for segmentation. In the effluent guideline development
document, it is stated that plants built prior to 1959 tend to be multi-storied, with
production lines located on many floors and confined to small areas. In such plants, process,
non-process, and domestic wastewater are combined in a common sewer, thus making
process contaminants difficult to locate and treat. The document states that the newer
plants have the benefit of modern design criteria in both the sanitary and maintenance
engineering fields. Sewers are no longer combined, thus making process sewer wastewaters
easier to locate and treat. As a consequence, the process wastewater streams from these
post-1959 plants are generally smaller in volume and contain lower loadings of both oily and
solid materials - thus making treatment less costly than for older plants with similar
production.
The technical segmentation used in the guideline documents is useful for categorizing
processes and pollution, but it is not appropriate for assessing the economic impact of
pollution control costs. An assessment of the economic impact of pollution control must
take into account the financial and economic characteristics of the business, and similarities
in technology do not imply similarities in business.
Therefore, to permit an analysis of how pollution control costs would affect produc-
tion, employment, profits, prices, and other economic variables that are critical to an
industry, the Contractor segmented the synthetic rubber industry by product. The tire and
inner tube industry was treated separately. The relationship between segmentation used by
the contractor and that used in the guidelines is shown in Table 3.
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TABLE 3
COMPARISON OF ECONOMIC AND TECHNICAL SEGMENTATION
Industry Economic Technical
Neoprene
Nitrile
Polybutadiene
Styrene-butadiene (SBR)
Synthetic Rubber ] Butyl
EPDM
Polybutadiene
Emulsion crumb
Solution crumb
Polyisoprene
Styrene-butadiene (SBR)
Styrene-butadiene (SBR latex) | Latex
Nitrile latex j
Tires and Inner Tubes Tires and inner tubes "i Old tire and inner tube
New tire and inner tube
In a preliminary review of the information available on these economic segments, the
Contractor concluded that one segment - SBR latex - could not be independently evalu-
ated. SBR latex represents about 9?r of the SBR produced. Production is so small, and
prices, profitability and outlook are so difficult to estimate that the Contractor deleted SBR
latex from further consideration.
Plant Locations
An analysis of plant locations for the manufacture of synthetic rubbers and tires and
tubes shows they are located in heavily industrialized areas. In the case of synthetic rubber
they are located near sources of raw materials and refineries. Figure 1 shows the locations of
the different plants.
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FIGURE 1 LOCATION OF SYNTHETIC RUBBER AND TIRE AND INNER TUBE PLANTS (1972)
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DESCRIPTION OF SYNTHETIC RUBBER INDUSTRY SEGMhNTS
Butyl Rubber-Solution
Technology. Butyl rubber is a copolymer of isobutylene and isoprcne and contains
\.47f to 4.5'/f of isoprene. The rubber is prepared by polymeri/ation in an organic solvent,
using aluminum chloride as the catalyst. After polymerization, the rubber, which is in the
form of a finely divided slurry, is recovered by vaporizing the organic solvent with hot water
and steam. The resulting aqueous slurry of rubber crumb is dewatered and dried by the
methods used for the other synthetic rubbers.
Plant Location. Sizes and Ages. There are only two domestic producers of butyl
rubber. Exxon and Cities Service's Columbian Carbon Division. Exxon operates two widely
diversified facilities, one at Baton Rouge with a capacity of 46,000 It/year, and the other at
Baytown, Texas, witli a capacity of 80,000 It/year. Synthetic rubber operations in these
plants began during World War II. Cities Service began operating their Lake Charles. La..
facility in 1963. They report a capacity of 37,500 It/year.
Uses. About 80'/ of total production is used in tires and tire products. This applica-
tion is expected to continue to show slow but steady increase. The use of butyl in adlie-
sives and sealants is growing well in excess of the overall market but is still small.
Ethylene-Propylene Elastomers-Solution
Technology. Ethylene-propylene elastomers (EP) arc synthetic polymers prepared by
the solution eopolymerization of ethylene and propylene. Two basic forms of the rubber are
produced, EPM (a saturated, peroxide vulcanizable polymer) and EPDM (an unsaturated
conventional sulfur curable polymer). EPDM accounts for aboul 95% of the total produc-
tion of ethylene-propylene elastomers, and has been used by the Contractor to represent the
entire class of EP elastomers.
Plant Locations, Sizes and Ages. Five plants operated by five different companies are
engaged in the production of EPDM. These plants are located in Louisiana (3) and Texas
(2), and range from 25-56,000 long tons of annual production capacity. All the plants were
built between 1963 and 1971.
Uses. Table 4 illustrates the variety of end-use markets in which EPDM is used:
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TABLE 4
MARKETS
Percent of Domestic Consumption
Automotive Parts (non-tire) 35.0%
Tires and Tire Products 32.0
Wire and Cable Insulation 7.0
Appliance Parts 6.5
Hoses 6.0
Gaskets, Seals, and O-Rings 4.5
Coated Fabric and Sheeting 2.0
Other 7.0
100.0%
Source: Chemicals Economic Handbook, Stanford Research Institute, May 1972.
Since the introduction of EPDM in 1 963, the forecast of demand for the rubber has
consistently exceeded actual demand. As a result production in 1972 averaged only about
50% of capacity. This excess capacity has created a marketing environment where the
rubber price is often discounted 10-20% below list (28-30^/lb).
However, despite excess capacity, some producers say that EPDM supplies are tight.
They explain that they now produce so many different types and grades of the elastomer
that their effective capacity is reduced.
New emphasis in automotive safety and pollution control equipment has boosted
demand for EPDM for such applications as bumpers and high-temperature-stable hoses and
belts. These and other growing markets are causing domestic consumption to grow at a brisk
10-15% per year.
Neoprene-Emulsion
Technology. Neoprene is one of the oldest synthetic rubbers in existence - having
been first introduced on a commercial scale in 1931 by Du Pont. Until relatively recently,
neoprene was made commercially from chloroprene monomer produced from acetylene
feed stock. Today, a more economical butadiene route to the monomer is being utilized.
Plant Locations, Sizes, Ages. Only two companies in the United States - Du Pont and
Petro Tex — make neoprene.
Du Pont presently operates two neoprene plants. The Louisville, Kentucky, facility,
with a capacity for 125,000 It/year, is a diversified complex, most of which was constructed
during World War II. The chloroprene monomer used here is supplied from a newly
constructed plant in Victoria, Texas.
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Du Font's facility in La Place, La., produces both chloroprcne monomer and neoprene,
with a neoprene capacity of 40,000 It/year. This facility went on-stream in 1970.
Petro Tex's Houston plant went on-stream-in 1970. Its capacity is estimated* at 44,000
It/year. The Houston facility also contains Petro Tex's butadiene monomer facility, one of
the largest in the United States.
Uses. Automotive,products (fan belts, hosing, etc.). account for about 45r/ of market;
industrial/aerospace/consumer products (conveyor belts, >vet suits, etc.), about 20r/; wire
and cable, 10% and declining; adhesives, 12%- with an annual growth rate of 10%. The
remaining 13f/f is used in a variety of other products, none of which is large enough to be of
interest.
Nitrile-Emulsion (Crumb and Latex)
Technology. Nitrite rubber, a copolymer of acrylonitrile and butadiene, is produced
by emulsion polymerization in a manner similar to that used in making emulsion SBR. The
basic steps involved in the manufacture of dry rubbers are polymerization, coagulation,
washing and drying. In case a latex is desired, the steps are polymerization, stabilization,
and usually concentration
Plant Locations, Sizes, Ages. Six companies produce nitrile rubber in nine plants; one
is located in Delaware, one in Kentucky, two in Louisiana, four in Ohio, and one in Texas.
Nitrile plants have the smallest production capacity of all the plants in the synthetic rubber
industry, exhibiting an average annual capacity of less than 15,000 long tons.
Most of these plants were built before or during World War II, and very little new
technology has been developed since then.
Uses. Because of its outstanding resistance to oil and solvent, nitrile rubber is utilized
for a number of "under-the-hood" automotive applications; these account for about 25'/<- ot
all nitrile produced. Other applications include mechanical goods, belting, rollers, etc.
Polybutadiene-Solution/Einulsion
Technology. Poly butadiene, a homopolymer of butadiene, accounts for 12% of total
U.S. synthetic rubber production.
In the commercial production of polybutadiene elastomers, the exact nature of the
final product depends on several factors, the most important of which are the catalyst
system and the reaction medium (solution or emulsion polymerization).
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Only one plant - Texas-U.S. in Port Neches, Texas - produces polybutadiene by the
emulsion process. This plant accounts for less than 10% of the domestic capacity for the
production of polybutadiene. The remainder is accounted for by six other polybutadiene
plants producing the rubber by solution polymerization.
Plant Locations, Sizes and Ages. At the present time there are seven plants producing
polybutadiene: one in Louisiana, one in Kentucky, and five in Texas.
There is quite a variation in plant size with the smallest having a capacity of about
20,000 long tons, the largest 110,000 long tons, and the average being about 64,000 long
tons.
The polybutadiene plants are relatively new, having been built between 1961 and
1963. From 1965 to 1968, the plants increased their capacity at a rate of about \67r per
year, through new construction. Over the last years the rate of growth has slowed to about
13.5% per year and has been the result of both new construction and the "dcbottleneck-
ing" of existing operations (primarily in the drying and finishing areas).
Polyisoprene-Solution
Technology. Polyisoprene elastomers are synthetic, predominantly stereoregular,
polymers which closely resemble natural rubbers in both molecular structure and properties.
Two basic types are currently being produced: cis-polyisoprene and trans-polyisoprene.
Cis-polyisoprene is used in many of the same applications as natural rubber: tires and
tire products, foam rubber, hoses, gloves, etc.
Trans-polyisoprene, on the other hand, has quite different properties and is used in
specialty applications such as golf ball covers, cable and wire covering, and adhesives.
All polyisoprene elastomers are produced by solution polymerization, in a manner
quite similar to that used to produce polybutadiene. The polymers are sold both in dry
rubber and latex form.
Plant Locations, Sizes, and Ages. There are two polyisoprene plants. The first was
built by Goodyear in Beaumont, Texas in 1962. This plant has a capacity of 62,000 long
tons. The second was built by Goodrich in Orange, Texas in 1968. The Goodrich plant has a
capacity of 62,500 long tons.
Uses. The growth of polyisoprene demand has been slow. However, it is believed that a
more general acceptance of radial ply tires in the United States would very likely increase
the demand for polyisoprene, since good building tack and green strength — qualities of
natural rubber — are essential in the construction of radial ply tires. Because of its similarity
to natural rubber, polyisoprene could become the logical replacement for this application.
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SBR-Emulsion/Solution
Technology. SBR, a copolymer of styrene and butadiene, typically contains about 25
parts styrene to 75 parts butadiene. SBR accounts for over 607, of all the synthetic rubber
manufactured in the United States.
Most of the SBR produced is manufactured by the so-called cold emulsion process
which was developed just after World War II and is used with few modifications even today.
Most process modifications have been concerned with alleviating bottlenecks in the poly-
merization, drying and finishing operations and with increasing the volume produced
through extension of the rubber with oil and carbon black. The same basic process is used to
produce both dry rubber and latex (a suspension of SBR in water).
An alternative to the emulsion process is a solution process used by Firestone Tire &
Rubber Company, and Phillips Petroleum, Co. Solution SBR exhibits better abrasion and crack
resistance than emulsion SBR, but at present is priced 10-1 5% higher than the emulsion type.
As far as water pollution is concerned, the emulsion process is by far the more
troublesome. Water is used as the suspending medium during the polymeri/ation, and it
must ultimately be removed to produce dry rubber.
Plant Locations, Sizes, and Ages. The plants in which SBR is made are located either
adjacent to butadiene-producing plants or near the markets. For example, during World
War II, SBR plants using butadiene derived from petroleum were located in Louisiana,
Texas, and California; those using butadiene made from alcohol were located in West
Virginia, Pennsylvania, and Kentucky. Those serving specific markets were located in Ohio
and Connecticut. At the present time there are eleven plants producing emulsion crumb
SBR, with an average annual production capacity of over 140,000 long tons. However, the
plants are by no means of uniform size, exhibiting a range of capacity from 28,000 long
tons to 410,000 long tons.
The newest plant was built in 1957, while the others were built between 1941 and
1945.
Us_es. An estimated 65-70% of SBR production goes into the tire industry; 7-8% goes
for mechanical goods, 9% for exports, 1-2% for footwear, and 12% for miscellaneous
products.
Growth in demand for emulsion SBR has slowed to 1-3%/year, reflecting the mature
status of this 30-year-old product.
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Summary of U.S. Synthetic Rubber Capacity
Table 5 lists the synthetic rubber production in the plants of concern in this study. Of
the 28 plants listed here, 18 produce only one rubber type, 9 produce two types, and one
plant produces three different rubber types. In addition, most of the 18 plants producing a
single rubber are part of diversified plant complex manufacturing other products such as
rubber processing chemicals, plastics, and basic and intermediate organic chemicals. As a
consequence, the wastewater effluent from the synthetic rubber operations is generally
combined with other plant effluents and treated in a common facility. The implication of
this common treatment in regard to pollution cost allocation to the individual products is
covered in a later section of this document.
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TABLE 5
CAPACITY OF U.S. SYNTHETIC RUBBER PLANTS
Company
Name
American Synthetic
Rubber
Ashland
Cities Service
Copolymer
DuPont
Exxon
Firestone
Gen. Tire
Goodrich
Goodyear
Petrotex
Phillips
Texas-US
Uniroyal
Location
Louisville, Ky.
Baytown
Lake Chas., La.
Addis, La.
Baton Rouge, La.
Beaumont, Tex.
La Place, La.
Louisville, Ky.
Baton Rouge, La.
Baytown, Tex.
Akron, Ohio
Lake Chas, La.
Orange, Tex.
Odessa, Tex.
Akron, Ohio
Louisville, Ky.
Orange, Tex.
Port Neches, Tx.
Akron, Ohio
Beaumont, Tex.
Houston, Tex.
Houston, Tex.
Borger, Tex.
Port Neches, Tex.
Baton Rouge, La.
Geismar, La.
Naugatuck, Conn.
Painesville, Ohio
Production Capacity
Butyl EPDM Neoprene Nitrile Polybutadiene Polyisoprene SBR
75,000 125,000
80,000
37,500
25,000
5,500 127,000
56,000
40,000
1 25,000
46,000 35,000
80,000
2,500 50,000
20,000 230,000 emuls.
23,000 sol.
75,000
110,000
35,000
35,000
25,000 87,000 62,500
178,000
1 1 ,000
110,000 65,000
11,000 410,000
44,000
50,000 77,000 emuls.
2,300 sol.
30,000 148,000
15,500
50,000
28,000
15,500
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DESCRIPTION OF THE TIRE AND TUBE INDUSTRY
Fifty-six plants in the United States produce tire and tube products. Of these, 40 are
operated by Firestone, General Tire, Goodrich, Goodyear and Uniroyal.
Technology
The technology of the production of tires is very similar in all plants. Basically, the raw
rubber is compounded with oil, carbon black and various curing ingredients. The compound
is then calendered onto fabric which forms the tire plies. Special tough stocks are made into
tread stock and sidewall stock and are extruded to shape. The tire is then built up on a
drum, one kind of drum for bias and belted bias tires, and another for radial tires.
In recent years each change in tire structure has resulted in more costly tires with
better wear and stability. Tread wear has been increased by 50% in going from the bias to
the belted bias, and by another 5Q'/r in going from the belted bias to the radial tire. Thus the
radial tire can be expected to provide from 40,000 miles of tire life versus 20,000 miles for
the conventional bias tire.
The change from bias to belted tires took place between 1968 and 1970 and required a
major investment by the tire companies for new equipment. A rough rule of thumb for
switching to radials (as companies are now doing) is that for a 10,000-passenger-tires-per-day
plant, an additional investment of about $7-8 million will be required. If there is a 60%
replacement to radials in the seventies, this will require a $280 million dollar investment by
the industry.
PJajitJSize
Tire plants vary widely in capacity; the largest produce some 30,000 tires per day, and
the smaller ones less than 5,000 per day. Production depends to a great extent on the tire
mix. For example, the building of a passenger car tire requires about one minute, while
many off-the-road tires require as long as an hour.
Plant Age and Location
The specific problems of pollution control depend in part on the age and general
upkeep of the plant because much of the pollution comes from washdown of facilities and
blowdown of cooling water. However, most tire plants have been expanded and modernized
since 1967, when the belted bias tires went into production.
Table 6 lists the tire plants and their location. The Akron area is a heavily built-up
industrial section with little land available for water treatment facilities. Newer plants are
located in less confining areas where sufficient land is generally available for ponds and
lagoons.
15
-------
TABLE 6
TIRE PRODUCERS AND PLANT LOCATIONS
Company
Armstrong Rubber
Carlisle Rubber
Cooper Tire & Rubber
Dunlop Tire & Rubber
Firestone Tire & Rubber
Gates Rubber
General Tire & Rubber
Goodrich
Goodyear
Mansfield Tire & Rubber
McCreary Tire & Rubber
Mohawk Rubber
Uniroyal
Plant Locations and Annual Passenger
Headquarters Car Tire Production
(number of tires)
W. Haven, Conn. W. Haven, Conn.; Natchez, Miss.; Des
Moines, Iowa; Hanford, Calif.
Total Production 14,700,000
Carlisle, Pa. Carlisle, Pa. Total Production approx. 1,200,000
Findlay, Ohio Findlay, Ohio; Texarkana, Arkansas,
Mississippi
Total Production, 8,000,000
Buffalo, N.Y. Buffalo, New York
Total Production 2,000,000
Akron, Ohio Akron; Des Moines; Los Angeles; Mem-
phis; Nashville; Noblesville, Indiana;
Pottstown, Pa.; Dayton Barberton,
Ohio; Oklahoma City
Total Production 49,100,000
Denver Denver; Nashville
Total Production 7,500,000
Akron Akron; Mayfield, Kentucky; Waco, Texas;
Byran, Ohio; Charlotte, N.C.
Total Production 12,300,000
Akron Akron; Ft. Wayne; Los Angeles; Miami;
Oklahoma;Tuscaloosa, Alabama;
Valley Forge, Pa.
Total Production 21,400,000
Akron Akron; Gadsden, Alabama; Conshohocken,
Penn; Jackson, Michigan; Los Angeles;
St. Mary's, Ohio; Topeka, Kansas;
Cumberland, Maryland Fayetteville,
N.C.; Union City, Tenn.; Freeport,
III.; Tylor, Texas.
Total Production 57,950,000
Mansfield, Ohio Mansfield, Ohio
Total Production 3,000,000
Indiana, Penn. Indiana, Pennsylvania
Total Production 2,500,000
Akron Akron; West Helena, Arkansas
Total Production 6,000,000
N.Y.C. Detroit; Eau Claire, Wisconsin;
Indianapolis; Los Angeles,; Ardmore,
Oklahoma; Opelika, Alabama, Spring-
field, Massachusetts
Total Production 32,000,000
16
-------
FINANCIAL PROFILES
Most manufacturers are large firms with a high level of integration, and most are
committed to the manufacture of synthetic rubber products. The financial position of these
companies is relatively strong.
There are, however, a few small producers of synthetic rubber, some of which are
owned by the petroleum industry, and some of which are not involved in the manufacture
of consumer rubber products. These producers would probably shut down if costs increased
significantly.
In 1 972 the synthetic rubber industry shipped 5,650 million pounds of rubber, having
an estimated value of $1.1 billion. Customers for synthetic rubber are mostly manufacturers
of components for transportation equipment. While this market has been expanding,
synthetic rubber shipments are increasing only moderately because of depressed prices and
substitution of plastics for rubber in non-tire uses. Table 7 gives a profile of the synthetic
rubber industry in 1972.
TABLE 7
1972 PROFILE - SYNTHETIC RUBBER
SIC Code 2822
Value of industry shipments (million) $1,125
Number of establishments 50*
Total employment (thousands) 13
Exports as percent of product shipments 12.8
Imports as percent of apparent consumption 4.6
Compound annual average rate of growth 1967-72 (percent):
Value of shipments (current dollars) 3.9
Value of exports (current dollars) 0.7
Value of imports (current dollars) 19.9
'Contractor data shows 56 plants
Source: Bureau of Domestic Commerce.
In 1972, the tire industry produced 225 million tires and tubes, valued at an estimated
$4.8 billion. Rising business activity and growth in new car sales have been providing
impetus to the growth of tire shipments. Original equipment tires on new cars jumped from
38 million tires in 1970 to 49 million in 1971 and to 54 million in 1972. Replacement tires
have grown from 129 million tires in 1969 to 135 million in 1971 and to 142 million in
1972. The slower growth rate in replacement tires of 3.5% a year reflects a combination of
factors. The comparatively poor year for original equipment tires in 1970 led to a smaller
market for replacements in 1972 and 1973. Longer lasting tires are extending the tradi-
tional two-year replacement cycle. Growth in snow tire demand has slowed, reflecting
maturity in the market. Table 8 gives a profile of the tire and inner tube industry for 1972.
17
-------
TABLES
1972 PROFILE - TIRES AND INNER TUBES
SIC Code 3011
Value of industry shipments (millions) $5,625
Number of establishments 200*
Total employment (thousands) 115
Exports as a percent of product shipments 2.0
Imports as a percent of apparent consumption 8.2
Compound annual average rates of growth 1967-72 (percent) :
Value of shipments (current dollars ) 8.6
Value of exports (current dollars) 6.5
Value of imports (current dollars) 36.8
*Total includes contributions of recappers and tire related products.
Source: Bureau of Domestic Commerce.
The major producers of synthetic rubber and tires and tubes also produce plastics, and
thus the two are considered together in reviews of financial performance. Table 9 shows
financial performance of manufacturers of rubber and plastic products from 1967 to 1972.
According to the U.S. Industrial Outlook* published by the Department of Commerce,
corporate profits after taxes, for manufacturers of rubber and plastics products, rose from
$456 million in 1970 to $664 million in 1971 and to almost $900 million in 1972. Profits in
1970 were exceptionally low; ratios of profits to sales and to capital investment returned in
1972 to 4:5 and 7:5, about the levels of the mid-1960's.
"Because of the poor financial returns in 1970 and early 1971, new capital expendi-
tures for plant and equipment dropped from $857 million in 1969 to $812 million in 1970
and to $726 million in 1971. Rising sales and improved operating ratios in 1972 resulted in
a 33% increase in new capital expenditures to $970 million, the largest one-year increase
ever recorded for the rubber and plastics industries. Most of the capital spending was for
new tire plants to meet increasing demand for tires in general and radial tires in particular,
plus new facilities for the rapdily growing plastic products industry." Table 10 gives finan-
cial profiles for the various industry segments in this report.
*U.S. Industrial Outlook; U.S. Department Commerce.
18
-------
TABLE 9
RUBBER AND PLASTICS PRODUCTS: FINANCIAL RATIOS 1967-72
(Percent)
First Half
1967 1968 1969 1970 1971 1971 1972
Ratios:
Profit after taxes/sales 4.0 4.5 3.8 2.8 3.6 3.5 4.1
Profit after taxes/investment 7.5 8.5 6.9 4.6 5.9 6.1 7.4
New capital expenditures/gross plant 8.7 10.3 9.7 ' 8.2 6.6 NA NA
Depreciation/gross plant 6.8 6.2 5.8 6.0 5.8 6.1 6.2
Depreciation/sales 3.4 3.2 3.1 3.6 3.5 3.5 3.4
Sales/total assets 140 136 133 123 120 126 130
Note — NA — not available.
*U.S. Industrial Outlook; U.S. Department Commerce.
Sources: Federal Trade Commission, Securities and Exchange Commission, and Bureau of the Census.
19
-------
TABLE 10
1972 FINANCIAL PROFILE FOR SEGMENTS
Anticipated Annual
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
Estimated
Price1
$0.25/lb
0.26
0.35
0.45
0.165
0.19
Relative Product
Profitability2
Moderate
Variable
Moderate -
High
Moderate -
High
Low -
Moderate
Low -
Moderate
Production as
Percent of Capacity3
80%
50%
87%
66%
83%
93%
Rate of Growth
for Next 5 Years4
2-5%
5-15%
0-4%
3-7%
3-5%
5-8%
SBR 0.13
Tires (general 21.24
average)
Tires (passenger
car tires) 14.43
Low
Moderate
85%
85%
0-3%
6-8%
1. The actual prices vary considerably depending on grade, type, and volume purchased. These
figures only approximate the average prices and are based on U.S. Tariff Commission data,
industry quotations, and Arthur D. Little, Inc., estimates.
2. Comments of industry spokesmen regarding profitability of segments compared to industry
as a whole.
3. Industry sources; Chemicals Economic Handbook, Stanford Research Institute (CEH).
4. Industry sources; Rubber World, Feb. 1973, CEH.
20
-------
WATER TREATMENT COSTS
Water treatment cost data for a typical plant in each of the technical segments were
furnished to the Contractor in the form of two reports: "Development Document for
Effluent Limitations Guidelines and Standards of Performance for the Rubber Processing
Industry," and "Supplement A" to this document. These documents establish a composite
average-sized plant for each segment on the basis of an analysis of EPA documents,
applications for Corps of Engineers Permit to Discharge, and individual company treatment
data. These documents identify: the raw waste characteristics of these composite plants, the
supply and volume of water used in the process, the sources of waste and wastewaters in the
plants, the constituents of all wastewaters, and those contaminants which are toxic or result
in taste, odor, or color in water or aquatic organisms. The constituents of wastewaters which
should be subject to effluent limitations guidelines and standards of performance were
established.
The range of control and treatment technologies within each segment was also
identified and assessed. This involved an evaluation of both in-plant and end-of-pipe
technologies which are existent or capable of being designed for each segment. The energy
requirements of each of the control and treatment technologies were estimated as well as
the cost of the application of such technologies.
This information was then evaluated to determine what levels of technology consti-
tuted the "best practicable control technology currently available" (B.P.T.), the "best
available technology economically achievable" (B.A.T.), and the "best available demon-
strated control technology, processes, operating methods, or other alternatives for new
sources" (N.S.P.S.).
I
We concentrated our analysis on an evaluation of those costs associated with the
technologies designated as meeting the B.P.T., B.A.T., or N.S.P.S., as appropriate. Less
costly, less effective technological alternatives were considered, but these played no role in
the ultimate assessment of economic impact.
Capital Investment
In the derivation of "typical plant" investment costs, the guideline development
documents include all capital expenditures required to bring the treatment or control
technology into operation. The capital costs were generated on a unit basis, with the
following "percent add-on" figures applied to the total unit process costs to develop the
total installed capital cost requirements.
21
-------
Percent of Unit
Item Process Capital Cost
Electrical 12
Piping 15
Instrumentation 8
Site Work 3
Engineering Design and Construction Supervision Fees 10
Construction Contingency 15
Since land costs vary appreciably between plant locations, land costs are not included in the
estimates, and must be added on an individual case basis.
Annual Costs
Annual costs for the technological alternatives include capitalization, depreciation,
operating and maintenance, and power costs. Utilizing the base investment supplied by the
documents, the contractor assessed the capitalization on an individual company basis,
assuming that new investments in pollution control equipment are financed by debt and
equity. The ratio of debt to equity was determined by the present capitalization ratios of
the companies that own these plants. Interest costs were assumed to be 10% per year on
that portion of investment financed by debt.
Depreciation was figured on a five-year straight-line basis with zero salvage value,
according to currently acceptable practices under Internal Revenue Service Regulations
pertaining to pollution control equipment. Operating costs, which include labor and
supervision, chemicals, sludge hauling and disposal, insurance and taxes, were computed in
the effluent guideline development documents at 2 percent of the capital cost. Maintenance
cost was computed at 4 percent of capital cost. Power was based on $0.01 kw-hour for
electrical power. Operating, maintenance and power costs were adjusted by the Contractor
for treatment facility capacity, as is given below.
All costs were computed in terms of August 1971 dollars, which corresponds to an
Engineering News Record Index (ENR) value of 1580.
Treatment Cost vs Plant Size
Table 11 lists the capital investment and operating, maintenance, and power costs
associated with the typical plants for the various levels of treatment. Using as a basis the
capital investment of the typical plant facility, the corresponding investments for other size
treatment units within the range evaluated were derived as follows:
T Capacity of Unit X ~| ° -5
Capital Cost of Unit X = Capital Cost of Typical Unit
[.Capacity of T ypical Unit J
22 .-
-------
where X is the unknown treatment facility. This relationship, which deviates from the
well-known "six-tenths pale," was found to provide a better estimation of the capital costs
involved in the construction of treatment facilities handling organic wastes. Appendix A
details the justification for this relationship.
Likewise, an analysis of operating and maintenance costs (see Appendix A) showed
them to be related to capacity of the treatment facility as follows:
0.5 8
u
Operating and Maintenance _ Operating and Maintenance f Capacity of Unit X
Cost for Unit X Cost for Typical Unit [capacity of Typical Unit
In the absence of a detailed cost breakdown, the Contractor assumed that the power costs
also vary in the same manner as the operating and maintenance costs.
The relationships describing the variation of capital investment and operating, mainte-
nance, and power costs as a function of treatment capacity were graphed for each technical
segment. These graphs are shown in Figures 2 through 5. In the case of tire and tube plants.
we have also related the costs to raw material consumption. In the case of synthetic rubber
plants, we have related costs to annual rubber production. The primary assumption we made
here is that raw material consumption or rubber production is directly proportional to water
usage. We realize that water usage is mainly a function of water availability at low cost, and
consequently varies significantly with geographic location; nevertheless we believe that firms
will be increasingly concerned with water conservation because of the necessity of con-
trolling their own waste. As a result, our assumption of a one-to-one relationship should be a
good first approximation.
Plant Cost Calculations
Synthetic Rubber Plants. The estimation of waste treatment costs for synthetic rubber
was complicated by the fact that many of the plants in the industry produce more than one
rubber type. In addition, a number of synthetic rubber facilities are portions of large
diversified plant complexes manufacturing organic chemicals as well as other products.
Since, in these cases, the wastes from the synthetic rubber operations are combined and
treated in a common waste treatment facility, the pollution control costs allocated to
specific rubber products become a matter of corporate policy. The contractor calculated
costs on the assumption that the effluents from the synthetic rubber operations were
combined and treated independently of the effluents from other plant manufacturing
operations.
In cases where a single plant contained synthetic rubber operations producing rubber
types of more than one technical segment (e.g:, emulsion crumb and solution crumb,
emulsion crumb and latex, etc.), costs were estimated by assuming the emulsion crumb and
latex effluent streams would first be coagulated independently and then combined with the
effluent from any solution polymer operations for further treatment (Table 11).
23
-------
Total pollution control costs for plants were allocated back to the individual products
on the basis of production capacity.
Tire and Tube Plants. Waste treatment cost estimates for specific tire and tube plants
were based on the guideline documents and on data reported to us by the various companies
involved. Raw material consumption was used as a basis for cost calculations in lieu of
effluent discharge rates, which were typically not available to us.
24
-------
5.5
5.0
4.5
4.0
= 3.5
o
Q
3.0
S2.5
2.0
1.5
1.0
0.0
Legend: © Denotes "Typical"
Plant for Segment
X
/ B.A.T.
Capital Investment
Capital Investment
B.A.T. Operating,
Maintenance, and
Power Costs
B.P.T. Operating,
Maintenance, and
Power Costs
(
1
0.5
1.0 1.5 2.0 2.5
Flow, Millions of Gallons/Day
3.0
i
_L
1
50,000 100,000 150,000 200,000 250,000
Production, Long Tons/Years
FIGURE 2 EMULSION SYNTHETIC RUBBER PLANTS: WATER TREATMENT
COSTS VERSUS WASTE WATER FLOW
25
-------
2.0
1.8
1.6
1.4
-
Q
1.0
0.8
0.6
0.4
0.2
0.0
Legend: 0 Denotes "Typical"
Plant for Segment
«
a/
<^.
Capital Investment
«
*
B.P.T.
Capital Investment
B.A.T Operating,
Maintenance, and
Power Costs
B.P.T. Operating,
Maintenance, and
Power Costs
0.1 0.2 0.3 0.4 0.5
Flow, Millions of Gallons/Day
0.6
10,000 20,000 30,000 40,000 50,000
Production, Long Tons/Year
FIGURE 3 SOLUTION SYNTHETIC RUBBER PLANTS: WATER TREATMENT COSTS
VERSUS WASTE WATER FLOW
26
-------
l.U
0.9
0.8
0.7
lo.6
o
Q
"o
V)
i
§0.4
o
0.3
0.2
0.1
0 0
Legend: y B AT
© Denotes / Capital Investment
' "Typicat" Plant /
for Segment /
/ /B.P.T.
/ / Capital Investment
/gf
f
/
j
1 /
.
- I/
1
-
B.A.T. Operating,
^ ^-^"^ Maintenance, and
. -®-***" " Power Costs
.^^ B.P.T. Operating,
*^^^^.. — "^ Maintenance and
--— Power Costs
i i i i i i
0 0.04 0.08 0.12 0.16 0.20 0.24
Flow, Millions of Gallons/Day
5,000 10,000 15,000 20,000
Production, Long Tons/Year
25,000
FIGURE 4 LATEX RUBBER PLANTS - WATER TREATMENT COSTS
VERSUS WASTE WATER FLOW
27
-------
1.0
0.9
0.8
0.7
j| 0.6
o
Q
c 0.5
8 0.4
o
0.3
0.2
0.1
0.0
Legend:
0 Denotes
"Typical" Plant
for Segment
Capital Investment for /
Old Tire Plant •
(to 1958) /
f
/
4
/
Capital Investment
for New Tire Plant
(1959 to Present)
Operating Cost
Old Plants
New Plants
I | I
20 40 60 80 100 120 140
Process Effluent Flow, Thousands of Gallons/Day
I | | | | |
50 100 150 200 250 300
Raw Material Consumption, Metric Tons/Day
FIGURE 5 TIRE PLANTS-WATER TREATMENT COSTS VERSUS
WASTE WATER FLOW
28
-------
to
Daily Raw Material
Consumption, metric tons
Annual Production,
metric tons
Estimated Total Effluent Flow,
thousands of gallons per day
Estimated Process Effluent
Flow, thousands of gallons per day
Total Capital Investment - Level I
Operating and Power Maintenance
Cost - Level I
Total Capital Investment
Level II
Operating and Power Maintenance
Cost- Level II
TABLE 11
WATER EFFLUENT GUIDELINES COSTS
Old Tire
and Inner
Tube Plant
205
-
2,004
86
$ 808,000
$ 56,000
*
*
New Tire
and Inner
Tube Plant
205
-
2,004
86
$ 628,000
$ 45,000
*
»
Emulsion
Crumb
Plant
-
128,000
1,483
$ 2,002,000
$ 250,000
$ 2,993,000
$ 425,000
Solution
Crumb
Plant
-
30,000
353
$ 810,000
$ 72,000
$ 1,182,000
$ 151,000
Latex
Plant
-
10,000
101
$ 637,000
$ 60,000
$ 784,000
$ 120,000
'Level I and Level II have identical guideline requirements for tire and tube plants.
Source: Roy F. Weston, Inc.
-------
ECONOMIC IMPACT ANALYSIS
Methodology
One of the key issues in determining the effect of pollution control costs on the
economy is the question of how much of the cost will be passed along in the form of higher
prices. In order to determine the relative price increases of the various rubber types and of
tires, the contractor assumed that most of the plants studied in this report will be working
at their 1972 production levels during the years 1977 through 1983, and that certain
plants — e.g., those which are making EPDM — will increase their production to about
80-85% of 1972 capacity by 1977. This better capacity utilization will be due to the
expanding demand for EPDM products. (Growth rate estimates for the various products are
quoted on the "financial profile" tables in this report.)
The Contractor also assumed that the industry demand curves for these products are
inelastic. This assumption is based on the facts that there are no substitutes for most of
these rubber products (other than natural rubber) and that because of the recent devalua-
tion of the dollar there will be little influence of imports on domestic demand for these
products.
At present, most rubber and tire companies are feeling the pressure of increasing costs.
During the last year labor and raw materials costs have increased, and most companies have
not been able to pass along these higher costs because of various governmental price
regulations. The Contractor has therefore assumed that most of the rubber and tire plants
will try to pass along most pollution abatement costs to the consumer; in fact, many
companies have told the contractor that they will try to do so.
Many companies have stated that they would calculate price increases by looking at the
annual pollution control costs, and that they would require a return on their investments in
pollution equipment of between 6% and 12% after taxes. By thus capitalizing their
investments, many firms would in reality be increasing the return on equity to their
stockholders, since their present average return on investment is lower than 6%.
In other words, many companies would try to become more profitable because of
pollution control equipment than they would be without the pollution control equipment.
The contractor considers the maximum price increase to be determined not by return on
investment criteria, but by maintaining a constant return on stockholders' equity. A
summary analysis of the mathematics of our methodology follows, and it relates different
criteria for judging price increases.
Price Increases Under Different Assumptions
Maintain Return on Stockholders' Equity (ROE). If a company increases its price in
order to maintain ROE, this price increase will be given by the following equations,
assuming that production remains constant.
30
-------
Profits before pollution control:
1
Profits after pollution control:
TT + ATT = [ (pQ + ApQ) - (c + Ac) - (1 + AI) - (d + Ad) ] ( 1-t)
= 7r + (ApQ- Ac- Al -Ad) (1-t)
In order to maintain ROE:
TT TT + Air
E +AE
AE =
N.B.
AI = interest rate x
x Inv.
and after simplification:
ApQ Inv. 1
pQ D + E (1-t)
' ir I |"Ac + AH-AD "1
pQj+L PQ J
or
unit price increase
Inv.
D + E
x [Pre-tax profit margin] + unit cost increase
Maintain After-tax Profit Margin
Margin before pollution control:
profits
pQ-c
PQ
Margin after pollution control:
revenues
c now denotes total costs, including taxes.
profits (p + Ap) Q - (c + Ac)
revenues
(p + Ap) Q
(D
(2)
(3)
(4)
(5)
(6)
(7)
1. 7T = profits after taxes; p = unit price; Q = volume of production; c = total operating costs; I = interest on
debt; d = depreciation; t = marginal tax rate; E = stockholders' equity; D = debt; Inv. = new investment
in pollution control equipment; A = designates an increment in revenues or cost.
31
-------
After simplification:
Ap , Ac
- = ~ <8>
Prices increase in the same ratio as costs.
Satisfy a Specified Return on Investment (ROI)
Ap Ac Inv. 1
p ~ pQ (l-t)xpQ X ROI rate (9)
c.now denotes total costs, including taxes.
Relationship Between the Various Assumptions
Return -on Stockholders' Equity and After Tax Profit Margin
1 Inv. Ap
If 77-7 '——— = then maintaining ROE or the (10)
(1-t) D + E p
after-tax profit margin will give us the same price increase
1 Inv. Ap
> -»• profit margin will decline
(1-t) D + E p
1 Inv. Ap
(i-t) 'D + E p
profit margin will increase
Return on Stockholders' Equity and Return on Investment
profits after taxes 1
if = (i
D + E ROI rate v
then the two assumptions will give us the same price increase.
Base Data
Annual operating costs due to pollution control equipment were calculated in the
following manner: Annual operating and maintenance costs were established for each of the
plants in our survey by adjusting the tentative cost estimates given to us in the effluent
guidelines development document. Depreciation is straight line over a period of five years.
The new investments in pollution control equipment are financed by debt and equity. The
ratio of debt to equity was determined by the present debt to capitalization ratios of the
companies that own these plants. Interest costs are 10% per year on that portion of the
investment financed by debt.
32
-------
The base price for the various synthetic rubbers is based on U.S. Tariff Commission
prices, industry source information, and the contractor's own internal data. Most of these
prices are substantially below list price because the contractor has taken in account the
discounts given by manufacturers. Also, substantial quantities of many synthetic rubbers are
sold, not on the open market, but internally within the large tire and rubber manufacturers.
The average price of tires (passenger, truck and bus) was established using Bureau of
Domestic Commerce data industry sources and estimates. The unit value of a passenger tire
in 1972 was $14.43 whereas the average price of all tires was $21.24.
Tables 12 through 15 on the following pages summarize product sales, B.P.T., B.A.T.
and B.P.T. + B.A.T. investment and annual costs for the various industry segments studied
in this report. The last two columns of these tables indicate what the expected annual costs
as a percentage of sales will be both for each segment on average, and the range of this ratio
for plants in each segment.
Tables 16, 17, and 18 summarize investment and annual costs as a percent of sales for
various synthetic rubber and tire companies both for B.P.T. and B.A.T. pollution abatement
levels.
Price Effects
The range of calculated price increases by plant for each of the rubber types and for
tires is given in Tables 19 and 20. This range is based not only on the effluent guideline
document figures, but also on the amount each plant has already invested to attain B.P.T.
pollution standards. The probable price increase for each rubber type and for tires was
computed by taking into consideration the range of possible price increases, the relative
position of the various plants and companies within the industry, whether or not there are
any price leaders, and the relative growth of this industry as well as its market position
vis-a-vis other rubber types and imports.
Our unit price increases were calculated using formula (5) in the methodology. Unit
cost increases have been summarized in Tables 12 through 15. The term Inv/D+E (pre-tax
profit margin) varied between 0.1 and 0.3% for synthetic rubber manufacturers and between
0.06 and 0.44% for tire and tube manufacturers.
The price increases that could be expected to attain B.A.T. pollution control standards
for the synthetic rubbers are based on 1972 prices. They were computed by taking into
consideration the incremental annual costs over and above B.P.T. costs. However, by 1983,
companies will have fully depreciated their 1977 pollution control equipment. This is the
basic reason for which we find in Table 19 that the price increases due to attaining B.A.T.
standards will not be higher than those necessitated for attaining B.P.T. standards.
33
-------
U)
TABLE 12
B.P.T. COSTS
(based on effluent guideline document data)
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
S.B.R.
Tires & Tubes
No. of Plants
Process in U.S.A.
solution
solution
emulsion
emulsion & (
latex \
emulsion
solution
solution
emulsion & (
solution i
-
3
5
3
9
1
6
2
11
56
No. of Plants
in Sample
3
5
3
8
if
2
11
48
Total
Investment
( millions of $)
3.0
3.5
4.0
4.5
6.8
1.4
19.5
35.2
Average
Investment
per Plant
1.0
0.7
1.3
0.6
1.0
0.7
1.8
0.7
Total
Annualized
Costs
( millions of $)
0.950
1.100
1.300
1.500
2.400
0.470
7.400
14.400
Average
Annualized
Cost per
Plant
0.320
0.220
0.430
0.210
0.340
0.230
0.670
0.300
Total
Product Sales
(millions of $)
72
90
142
93
144
51
406
5,069
Total
Annualized Costs/ Plants Range
Total Sales (%) (%'s)
1.3
1.2
0.9
1.6
1.7
0.9
1.8
0.3
1.2-1.5
0.7-1.5
0.7-1 .2
0.5-2.4
1.2-2.2
0.9
1.3-4.7
0.2-0.5
-------
TABLE 13
B.P.T. COSTS
(band on industry incremental costs!
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
S.8.R.
Tires & Tubes
No. of Plants
Process in US.A.
solution
solution
emulsion
emulsion & /
latex (
emulsion
solution
solution
emulsion & (
solution (
-
3
5
3
9
1
6
2
11
56
No. of Plants
in Sample
2
5
3
8
l\
2
10
40
Total
Investment
(millions of $)
2.7
2.1
4.30
2.6
1.8
0.4
8.6
31.5
Average
Investment
per Plant
1.3
0.4
1.4
0.3
0.3
0.2
0.9
0.8
Total
Annualized
Costs
(millions of $)
0.850
0.730
1.600
0.840
0.700
0.170
3.050
12.560
Average
Annualized
Cost per
Plant
0.430
0.150
0.530
0.110
0.120
0.090
0.310
0.310
Total Total
Product Sales Annualized Costs/ Plants Range
(millions of $) Total Sales (%) (%'s)
53
90
142
93
121
51
386
4,681
1.6
0.8
1.1
0.9
0.6
0.3
0.8
0.3
1.2-2.3
0 -2.1
0.3-1.5
0 -3.5
0 -1.4
0 -0.7
0 -7.4
0.2-0.4
-------
ON
TABLE 14
B.A.T. COSTS
(based on effluent guideline document data)
No. of Plants
Product in U.S.A.
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
SBR
Tires & Tubes
3
5
3
9
7
2
11
No. of Plants
in Sample
3
5
3
8
7
2
11
Total Average
Total Average Annualized Annualized Total Total
Investment Investment Costs Cost per Product Sales Annualized Costs/ Plants Range
(millions of $) per Plant (millions of $) Plant (millions of $) Total Sales (%) (%'s)
1.4
1.6
2.0
1.1
3.2
0.6
10.2
0.5
0.3
0.7
0.1
0.5
0.3
0.9
B.A.T. standards are
0.610
0.580
0.750
0.700
1.500
0.300
4.000
the same as B.P
0.200
0.120
0.250
0.090
0.210
0.150
0.360
.T. standards
72
90
142
93
144
51
406
0.9
0.6
0.5
0.8
1.0
0.6
1.0
0.7-1.0
0.4-0.9
0.4-0.7
0.2-1.1
OB-1.5
0.6
0.5-2.6
-------
TABLE 15
B.P.T. COSTS
(industry response)
AND
B.A.T. COSTS
(effluent guideline document data)
No. of Plants
Product in U.S.A.
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
SBR
Tires & Tubes
3
5
3
9
7
2
11
No. of Plants
in Sample
2
5
3
8
6
2
10
Total
Total Average Annualized
Investment Investment Costs
(millions of $) per Plant (millions of $)
3.6
3.7
6.4
3.6
4.4
1.0
IBS
1.8
0.7
2.1
0.5
0.7
0.5
1.9
B.A.T. standards are
0.740
1.010
1.700
1.120
1.600
0.330
5.000
the same as
Average
Annualized Total Total
Cost per Product Sales Annualized Costs/ Plants Range
Plant (millions of $) Total Sales (%) (%'s)
0.370
0.200
0.570
0.140
0.270
0.150
0.500
B.P.T. standards
53
90
142
93
121
51
386
1.4
1.1
1.2
1.2
1.3
0.6
1.3
1.2-1.7
0.4-1.4
1.1-1.4
0.2-2.4
0.9-1.9
0.6-0.7
0.5-4.7
-------
TABLE 16
SYNTHETIC RUBBER COMPANIES
Investment as a Percent of Sales Annual Costs as a Percent of Sales
Company*
1
2
3
4
5
6
7
8
9
10
11
12
B.P.T.
9.9
3.0
5.1
2.2
3.0
4.3
1.7
0.8
0.4
0
0
0
B.A.T.
2.5
1.4
1.8
1.6
2.6
2.5
2.1
2.5
2.7
3.1
2.4
3.3
B.P.T,
3.1
0.6
1.7
0.7
1.1
2.1
1.0
0.3
0.1
0
0
0
B.A.T.
1.2
0.3
0.8
1.2
1.1
1.0
1.0
1.2
1.1
0.7
0.5
1.3
'Ranked by size of B.P.T. investment.
TABLE 17
TIRES AND TUBES COMPANIES
Company Investment/Sales Cost/Sales
I 0.7 0.2
II 0.8 0.2
III 1.0 0.3
IV 1.3 0.4
V 0.5 0.2
38
-------
TABLE 18
SYNTHETIC RUBBER + TIRES AND TUBES
Company
A
B
C
D
E
F
G
H
I
J
K
L
B.P.T.
Investment
(millions of $)
13.6
12.6
10.0
6.0
5.7
4.1
3.5
2.0
1.5
0.3
0.2
0
B.P.T.
Investment/Sales
0.9
1.0
0.9
1.2
0.8
3.0
5.1
4.3
1.7
0.8
0.4
0
B.A.T.
Investment/Sales
0.2
0.2
0.1
0.2
0.4
1.4
1.8
2.5
2.1
2.5
2.7
2.4
B.P.T.
Annual
Cost/Sales
0.3
0.3
0.4
0.3
0.2
0.6
1.7
2.1
1.0
0.27
0.1
0
B.A.T.
Annual
Cost/Sale*
0.1
0.1
0.1
0.1
0.2
0.3
0.8
1.0
1.0
1.2
1.1
0.5
Range1
TABLE 19
SYNTHETIC RUBBER (SIC 2822)
Price
B.P.T.
Probable Effect
<1.2%
<0.5%
1%-1.5%
<0.6%
1%-1.5%
<0.6%
<0.8%
Effects
Range1
0-1.6%
0-1.6%
0-1.7%
0-2.5%
0-2.0%
0-0.8%
0-4.7%
Other Effects
B.A.T.
Probable Effect
<1.2%
<0.5%
1%-1.5%
<0.6%
1%-1.5%
<0.6%
<0.8%
Price Effect
on Tires
No
Yes
No2
Yes
Plant
Shutdown
None
None
None
None
None
None
None
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
S.B.R. Crumb
1. Based on E.P.A. tentative costs and industry response.
2. Polyisoprene competes with natural rubber, the price of which can be expected to be higher
in the U.S.A. than that of polyisoprene in the coming 5 years.
39
-------
TABLE 20
TIRES AND INNER TUBES (SIC 3011)
Price Effects Other Effects
Based on Revised Based on Industry Probable Plant
E.P.A. Figures Response Effect Shutdown Other
0.3-0.6% 0.45-0.6% <0.45% None Lowering of profit
margins of small tire
manufacturers rela-
tive to the large inte-
grated companies
Secondary Effects
Synthetic Rubber Industry (SIC #2822). We do not consider that there will be any
major changes in this industry because of the small changes in the relative prices of the
synthetic rubbers. However, synthetic rubbers are a major component of tires (SIC #3011),
and therefore we expect that tires will increase in price not only because of the costs
incurred in controlling the pollution of tire plants, but also because of the increased cost in
synthetic rubbers due to pollution control.
If the rubber content of a tire is approximately 25 percent of the total value of a tire
then we can expect a 1 percent increase in rubber raw material cost and therefore a tire cost
increase of 0.25 percent.
Tire and Tube Industry (SIC #3011). Within the tire industry there may be certain
small changes. Because of plant size, age and already existing pollution abatement equip-
ment, the large companies will increase their prices relatively less than the small companies
would like to increase their prices. In other words, the profitability of the smaller firms will
decrease relative to the larger firms. (It should be noted that this effect is not due to our
method of calculating price increases: in equation 5, the term "Investment Over Debt plus
Equity," was held constant and equal to 0.02 for all tire plants.)
Financial Effects (SIC #2822 and SIC #3011)
If prices are raised in order to maintain the return on equity for the various companies
and plants, there should not be any major financial effects for the industry as a whole.
However, certain of the smaller firms Would like to raise their prices more than their larger
competitors would. In other words, their profit margins will decrease as compared to that of
their competitors. In the long run this could slightly change the structure of these
industries.
40
-------
Capital Availability. Of all the companies that we interviewed for this study, we
consider that there is only one that could have problems raising the necessary capital in
order to meet pollution guidelines. However, we feel that this company will be in a much
stronger financial position by 1976 and that it should not have any problems at that time.
Our survey covered all the major tire manufacturers. It is possible that some of the smaller
companies will have capital availability problems.
Production Curtailment
Synthetic Rubber. We do not expect to see any production curtailment in any of the
synthetic rubber plants because of the new guidelines.
Tires and Tubes. Many tire manufacturers feel that they would have to shut down
their plants temporarily in order to segregate their process effluent lines from their other
effluent lines. We have no way of evaluating the validity of these statements nor what their
true economic consequences may be.
Plant Closings
Synthetic Rubber (SIC #2822). On the basis of our data and industry response we do
not expect any plant to be closed down.
Tires and Tubes (SIC #3011). On the basis of our data and industry response we do
not expect any plant to be closed down.
Community Impacts
Synthetic Rubber (SIC #2822). None
Tires and Tubes (SIC #3011). If plants have to be temporarily shut down to segregate
process effluent lines from other lines, there would probably be lay-offs of workers in the
plants thus affected. It is presently impossible to evaluate such effects.
Industry Growth (SIC #2822 and SIC #3011)
We do not feel that the economic effects of the B.P.T. or of the B.A.T., N.S.P.S.
guidelines will adversely affect the growth or the growth potential of either the synthetic
rubber or the tire industries. Industry spokesmen have said that their plant expansion
decisions will not be affected by the new guidelines.
International Trade Effects (SIC #2822 and SIC #3011)
The recent devaluations of the U.S. dollar have made U.S. produced tires and synthetic
rubbers much more competitive on the international scene. The relatively small increase in
41
-------
prices required to meet pollution guidelines should hardly change this position. The price of
natural rubber imported into the United States has increased substantially more than, for
instance, polyisoprene, its synthetic substitute. Even if there were large surpluses of
synthetic rubbers in other countries, it is doubtful that foreign manufacturers could dump
their products on the U.S. market at a competitive price given the recent U.S. devaluations.
However, we must qualify these statements by saying it is impossible to know what the
position of the United States dollar will be in 1977 and thereafter relative to other
currencies.
Limits of the Analysis
When interpreting the findings of this study, it is important to be aware of the nature
and limitations of the cost data specifically as regards B.P.T. guidelines and the key
assumptions which were used.
The investment costs of pollution control equipment were defined to include the direct
incremental investment required to attain environmental standards. The operating costs for
pollution control equipment were defined to be incremental costs.
The establishment of the pollution standards as well as the determination of the cost
basis for investment and operating costs was provided to us in the effluent guideline
development document. In the appendix to our report we have listed the cost data as well as
the scale-up factors we used in estimating the investment and operating costs for plants with
capacities other than those on which the data is based. Additional data input to our study
was provided through field interviews with and questionnaires to industry representatives.
This data was used to supplement the information.
Only water pollution abatement costs associated with Federal standards were con-
sidered; and these costs were assumed to be independent of air and solid waste control
requirements.
The calculated price effects on the various rubber types and tires of the pollution
guidelines (B.A.T. and B.P.T.) are maximum expected price increases. Certain companies
and certain plants already meet B.P.T. guidelines. Because of this, they may not increase
their prices at all. And other companies within the industry may follow suit.
42
-------
APPENDIX A
ESTIMATION OF PLANT COSTS FOR EFFLUENT GUIDELINES
The typical plant costs given in the effluent guidelines development document do not
provide any information indicating how the costs vary as a function of treatment facility
capacity. At the recommendation of Dr. David Day of Roy F. Weston, Inc., we utilized the
data provided in the "Development Document for Effluent Limitations Guidelines and
Standards of Performance for the Organic Chemicals Industry, Supplemental Data." The
pollution control technology described in this document was considered to be comparable
to that utilized in treating the wastes of the rubber processing industry.
In Figures 6 and 7 are plotted the appropriate data points given in the organic
chemicals document. Figure 6 shows that a curve generated according to the equation
CapitalCostofPlantX = CaPitalCostofBasePlant x [ Waste water flow of Plant X "I 0.5
I Waste water flow of Base PlantJ
(where X designates an unknown plant) correlates very well with the actual data.
Likewise, Figure 7 shows that the operating, maintenance, and power costs (designated
as "Operating Costs" in the figure) vary as a function of capacity according to
Operating, Operating,
Maintenance, and Maintenance, and
Power Costs of = Power Costs of x I" Waste water flow of Plant X "10.58
Plant X Base Plant [Waste water flow of Base Plant]
Although specific categories of treatment were chosen for the purposes of illustration
in these figures, the equations described above were found to apply for all the categories in
the organic chemicals document, and were found to provide reasonable cost estimates for
the rubber processing industries. Therefore, the Contractor used these relationships for
generating pollution control costs for specific plants.
43
-------
2.5
•;2.0
03
"o
Q
"o
£ 1.5
o
'—
rf
S1.0
ra
"5.
03
0.5
0 0
0 Data Points from "Supplemental Data for Organic
Chemicals Guidelines," Roy F. Weston, Inc.
A Data Point Representing "Typical" Emulsion ^,
Polymerization Plant from Supplement A of ^
~ Development Document for Rubber .^^"^
Processing Industry „ '
-, -^"^
^, ****^
, —
Q^^
jS* 1 Curve Generated According to
^ — ». ( Flow >j
0 ^ Capital Costs $1.410.000^ )
/ ^
. ' Selected
0X^ Data Base
o/
i i i i 1 i i i
0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6
. — '
0.5
I
1.8
Flow, Millions of Gallons/Day
FIGURE 6 CAPITAL COST VERSUS WASTE WATER FLOW
44
-------
60
50
o
D
T3
| 30
o
H
6 20
d.
O
10
O Data Points from "Supplemental Data
for Organic Chemicals Guidelines,"
Roy F. Weston, Inc.
»•
Selected v
Data BaseX
-/
0
/
/*
Curve Generated According to
t
i
i
0.2 0.4 0.6
Flow, Millions of Gallons/Day
FIGURE 7 B.P.T. - YEARLY OPERATIONAL COSTS VERSUS
WASTE WATER FLOW
45
-------
APPENDIX B
SAMPLE CALCULATION OF SYNTHETIC RUBBER
PLANT POLLUTION CONTROL COSTS
The annual B.P.T. pollution control costs, for example, of a plant with the hypotheti-
cal production of 100,000 long tons of emulsion crumb, 40,000 long tons of solution
crumb, and 8,000 long tons of latex are calculated as follows.
Through reference to the information summarized in Figures 2, 3. and 4, we would
generate
B.P.T. B.P.T. Operating,
Investment Maintenance & Power Costs
100,000 It Emulsion crumb $1X,760,000 $215,000
8,000 It Latex 570,000 53,000
And these would be the cost estimates of each if these effluent streams were to be fully
treated independently. However, we assume that after pretreatment to chemically coagulate
the suspended rubber in these streams they are then combined with the effluent stream
from the solution crumb operation (which does not have to be chemically coagulated) for
further treatment - thus benefitting from the economies inherent in treating the combined
effluents. Thus, instead of sizing the solution crumb waste treatment facility to handle the
effluent represented by 40,000 long tons of production, we size it to handle the load
represented by 100,000 + 8,000 + 40,000 = 148,000 long tons.
From Figure 3 we find the costs associated with such a facility are
Operating, Maintenance,
Investment and Power Costs
$1,780,000 $180,000
We then apportion the various costs developed above according to actual effluent load, as
follows:
100,000 40,000
Total Plant Investment = - x $1,760,000 + TTT $1,780,000
Emulsion Crumb Solution Crumb
Treatment Treatment
8,000
Latex Treatment
- $1,700,000
46
-------
Likewise,
Total Operating, Maintenance, and Power Costs (O.M.P.) =
1J}_01OC)CL x $215,000 + x $180,000
148,000 148,000
x $53,000 = $197,000
148,000
A comparison of the costs generated by this technique with those generated by assuming
that each of the effluent streams at the plant are treated in separate facilities is given below:
Cost Apportionment by Assuming Cost Apportionment by Assuming
Combined Effluent Treatment Separate Treatment
Investment
$1,190,000
480,000
30,800
O.M.P.
$145,000
49,000
2,900
Investment
$1,760,000
935,000
570,000
O.M.P.
$215,000
85,000
53,000
Emulsion crumb
Solution crumb
Latex
Total Plant Cost $1,700,800 $196,900 $3,265,000 $353,000
On the basis of our discussions with industry spokesmen, our assumption of the use of
combined treatment is valid, and, as a consequence, we believe our cost estimates based on
this assumption are more accurate indications of the costs that will actually be incurred.
47
-------
SBR - LATEX
Addendum to the
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE RUBBER PROCESSING INDUSTRY
INTRODUCTION
In the preliminary review of information available on the various synthetic
rubbers, the Contractor contended that one segment - SBR - could not be
evaluated in a valid fashion. SBR latex represents about 9% of the SBR produced.
Production is so small, and prices, profitability and outlook are so difficult to
estimate that the Contractor deleted SBR latex in the main report.
In the course of his work, the Contractor did, however, gather some
information on SBR latex, information which is presented in this addendum to
the "Economic Analysis of Proposed Guidelines - Rubber Processing Industry,
September 1973, EPA - 230 - 1 - 73 - 024."
TECHNOLOGY
SBR latex, a copolymer of styrene and butadiene, is produced by the same
polymerization process used in the manufacture of SBR crumb rubber. The steps
required to produce a latex are polymerization followed by stabilization and
usually concentration.
PLANT LOCATIONS, SIZES AND AGES
Fifteen companies presently produce SBR latex in 23 plants located in 14
different states. The production capacity of the 12 plants for which this data is
available ranges from 5,000 to 35,000 long tons per year.
Plants vary widely in age. The older plants date from World War II; the latest
plant was built in 1972.
USES
SBR latex is used primarily in carpet backing, dipped rubber goods and
adhesives.
Approximately 15% of the 1972 U.S. production (158,000 long tons) was
exported.
Arthur D little hie
-------
The projected growth for SBR latex is less than that of most other latices
and is expected to be less than 4% per year through 1975 (Chemical and
Engineering News, 8/21/72).
PRICE AND OTHER EFFECTS
Most latex plants belong to large corporations and are but small contributors
to overall profits. Because of the lack of data on the SBR industry, the Contractor
is not able to make good predictions of how pollution abatement costs will affect
this segment of the synthetic rubber industry.
In the following tables he has, however, shown the available data in a fashion
consistent with that in the main body of the report. The Contractor believes that
the conclusions in the main report also apply to SBR latex, although further
study would be necessary to validate this opinion.
Arthur D Little, Inc
-------
I
D
*•+"
«•*•
ft
R
EXHIBIT 1: COSTS OF PROPOSED EFFLUENT GUIDELINES
EXHIBIT 1: COSTS OF PROPOSED EFFLUENT GUIDELINES
Product Process
S.B.R. Latex
No. of Plants No of Plants
23
Simple Plants
Production as a %
of 1972 Totil
Production
70%
Total
Investment
(millions of $)
Average
Investment
per Plant
Total
Annualized
Costs
(millions of $)
Bf.T. Costs
(band on effluent guideline document data)
3.6
06
1 21
Average
Annualized
Coitper
Plants
020
Product Sales
ImiMiom of t)
373
Total Plant
Annuitized Costs/ Range
Total Sales <%) (%'s)
32
1552
S.B.R. Latex
23
38%
B.P T. Costs
(based on industry incremental costs)
1 0
03
038
013
202
19
05.2
S.B.R. Latex
S B.R. Latex
23
23
70%
38%
B.A.T. Costs
(based on effluent guideline data)
18 03 0.56
B.P.T. Costs
(industry response)
and
B.A.T. Costs
(effluent guideline document)
1 4 0.5 41
0.19
14
373
202
1 5
20
0424
0448
-------
EXHIBIT 2: PRICE EFFECTS1
B.P.T. B.A.T.
Range2 Probable Effect Range2 Probable Effect
5
0-5.4 <2.1 0.6-5.0 <2.2
1. The validity of these price effects is limited due to the small
size (3) of the sample.
2. Based on E.P.A. tentative costs and industry response.
Arthur D Little Inc
-------
j II ( IINKAI Kl POR'I
1 DA'I A I'ACI
1 Ucport No.
EPA-230-1 -73-024
4 I ilk- .iiul Subtitle
Economic Analysis of Proposed Effluent Guidelines -
The Rubber Processing Industry
Aiilhoils)
John T. Howarth John A. Carter
Kenneth R. Sidman
') I'lMhinnmg Organization Name anil Address
Arthur D. Little, Inc.
Acorn Park
Cambridge, Mass. 02140
I J Sponsoring Oigani/alion Name and Addres
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D.C. 20460
3. Recipient's Accession No.
5. Report Dale
September 1973
6.
8. Performing Organization Rept No.
C-75903
10. Project/Task/Work Unit No.
Task Order No. 3
11. Contract/Grant No.
68-01-1541
13. Type of Report & Period Covered
Final
14
I *> Supplementary Notes
Id Abstracts
An initial analysis of the economic impact of proposed water effluent guidelines upon the Rubber Processing Industry
(SIC #2822 and SIC #3011) was performed, based on the abatement cost data supplied by EPA. On this basis, with better
than 88% coverage of the industry, none of the plants appears to be severely affected in meeting either the B.P.T. or
B.A.T. requirements. For the Synthetic Rubber segment, capital investment for pollution control will be an estimated $23
million through 1977, and $10 million from 1977 through 1983. Annual operating costs will be $8 million higher through
1977, and $4 million higher from 1977 through 1983. The Tire and Tube segment will meet both B.A.T. and B.P.T. in one
step; investment will be an estimated $32 million, and annual operating costs will be roughly $13 million higher through
1977. The impact on prices will be no greater than 1.5% for B.P.T. and B.A.T. for the Synthetic Rubber segment, and
about 0.45% for the Tire and Tube segment.
17. Key Words and Document Analysis.
Economic Analysis
Effluent Guidelines
Rubber Processing Industry
Synthetic Rubber
Tires and Tubes
17b. Identificrs/Open-Knded Terms
17a. Descriptors
I7c COSATI Held/Croup
IS. Availability Statement
19. Securitj Class (This
Report)
IINCI.ASSIHM)
2(1. Security ( lass ( This
Paw)
UNCLASSiril I)
21. No of Pane
2: Price
I ORM NT1S 35 (Rl V. 3-72)
USCOMM-IX' 1495 2-l'7 2
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