EPA 230/1-74-034
Phase 2
DECEMBER 1974
           ECONOMIC ANALYSIS
                      OF
          EFFLUENT GUIDELINES
    ON THE ELECTROLYTICALLY PRODUCED
   CHROMIUM, MANGANESE AND SYNTHETIC
  MANGANESE DIOXIDE INDUSTRIES; AND ON
       THE CALCIUM CARBIDE INDUSTRY
                     QUANTITY
      U.S. ENVIRONMENTAL PROTECTION AGENCY
           Office of Planning and Evaluation
              Washington, D.C. 20460

-------
EPA - 230/1-74-034
Phase 2
December 1974
                         ECONOMIC ANALYSIS

                                OF

                        EFFLUENT GUIDELINES

                  ON THE ELECTROLYTICALLY PRODUCED
                  CHROMIUM,  MANGANESE AND SYNTHETIC
                MANGANESE DIOXIDE INDUSTRIES;  AND ON
                   THE CALCIUM CARBIDE INDUSTRY
                          DECEMBER,  1974
                   OFFICE OF PLANNING AND EVALUATION
                    ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON, D. C.  20460
                     CONTRACT NO.  68-01-1545

-------
                             PREFACE
     The attached document  is a  contractor's  study prepared for
the Office of Planning and  Evaluation  of  the  Environmental
Protection Agency ("EPA").  The  purpose of  the  study is to ana-
lyze the economic impact  which could  result from the application
of alternative effluent limitation  guidelines and standards of
performance to be established under  section 304(b) and 306 of
the Federal Water Pollution Control  Act,  as amended.


     The study supplements  the technical  study  ("EPA Development
Document") supporting the  issuance  of  proposed  regulations under
sections 304(b) and 306.   The Development Document surveys exist-
ing and potential waste treatment control methods and technology
within particular industrial source  categories  and supports pro-
posal 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 product price increases, effects  upon  employment and the con-
tinued viability of affected plants,  effects  upon foreign trade
and other competitive effects.


     The study has been prepared with  the supervision and review
of the Office of Planning  and Evaluation  of EPA.   This report was
submitted in fulfillment  of Contract No.  68 01  1545, Task Order
No. 4 by Kearney:  Management Consultants.   Work  was completed as
of December 20, 1974.


     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 is not an offi-
cial EPA publication.  It  will be considered  along with the infor-
mation contained in the Development  Document  and  any comments re-
vealed 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  proceedings 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.

-------
                ENVIRONMENTAL PROTECTION AGENCY

               OFFICE OF PLANNING AND EVALUATION


                       TABLE OF CONTENTS
SECTION                 DESCRIPTION                    PAGE

                EXECUTIVE SUMMARY

                   Electrolytically Produced
                     Chromium,  Manganese and
                     Synthetic  Manganese Dioxide         1

                   Calcium Carbide                       2'

                   Impact Conclusions                    4


                INTRODUCTION
  I             ECONOMIC ANALYSIS OF PROPOSED
                EFFLUENT GUIDELINES  ON THE
                ELECTROLYTICALLY PRODUCED CHROMIUM,
                MANGANESE AND SYNTHETIC MANGANESE
                DIOXIDE INDUSTRIES - SIC 3313

                   Industry Description                I  -  1
                   Principal Applications and
                     Potential Substitute Products      1-3
                   Production Techniques               1-4
                   Financial Characteristics  of
                     the Firms in the Industry         1-5
                   Pricing Analysis                     1-6
                   Technical and Cost Data  Base         1-7
                   Impact Analysis                     1-7
                   Impact Conclusions                  1-9


 II             ECONOMIC ANALYSIS OF PROPOSED
                EFFLUENT GUIDELINES  ON THE  CALCIUM
                CARBIDE INDUSTRY - SIC 2819912

                   Industry Description               II  -  1
                   Principal Applications and
                     Potential Substitute Products     II

-------
                                                           -ii-
SECTION                  DESCRIPTION                   PAGE
 II                Foreign Trade                       II - 3
                   Production Techniques               II - 4
                   Financial Characteristics of
                     Firms in the Industry             II - 4
                   Pricing Analysis                    II - 5
                   Technical and Cost Data Base        II - 5
                   Impact Analysis                     II - 6
                   Impact Conclusions                  II - 7

-------
                       LIST OF TABLES
Table
Number                   Title                         Page

 1-1           Firms Which Electrolytically            I - I
               Produce Cr, Mn, and Mn02

 1-2           Domestic Consumption and Imports        1-2
               of Selected Electroytically
               Produced Ferroalloys

 1-3           Financial Profiles of Electrolytic      I - 5
               Chromium, Manganese and Synthetic
               Manganese Dioxide Producers - 1973

 1-4           Combined Incremental Total Annual       1-7
               Operating Costs

 1-5           Combined Incremental Investment         1-8
               Costs for Pollution Control (BPT
               plus BAT)

II-l           Calcium Carbide Producers              II - 1

II-2           Calcium Carbide Production,            II - 2
               Shipments and Value of Shipments

-------
                                                           -iv-
                       LIST OF EXHIBITS
EXHIBIT
NUMBER                            DESCRIPTION
 1-1                Producers of Specialty Ferroalloys

 1-2                1972 Production Data of Specialty-
                    Ferroalloys

 1-3                1973 Financial Profiles of Ferroalloy
                    Producers - SIC 3313

 1-4                Incremental Cost Data for Waste Water
                    Treatment

II-l                Annual Production and Shipments of
                    Calcium Carbide
II-2                1973 Financial Profiles of Calcium
                    Carbide Producers (or their Parent
                    Company)

II-3                Investment and Total Annual Operating
                    Costs for Water Pollution for Calcium
                    Carbide Producers

-------
             ECONOMIC  ANALYSIS  OF  PROPOSED EFFLUENT
               GUIDELINES  ON  THE ELECTROLTYICALLY
                PRODUCED CHROMIUM,  MANGANESE  AND
             SYNTHETIC  MANGANESE DIOXIDE  INDUSTRIES;
               AND ON  THE  CALCIUM  CARBIDE INDUSTRY
                         EXECUTIVE  SUMMARY


ELECTROLYTICALLY PRODUCED
  CHROMIUM, MANGANESE  AND
  SYNTHETIC MANGANESE  DIOXIDE

     Four  firms operating  five  plants  are currently manufacturing

electrolytically produced  chromium,  manganese  and  synthetic man-

ganese dioxide.  Consumption of  chromium metal was 5.2 thousand

short tons in 1973.  Of  this, approximately  52% was imported.

Consumption of manganese metal  was  35.2  thousand short tons in

1973.  Of  this, approximately 6% was imported.


     Where pure chromium or manganese  is a requirement,  there are

no technically feasible  substitutes.   Where  high grade manganese

dioxide  is a requirement,  there  is  no  economically feasible sub-

stitute  product.  These products are each produced by electrolytic

methods.


     The firms which produce electrolytic chromium, manganese and

synthetic manganese dioxide are  large  and financially sound.   Each

of these firms is engaged  not only  in  the production of  electro-

lytic products, but also other  ferroalloys,  metals and industrial

chemicals.


     The demand for these  electrolytically produced products  is

primarily derived from the demand  for  major  end use products.

-------
                                                         - 2 -
Prices are determined by supply  and  demand  conditions.


     The combined  incremental  total  annual  operating costs (those

for 1977 plus those for 1983),  for water  pollution abatement on

a per ton basis are less than  3% of  the  price  for  each product

sidered.


     The combined  total incremental  investment costs (those for

1977 plus those for 1983)  as a  percent  of net  earnings are in all

cases less than 1%.  Thus,  these costs  will not unduly burden the

financial positions of the  firms producing  these products.


     If these costs are "passed  on"  to  end  users,  a significant

decrease in the quantity demanded  is not  anticipated.   This is

because the demand  for each of  these electrolytic  products is a

"derived demand" and the costs  of  electrolytic products are a

very small portion  of the  total  manufacturing  costs of the pro-

ducts that use them.  Also, there  are no  technically feasible or

economic direct substitutes,  and the minor  cost increase will

not change the relative market  share for  imported  products.


CALCIUM
  CARBIDE

     The calcium carbide  industry  is comprised of four firms

operating five installations.   The  latest estimate of 1973 cal-

cium carbide  production is 350,000  tons.   The  two principal end

uses for calcium carbide are  for the production of cyanamide and

acetylene.  There  is no economic substitute for calcium carbide

-------
in the production of cyanamide.   Petroleum based raw materials



may be substituted  in  the  production  of  acetylene.  These mate-



rials currently have over  25%  of  this  market.   However, this



market share will decline  as  the  price of petroleum based sub-



stitutes for calcium carbide  increases relative to the price of



calcium carbide, as  is  expected due  to the current energy



situation.





     Calcium carbide is  produced  in  modified electric arc reduc-



tion furnances.  The firms which  produce calcium carbide are



large, diversified  and  financially  sound.





     The demand for  calcium carbide  is primarily derived from re-



quirements for cyanamide and  acetylene.   Prices are primarily re-



lated to supply and  demand conditions  in these  markets and the



price and availability  of  petroleum  based substitutes.





     The combined incremental  total  annual operating costs (for



1977 plus those for  1983)  for  water  pollution  abatement on a per



ton basis are less  than  .5% of the market price.





     The combined incremental  investment costs  (for 1977 plus



those for 1983) as a percent  of net  earnings are less than 1%.



Thus, these costs will  not unduly burden the financial positions



of the firms producing  calcium carbide.





     If these costs  are  "passed on"  to end users, a significant
 *  Primarily natural gas and  liquid  hydrocarbon feeds.

-------
decrease in the quantity demanded  is  not  anticipated.   This is

because the demand  is a "derived demand"  and  the price increase

necessary to cover  pollution control  costs  is minor.   There are

few technically feasible and economic substitutes, and the price

of petroleum based  substitutes  is  anticipated to increase more

than the price of calcium  carbide  (with pollution control costs).

Also, the minor cost  increase will  not  change the relative mar-

ket share for  imports.


IMPACT
  CONCLUSIONS

     Costs  associated with conforming to  the  proposed effluent

guidelines  are expected to be passed  on to  end users.   The minor

anticipated price increases are not expected  to produce a signi-

ficant decrease in  shipments.   No  significant net effect on the

earnings or profitability  of the  firms producing these products

is expected.   No  closures  or significant  curtailment of opera-

tions nor reduction in  industry employment  are forecast.

-------
             ECONOMIC  ANALYSIS  OF  PROPOSED EFFLUENT
              GUIDELINES  ON  THE  ELECTROLYTICALLY
               PRODUCED CHROMIUM,  MANGANESE AND
             SYNTHETIC MANGANESE DIOXIDE  INDUSTRIES;
              AND ON THE  CALCIUM CARBIDE  INDUSTRY
INTRODUCTION

     This report assesses  the  economic  impact  of proposed efflu-

ent guidelines on establishments  which  electrolytically produce

chromium (Cr), manganese  (Mn),  and  synthetic  manganese dioxide

(MnO-); and on establishments  which  produce calcium carbide (CaC-)

in modified electric arc  reduction  furnances.   This report is

divided into two sections.  Section  I deals with the electroly-

tically produced products  and  Section II  with  calcium carbide.


     Capital recovery factors  were  used  to prorate  the total  in-

vestment cost and debt service  over  the  depreciable life of the

capital equipment required  to  effect compliance  with the proposed

effluent guidelines.  The  capital recovery factor  used for elec-

trolytically produced chromium, manganese and  synthetic manganese

dioxide reflects an interest  rate of 8%  and a  depreciable life of

15 years.   The capital recovery factor  used for  calcium carbide

relects an interest rate  of 10% and  a depreciable  life of 15

years.   These capital recovery  factors  are different than the cap-

ital recovery factor originally supplied  by the  Environmental

Protection Agency reflecting an interest  rate  of 6% and a depre-

ciable  life of 10 years.   This  was done  because  an  interest rate

of 6% did  not reflect market conditions  and a  depreciable life of

-------
                                                         - 2 -
10 years was not consistent with prevailing  Internal Revenue



Service allowances.





     The two capital recovery  factors  used  in  this report differ



from each other due to the prevailing  capital  market conditions



at the time the two sections were  written.   The two different



capital recovery factors are used  in  this  interim final report.



However, Kearney anticipates that  the  capital  recovery factor



used for the final report will  reflect an  interest rate of 10%



and a depreciable life of 15 years for all  industries considered



In any case, the difference in  interest rates  does not have any



important effect on the conclusions  of the  impact analysis.
   The  EPA Technical  Manager  approved this approach.

-------
                          SECTION  I
             ECONOMIC ANALYSIS OF  PROPOSED  EFFLUENT
              GUIDELINES ON THE  ELECTROLYTICALLY
               PRODUCED CHROMIUM,  MANGANESE  AND
             SYNTHETIC MANGANESE DIOXIDE  INDUSTRIES
                        - SIC 3313
INDUSTRY
	DESCRIPTION

     Firms which electrolytically  produce  chromium,  manganese and

synthetic manganese dioxide are  shown  in Table  1-1  below.

                            Table  1-1

                  Firms Which Electrolytically
                  Produce Cr, Mn,  and  MnO
                                               Product(s)  Produced
       Firm                Location            Cr      Mn
ESB, Inc.               Covington,
                          Tennessee                           x

Foote Mineral           New Johnsonville ,
  Company                 Tennessee                   x

Kerr-McGee              Hamilton,
  Chemical Company        Mississippi                 x

                        Henderson, Nevada                     x

Union Carbide
  Corporation           Marietta, Ohio         x       x        x

Source:  Exhibit 1-1.

These firms are part of the larger industry  category  of  specialty

ferroalloy producers shown in Exhibit 1-1.


     Consumption and imports of chromium metal and  manganese

metal from 1967 to 1973 are shown in Table 1-2 on  the following

page.

-------
                                                             1-2
                              Table 1-2

            Domestic  Consumption  and Imports  of Selected
               Electrolytically  Produced  Ferroalloys	
                      (Thousands  of Short  Tons)


                   Average
                    1961                                          1973
                    1966    1967   1968   1969   1970  1971   1972   Pre.
Chromium Metal

  Total Consumption   N.A.     3.6     3.1    3.3    3.5   3.1   3.2    5.2
  Imports            1.1      1.2     1.4    1.5    1.9   1.6   1.9    2.7
  Percent of Total
    Consumption      N.A.    33.8   44.3   44.2   54.7  52.2   59.4  . 51.9
Manganese Metal

  Total Consumption   21.1    24.0   25.7   28.0   24.5   27.5   30.2   35.2
  Imports             1.6     2.3    3.2    1.4    1.3    2.9    4.1    2.2
  Percent of Total
    Consumption       7.5     9.7   12.4    4.9    5.2   10.5   13.6    6.3

Source:  Statement for Relief from Excessive Imports, 1973;
        The Ferroalloys Association.
      The data  in  Table 1-2  indicate that  until 1973  the consump-

tion  of  chromium  metal and  manganese metal  was fairly constant.

The  increase  in consumption  in  1973 is mainly attributable to

large increases in  the production of iron and steel  castings and

steel mill products.


      Production,  foreign trade  and net consumption data for the

larger  class  of specialty ferroalloys for 1972 are shown in

Exhibit  1-2.

-------
                                                         1-3
PRINCIPAL APPLICATIONS
  AND POTENTIAL
  SUBSTITUTE PRODUCTS

     (a)  Chromium

     Principal applications for chromium  metal  are  as an alloying

agent in the production of specialty  ferrous  products and in plat-

ing ferrous products.  Metals  such  as  nickel,  cobalt, molybdenum,

and titanium can be substituted for chromium  in some  alloys.

However, the use of these substitutes  frequently results in high-

er costs or decreased performance of  the  alloy.   Generally'where

the requirement is for pure chromium,  no  technically  feasible

substitutes exist.


     (b)  Manganese

     The major use of manganese metal  is  in  the production of low

carbon sheet steel, welding electrode  coatings,  primary aluminum

and copper alloys, and manganese chemicals.   Where  pure manganese

is required, no technically feasible  substitutes exist.


     (c)  Synthetic Manganese
     	Dioxide	

     Electrolytically produced  synthetic  manganese  dioxide is

principally used in the manufacture of dry  cell batteries, par-

ticularly for the manganese-alkaline  battery  and the  premium or

heavy-duty Leclanche cells.  This product can  also  be used in the

manufacture of glass, and certain types of  chemicals.  High grade

Mn02 ore, (naturally occurring, called pyrolusite)  can be used in

battery production, but the resulting  product  is of lower quality.

-------
                                                         1-4
Other types of batteries are manufactured  that  do  not require

manganese dioxide  in any form.   In  all  other  applications,  sub-

stitutes for synthetic manganese dioxide  usually  increase cost

or alter the overall quality of  the end product.


PRODUCTION
  TECHNIQUES

     (a)  Chromium

     Electrolytic  chromium  is  the purest  form of  the  metal  com-

mercially available, 99+% pure.  It is  produced by electrolysis

from one of several electrolytes containing  chromium.  Approx-

imately 75% of the electrolytic  production utilizes a chromium-

alum solution.


     (b)  Manganese

     Manganese metal is produced by electrolytic  methods.  High

grade manganese ore and slag generated  during the  electric  fur-

nace production of ferromanganese are  used as raw material  inputs


     (c)  Synthetic Manganese
          Dioxide
     Synthetic manganese dioxide  of  high purity is produced by

electrolytic means.  Manganese  ore  is  first  dried  and calcined.

It  is then  leached  with depleted  cell  solution to  generate new

cell solution and then plated out.   This process is separate and

distinct  from the electrolytic  manganese production process.

-------
                                                                      1-5
FINANCIAL  CHARACTERISTICS
   OF THE FIRMS  IN
   THE  INDUSTRY	

      Financial  profiles  of  the  producers  of  specialty ferroalloys

for  1973 are shown  in Exhibit 1-3.   The  1973  financial profiles

of the  producers of  electrolytic  chromium, electrolytic manganese

and  electrolytic synthetic  manganese  dioxide  are  presented in

Table  1-3.

                                  Table  1-3

              Financial  Profiles of  Electrolytic Chromium
                    Manganese and Synthetic  Manganese
              	Dioxide  Producers  - 1973(1)
^ ^Company	


ESB, Inc


Fuote Mineral
  Company

Korr-McCee Chcm L-
  cal Company
Union Carbide
 Corporation
               Plant Location
Covington, Tennes-
 see

New Johnsonville,
 Tennessee

Hamilton,
 Mississippi

Henderson,
 Nevada

Marietta,
 Ohio
Net
Sales
Millions)
436.0
87 0
728 0
Net
Earnings
(S Kill ions)
19.3
2.8
62 8
Equity
(S Millions)
156.0
58 7
558.6
Earnings as
a Percent
of Sales

4 4
3 2
.6
Earn
a P.
of Ei

12
a
11
                                                                        t    Total
                                                                  of Equity   Employees


                                                                            17 000


                                                                            2,172


                                                                            S . 966
                            3,938 8
                                      290.9
                                               2,105.2
                                                                   13 8
                                                                           109,417
Note:  (1) No information is available on specific investment and earnings of tht*se companies as related to sales of
        electrolytically produced chromium, manganese and synthetic manganese dioxide.  The reason for this is that
        these products constitute a small portion of the total investment and earnings of these producers.  It is
        Kearney's understanding that production of these products is profitable.

Source: Exhibit 1-3.
      Each  of these  firms  is  engaged  not  only  in the production  of

electrolytic products, but also  other  ferroalloys,  metals  and  in-

dustrial chemicals.

-------
                                                         1-6
PRICING
  ANALYSIS

     The demand for electrolytically  produced  chromium is derived

from the demand for plating ferrous products and  the  production

of iron alloys and steel requiring high  purity chrome.  The de-

mand for electrolytically produced manganese  is derived from the

demand for low carbon sheet steel, welding  electrode  coatings,

and primary aluminum and copper  alloys.   The demand  for synthetic

manganese dioxide  is almost exclusively  determined  by the require-

ment for dry cell  batteries.  Therefore,  the prices  of the elec-

trolytic products  considered  in  this  report are primarily deter-

mined by supply and demand conditions  in  these markets.  Other

factors affecting  price are purity in  the case of chromium and

manganese, and volume discounts  for large bulk purchases.


     Historically, the quantity  sold  has  been  insensitive to price

increases because  of the small portion of the  cost  of end use

products represented by these electrolytically produced products.


     Recent quotes for these  special  ferroalloys  are:  chromium,

$2.10 per pound; manganese, $0.39 per  pound;  and  synthetic mangan-

ese dioxide $0.30  per pound.*  High grade Mn02 ore  (pyrolusite)

was recently quoted at $0.08  per  pound.*   However,  as pointed out

previously, synthetic manganese  dioxide  and high  grade Mn02 ore

are not directly competitive  in  most  instances.
*  Quotations  are  from  major  current  producers.

-------
                                                         1-7
TECHNICAL  AND
  COST DATA  BASE

      Kearney was  provided  costs  of meeting the proposed effluent

guidelines by  EPA through  its  technical  contractor,  Datagraphics,

Inc.  Exhibit  1-4 presents costs to meet Level I, or Best Prac-

ticable Control Technology Currently Available (BPCTCA);  and

Level II,  or Best Available Control Technology Economically Achiev-

able  (BACTEA)  as  calculated by Datagraphics,  Inc.


      The annual costs  were developed by  calculating  the annual

capital costs  for  15 years at  8% interest  and  adding the  operat-

ing costs.


IMPACT
	ANALYSIS

      The combined  incremental  total annual operating costs, (those

for 1977 plus  those for 1983), for  water pollution abatement on

a per ton  basis by product are presented  in Table I~4 shown below.

                            Table 1-4

                   Combined Incremental  Total
                     Annual Operating  Costs
Product
Chromium
Manganese
Increased Annual
Operating Cost per
Ton Due to Pollution
Abatement
$52.12
20.02
Price
per Ton
$4,200.00
780.00
Cost as a
Percent
of Price
1.24%
2.57
Synthetic Manganese
  Dioxide                    15.96               600.00      2.66

Source:  Exhibit 1-4.

-------
                                                         1-8
      If the entire  increased  annual  costs  are "passed on" to the

users of electrolytic  chromium,  manganese, and synthetic mangan-

ese dioxide they would  represent less  than a 3% price increase.


      The combined  total  incremental  investment costs (those for

1977  plus those for  1983),  on  a  typical  capacity tonnage basis,

by product are shown in  Table  1-5.

                            Table 1-5
             Combined  Incremental  Investment Costs
              for Pollution Control  (BPT plus BAT)
Product
              Total
            Investment
Tonnage(l)    Cost(2)
Cr
Mn
MnO
3,000
9,000
5,500
                       {$ Millions)

                          .30

                          .34

                          .15
   Net
Earnings(3)
($ Millions)

     300

      50

      50
Total Investment
as a Percent of
Net Earnings(4)
                                                 0.1%

                                                 0.7

                                                 0.3
Notes:  (1)
        (2)
        (3)
        (4)
   Tonnage figures approximate single producer capacity,
   a weighted average of the capacities of all producers,
   or a typical tonnage.
   The 1977 investment cost per input product ton plus
   the 1983 investment cost per input product ton as
   cited in Exhibit 1-4 multiplied by tonnage.
   Net earnings figures approximate single producer
   earnings, a weighted average of the earnings of all
   producers or typical net earnings.
   Calculated by dividing total investment costs by net
   earnings.
Sources:  Exhibits 1-3 and 1-4.
     Thus, the combined total incremental  investment  cost  for

water pollution abatement systems will not unduly burden  the

financial positions of the firms producing electrolytic  chromium,

-------
                                                         1-9
electrolytic manganese and electrolytic  synthetic  manganese

dioxide.

     If all costs associated with  conforming  to the proposed

effluent guidelines are "passed  on"  to  end  users in the form of

price increases, a significant decrease  in  demand  is not antic-

ipated due to the following factors.

          1.  The demand  for each  of  the electrolytic products

is primarily a "derived demand."

          2.  The costs of electrolytic  products are a very small

portion of the total manufacturing  costs of the products that

use them.

          3.  There are few feasible  or  economic substitutes for

electrolytically produced products  in most  applications.

          4.  The minor anticipated  price increase is not ex-

pected to substantially change the  relative demand for imports

of these electrolytically produced  products.


IMPACT
  CONCLUSIONS

     The costs associated with conforming to  the proposed efflu-

ent guidelines are expected to be  passed on to  end users.  The

minor anticipated price increases  are not expected to produce a

significant decrease in shipments.  No  significant net effect on

the earnings or profitability of the  firms  producing these pro-

ducts is expected.  No closures  or  significant  curtailment of

operations and reduction  in industry  employment are forecast.

-------
                                  ENVIRONMENTAL PROTECTION AGENCY
                                PRODUCERS OF SPECIALTY FERROALLOYS
                                                                  Products
     Company
     Plant
Climax Molybdenum
Diamond Shamrock Corp.
ESB, Inc.
Foote Mineral Co.

Kawecki Chemical Co.
Kerr-McGee Chemical
  Company
Mobil Chemical Co.
Molybdenum Corp.
Monsanto Chemical
  Company
Reading Alloys Co.
Shieldalloy Corp.
Union Carbide Corp.
Langeloth, Pa.
Kingwood, W. Va.
Covingt on, Tenn.
New Johnsonville,
  Tenn.
Easton, Pa.
Hamilton, Miss.
Henderson, Nev.
Nichols, Fla
Washington, Pa.
Columbia, Tenn.

Robesonia, Pa.
Newfield, N. J.
Marietta, Ohio
Cr  Mn  Mn02  FeB  FeCb  FeMn  FeMo  FeTi  FeW  FeV
                    A
                    A


                    A
                    A
A
A
                 A
                 A
Notes:  A - Aluminothermic Process
        C - Electrolytic Process
Sources: 1972 Minerals Yearbook, Preprint, EG/EPA and Datagraphics,  Inc.
                                                                             H
                                                                             M
                                                                              I

-------
                                                       EXHIBIT 1-2
                  ENVIRONMENTAL PROTECTION AGENCY
           1972 PRODUCTION DATA OF SPECIALTY FERROALLOYS
                     U.S.                                 Net
                  Prc
Chromium Metal
Manganese Metal
Manganese Dioxide
Ferroboroh
Ferrocolumbium
Ferromanganese
Ferromolybdenum
Ferrotitanium
Ferrotungsten
Ferrovanadium

Notes:  (1)  Gross Weight
        (2)  Calculated, based on 25.7% average contained element.
        (3)  Includes scrap Titanium Metal.
Source:  1972 Minerals Yearbook. Preprint.
Production
N.A.
23,200
N.Ac
N.A.
737
N.A.
N.A.
938
N.A.
NoAo
Imports
1.9
N.A.
N.A.
N.A.
N.A.
NoA.
N.A.
23 (2)
407
334
Exports
N.A.
N.A.
N.Ao
N.A.
N.A.
N.A.
454
N.A.
11
269
Consumption
3,200
29,949
-------
ENVIRONMENTAL PROTECTION AGENCY
1973 FINANCIAL PROFILES OF FERROALLOY
PRODUCERS - SIC 3313
Company

Climax Molybdenum Co.
Diamond Shamrock Corp.
ESB Inc. (*)
Foote Mineral Co.
Kawecki Chemical Co.
Kerr-McGee Chemical Co.

Mobil Chemical Co.
Molybdenum Corp.
Monsanto Chemical Co.
Reading Alloys Co.
Shieldalloy Co.
Union Carbide Corp.
Plant Location

Langeloth, Pa.
Kingwood, W. Va.
Covington, Tenn.
New Johnsonvllle, Tenn.
Easton, Pa.
Hamilton, Miss.
Henderson, Nev.
Nichols, Fla.
Washington, Pa.
Columbia, Tenn.
Robesonia, Pa.
Newfield, N. j.
Marietta, Ohio
Net
Net Sales Earnings
($ Millions) ($ Millions)
$ 1,336.8 $105.1
651.1 50.5
436.0 19.3
87.0 2.8
86.7 4.7
728.0 62.8

12,755.6 849.3

2,647.7 238.3
N/A^3> N/A
18.0 N/A
3,938.8 290.9
Earnings Earnings
Percent Percent Total
Equity of Sales of Equity Employees
($ Millions)
$ 840 .4 7.97. 12.5% 17.940
412.3 7.8 12.2 9,295
156.0 4.4 12.4 17,000
58.7 3.2 4.8 2,122
49.7 5.4 9.5 1,800(2*
558.6 8.6 11.2 8,966

5,714.8 6.7 14.9 73,900

1,496.2 9.0 15.9 58,277
N/A N/A N/A N/A
1.5 N/A N/A 180
2,105.2 7.4 13.8 109,417
Notes: (1) Fiscal year ended March 31, 1974.
(2) As of December 31, 1970.
(3) N/A is not available.
Source: Annual Reports.








S
M
M
M
1
OO

-------
ENVIRONMENTAL PROTECTION AGENCY
INCREMENTAL COST DATA FOR WASTE WATER TREATMENT
Product
Cr
Mn
Mn02
Note:

Source:




1977
Investment
Cost /Annual
IPT(l)
$90.71
29.79
23.40
(1) Based on an annual
1977
Cr 3,068
Mn 9,048
Mn02 5,876
1983 NSPS
Investment Investment
Annual Cost/Annual Annual Cost/Annual Annual
Cost/Ton IPT(l) Cost/Ton IPT(l) Cost/Ton
$47.43 $8.96 $4.69 $157.62 $59.16
15.57 8.51 4.45 92.33 30.68
12.24 7.11 3.72 30.51 15.95
input product tonnage (IPT) of:
1983 NSPS
3,068 3,068
9,048 9,410
5,876 5,876
EG/EPA and Datagraphics, Inc.




r*S
SC
w
H
M
1

-------
                          SECTION  II


                 ECONOMIC ANALYSIS  OF  PROPOSED
               EFFLUENT GUIDELINES  ON  THE  CALCIUM
                 CARBIDE INDUSTRY  - SIC  2819912

INDUSTRY
	DESCRIPTION

     The calcium carbide industry  is comprised of four  firms

operating five installations as  shown  in Table II-l.

                           Table II-l

                   Calcium Carbide  Producers

           Firm Name                          Plant Location
Airco Alloys & Carbide Division,
  Airco, Inc.                              Louisville,  Kentucky

Chemetron, Midwest Carbide Corp.           Koekirk,  Iowa
                                           Pryor,  Oklahoma

Pacific Carbide & Alloys Corp.             Portland,  Oregon

Union Carbide Corporation,
  Ferroalloys Division                     Ashtabula,  Ohio

Source:  EG/EPA, Datagraphics,  Inc.,  and  annual  reports.


     Of these four firms, three  are  large diversified  firms.

Very little  information  is available  for  Pacific  Carbide  & Alloys

Corporation.


     Airco,  Inc. intends to  resume production  of  calcium  carbide

at its Calvert City, Kentucky plant  in  the  near  future.


     The latest estimate of  total  1973  calcium carbide production

is 350,000 tons.  Total  calcium  carbide production,  shipments  and

value of shipments for the years 1968 through  1972  are presented

in Table II-2 on the following  page.

-------
                                                         II - 2
                            Table  II-2
Calcium Carbide Production, Shipment
and Value of Shipments
Production
(Tons)
942,098
856,039
791,346
625,338
493,418
Exhibit II-l.
Shipments
(Tons)
596,376
514,172
503,172
455,876
354,972

s
Value
($)
$56,002,000
40,354,000
41,046,000
40,906,000
24,619,00'0

Year


1968

1969

1970

1971

1972

Source:


     Over this  five year  period  production steadily declined.

The total decline was approximately  47.6%.   Similarly,  shipments

steadily declined 40.4% and  the  value  of  shipments dropped by

56.1%.  These declines occurred  due  to the substitution of cheaper

petroleum based raw materials  in the production of acetylene.

This downward trend will  stop  or  reverse  as the price of petroleum

based  substitutes* for calcium carbide increases relative to the

price  of calcium carbide.


PRINCIPAL APPLICATIONS
  AND  POTENTIAL SUBSTITUTE
	PRODUCTS	

     The two principal end uses  for  calcium carbide are for the

production of cyanamide and  acetylene.  Calcium carbide is heated

in an  atmosphere of nitrogen to  produce cyanamide.  Cyanamide is
*  Primarily natural gas  and  liquid  hydrocarbon feeds.

-------
                                                          II  -  3



 used  as  a  raw material  in the chemical process industries and

 agriculture.   Acetylene is produced by reacting calcium  carbide

 with  water.   Acetylene  is used in metalworking applications such

 as  cutting  and welding  and as a chemical feed stock.


      Other  markets  for  calcium carbide include uses as a reducing

 agent  in some metallurgical  processes, a desulfurizing agent  for

 ductile  iron  treatment,  and  as a  drying agent in various applica-

 tions.   These are minor  markets in comparison to cyanamide and

 acetylene.


      There  is no direct  economic  substitute for calcium carbide

 in  the production of  cyanamide.


     Acetylene for  use  as a  chemical  raw material  can be generated

 from  natural  gas or liquid hydrocarbon feeds.   This is more eco-

 nomical  in  the case of  many  large scale chemical  plants.  Acety-

 lene produced  from  natural gas (petro-acetylene)  currently accounts

 for in excess  of 25%  of  the  acetylene  market.   However, in other

 cases, calcium  carbide  has a  cost advantage.   Rising natural gas

prices will tend to reduce any petro-acetylene cost advantage.


FOREIGN
  TRADE

     Detailed  calcium carbide  import and  export data is not  avail-

able.   However, information  from  producers  indicates that imports

and exports represent only a minor  portion  of  total domestic con-

sumption and production  respectively.

-------
                                                         II - 4



PRODUCTION
	TECHNIQUES

     Calcium carbide  (CaC2)  is  an  inorganic chemical made from

quicklime and carbon.  Quicklime  is  prepared by burning lime-

stone.  Carbon  is most frequently  obtained  from coke, although it

can also be obtained  from  anthracite or  petroleum coke.


     Molten calcium carbide  is  produced  in  modified electric arc

reduction furnaces.   These  furnaces  are  continuously charged

and are tapped  directly  into  chill  pots  of  approximately five-ton

capacity on a continuous or  intermittent schedule.   After solid-

ifying, the calcium carbide  is  crushed,  sized and packed for ship-

ment.  Shipping sizes range  from  ten pounds to five tons.


FINANCIAL CHARACTERISTICS
	OF FIRMS IN THE INDUSTRY

     Airco, Inc., Chemetron  and Union Carbide Corporation had a

composite margin on sales  of  6.6%  in 1972.   This compares with an

average 1973 margin on sales  of 6.9% for 82 companies in the

chemical process industry.*   The  return  on  net worth of these

calcium carbide companies  was 12.6%  in 1973.  This compares with

an average 1973 return on  net worth  of 15.0% for 82 companies in

the chemical process  industry.*  Detailed financial data for

Airco, Inc., Chemetron and Union  Carbide Corporation is presented

in Exhibit II-2.  Financial  data  is  not  available for Pacific

Carbide and Alloys Corporation.  No  information is available on
*  Monthly  Economic  Letter  of the  First National City
     Bank,  April,  1974.

-------
                                                         II - 5



investment and earnings  of  these  companies  as related to sales of

calcium carbide.  The  reason  for  this  is  that calcium carbide

constitutes a small portion of  the  investment and earnings of

these producers.  It  is  Kearney's understanding that the produc-

tion of calcium carbide  is  profitable.


PRICING
  ANALYSIS

     Producers attempt to price on  the  basis  of manufacturing

costs.  Raw materials  typically account  for  80% of total calcium

carbide production costs.   The  remaining  costs, referred to as

conversion costs, include labor,  maintenance, power, etc.   This

industry is extremely  sensitive to  the  price  of coal as it pro-

vides three vital ingredients which  are  coke, carbon electrodes

and very often electric  power.


     The demand for calcium carbide  is  primarily derived from the

demand for cyanamide and acetylene.  Therefore, the price  of

calcium carbide is directly related  to  supply and demand condi-

tions in these markets and  the  price and  availability of petroleum

based substitutes.  The  current price  of  calcium carbide is ap-

proximately $180 per ton.*


TECHNICAL AND
  COST DATA BASE

     Sources of water  pollution are  wet  air pollution devices and

contact cooling.  Many modern carbide  furnaces  are "closed" in
*  Quotations are from a major current  producer

-------
                                                         II - 6



that almost all of the by-product  gas  (carbon  monoxide),  is col-

lected and utilized.


     Kearney was provided costs  of meeting  the proposed effluent

guidelines by EPA through its technical  contractor,  Datagraphics,

Inc.  Exhibit II-3 presents costs  to meet Level  I,  or  Best

Practicable Control Technology Currently Available  (BPCTCA),

and Level II, or Best Available  Control  Technology  Economically

Achievable (BACTEA) as calculated  by Datagraphics,  Inc.  These

costs have been calculated applying the  "6/10  Rule"  to the

investment costs supplied by EPA when  appropriate.   Total  annual

operating costs include annualized capital  charges  (interest and

depreciation) and actual operating costs.   The capital charges

included  in the total annual costs are based on  10%  and 15 years.


IMPACT
  ANALYSIS

     The  combined incremental total annual  operating costs (for

1977 plus those for 1983) for water pollution  abatement per

capacity  ton range from 18 to 38 cents.   If this entire cost in-

crease is "passed on" to calcium carbide customers  it  represents

a 0.2% increase based on a selling price of $180 per ton.


     The  combined incremental investment costs (for  1977  plus

those for 1983) as a percentage  of 1972  net earnings (for  the

three firms where financial information  is  available)  range from

0.035% to 0.936%.  These costs per capacity ton  range  from $0.62

to $1.62.  Based on a selling price of $180 per  ton  this  is less

than 1%.

-------
                                                          II -  7
      If all  costs  associated  with conforming to the proposed

effluent  guidelines  are  "passed on" to end users in the form of

price  increases, a  significant  decrease in demand is not anti-

cipated for  the  following  reasons.

          1.  The  demand  for  calcium carbide is primarily a

"derived  demand."

          2.  The  anticipated price increase necessary to cover

pollution control  costs  is  minor.

          3.  There  are  few feasible and economic substitutes for

calcium carbide.  Where  petroleum based substitutes are technically

feasible  and economic, the  price  of these substitutes is antici-

pated  to  increase  relative  to the price of calcium carbide (with

pollution control  costs).

          4.  Imports  are  presently not a factor in this market.

The minor price  increase anticipated will not change the relative

demand for imports.


IMPACT
	CONCLUSIONS

     The  costs associated  with  conforming to the proposed efflu-

ent guidelines are expected to  be  passed on  to  end users.   The

minor  anticipated price  increase  is not expected to produce a

significant decrease in shipments.   No  significant net  effect on

the earnings or profitability of  the firms producing calcium

carbide is expected.  No closures  or  significant curtailment of

operations and reduction in industry employment are forecast.

-------
                                                                   ENVIRONMENTAL PROTECTION AGENCY
ANNUAL PRODUCTION AND
Total
Number of Production
Year Establishments Quantity
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
(N/A)
11
11
11
11
8
8
8
7
7
(N/A)
1,109,109
1,131,659
1,098,003
1,063,202
912,293
942,098
856,039
791,346
625,338
493,418
298,884(P)
(Quantity Figures - Snort
Total Shipments
Average
Quantity Value (fob Plant) Price/Ton
641,391
689,737
643,767
586,966
564,392
596,376
514,172
503,967
455,876
354,972
(N/A)
60,697
62,608
57,404
51,299
53,184
56,002
40,354
41,046
40,906
24,619
(N/A)
94.63
90.77
89.17
87.40
94.23
93.90
78.48
81.45
89.73
69.35
(N/A)
SHIPMENTS OF CALCIUM CARBIDE
(CaC2)

Tons, Values in Thousands of Dollars)
Average
Quantity Value (fob Plant) Price/Ton
284,554
241,083
278,701
(D)
(D)
(D)
(D)
(D)
(D)
(D)
(D)
25,103
21,293
22,225
(D)
(D)
(D)
(D)
(D)
(D)
(D)
(D)
88.22
88.32
79.74
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)


Value (In Average
Quantity Foreign Country) Price/Ton
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
17,876
18,649
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
1,215
1,301
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
(N/A)
67.97
69.76
(N/A)
(N/A)
(N/A)
Notes:  (D)  Withheld  to  avoid disclosing figures for individual companies.



        (N/A)  Not  available.



        (P)  Preliminary.





Source:  Current  Industrial  Reports: Inorganic_C!heinical_s.i Jjeries:  M28A.
                                                                                                                                                                                                  a
                                                                                                                                                                                                  M

-------
                                                   ENVIRONMENTAL PROTECTION  AGENCY

                         1973 FINANCIAL PROFILES OF CALCIUM CARBIDE PRODUCERS (OR THEIR PARENT COMPANIES)
Airco, Inc.

Chemetron  (Midwest Carbide Corp.)

Pacific Carbide & Alloys Co.

Union Carbide  Corp.


Note:  (1)   N/A is not available.

Source:  Annual reports.
 Net Sales
? Millions)

  584.8

  364.1
3,938.8
                                                        Earnings      Equity
                                                      ($ Millions)  ($  Millions)
 19.1

 10.4

  N/A

290.9
  266.1

  167.4

   N/A

2,105.2
Earnings as
 a Percent
  of Sales

   3.3

   2.9

   N/A

   7.4
Earnings as
 a Percent
 of Equity

    7.2

    6.2

    N/A

   13.8
                                                     Current
                                                      Assets     Current
                                                    ($ Millions)   Ratio
  249.7

  146.3

   N/A

2,022.4
3.30

2.64

N/A
  Working
  Capital
($ Millions)

  174.0

   90.9

   N/A
                                                                               2.46   1,201.8
                                                                                                                                         M
                                                                                                                                         X
                                                                                                                                         W
                                                                                                                                         N>

-------
ENVIRONMENTAL PROTECTION AGENCY
INVESTMENT AND TOTAL ANNUAL OPERATING COSTS
FOR WATER POLLUTION CONTROL FOR CALCIUM CARBIDE PRODUCERS
Company
Airco, Inc.
Chemetron (Midwest Carbide Corp.)
Pacific Carbide & Alloys Co.
Union Carbide Corp.
Location
Louisville, Ky.
Keokuk , Iowa
Pryor, Okla.
Portland, Ore.
Ashtabula} Ohio
BPT - 1977(!) BAT - 1983(J)
Total Total
Capacity Annual Annual
Thousand Investment Operating Investment Operating
Tons (2) Cost Cost Cost Cost
150 $10,000(3) $6,456(4> $68,000(3) $26,040(4)
30 4,500 1,941 36,758 8'250
50 6,096 3,050 50,000 12,273
20 3,518 1,360 28,833 6,072
200(5) -0-(6) -0-(6) 100,000(4) 35,947(4)




Notes: (1) BPT = Best practicable control technology currently available.
BAT = Best available control technology economically achievable.
(2) Sources of capacities: EG/EPA.
(3) Actual figures obtained by EG/EPA, and supplied to Kearney.
(4) Recalculated using Crf (107,, 15 yrs.), Original data reflected Crf (6%, 10 yrs.).
(5) CaC2 capacity calculated.
(6) Assumed zero.
Sources: EG/EPA and Datagraphics,





Inc.












SC
W
H
M
1
U>

-------