-74-044
SEPTEMBER 1974
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE PLASTICS AND SYNTHETICS INDUSTRY
PHASE II
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
UK
a
\
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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 -A ill subsequently be available through the
National Technical Information Service, Springfield, Virginia
22151.
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ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE PLASTICS AND SYNTHETICS INDUSTRY
(PHASE II)
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
EPA 230/1-74-044
September 1974
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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 analyze the economic impact which could result from the application of alternative
effluent limitation guidelines and standards of performance to be established under sections
304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document") support-
ing the issuance of proposed regulations under sections 304(b) and 306. The Development
Document surveys existing and potential waste treatment control methods and technology
within particular industrial source categories and supports proposal 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 tech-
nologies. This study investigates the effect of alternative approaches in terms of product
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 Contract No.
68-01-1541, Task Order No. 13 by Arthur D. Little, Inc. Work was completed as of
September 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 official
EPA publication. It 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 industy. It cannot be cited, referenced, or represented in
any respect in any such proceeding as a statement of EPA's views regarding the subject
industy.
in
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TABLE OF CONTENTS
Page
I. INTRODUCTION 1
II. EXECUTIVE SUMMARY 3
III. METHODOLOGY 9
IV. INDIVIDUAL PRODUCT SEGMENTS 11
CELLULOSE NITRATE 11
NITRILE BARRIER RESINS 15
FLUOROCARBON 19
ETHYLENE VINYL ACETATE 23
UNSATURATED POLYESTER RESINS 27
SATURATED POLYESTER RESINS 35
POLYPROPYLENE FIBERS 39
METHYLMETHACRYLATE RESINS 43
ALKYD MOLDING RESINS 47
POLYVINYLBUTYRAL 51
POLYVINYL ETHERS 55
POLYVINYLIDENE CHLORIDE 59
SILICONE RESINS 63
POLYAMIDES 67
SPANDEX FIBERS 69
ETHYL CELLULOSE 73
OTHER RESINS 75
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I. INTRODUCTION
The purpose of this study is to determine the economic impact of the costs of
pollution abatement requirements under the Federal Water Pollution Control Act Amend-
ments of 1972 for each of four levels of treatment:
1) Best practicable control technology currently available - to be met by
industrial discharges by 1977.
2) Best available technology economically achievable - to be met by industrial
dischargers by 1983.
3) New source effluent standards — to be applied to all new facilities (that
discharge directly to navigable waters) constructed after the promulgation of
these guidelines.
4) New source pretreatment standards - to be applied to all facilities (that use
municipal systems) constructed after promulgation of these guidelines.
The specific impacts to be considered are:
1) Price effects - including effects upon an industry's suppliers and consumers.
2) Profitability, growth, and capital availability effects.
3) Number, size, and location of plants that can be expected to close or curtail
production.
4) Changes in employment.
5) Community impacts.
6) Balance of payments consequences.
7) Any other impacts.
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II. EXECUTIVE SUMMARY
This Phase II study of the economic impact of water pollution control costs on the
synthetics polymer industry is focused on the small volume specialty plastic materials which
are generally made by two or more companies. With the exception of the unsaturated
polyester resins, these materials are produced by major chemical companies which have both
the technology and the capital available to install and operate water pollution control
equipment. Again, with the exception of the unsaturated polyesters, the producers of these
resins all produce other plastic materials, many of which are large volume, lower priced
commodity type resins. Because of the specialized uses for these resins, they generally
command higher prices and generate higher profits than do the larger volume commodity
resins. With the exception again of the unsaturated polyester resins, the number of
producers is limited to at most six. This prevents the very intense price competition
characteristic of the large volume resins which are made by as many as 20 companies, and
this in turn keeps profits at a higher level. With a few exceptions, there is little integration to
end use products such as film or bottles. The exception is the unsaturated polyesters. Most
of the resin producers, however, are integrated back to their raw materials. These resins are
generally produced in plants which produce other resins. The location of the plants
generally depends on the locations selected for the larger volume resins made at the same
site, and there is a tendency for these plants to be located in the Southwest.
The production of these resins involves fairly sophisticated technology, again, with the
exception of the unsaturated polyesters. These plants are generally quite well automated,
and therefore are not labor intensive.
In general, prices in this industry are determined by the performance value of the
material in competition with other plastics and non-plastic materials. A second factor in the
price structure is the price sensitivity and in general, these products will not show con-
spicuously lower demand if the price were increased within reason. Three of the products,
cellulose nitrate, ethyl cellulose and spandex fibers, have reached the peak of their demand
and are declining in importance.
The characteristics of the unsaturated polyester resin industry segment are quite differ-
ent. This industry consists of a large number of producers. The U.S. Tariff Commission lists
some 70 producers, and this is not believed to be complete. These producers fall into two
different categories; large resin and chemical companies, and small specialty resin and paint
companies. Twenty-six of the companies are believed to represent 90% of the production,
the remainder being spread over a number of small operations. The large companies have
production capacities over a hundred million pounds, while some of the smaller individual
operators produce less than a million pounds a year. The larger companies are integrated to
some end products, and to some of the raw materials. The smaller companies are not
integrated. The larger companies have a number of plants at various locations, primarily
chosen close to the markets. The small companies generally have only one location. This
segment of the industry is also characterized by the demand for a variety of grades and
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types of resins, specifically formulated for a given end use. Large producers market a wide
line of products whereas the smaller companies usually produce only one grade. The larger
companies in the industry generally have modern up-to-date well-automated plants whereas
the small companies have old relatively obsolete operations. It is estimated that 90% of the
plants in this segment discharge to municipal sewers. The profits of the large producers are
generally average for the plastics industry while profits for the smaller companies are below
average.
Prices of these resins are generally determined by the performance of the polyester
resin versus that of competing plastics and metals. In the case of some of the smaller
companies, the price is determined largely by the level necessary to obtain the contract.
The assessment of the economic impact of the cost of meeting effluent guidelines is
based primarily on whether the cost can be passed through as price increases to the
consumer. If it can be passed on, there will be little or no effect on profitability, plant
closures, employment effects, community effects, growth or balance of trade. In general,
the price would rise slightly. A second consideration is whether the increase in price
required to cover the cost of meeting the guidelines would affect the demand for the
material. This is analyzed on the basis of the price/performance ratio of the plastic material
versus that of substitute products such as glass, paper, metal and other plastics, recognizing
that all of these may also face some increase in price in order to cover the cost of meeting
their guidelines.
Impact
A review shown in Table 1, of the costs associated with pollution abatement control to
be achieved by 1977, best practical control technology currently available (BPCTCA), and
the cost associated with best available technology economically achievable (BATEA), to be
achieved by 1983, shows a range of 0.1% of the current selling price to 10.79?.
Costs of this magnitude are insignificant compared to the increases in costs which are
now and will result from increased raw material prices. We believe in all but two cases that
the cost of meeting these controls can be added to the sales price so that there will be no
effect on the profitability, growth, employment, production, the community or balance of
trade. In general the producers have the capital and technology to achieve the standards set.
In two segments, saturated and unsaturated polyester resins, the costs of the initial
investment to install treatment facilities to meet BPCTCA, BATEA and BADT guidelines
will have some effect and may cause some companies to shut down. This added expense
may also prevent some potential producers from entering these two industry segments. The
cost of adding the necessary water pollution control equipment is only one factor in these
situations. Added to this are the costs associated with gathering the necessary technical data
and employing experts to assess the information and determine what treatment technology
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Table 1
Cost Impact on Synthetic Polymers Production
Capital Cost Per Plant ($1000) Annualized Cost (c/lb)*
Annualized Cost as % of Sales Prices*
BPT BAT BADT
BPT
BAT
BADT
BPT
BAT
BADT
Cellulose
Nitrate
Nitrile
Barrier
Fluorocarbon
Ethylene Vinyl
Acetate
Unsaturated
Polyester
Saturated
Polyester
Polypropylene
Fiber
Methyl
Methacrylate
Alkyd Molding
Polyvinyl
Butyral
Polyvinyl
Ether
1113
82
44-145
26-47
198
49
146
155 -
1020
198
1010
29
2260
161
44-145
53-101
198
77
579
179-
1176
198
2759
58
1113
82
44-145
26-47
198
49
146
155-
1020
198
1010
29
0.4 - 0.85
0.06 - 0.36
0.32 - 1.95
0.03 - 0.30
0.08 - 0.38
0.07 - 2.03
0.24 - 0.49
0.07 - 0.28
0.08 - 0.38
0.28 - 1.47
0.20 - 0.70
0.5 - 1.8
0.06 - 0.78
0.32 - 1.95
0.06 - 0.93
0.08 - 0.76
0.21 - 4.48
0.24 - 0.49
0.07 - 0.28
0.08 - 0.76
0.28 - 7.50
0.20 - 1-80
0.45
0.18
0.32
0.03
0.16
0.14
0.24
0.07
0.16
0.56
0.30
0.8 - 1.7
0.1 - 0.6
0.1 - 0.6
0.2 - 2.0
0.4 - 1.9
0.1 - 2.9
0.7 - 1.4
0.1 - 0.4
0.4 - 1.9
0.4 - 2.1
0.2 - 0.7
1.0 - 3.6
0.1 - 1.3
0.1 - 0.6
0.4 - 6.2
0.4 - 3.8
0.3 - 6.4
0.7 - 1.4
0.1 - 0.4
0.4 - 3.8
0.4 - 10.7
0.2 - 1.8
0.9
0.3
0.1
0.2
0.8
0.2
0.7
0.1
0.8
0.8
0.3
*Includinc Capital Charges
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Table 1 (continued)
Cost Impact on Synthetic Polymers Production
Capital Cost Per Plant
BPT BAT BADT
Annualized Cost (c/lb>
BPT
BAT
BADT
Annualized Cost as % of Sales Prices *
BPT BAT BADT
Polyvinylidene
Chloride
Silicones
Polyamides
Spandex
Ethyl
Cellulose
6-32
1696-
2480
60
24
360-
530
19-87
4176-
5965
172
48
750-
1386
6-32
1696-
2480
60
24
360-
530
0.05 - 0.11
0.60 - 1.20
0.13 - 1.17
0.10 - 0.30
0.55 - 1.0
0.05 - 0.38
1.70 - 3.50
0.26 - 3.25
0.10 - 0.50
1.65 - 2.84
0.05
0.70
0.26
0.20
0.60
0.1 - 0.2
0.6 - 1.2
0.1 - 0.9
0.1 - 0.3
1.1 - 2.0
0.1 - 0.7
1.7 - 3.5
0.2 - 2.5
0.1 - 0.5
3.3 - 5.7
0.1
0.7
0.2
0.2
1.2
*Including Capital Charges
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is needed. These costs will be a deterrent to some small producers. The effect will be
heightened by the necessity to meet other federal standards such as air pollution, solid waste
disposal, safety and noise control regulations. None of these factors would affect major resin
producers. They may, however, affect the small - i.e., less than 50 employee - company.
The producers which will face the greatest difficulty will be the small manufacturer of
unsaturated polyester resins (approximately two to three direct dischargers and seven
plants in municipal systems.) These companies, faced with raw material shortages, costs to
meet other federal standards, and increasing water pollution control costs might elect to
shut down - certainly they will not expand. This situation represents only a very minor
portion of the industry segment, and any dislocations would have only a minor impact on
the entire industry but would be serious to the companies involved.
Production capacity and industry growth would not be seriously affected since the
plants represent less than 1% of the industry capacity. Possibly 30 employees might be
affected but this would not have any significant community effect. There would be no
balance of trade effect since these producers do not export.
The other industry segment which might have a problem is the saturated thermoplastic
polyesters. This new product is just getting started and the plants are small (25-50 MM Ibs).
As demand develops and larger plants are built the price will decline.
The extent of this price decline will determine the demand for the resin which will be
based on its price/performance versus that of competitive materials, both plastic and
non-plastic.
Table 1 shows that costs to meet BPCTCA are 0.1% - 2.9% of current sales price; the
costs to meet BATEA are 0.3% - 6.4% and to meet BADT are 0.2%. As the price declines
these percentages will increase and at the high end of the range of costs to meet BATEA
these costs may become burdensome. Thus, one plant may be shut down in favor of
building a new larger plant which would have lower pollution abatement costs per ton of
product. There would be no effect on capacity, growth, employment or balance of trade.
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III. METHODOLOGY
The economic analysis of proposed effluent limitations on the plastics industry is based
on a consideration as to whether the cost of achieving these guidelines can be passed on to
the consumer, and whether this increase in price would affect demand. If the added cost of
meeting these guidelines cannot be passed on in the final selling price, then profitability
would be lessened and if this is severe, plants would possibly shut down.
Another factor which we consider is whether the additional cost of meeting guidelines
for water pollution control would increase the price so that the plastic material would no
longer be competitive in the marketplace with substitute materials. Plastic materials com-
pete in the marketplace on a price/performance basis with non-plastic materials, i.e., metal,
glass and paper as well as other plastic materials. If the cost of meeting controls is high and
is passed on to the consumer, this might reduce industry growth or perhaps cause a decline
in demand, the latter of which could force plants to close. If such costs were not passed on
in the final price, then profitability would be lessened to the point where no additional
capacity would be installed and perhaps some plants would be shut down.
Where the costs of meeting guidelines can be passed on without affecting the growth of
the industry, since other competing substitute materials are also going to have to pay
increased coslsfor water pollution control, we conclude that there will be no plant closings
and therefore no effect on the community, employment, production^ balance of trade.
Since these specialty plastics are not heavy polluters, we are assuming that the cost to
meet the guidelines are certainly no greater than that of competing materials such as paper,
glass, steel, aluminum and the large volume commodity plastics.
A second consideration is whether the companies producing the materials which must
invest additional capital to install equipment for water pollution control have capital
available for these expenditures. If this capital is not available, then some plants might
choose to shut down.
With regard to balance of trade, the United States is generally the leader in specialty
plastic materials so that there is little competition from foreign sources. Generally, prices
abroad for these materials are higher than in the United States. We therefore conclude that
generally there will be no effect on balance of trade unless the cost of meeting the guidelines
should exceed the differential between the U.S. price and foreign prices. Generally speaking,
exports of these materials is not a significant factor in total sales.
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IV. INDIVIDUAL PRODUCT SEGMENTS
CELLULOSE NITRATE
A. INDUSTRY SEGMENTS
Cellulose Nitrate is made by only two companies, the Hercules Company with a plant
at Parlin, New Jersey and the DuPont Company with a plant at Deepwater, New Jersey.
Both companies manufacture their own chemical cellulose which is the major raw material.
Cellulose nitrate is not used to any extent today as a plastic; it is still used in the production
of lacquers. The product in the past has been made into sheet and rods; major applications
were optical frames, shoe heels, piano and accordion keys, Ping-Pong balls, playing cards,
market price tags, business machine cards and gambling dice. At one time there were a
number of other producers including Monsanto and Cellanese. In all of the above applica-
tions other materials have replaced cellulose nitrate with the possible exception of dice. As a
result almost all cellulose nitrate is now sold to paint companies for the production of
lacquers.
Production of cellulose nitrate plastics other than coatings declined from 12 million
pounds in 1940 to 1 million pounds in 1962 when statistics were discontinued. There is no
future growth in cellulose nitrate plastic. Consumption of cellulosic resins for surface
coatings was estimated to be 45 million pounds in the last reported year 1967.
Estimated end use is as follows:
Wood Furniture Finishes 27 million gallons
Cellophane Coatings 10 million gallons
Wood Finishes - Non-Furniture 6 million gallons
Paper Coatings 5 million gallons
Miscellaneous Finishes 5 million gallons
Modifiers 5 million gallons
All these cellulose nitrate finishes are lacquers and hence are based on solvent systems.
Because of flammability hazards and air pollution considerations, solvent systems are being
phased out in favor of aqueous or powdered coatings.
The cellulose nitrate plant of Hercules is at Parlin, New Jersey and it produces one
other product. The DuPont plant at Deepwater produces resin primarily for lacquers. There
is no water treatment plant at that facility; they pipe waste water to another plant where
the wastes are treated along with the wastes from other organic chemical production. The
total number of employees in these two plants is less than 100. We do not see any further
growth for cellulose nitrate.
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B. FINANCIAL PROFILES
The estimated annual profit before taxes for production of cellulose nitrate is shown
below:
c/lb
Income
51
Cost
Fixed Costs
Variable Costs
Sales G&A
Total
Net Return before tax1
% of Sales $
10
25
_5_
40
11
21.6%
The market salvage value of plant assets would only be the extent to which the specific
pieces of equipment could be used for other purposes; i.e., pumps, kettles, filter presses, etc.
The plants themselves are too old to be sold for further production of cellulose nitrate. The
major constraint on financing additional capital assets is the lack of growth of the market
rather than anything else.
C. METHODOLOGY
No change from general methodology.
D. POLLUTION CONTROL COSTS
Total Capital Cost Per Plant,$1000
Total Annual Cost^/lb
Annual Cost as % of
Sales Price
BPT
BAT
1113
0.4 - 0.85
0.8- 1.7
2260
0.5 - 1.8
1.0-3.6
E. IMPACT ANALYSIS
1. Price Effects
The additional cost to achieve BAT and BPT water pollution guidelines would not have
any significant effect on the cellulose nitrate industry. Cellulose nitrate is only used where
its properties dictate the application rather than by price. The small additional cost could be
passed on to the consumer so that the price would be raised to accommodate these costs.
Such a minor increase would not affect the market.
1. Excludes freight, local and state taxes.
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2. Profitability
40% of the waste from these plants is handled through plant waste treatment facilities
and the other 60% is discharged to sewers Since we believe that the costs for meeting the
guidelines can be passed on to the consumer, there would be no effect on the profitability
of the industry.
3. Plant Closures and Production Effects
Since there would be no effect on profitability with the extra cost being passed on to
the consumer, we see no plant closings or production effects.
4. Employment Effects
There would be no employment effects since there are no plant closings.
5. Community Effects
There would be no community effects.
6. Impact on Industry Growth
The increased costs would not affect the industry growth. The industry is declining
because of the appearance of better and lower cost plastic materials. All previous molding
uses are believed to have been discontinued and the only remaining segment, coatings, is
declining.
7. Balance of Trade Effects
There would be no balance of trade effects.
F. LIMITS TO THE ANALYSIS
Assuming that the cost figures are accurate, we do not see that there are any
questionable aspects to the impact analysis and no assumptions were made that were critical
or would affect the accuracy of our judgment.
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NITRILE BARRIER RESINS
INTRODUCTION
Nitrile Barrier resins are included in this study not because of their present significance
(they are not yet made in commercial quantities and are not yet available for sale) but
because of their potential significance in the future. These are the resins which have been
test marketed as Coca Cola bottles, Pepsi Cola bottles and Seven-Up bottles. Obviously, if
they should be accepted for soft drink bottles their consumption would quickly become
significant. Since they are not yet being made commercially and in some cases even the raw
materials have not yet been established, economic data on costs, profits, and type of plant
are not available. The processes are proprietary.
The three materials classified as nitrile barrier resins are Barex made by Standard Oil
of Ohio, Lopac made by Monsanto and NR-16 (an experimental designation) by DuPont.
The NR-16 resin was developed jointly with American Can Company and is trade named
Vicobar. These resins are lightweight, transparent, impact resistant and have a high
acrylonitrile content. They can be formed into bottles which are clear, have excellent barrier
properties, and can contain carbonated beverages. It is stated that they can be disposed of in
normal waste channels without adversely affecting incinerator operations. They are
generally approved for packaging foods and beverages. These materials will be competing
with glass and other clear transparent plastics suitable for bottles such as PVC, methyl
methacrylates and possibly aromatic polyesters. The reason for their potential significance is
the market for soft drink bottles which could consume up to 4.4 billion pounds of this
resin. These resins, of course, must compete with plastic coated glass bottles and other
plastic bottles.
A. INDUSTRY SEGMENTS
At present these nitrile resins are only being made in developmental quantities for
evaluation. There are several operating units. One is the DuPont Company, which is
operating at a level of about 10 million pounds per year at Montague, Michigan and is
presently increasing capacity to 30 million pounds per year. It is rumored that they are
considering a 100 million pound a year plant. They state, however, that they do not have an
operating plant, do not have a design basis, have made no decision on the process and have
no plant data on the raw wastes or treatability of such wastes.
Vistron Company, a division of Standard Oil of Ohio, makes a product called Barex. It
is presently being made in a pilot plant with a capacity of 12 million pounds per year
operated by Ethyl Corporation at Baton Rouge, Louisiana. It is understood that Vistron is
currently constructing a plant with a capacity of 20 million pounds a year at a cost of 59
million to be completed by 1975 in Ohio.
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The third producer is Monsanto which produces Lopac resin. They are currently
constructing a plant at Springfield, Massachusetts. Data on its capacity and process are not
known. Monsanto is also constructing a plant to make nitrile barrier bottles in South
Windsor, Connecticut and is considering two more bottle plants.
Probably no more than 50 people are currently employed in production. To date the
composition of these specific resins is not known nor is it known whether the formulas are
definitely established. One thing is common to all processes; they have at least a 60%
acrylonitrile content. The other monomers which may be copolymerized with the
acrylonitrile include methyl acrylate, methyl styrene, styrene, methyl acrylonitrile and
butadiene.
Other companies who have been mentioned in the press as considering production of
similar nitrile barrier resins include Borg-Warner, Dow, Rohm and Haas, Union Carbide,
American Cyanamid and B.F. Goodrich.
Without knowing the specific raw materials or processes, it is not possible to discern
whether there will be any difference in the effluent control costs by the different producers
but we consider it unlikely.
B. FINANCIAL PROFILES
Since we do not know the process, size of the plant, raw materials or selling price, it is
not possible to establish financial profiles. We estimate current profitability to be negative;
but future profitability will be positive and approaching the industry average.
C. METHODOLOGY
Same as general methodology.
D. POLLUTION CONTROL COSTS
Capital Cost Per Plant, $1000
Annual Cost^/lb
Annual Cost as % of Sales Price
BPT
82
0.06 - 0.36
0.1 -0.6
BAT
161
0.06 - 0.78
0.1 - 1.3
E. IMPACT ANALYSIS
1. Price Effects
The impact of present costs to reach both BPT, BAT, and BADT are not significant
enough to affect the production or profitability of nitrile barrier resins. The price would be
raised to take into account the cost of meeting the guidelines due to the anticipated demand
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inelasticity of the product. These increases in price would be insignificant compared to
anticipated increases caused by rising raw material prices. They will also be small in
comparison to anticipated cost savings as larger plants are built.
2. Profitability
Under present circumstances with resin selling at 60^ a pound, the added cost for water
pollution can be passed on to the consumer and therefore there would be little effect on
profitability. If, however, the nitrile barrier resins become suitable as bottles for carbonated
beverages, the price will have to drop so that they will be competitive with glass and other
resins. At these lower prices, the cost of meeting EPA guidelines might not be able to be
fully passed on, which would reduce the profitability. Economies of scale of large plants
which would then be built might offset this. Again, profitability would probably be more
affected by the raw material costs than water abatement costs.
3. Plant Closures and Production
We do not expect any plant closures due to the cost of meeting BPT,
BAT, and BADT guidelines.
4. Employment Effects
We do not anticipate any unemployment effects since no plant closures
are expected.
5. Community Effects
Since there would be no employment effects there should be no community effects.
6. Impact on Growth
The major factor affecting the industry growth is going to be the performance
qualifications of these resins versus glass bottles, polypropylene bottles and poly-
vinylchloride bottles. Since the cost of establishing new plants, BADT, represents only .03
of a percent of present selling price, there would not seem to be any restrictions on the
construction of additional capacity. Our analysis shows that most of the barrier resin plants
being built will have their own treatment facility or will have primary treatment, and 70%
will be direct dischargers with the remaining 30% discharging to municipal sewers.
7. Balance of Trade
No effect •
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F. LIMITS OF ANALYSIS
The major limit to the accuracy of our estimates is the fact that we do not know what
the final nitrile barrier resins will be made of. Also we do not know what the future price
will be. And finally, we do not know whether the properties of the resin will allow it to
capture the large market from substitute materials. We are assuming that the resin will have
moderate success which will allow construction of plants of 100 million pounds per year
capacity by 1983. Further, we are assuming that the costs of pollution control will be
comparable to those for competing materials.
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FLUOROCARBON
INTRODUCTION
The six fluorocarbon resins listed below are considered together since they have several
common properties. First, they all have similar effluent problems in dealing with fluorine.
Secondly, they have a basically similar chemical nature. Thirdly, they are all high priced,
small volume specialty resins produced by, at the most, three producers.
Company
FLUOROCARBON RESIN PRODUCTION
Resins
Trade Name
Capacity
MM Ib/yr
DuPont Tetrafluoroethylene
Fluoronated ethylene propylene
Perfuoroalkoxy
Ethylene Tetrafluoroethylene
Allied Chlorotrifluoroethylene
Ethylene Chlorotrifluoroethylene
Tetrafluoroethylene
ICI Tetrafluoroethylene
Pennwalt Vinylidene fluoride
3M Corp. Chlorotrifluoroethylene
Teflon
Teflon FeP
Teflon PFA
Tefzel
Plaskon CTFE
Halon TFE
Halon TFE
Fluon
Kynar
KelF
Total
14
2
3.5
2.2
2.2
2.3
26.2
Of the total produced, tetrafluoroethylene is believed to account for 75% of capacity
and production. The fluorocarbon resins are noted for their lubricity, temperature resis-
tance, chemical inertness, and weatherability. As a result, these products have found use in
military vehicles, aerospace applications, automotive lubricants, non-stick pots and pans,
electrical applications, and exterior coatings for buildings and equipment exposed to
corrosive environments. They are available as granules, either filled or unfilled, powders,
dispersions, elastomers, and as rods, tubes, and sheets.
A. INDUSTRY SEGMENTS
There are only five companies producing fluorocarbon resins as shown in the table
above. All are major corporations having broad product lines, a high degree of diversifica-
tion, excellent technology and strong financial backing. All but Pennwalt produce a variety
19
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of other plastic materials. Allied and DuPont are integrated to the manufacture of ethylene
and fluorine. All of these plants are modern, efficient, and have a high degree of technology.
All of them are believed to be operating at an economic size level which is small because of
the limited market for these products.
There are only five plants involved and the total number of employees in the industry
is estimated to be less than 200.
All of these plants will be impacted about equally and we have contacted all the
producers.
Prices of fluorocarbon resins range from $3.25 to $10.00 per pound depending on
type. Tetrafluoroethylene, the largest volume produced, is $3.25 per pound. Considering the
limited number of producers, the price of the fluorocarbons is determined not so much by
competition between producers as competition with other materials, both plastic and
rubber. For example, vinylidene fluoride, when used as a corrosion resistant coating for
buildings, processing equipment, etc., competes with PVC, vinylidene chloride and silicate
coatings. Tetrafluoroethylene competes with other plastics such as nylon and chlorinated
tetrafluoroethylene. To some extent the producers also tend to follow the pricing lead of the
major producer.
While there is continued slow growth for these materials we do not foresee that
demand will reach a level where larger plants can be constructed which would allow a
significant cost reduction. Therefore, major price changes in this segment of the industry
will tend upward due to the increased costs of raw materials.
B. FINANCIAL PROFILE
Published data on profitability and cost structure for these materials is not available.
Our best estimate of the industry averages is shown below:
Fluorocarbon Costs:
Income 325
Cost
Fixed 85
Variable 135
Sales, G&A 25
Total 245
Return Before Tax1 80
% of $ Sales 24.6
1. Excludes freight, state and.local taxes
20
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We do not know of any significant deviation or variation between the producers
regarding production cost or profitability. 3M may have somewhat higher raw material costs
since it is not integrated to raw materials.
The market value of plant assets is probably about 10% of the original plant value since
the only salvageable assets are the individual pieces of equipment. One tetrafluoroethylene
plant was shut down last year because of market competition and was dismantled in this
fashion.
C. METHODOLOGY
Same as general methodology.
D. POLLUTION CONTROL COSTS
BPT
BAT
Capital Cost Per Plant,$1000
Annual Cost^/lb
Annual Cost as % of Sales Price
44 - 145
0.32 - 1.95
0.1 -0.6
44- 145
0.32- 1.95
0.1 -0.6
E. IMPACT ANALYSIS
1. Price Effects
Based on the average selling price of fluorocarbons, the cost to meet both BPT and
BAT range from . 1 percent to .6 percent of the selling price. The cost of pollution control
for new plants is .10 of a percent. Since this would not affect demand, these prices will be
passed along to the consumer and result in a consequent price rise.
2. Profitability
Due to the highly specialized and sophisticated uses for these expensive resins, there is
no concern but that a cost of this order of magnitude can be passed along to the consumer
and will have no effect on the profitability of the industry. In addition, all of the plants
have some in-plant treatment, and all discharge to municipal sewers. This industry has
already spent $180,000 on in-plant treatment, so that the effects of additional costs for the
industry will only be another $180,000.
21
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3-7 Plant Closures, Production, Employment, Community,Industry Growth
and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on plant
closures, production, employment, communities, industry growth, or the
balance of trade.
F. LIMITS OF ANALYSIS
We know of no critical assumptions which would affect our conclusions, and believe
that our judgments are correct.
22
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ETHYLENE VINYL ACETATE
INTRODUCTION
Ethylene vinyl acetate resins are essentially low-density polyethylene resins which
have been copolymerized with 15% to 30% of vinyl acetate monomer in order to modify
the properties. They should be considered as modified low-density polyethylenes. The
major reasons for the modification is to change the crystallinity in order to improve the
toughness of the polyethylene. These copolymers have found major application in films
used to produce industrial sacks, i.e. 80 pound sacks used for the packaging of fertilizer,
grain, chemicals, etc.
Technically, any of the 12 producers of low-density polyethylene can produce
ethylene vinyl acetate copolymers and can utilize the same equipment. Therefore, refer-
ence should be made to the U.S. Environmental Protection Agency report on poly-
ethylene entitled "Economic Analysis of Proposed Effluent Guidelines: The
Plastics and Synthetics Industry (Phase I)".
A. INDUSTRY SEGMENTS
The producers of ethylene vinyl acetate resins are all essentially of the same size,
nature and degree of integration. While almost any producer of low-density polyethylene
could produce these resins, the major suppliers are believed to be:
Chemplex Union Carbide
Dow US1
DuPont
Of these, DuPont has announced that it is withdrawing production of these resins in
1974. USI is probably the most vigorous in promoting the development of these products
and indeed is integrated to manufacturing films as well as marketing resin. All of the
companies are major sized corporations with sales over $100 million. All are integrated to
the production of the basic raw material ethylene and all are major corporations highly
diversified into other plastics.
It is our understanding that total production of ethylene vinyl acetate copoJymer is
about 3% of all low-density polyethylene resin or approximately 150 million pounds per
year; this percentage is increasing. The total amount of vinyl acetate in the copolymer
can vary between 15% and 30%. We believe that it averages about 17% and that this
average content is also increasing. The difference in water pollution between low-density
polyethylene and ethylene vinyl acetate resin is the recovery and purification of the
unreacted vinyl acetate monomer.
The size, age, location, level of technology, level of integration and efficiency of
these plants is similar to that for low-density polyethylene production. Only one
23
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company, USI, has a separate line that produces just ethylene vinyl acetate copolymers.
The others use equipment interchangeably with low-density polyethylene production. All
others are of economic size which is now roughly 200-500 million pounds. Most plants
were built within the last 10 years and operate at a high level of technology and effi-
ciency. All of the producers are integrated to ethylene except USI and all are integrated
to end products particularly film. It is not possible to identify the number of people
employed in ethylene vinyl acetates production since there is no data on the percentage
of each plant capacity used to produce the copolymer. We do not see any significant
difference between the various producers of EVA.
B. FINANCIAL PROFILE
The financial performance of producing EVA versus low-density polyethylene de-
pends mainly on the difference in the selling price between the copolymer and the
homopolymer minus the additional cost of vinyl acetate monomer. Since there is no real
data to determine the actual percentage of vinyl acetate in the product mix we can only
base our figures on an estimate that on the average 17% vinyl acetate is added. These
economics are shown below:
Profitability Analysis
Income
Cost
Fixed
Variable
Sales, G&A
Total
16
3.5
8.1
_L4
13.0
Return Before Tax1
% on Sales $
C. METHODOLOGY
Same as general methodology.
D. POLLUTION CONTROL COSTS
Capital Cost per Plant.SlOOO
Annual Costx^/lb
Annual Cost as a % of Sales Price
BPT
26-47
0.03-0.30
0.2- 2.0
3.0
18.7
BAT
53-101
0.06 -0.93
0.4-6.2
1. Excludes freight, state and local taxes.
24
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E. IMPACT ANALYSIS
1. Price Effects
The costs of meeting BPT, BAT, and BADT are small in relationship to the selling
price and insignificant in view of rising raw material costs. Prices will rise to accommo-
date the cost of meeting water pollution guidelines.
2. Profitability
All producers of ethylene vinyl acetate resins are understood to do primary treat-
ment and 50% of them also do biological treatment. Thus,any impact on the industry's
profitability will be less than that indicated by the costs required to meet standards. The
industry is expected to spend $120,000 a year to meet 1977 standards, and $370,000
annually to meet 1983 standards. New plants will have to spend approximately $100,000
per year to meet 1977 requirements. Capital expenditures to date approximate $50,000
worth of installed equipment. As a result of the low percentage of total sales price
required to meet standards and the substantial amount of already installed equipment, we
do not see that the cost of meeting BPT and BAT will affect the profitability of the
industry. These costs can be passed on to the consumer so that there should be no effect
at all on profitability. The cost of water pollution control will be minimal compared to
the overriding factor of the increased costs of ethylene due to the rising price of oil. In
addition, data indicates that the costs of meeting water pollution guidelines for EVA is
less than for both polyvinyl chloride and low-density polyethylene, its major competitors.
We therefore see no effect on the profitability of producing EVA because of meeting
EPA guidelines.
3-7 Plant Closures, Production, Employment, Community, Industry Growth
and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines had no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on plant
closings,employment, communities, industry growth, or the balance of trade.
F. LIMITS OF ANALYSIS
We believe that these analyses are correct based on our judgment of the growth of
the industry. There are no critical assumptions which would affect the validity of our
conclusions.
25
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UNSATURATED POLYESTER RESINS
INTRODUCTION
Unsaturated polyester resins refers to the resins which are almost always reinforced
with glass fiber and used in the production of sail boats, translucent corrugated archi-
tectural panels, automotive parts, motor boats, etc. This industry segment is the largest
and most important of this study.
A. INDUSTRY SEGMENTS
The major producers are listed below:
Company No. Plants
Owens Corning 2
Reichhold 7
Ashland 4
Glidden 5
W.R. Grace 5
Freeman 2
PPG 4
Koppers 2
Cook Paint and Varnish 5
Rohm & Haas 2
Atlas-ICI J_
39
Producers who report their production range in size from companies producing less
than 1 million pounds per year to major firms such as Reichhold Chemical and W.R.
Grace which produce in excess of 100 million pounds per year. Some companies such as
Ford Motor Company, Pioneer, and boat manufacturers produce primarily for captive use
in cars, decorative laminates, and boats, respectively. Other firms such as Reichhold are
primarily merchant producers selling a broad line of products. Since the equipment used
to make polyester resin is the same as that used to make alkyd paint resins and most of
the producers make both products, it is difficult to establish the exact capacity for either
material. Present consumption by end use is shown below. Growth is expected to be 15%
per year through 1978 with the most rapid growth in the transportation, appliances and
construction segments.
27
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1973
End Uses MM Ibs.
Aircraft & aerospace 28
Appliance & Equipment 82
Construction 220
Consumer goods 115
Corrosion resistant products 120
Electrical parts 108
Marine 385
Car and train 307
Other 85
1450
Only one producer in the industry is using a continuous process. All others use a
batch process and the minimum size economic plant is in the order of 25 million pounds
per year requiring probably two to three kettles. Most of the major producers have
multiple small plants located relatively near the markets with capacities of about 50
million pounds a year. As a result of this fragmentation it is unlikely that there will be
further reductions in costs resulting from economies of scale in expanding to large plants.
The larger producers manufacture and market a variety of grades of resin, i.e. 12
base resins and 30 formulations tailored to their customer needs which vary in viscosity,
molecular weight, etc. Some producers also provide specialty resins such as flame resistant
grades which sell for a premium price. Most of the major pro^'eers are integrated to the
manufacture of at least some of their raw materials namely, styrene monomer, glycols,
and maleic or phthalic anhydride. However, raw materials are generally available in small
quantities to all producers so that integration is not a necessity. A number of producers
are also integrated to the manufacture of end products such as building panels, pipe,
down spouts and gutters. Some producers of end products such as boats manufacture
their own resin. Most of the major producers of polyester resins also produce a variety of
other plastic materials particularly alkyds and other thermosetting resins.
In general, the resin producing plants are located near the marketplace since these
resins do not require large-size plants. Reichhold Chemical, one of the largest manu-
facturers has, for example, located plants near the customers in such locations as Azusa,
California; Detroit, Michigan; Elizabeth, New Jersey; Grand Junction, Tennessee;
Houston, Texas; Jacksonville, Florida; San Francisco, California and Tacoma, Washington.
We estimate the following geographical breakdown of production:
Midwest 50%
Northeast and Middle Atlantic 15%
South 25%
West 10%
28
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Since the resins are relatively simple to make, a number of end users such as boat
producers, corrugated panel producers, automobile companies, and furniture companies
make their own resins. In addition, some of the producers of fiber glass reinforcement
make their own resins.
The average age of the plants in the industry is impossible to estimate. There have
been a number of recent expansions by the major producers in new plants. However,
there are also some old alkyd resin kettles that have been in existence for 25 years which
are now producing polyester resins. Since this is essentially a batch process the capacity
depends on the number of kettles in a given plant and this varies from one to ten or
more. All producers use the same technology which has not changed materially in the
past 20 years. The one exception is the development of a continuous process by Reich-
hold Chemical Company which is believed to be used in one plant.
We estimate that there are approximately 80 plants producing these resins and 40 of
them produce 90% of the resin. The major resin producers which have captive operations
are
Owens Corning
Reichhold
The total number of employees in the industry is estimated to be 1200.
It is expected that the industry will grow from the 1973 level of 1.4 billion pounds
per year to 2.8 billion pounds by 1978. Growth in 1974 will be limited by raw material
shortages.
B. FINANCIAL PROFILE
It is extremely difficult to arrive at a meaningful, average financial profile for
companies in this industry since they vary all the way from small companies operating
obsolete alkyd resin kettles to large multi-national firms fully integrated to materials and
end products. Furthermore, since the equipment is used interchangeably for other
products, it is difficult to determine the operating profits for any given product at any
given time. We are showing below, however, our best estimate of the financial profile for
this industry including 1) a major merchant supplier and 2) a small custom producer.
29
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PROFITABILITY ANALYSIS
Production Capacity 10 MM Lbs. 100 MM Lbs.
Income^/lb 19 21
Cost^/lb
Fixed 11 10.0
Variable 4 3.0
Sales. G&A _2__ 3.5_
Total 17 16.5
Return Be fore Tax1 2.0 4.5
7< on Sales $ 10% 21.4%
There is a very wide range of profitability from perhaps 10% to 25% return on sales
before tax depending on the size of the company, the degree of integration, the product
mix and the overhead cost.
The salvage value of the assets is small, perhaps 10% of the original value of the
equipment. Generally the equipment can be used to produce other resins.
C. METHODOLOGY
The best way to assess the economic impact of water pollution control costs is to
relate the value of polyester resins to the value of competing materials and determine
whether these costs can be passed through to the consumer. If they can there will be no
impact.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$ 1000 198 198
Annual Cost^/lb 0.08 - 0.38 0.08 - 0.76
Annual Cost as a % of Sales Price 0.4 - 1.9 0.4 - 3.8
1. Excludes freight, state and local taxes.
30
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E. IMPACT ANALYSIS
1. Price Effects
Prices in this industry are determined primarily by strong price competition amongst
producers. Since there are a wide variety of formulations it is readily possible for one
producer to reduce his costs and therefore use price to obtain a specific customer
contract. Another factor influencing the price structure of the industry is competition
from other substitute materials particularly in automotive parts where reinforced poly-
esters must compete with steel, other plastics and aluminum which are equally suitable.
As it is true with many other industries, the major price effect of the future is going to
be due to the rapidly increasing cost of raw materials particularly styrene, which, for
example, has doubled in price in the last nine months. This price increase far obscures
the .4 cent per pound cost to meet 1977 pollution controls. For example, due to the
shortage of styrene, prices of the resins have increased by 50% in the last three months
to approximately 30<^ a pound.
This industry sends 90% of its waste to municipal sewers so that only 10% of the
waste load is regulated by effluent limitations. The BPT and BAT costs can readily be
passed on to the consumer by the larger producers. We therefore expect that there may
be minor increases in prices due to meeting effluent guidelines with major price increases
due to the increased price of raw materials.
2. Profitability
The major financial effect will be on the profitability of smaller companies if they
have to invest substantial capital to install pollution control equipment. They will also
need technical assistance in installing and providing for water pollution control. These
companies will have to compete on a price basis with the companies which already have
these capabilities and much of the installed equipment. This will be compounded by a
probable necessity for their meeting other federal standards such as air pollution, safety
and noise. The cumulative effect of these regulations may severely reduce their profit-
ability and strain their capital resources. Today many of these companies discharge to
municipal sewers. The larger companies should be able to pass on the costs of pollution
control.
3. Production Effects
Production of these resins is now controlled by the availability of raw materials.
Many companies have recently cut back on production because of the lack of raw
materials. While it is possible that some small companies not discharging to municipal
sewers will shut down operations rather than pay for water pollution control, this pro-
ductive capacity would be more than offset by expansions of the major producers if they
could get sufficient styrene monomer and other raw materials. If there are plant closings
31
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the major reason will be the lack of available raw materials rather than the costs of water
pollution abatement. The major effect of water pollution control costs would be that
some small companies might close down rather than install the necessary treatment equip-
ment. Annual operating costs to meet 1977 and 1983 standards will be 0.4% of the sales
price for a small plant; hence only a few, perhaps 10 plants, might close. These would be
those plants too small to afford the investment. Since only 10% of the waste load is
discharged directly it is estimated that two to three plant closures would occur as a result
of effluent limitations and approximately seven plants could potentially close if pretreat-
ment standards require capital and annual expenditures similar to BPT.
4. Employment Effects
We estimate that perhaps 10 small plants; i.e. 5 mm Ibs/year capacity, might choose
to cease operations. The employment effect from such plant closings would approximate
100 people. However, only about twenty to thirty employees would be affected by direct
discharge effluent limitations.
5. Community Effects
Plant closings would generally be in medium sized cities in New England and the
Midwest. The overall effect on the community would be negligible due to the small size
of the companies closing down. Dislocated employees would undoubtedly be absorbed in
the local work force. There would be no secondary effects.
6. Impact on Industry Growth
A new polyester resin plant coming on stream and meeting BADT levels will have a
cost of .154 per pound. This might prevent small producers from entering this industry;
however, it would not affect industry growth since large present producers would expand
and build new plants. We believe that the costs for meeting new plant standards will be
able to be passed on to the consumer and, therefore, industry growth will not be
affected. Industry growth will be affected over the next several years due to a shortage of
raw materials, however.
7. Balance of Trade Effects
We do not see that the small additional costs for water pollution control of the
unsaturated polyesters would have any effect on the balance of trade.
32
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F. LIMITS OF ANALYSIS
We know of no critical assumptions which have been made that would affect the
accuracy of this analysis. Estimates as to the number of plants which might close could
vary by ± 20%. The only assumption which has been made is that 90% of the waste is
discharged to municipal sewers. If this were incorrect, there might be additional prob-
lems since some additional small plants not on municipal sewers might have difficulty in
meeting the standards.
33
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SATURATED POLYESTER RESINS
A. INDUSTRY SEGMENTS
Saturated polyester resins as distinct from unsaturated polyester resins are a series of
relatively new engineering thermoplastic molding resins, which are sold in limited quanti-
ties (15 million pounds per year) for injection molding of parts requiring high tempera-
ture resistance, excellent dimensional stability and excellent electrical properties. They
have unsurpassed chemical resistance and are very easily fabricated. These resins compete
with materials such as nylon, phenolics, and polyacetals. They sell in the price range of
65^ to 95^ per pound.
There are only three producers, General Electric which manufactures Valox,
Celanese which manufactures Celenex, and Eastman Chemical Products which makes
Tennite.
All of the plants are new, i.e. built in 1971. The Tennessee Eastman plant is at
Kingsport, Tennessee. The General Electric plant is at Pittsfield, Massachusetts and the
Celanese plant is at Belvidere, New Jersey. Total employees are estimated to number 25.
There are two basic types of resins: PET (polyethylene terephthalate) and PTMT
(tetramethylene phthalate). A variety of grades are offered including flame resistant
grades in both natural and colors. The product is similar to polyester fibers and can be
made in the same equipment. Both Celanese and Tennessee Eastman make polyester
fibers.
A 20% per year growth is expected with predictions of 100 million pounds per year
by 1980.
B. FINANCIAL PROFILE
It is very difficult to establish the financial profile for these resins since they are
only being made in limited quantity and/or are being made in facilities used for polyester
textile fibers. The economics of a commercially sized plant which will be built as demand
grows, will be significantly different. Our estimate of future profitability is shown below:
35
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Income 68
Cost
Fixed 9
Variable 35
Sales, G&A 10.5
Total 54.5
Return before tax1 13.5
'/'/• on sales $ 20
C. METHODOLOGY
The only method of assessing the economic impact of water pollution abatement
costs is the extent to which these costs can be passed on to the final consumer. Since
these materials are relatively high priced engineering materials whose price will be declin-
ing, the assessment will have to be based on estimated future prices and estimates of the
materials which these engineering plastics will replace.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant^ 1000 49 77
Annual Cost^/lb 0.07 - 2.03 0.21 - 4.48
Annual Cost as a % of Sales Price 0.1 - 2.9 0.3 - 6.4
E. IMPACT ANALYSIS
1. Price Effects
The price of polyesters today, 68^/lb. is an introductory price and probably does
not cover the full cost of production and development. As larger scale plants are built
and sales increase in volume, it is expected that the price would come down. The level to
which this price will drop depends on the performance value of the polyester versus
competing materials, including metal, polypropylene and other engineering plastics. The
price will be maintained at whatever level is required to market the products in sufficient
volume to operate the plants close to capacity. We believe that the polyesters will com-
pete primarily with other engineering resins such as polyacetal and nylon and that the
cost of meeting water pollution standards will be passed on to the consumer since the
1. Excludes freight, state and local taxes.
36
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increase is small in relationship to the value of the product; therefore, prices will rise to
reflect these costs. It will, however, be only a small percentage 0.1% to 3.0%. A rise of
this nature will be obscured by considerably higher price increases due to the increased
cost of raw materials. The cost for water pollution control in new plants is only .02 of a
% of selling price, and this would be added to the sales price.
2. Profitability
The financial effects of water pollution control on the profitability would be negli-
gible for companies who are able to meet BPT and BAT and who are operating on low
volume water supplies, since these costs could be readily passed on to the consumer.
There is believed to be one present plant operating on a high volume water flow. If it has
to meet 1977 and 1983 standards it would be at a disadvantage and its profitability
would be reduced since it could only pass on as much of the cost as the lower cost
producers. The effect on profitability of new entrants and new plants, which is indeed the
future of this industry, would also be negligible since the costs are quite low. The present
and potential producers, General Electric, Tennessee Eastman, Goodyear and Celanese all
have ample capital reserves.
3. Plant Closures and Production Effects
There would be no effect on present production because of the cost of water
pollution. There is the possibility that the costs of water pollution in the one high-cost
plant might cause this plant to be shut down in favor of building a new plant since the
cost of new plant construction is only .02 of a percent of sales price for water pollution
controls, whereas modifying the one existing plant to meet BAT by 1983 would be 6.4%.
We foresee that the old plant will not shut down until the new plant is substituted; thus,
on a overall basis, total production would not be affected. We expect that production
will expand as the market expands and as the price/performance ratio of the materials
improves versus competitive materials. Since we believe this product will expand in use
and that there is capital available, and since the cost of water pollution control in new
plants is low, these costs can be passed on. There will be expansions and growth in the
industry to 100 million pounds.
4. Employment Effects
We believe that this industry is going to expand, that more and more people will be
employed, and if an obsolete plant is shut down, the employees will be readily absorbed
into the new plant which will have considerably larger capacity.
5. Community Effects
Since this industry is expanding and employing more people, and the dislocated
employees will be reemployed in another plant within the industry there will be no
community effects.
37
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6. Impact on Industry Growth
This industry is expected to grow depending on the price/performance ratio of this
material versus competitive products. We do not see that the cost of meeting guideline
standards would affect this growth. Growth will depend on the relative value of these
materials which will be more dependent on raw material costs than on costs for water
pollution controls.
7. Balance of Trade Effects
There will be no balance of trade effects since exports are expected to increase
regardless of price rises affected by effluent abatement costs.
F. LIMITS OF ANALYSIS
We believe that the accuracy of our estimates are ± 15%. There were no critical
assumptions which would be sufficiently sensitive to overrule our basic conclusions and
there are no questions remaining to be answered.
38
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POLYPROPYLENE FIBERS
A. INDUSTRY SEGMENTS
Polypropylene fibers are defined as multi-filament and staple fibers used in textile
applications and exclude slit film, fibrelated film and mono filaments. Capacity for
multi-filament and staple is estimated at 205 million pounds per year. The principal
market for multi-filament is in the manufacture of indoor/outdoor carpets. Shown below
is our estimate of the demand for polypropylene fiber.
Multi-filament MM Lbs. MM Lbs.
Carpets 55 65
Upholstery 30 35
Other 5
Staple
Nonwoven Carpets 40 45
Carpet Backing 13 20
Other _2 _1_0_
Total 140 180
All three of the major producers of polypropylene fibers are large well financed
diversified corporations. The table below shows their estimated capacity.
Capacity
Company MM Ibs/yr.
Hercules Co. Covington, Kentucky 115
Oxford, Georgia
Phillips Fiber Spartanburg, South Carolina 45
Standard Oil of California Dayton, Tennessee 45
205
39
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Of the three companies, Hercules and Phillips are both integrated to the manu-
facture of polypropylene resins. Standard Oil of California purchases resin. Hercules is the
major producer of polypropylene and Phillips is a major producer of other polyolefin
resins. Phillips is also integrated to the manufacture of other fabricated forms such as
film and bottles. Standard Oil of California is only concerned with the production of
polypropylene multi-filaments. All of the plants are under 10 years of age. All producers
use essentially the same technology and we do not know any difference in efficiency
between these operations. The only difference between the producers is the fact that
Standard Oil of California does not make its own resin. The number of employees in this
industry is estimated to be 1,000.
B. FINANCIAL PROFILES
Shown below is our estimate of the profit of polypropylene fiber production:
Profitability Analysis
l/lb
Income 35
Cost
Fixed 12
Variable 11
Sales, G&A _4_
Total 27
Return Before Tax1 8
% Return on Sales $ 23
This is an estimated average of the three producers. There could be a different profit
for Hercules and Phillips depending on the price which they pay themselves for their
captive polypropylene resin. Since Standard Oil of California has propane available it
need not worry about the availability of propylene which is made from propane raw
material sources. We do not see that there are any financial constraints on additional
expansions in this industry since all of the producers have ample capital available.
C. METHODOLOGY
This is the same as the general methodology. The impact depends on whether the
industry can pass costs through as price increases to consumers which in turn depends on
the price/performance of the material versus that of competitive materials.
1. Excludes freight, state, and local taxes.
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D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$ 1000 146 5 79
Annual Cost^/lb 0.24 - 0.49 0.24 - 0.49
Annual Cost as a % of Sales Price 0.7 - 1.4 0.7-1.4
E. IMPACT ANALYSIS
1. Price Effects
Since there are only three producers of polypropylene fiber, prices are not deter-
mined by competition between producers, but by competition and end uses between
polypropylene fiber and other substitute fibers such as polyesters and nylon. We do
expect that there will be an increase in the price of polypropylene fiber over the next
several years due to sharply increasing prices of the raw material propylene which comes
from natural gas and which is now and is expected to continue to be in short supply.
The cost to control water pollution for polypropylene fibers through 1977 and 1983
amounts to only 0.7% to 1.4% of present selling price, while the cost for a new plant is
only 0.07 percent of the selling price. These factors are insignificant in comparison to the
cost increases of raw materials and can undoubtedly be passed along to the consumer,
thus raising the price slightly. Further, all present producers of polypropylene discharge
to municipal sewers and, therefore, do not come under the effluent standards. We, there-
fore, project only a minor increase in prices due to the costs of water pollution control.
Such a minor increase would not affect the competitive position of polypropylene fibers
versus that of competitive materials since these materials face similar price increases due
to water pollution controls.
2. Profitability
The profitability of producing polypropylene fibers should not be affected in any
way since any minor increase in costs can be passed on to the consumer. There will be
no effect on capital availability since all of the producers of polypropylene fibers have
almost unlimited capital available.
3.-7. Plant Closures, Production, Employment, Community, Industry
Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
41
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required increases can be passed on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth or the balance of trade.
F. LIMITS TO THE ANALYSIS
We believe the accuracy of our judgment is high. We do not believe that there are
any critical assumptions which would affect the overall validity of our conclusions, and
there are no questions remaining to be answered.
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METHYLMETHACRYLATE RESINS
A. INDUSTRY SEGMENTS
Methylmethacrylate resins were originally produced in sheet form during World
War II and trade named Plexiglass and Lucite. These clear, transparent sheets were used as
canopies on military aircraft. These resins are now familiar in their use as illuminated
signs at gas stations and other outdoor displays, ornamental decorative objects such as
cigarette lighters and the ubiquitous automobile tail light lenses. The product is made in
two forms: (l)a clear transparent sheet and (2) a molding powder. Major new growth is
anticipated for these materials due to the laws requiring unbreakable glazing in storm
doors, etc.; thus, methacrylate sheeting is replacing glass in these applications. Another
new application for methacrylate resins which could increase demand by 50% over the
next seven years is the development of methacrylate bath tubs and wash basins. These are
already used extensively in mobile homes and are finding increased use in residential
homes.
Shown below is the estimated production capacity of the methacrylates including
integrated production of the monomer:
Company Capacity MM Ibs.
Monomer Cast Sheet Molding Resin
Rohm and Hass Bristol, Pa.
Deer Park, Texas 520 130 45
DuPont Parkersburg, W.Va. 120 0 35
American Cyanamid Wallingford, Ct.
Sanbom, Maine 100 25 13
Swedlow Florence, Ky.
Garden Grove, Cal. 0 70 0
Others 0_ _1_5_ 1_
Total 740 240 100
It can be noted that three of the producers, Rohm and Haas, DuPont and Cyanamid
are major chemical firms producing a variety of other chemicals and plastics. Swedlow
which has two plants, one on the west coast and one in Kentucky, produces only
methacrylate resins. All producers, with the exception of DuPont, are integrated to the
production of the cast sheet. DuPont has recently licensed a process from Japan to make
cast sheet and will build a production unit at Memphis to do this. The technology in the
manufacture of molding resins has not changed substantially over the past 10 years and is
not expected to. There has been, however, a major change in the manufacture of cast
sheet since Swedlow developed a continuous casting process. Rohm and Haas has also
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developed a continuous casting process and DuPont has licensed one from Japan. Con-
tinuous casting is less expensive than cell casting. These continuous casting plants are 0-5
years of age. The cell casting units are considerably older, being perhaps 25 years old.
The only segment of the industry which would be affected differently by water
abatement costs are the approximately 3 small companies included in the "other" cate-
gory which account for a total of 22 million pounds.
B. FINANCIAL PROFILE
Shown below is the estimated profitability of producing methylmethacrylate sheet
and compound.
Profitability Analysis
Income 70
Cost
Fixed 10
Variable 43
Sales, G&A _7_
Total 60
Return Before Tax1 10
% Return on Sales 14.3
Costs will be similar for all producers with the exception that American Cyanamid,
which only has a cell casting line, will have somewhat higher costs for sheet and DuPont
will have to pay a royalty to Mitsubishi for its license. Swedlow's costs may be higher
since they must purchase monomer.
Prices of the methacrylate molding compounds are determined by the price sensi-
tivity effect and the prices of competing materials. The price sensitivity effect is small;
namely, lowered prices are not going to materially increase demand. Competition from
other resins, i.e., polycarbonates in tail light lenses is a big factor. In general, these prices
will remain stable except for any increase in raw material cost. In the cast sheet segment
the price of methacrylate sheet will be determined by its performance value versus safety
glass, polycarbonates, and other plastic glazing materials. Its use in sanitary ware such as
wash basins and bath tubs will also be based on its performance against that of com-
peting materials such as melamine resins and enameled iron. The price in general will be
held at the highest level which will allow it to improve its market share in each of these
applications. The price of cell cast sheet will be determined by competition with the
continuous cast sheet and will be held at a slight premium due to its somewhat better
properties. The continuous cast sheet will maintain a price/performance value relative to
extruded sheet since the continuous cast sheet has better properties than the extruded
sheet. Prices are expected to increase as basic feedstocks rise in cost.
1. Excludes freight, state and local taxes.
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C. METHODOLOGY
The economic impact of the co*ts of pollution controls will be based on the extent
to which these costs can be passed along to the consumer without losing a share of the
market to competitive materials.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$1000 155-1020 179-1176
Annual Cost^/lb 0.07-0.28 0.07-0.28
Annual Cost as a % of Sales Prices 0.1-0.4 0.1-0.4
E. IMPACT ANALYSIS
1. Price Effects
There is a problem in dealing with methylmethacrylate resins since 240 million
pounds are sold as a cast sheet in a finished fabricated form, whereas another 100 million
pounds are sold as resin at a significantly lower price. This resin then is injection molded
into automobile tail lights, etc. The cost of the finished sheet is 70^/lb and the resin is
45^/lb. As a result the cost of water pollution control as a percent of the sales price
varies considerably. In any event the cost, as shown above, is small. These required price
increases are all relatively insignificant.
Due to the increasing price/performance value of these materials we believe that the
costs to meet BPT, BAT and BADT water pollution abatement will be passed on to the
consumer and the prices will rise accordingly. We see no secondary effects as a result of
these price increases.
2. Profitability
The profitability of this industry should not be affected by this minor increase in
cost since we believe it can be passed on to the consumer. There would be no problem
with capital availability since the producers, Rohm and Haas, DuPont, American
Cyanamid, and Swedlow^have ample capital reserves.
3.-7. Plant Closures, Production, Employment, Community, Industry
Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
45
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required increases can be passed on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth, or the balance of trade.
F. LIMITS TO THE ANALYSIS
We believe the accuracy of our judgment is high. We do not believe that there are
any critical assumptions which would affect the overall validity of our conclusions, and
there are no questions remaining to be answered.
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ALKYD MOLDING RESINS
A. INDUSTRY SEGMENTS
Alkyd molding resins are chemically similar to unsaturated polyester resins and the
alkyd resins used for paint. They are generally available in the form of dry powder, paste,
and rope and usually contain fillers including glass and clay. The alkyd resin itself can be
made by any company which makes polyester resin or alkyd paint resin and thus capacity
figures are not meaningful. Much of the alkyd resin is sold to compounders who add fillers,
colors, catalysts and reinforcement and then sell their proprietary compound to the end
users such as aircraft companies, automotive companies, electrical appliance companies, etc.
Major uses for these resins are in automotive parts because of their high temperature
resistance, excellent electrical properties and excellent dimensional stability. Other applica-
tions include appliances, television sets, etc. The compounder who adds fillers, such as glass
fiber and clay, to prepare a proprietary compound does not generate any liquid waste. These
resins have been in use since 1950 but consumption is believed to be less than
75 MM pounds. Growth is expected to be modest, 5-7% per year.
It is difficult to prepare a list of alkyd molding resin producers since some listings
include people that are primarily paint resin producers and others who are primarily
compounders. Shown below is our estimate of the major producers.
Allied Chemical, Morristown, N.J.
Durez, Tonawanda, N.Y.
Plastics Engineering Company, Sheboygan. Wis.
Koppers, Pittsburgh, Pa.
Celanese, Louisville, Ky.
Freeman Chemical, Port Washington, Wis.
Resyn Corporation. Enden, N.J.
Arco Chemical, Philadelphia, Pa.
There is no significant difference in the firms that produce these resins. Some of the
firms are integrated to the manufacture of raw materials, such as Allied and Koppers, and
most of them formulate molding compounds. There are a large number of different
formulations as indicated by the fact that the price varies from 35^ to 55^ depending upon
the specific formulation.
The technology to make these resins has not changed much over the past 10 years
except in formulations for specific end uses. The plants are relatively old compared to the
plastics industry since they are using older alkyd and polyester equipment.
No producer makes these resins in more than one plant. There are a number of smaller
plants that could make these resins and no new producers are anticipated.
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We have taken into account all the major producers of these resins and do not see that
any one producer would be affected differently than any other.
B. FINANCIAL PROFILE
It is very difficult to determine the financial profiles for these resins including profit
before tax and cash flow since production costs are similar to those for polyesters whereas
the price is dependent on the specific nature of the proprietary compound manufactured.
Thus, the profitability may even vary for each batch of resin made by any one of the
producers. Because of the technical service required and the costs associated with developing
proprietary compounds there is a considerable increase over the actual production cost of
the resin at the mill. Those companies which have highly proprietary compounds may sell
them for 55^ per pound. Other companies which are producing fairly standard resins may
only receive 35^. Margins are estimated to range from 25% to 10% on sales before tax. The
salvage value of the assets is the same for all producers and is only that of the value of the
resin kettle. These can generally be sold as used equipment for perhaps 10% to 20% of the
original dollar investment depending on their condition. The estimated cost structure is
shown below:
Income 39
Cost
Fixed 17.0
Variable 9.0
Sales, G&A 4.5
Total 30.5
Return before tax1 8.5
% Return on Sales 22%
Prices in this industry are dependent upon the performance of the alkyd molding
compound versus that of competitive plastics materials such as phenolics, polyesters, and
the new engineering thermoplastics. Price is not affected by supply versus demand because
supply can be readily increased at any time that the demand should grow. The market
volume is not sufficiently large to encourage intense competition. This is a specialty product
whose price is determined by its specific performance value in a given application. We do
not see that there will be any major price change in the near future since the technology is
fairly well understood and the raw materials are standard. Prices may go up some as a result
of the increased cost of raw materials such as styrene monomer.
1. Excludes freight, state and local taxes.
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C. METHODOLOGY
Same as the general methodology; the impact depends on the ability to pass costs
through as increased prices to consumer, which in turn depends on the price/performance of
the product versus that of competitive materials.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,,$ 1000 198 198
Annual Cost^/lb 0.08 - 0.38 0.08 - 0.76
Annual Cost as a % of Sales Prices 0.4-1.9 0.4-3.8
E. IMPACT ANALYSIS
1. Price Effects
The cost for water pollution control for alkyd molding resins is the same as for
unsaturated polyesters. However, since the alkyd molding resins sell for a higher price per
pound the percent increase in selling price is less.
The alkyd resins are used only where their particular performance is required. The cost
of water pollution control as a percent of sales is not significant for BPCTCA, BATEA or
BADT. We do not believe that there are going to be any new plants. Since this is a relatively
low percent increase, we believe that these costs can be passed on to the consumer with a
resultant price increase, and there would be no secondary effects of these price increases.
2. Profitability
Since price increases can be passed on to the end user, there would be no effect on
profitability. In addition,there would be no problem with capital availability since the major
chemical companies have ample financial resources.
3-7. Plant Closures, Production, Employment, Community,
Industry Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth or the balance of trade.
F. LIMITS TO THE ANALYSIS
We believe our analysis is accurate by ± 15%. We do not believe there are any critical
assumptions which would affect the validity of our conclusions and there are no questions
remaining to be answered.
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POLYVINYL BUTYRAL
A. INDUSTRY SEGMENTS
Eighty percent of the market for polyvinyl butyral is for the safety inner layer in
automobile glass; the remainder is for coatings and export. This product was developed
about 40 years ago and at one time was used in all windows of automobiles. In the 1950's
the automotive manufacturers shifted to tempered glass for side windows and rear windows
for most cars. In all cars, however, polyvinyl butyral is used as the safety ply in the front
windshield. In 1966 the PVB ply was increased in thickness to 0.76 millimeter.
There are at present only two producers of polyvinyl butyral sheet, Monsanto and
DuPont. Up until December of 1973 it was also made by Union Carbide.
Polyvinyl butyral is made from polyvinyl alcohol and both producers are integrated to
this intermediate raw material, polyvinyl alcohol. Further, both producers are integrated to
the manufacture of the sheet which is then sold to the major manufacturers of automobile
windshield glass, namely Pittsburgh Plate Glass and Libbey-Owens-Ford. There are three
plants: Monsanto has a plant at Indian Orchard, Massachusetts which is 30 years old and a
newer plant at Trenton, Michigan which is 16 years old. The DuPont plant is at Fayetteville,
North Carolina and is about 20 years old. The Trenton, Michigan plant of Monsanto
produces only polyvinyl butyral; the Indian Orchard plant produces a complex of thermo-
setting and thermoplastic resins.
The capacity of these plants is not readily discernible since they can be easily expanded
as the demand by the automotive industry increases. It is a batch process and the basic raw
material is polyvinyl alcohol and its precursor polyvinyl acetate. The technology differs
somewhat between the two plants since it is possible to produce by-product materials such
as ethyl acetate or to recycle the polyvinyl alcohol. It is doubtful that this technology is
going to change. It is also very doubtful that any new producers will enter the market. Both
producers would probably be equally impacted by the cost of water pollution control.
B. FINANCIAL PROFILES
No figures have ever been released on the cost of production or profitability of
producing polyvinyl butyral since they are interwoven with the cost of production of the
polyvinyl acetate, polyvinyl alcohol, polyvinyl formal and other derivatives that can be
made in the same plant. Our best estimate is shown below:
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l/lb
Income 72
Cost
Fixed 10
Variable 40
Sales G&A J7.5_
Total 57.5
Return before tax1 14.5
% Return on Sales 20.0
We believe that the production costs to both producers, although using somewhat
different processes, are quite similar.
Prices in this industry are determined by competitive materials. The only competitor is
tempered glass which is lower priced but not as effective. It has been approved for use in
side and rear windows but not for front windows. Improvements in the performance of
tempered or coated glass could force a reduction in the price of polyvinyl butyral. At the
higher end of the scale polycarbonate sheet, which is about four times as expensive as
tempered glass, grew 38% last year in use in safety glass. It is being used in security areas
such as armored cars, bulletproof cars, and areas where theft or other security problems are
high. A third product has now been made available. This is a polyester windshield produced
by the Sieracin Corporation which is optional on certain high priced models. It can be
electrically heated, is shatterproof, and was used in aircraft in competition with
methacrylates many years ago.
We do not foresee that there will be any significant changes in the prices of polyvinyl
butyral as a result of water pollution abatement costs. However, the basic intermediate,
vinyl acetate, is based on ethylene which is expected to increase sharply in cost due to the
"energy crisis."
C. METHODOLOGY
The economic impact of water pollution costs will be assessed on the basis of whether
these costs can be passed on to the ultimate consumer.
1. Excludes freight, state and local taxes.
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D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$1000 1010 2759
Annual Cost,
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POLYVINYL ETHERS
A. INDUSTRY SEGMENTS
The vinyl ethers presently made include: vinyl ethyl ether made by Union Carbide,
vinyl methyl ether made by GAP Corporation and a vinyl methylmaleic anhydride
copolymer also made by GAP. Other ethers have been made in experimental quantities but
these are the only ones of commercial significance. They are offered in both solution and
powdered form so that in total there are about six different grades.
These are not true plastic materials in that their applications are in the manufacture of
hair spray, can coatings, warp sizing of textiles and pressure sensitive adhesives. GAP
operates two plants, both at Calvert City. The Union Carbide plant is at South Charleston,
West Virginia. All three are parts of larger chemical producing operations.
There is no published information on the capacity to produce these particular resins
and the information is held confidential. We beh'eve, however, that the total market is about
3-5 million pounds and we estimate that the dollar sales in total is in the order of $3.75
million. Plants are not operating at capacity and because of limited growth we do not expect
new producers or new plants. Both producers are integrated to the manufacture of some of
their raw materials. There is no integration to end products.
The plants are approximately 15 years old. We do not foresee any changes in
technology which would change the nature of the production process. We would estimate
that less than 1 00 employees are employed in total. We see no reason to distinguish between
the two producers with regard to the impact of water abatement costs.
B. FINANCIAL PROFILES
No information is available on the profitability or cash flow of these three resins. Our
estimate is that the total profit before tax on all three of them is in the order of $1.0
million. Our estimate of costs are shown below. We have no reason to believe that the
profitability of one producer differs materially from that of the others. The major con-
straint on additional plant construction is the size of the market. There are no financial
constraints.
Income 1 00
Cost
Fixed 25
Variable 50
Total 75
Return before tax1 25
% Return on Sales 25
1. Excludes freight, state and local taxes.
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Prices in this industry are determined by the value of the product in its end use. These
resins are only used in highly specialized applications where there is little competition.
Under these circumstances prices can probably be maintained at a profitable level. We do
not think prices will change unless some new technology is developed and that is considered
quite unlikely. New competing plastics with lower prices might force a reduction in prices.
C. METHODOLOGY
The economic impact of the cost of water abatement controls will be determined by
whether the cost can be passed along to the consumer, which we think is likely. These
products are based on raw materials which are likely to increase in cost.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$ 1000 29 58
Annual Cost,tf/lb 0.20 - 0.70 0.20 - 1.80
Annual Cost as % of Sales Price 0.2 - 0.70 0.20 - 1.80
At present, polyvinyl ether wastes are treated as follows: 70% is handled in primary
industrial treatment and 30% is discharged to municipal sewers. The total annual cost to the
industry to meet 1977 standards has been estimated at $30,000; to meet 1983 standards, it
will be $70,000 per year.
E. IMPACT ANALYSIS
1. Price Effects
We believe that since the costs to meet water pollution guidelines are a minor percent
of the selling price,these costs will be passed on to the consumer. Thus, the price of the resin
will rise to include the costs for water abatement control in 1977 and 1983. These increases
will also cover the costs to new plants. We do not see that there will be any secondary
effects as a result of these price increases.
2. Profitability
Since we believe that the costs for water pollution abatement can be passed on to the
consumer, there will be no effect on profitability. Further, since the cost to provide such
water abatement is low, we do not see that there will be any effect on capital availability.
3-7. Plant Closures, Production, Employment, Community,
Industry Growth, and Balance of Trade Effects
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Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth or the balance of trade.
F. LIMITS TO THE ANALYSIS
We believe that our analysis is correct by ± 15%. We have made no assumptions that
would be critical to our conclusions, and there are no questions remaining to be answered.
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POLYVINYLIDENE CHLORIDE
A. INDUSTRY SEGMENTS
Polyvinylidene chloride resin, trade named Saran by Dow, is manufactured in two
forms, as a latex which is used for coatings on paper and other plastic films and as a solid
material which is extruded into film commonly used for wrapping turkey, cheese, etc.
Dow and Vulcan are the sole producers of the monomer and Dow is the sole producer
of the solid polyvinylidene chloride. Dewey and Almy produces latex from purchased
monomer at Owensboro, Kentucky. DuPont is believed to make latex for captive use.
Latices are offered in different solids concentration and molecular weights for different
uses.
The Dow plant at Midland, Michigan is estimated to be at least 20 years of age, whereas
the latex plant of Dewey and Almy is about 12 years of age. We estimate that production is
in the order of 50 million pounds per year. The total number of employees involved would
be less than 100. We do not see that the producers would be affected differently by the
impact of water abatement control costs. Growth is estimated to be 10% per year over the
next five years.
B. FINANCIAL PROFILES
No data has ever been released on the profitability of producing vinylidene chloride
latex. We estimate a profit of 30% of the sales as shown below. The salvage value of the
assets would be that of the equipment such as kettles and reactors which are used. This
equipment can be used in the manufacture of other types of resins. Dow would probably
have higher profits then Dewey and Almy since it markets both the solid and latex and is
integrated back to the monomer. There are no financial constraints on additional plant
expansions; the major restriction being the limited growth of the market which is estimated
to be about 12% per year.
Income 54
Cost
Fixed 8
Variable 30
Total 38
Return before tax1 16
% Return on Sales 30
1. Excludes freight, state and local taxes.
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Prices in this industry are determined by the competitive value of the product, i.e., the
price/performance ratio of vinylidene chloride versus other packaging materials and other
plastic coatings. Vinylidene chloride latices are high priced and, hence, are used only where
they are required for their excellent barrier properties. They are not price sensitive and,
thus, lower prices would probably not increase the size of the market significantly. We do
not see that there will be significant price changes other than those caused by increases in
feedstock raw materials, i.e., ethylene due to increased crude oil prices.
C. METHODOLOGY
The impact of increased costs for water abatement control will be assessed on the basis
of whether these increased costs can be passed on to the final consumer without loss of
market share.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant, $1000 6-32 17-87
Annual Cost/tf/lb 0.05 - 0.11 0.05 - 0.38
Annual Cost as a % of Sales Price 0.1-0.2 0.1-0.7
There are only three independent producers and one captive producer, all of which are
major corporations. All producers have primary treatment, and 50% of these have biological
treatment. There is no discharge to municipal sewers. The annual cost to meet 1977
guidelines is only $10,000;for the industry to meet 1983 guidelines, the industry will spend
$40,000/year, and no new plants are expected.
E. IMPACT ANALYSIS
1. Price Effects
Any additional costs for water pollution abatement will be passed on to the consumer
since no other materials are available at similar prices. Therefore, there will be a minor
increase in price to offset the additional expenses needed.
2-7. Profitability, Plant Closures, Production, Employment,
Community, Industry Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on profitability,
plant closings, employment, communities, industry growth or the balance of trade.
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F. LIMITS TO THE ANALYSIS
The estimated accuracy of our analysis is ± 15%. We have made no critical assumptions
which could affect our conclusions and there are no questions remaining to be answered.
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SILICONS RESINS
A. INDUSTRY SEGMENTS
Silicone materials fall into four categories: resins, fluids, specialties, and elastomers.
This study is concerned only with the resins and fluids. The elastomers are used for seals
and gaskets, cosmetic surgery, and medical applications. The fluids include greases, water
resistant coatings, emulsifying agents, defoaming agents, and automobile and furniture
polishes. The specialties include hand lotions, release agents, anticoagulants and water
repellents. There are also five new silicone glycols used as powder surface modifiers,
emulsifiers and wetting agents.
There are five plants producing these products as listed below:
Stauffer: Adrian, Michigan
General Electric: Waterford, New York
Union Carbide: Sistersville, West Virginia
Dow Corning: Carrollton, Kentucky and Midland, Michigan
All of the producers of silicones are diversified into other plastic and chemical products.
The total capacity of the industry is estimated at 150 million pounds and it is
broken down as follows:
Elastomers 45 million pounds
Resins 20 million pounds
Fluids 60 million pounds
Specialties 15 million pounds
Other 10 million pounds
The industry is believed to be running at about 85% of capacity. The plants range
from 20 years old to 10 years old.
All producers utilize nearly the same technology and all are integrated to the inter-
mediate raw material chlorosilane. All of the companies produce end product such as
greases, rubbers, resins and fluids. We estimate that the number of employees involved in
the manufacture of these resins is less than 100.
B. FINANCIAL PROFILES
It is not possible to estimate the profitability of silicone resin production since the
producers make both elastomers, resins, fluids, and specialties and prices range from $9
to $l/lb. Any average profit figure would have to cover products ranging from medical
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inplants to rubber gaskets used in automobiles. There is no way to separate the profit-
ability of the resin segment from the overall operations. Our best estimate is that return
on sales before tax is in the order of 20%. Fixed costs are high, perhaps as high as 30%
of total costs, due to the extensive technical service and product development effort
required.
There are no financial constraints on further expansion. Expansion will be dictated
by demand. We do not see that there is any significant difference between the profit-
ability of the various producers although their product mix does vary on a year-to-year
basis.
The major factor that determines the price of the silicone resins is its price sensi-
tivity and this effect is small. In most applications, silicones are used where no other
products are available and, therefore, a price reduction would not materially increase
demand. This tends to keep prices stable and at a high level. The constraints on higher
prices are the availability of competitive materials once the price reaches a high enough
level. We do not foresee any likely price changes other than those caused by inflation.
C. METHODOLOGY
The economic impact of water pollution control costs will be determined by the
extent to which these costs can be passed on to the consumer through price increases.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant, $1000 1696-2480 4176-5965
Annual Cost.^/lb 0.60 - 1.20 1.70 - 3.50
Annual Cost as a % of Sales Price 0.6-1.2 1.7-3.5
It should be recognized that all of the present producers have their own treatment
plants rather than depending upon municipal sewage treatment. All producers provide
primary treatment and 20% of the producers provide biological treatment of their wastes
within their own plant complex. The data we have been provided states that the total
annual costs to handle silicone wastes in 1977 will be $1,560,000 and the annual cost to
meet 1983 guidelines will be $5.21 million dollars. Offsetting this, however, is the fact
that the industry already spends $390,000/year for present pollution control systems.
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E. IMPACT ANALYSIS
1. Price Effects
We believe that in light of the unique price/performance position of silicone resins
the costs of meeting BPCTCA, BATEA and BADT guidelines can be passed along to the
consumers. We, therefore, expect that prices will rise proportionate to the costs of water
pollution abatement. We suggest that costs for raw materials and inflation will grossly
exceed these costs. We see no secondary effects because of the price increases.
2-7. Profitability, Plant Closures, Production, Employment,
Community, Industry Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on profit-
ability, plant closings, employment, communities, industry growth or the balance of
trade.
F. LIMITS TO THE ANALYSIS
The accuracy of our analysis is ± 15%. We do not know of any critical assumptions
that have been made which would alter our overall conclusions, and there are no
questions remaining to be answered.
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POLYAMIDES
A. INDUSTRY SEGMENTS
The polyamides considered in this report are those other than nylon 6 and 66. This
includes nylon 6-10, nylon 1 1 and nylon 12. A listing of producers is shown below:
Sales/Price
Nylon 6-10 - DuPont, Richmond, Virginia $1.20
Monsanto, Pensacola, Florida
Nylon 11 - Rilsan Corporation, Glen Rock, N.J. $1.54
Nylon 12 - Rilsan Corporation, Glen Rock, N.J. $1.60
Monsanto reports that their specialty nylons are produced at irregular intervals on
one or two of their 20 autoclaves. They operate for about one day at a time and the
waste is insignificant compared with the water waste generated from production of nylon
6 and 66 at the same plant. Rilsan Corporation, a French Company, has a plant at
Glen Rock, New Jersey which produces nylon 11 and 12. They state that manufacturing
data is classified as confidential and cannot be made available. Our best estimate is that
their total production is in the order of 5 million pounds a year. These resins are used
for powder coating, a technique common in Europe but only just getting started in this
country. They obtain their monomers from their plant in Europe. An examination of
their facility indicates that the plant has zero discharge. The total number of people
employed in this industry segment is less than 100.
B. FINANCIAL PROFILE
There is no way to isolate the costs and profits of producing nylon 6-12 from the
other nylons produced in the same plants at Richmond and Pensacola. There is no data
on raw material costs or production costs at Rdlsan's plant at Glen Rock, New Jersey and
the plant is not operating on a commercial scale. There are so many factors, i.e., con-
sumer acceptance, price/performance, affecting the future profitability of these experi-
mental resins that the cost of water abatement is not significant.
C. METHODOLOGY
The methodology is the same as for the other resins, i.e., the impact depends upon
whether the costs can be passed to the consumer through price increases and, thus, the
firm's profitability is not affected.
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D POLLUTION CONTROL COSTS
BPT BAT
' ..pita! Cost per Plant;$ 1000 60 172
Annual Cost^/lb 0.13-1.17 0.26 - 3.25
Annual Cost as a % of Sales Price 0.1 - 0.9 0.2 - 2.5
We have been informed that at present 100% of the producers treat their own waste
jnd do not discharge to municipal sewers. All producers provide primary treatment, and
60 r provide biological treatment. The annual cost to meet 1977 guidelines will be
580,000 for the industry and to meet 1983 levels, $220 000. The industry already
:-ne;ui-; 540,000/year.
h 'MPACT ANALYSIS
1 Pr.ct Effects
Our analysis of industry pricing practice shows that the insignificant cost for water
i : ,. ;, u control could be readily added to the price, and priceswill rise accordingly. We
. , secondary effects as a result of these price increases.
?;, :ci (.: demand for these products is based on their performance in various end
• >•;!• ; ,, - not sensitive to minor increments in price. There will, however, be major
H •(. ^ r,.L-.ce n\>i to raw material shortages. Since the corporations involved in manu-
: .f,i, .. ,' products have ample financial reserves, we see no problem with capital
Closures, Production, Employment,
,s!ry, industry Growth, and Balance of Trade Effects
:>•'".,' ,1 ici.oact of the cost of meeting the guidelines has no important effect on
p'i^-.- '! : --.jits are insignificant in view of rapidly rising raw material costs, and any
required irire^ses can be passed on to the consumer, there will be no effect on profit-
; :i'-::!\, ;/;nu closings, employment, communities, industry growth or the balance of
<-. I.IM- •"- *0 fHE ANALYSIS
Vve be.'if-n; GUI judgments are accurate. We have made no assumptions which are
crilica! to the sensitivity of our conclusions, and there are no questions remaining to be
v;is \vered.
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SPANDEX FIBERS
A. INDUSTRY SEGMENTS
Spandex is a polyurethane synthetic fiber manufactured in the United States by
three companies, DuPont at Williamsburg, Virginia, Globe Manufacturing Company at Fall
River, Massachusetts and Gastonia, North Carolina and Ameliotex Incorporated, at Rocky
Hill, New Jersey. No production figures are available. We believe that DuPont which is
integrated to raw materials manufactures 75% to 80% of the total produced, which is
between 15-20 million pounds per year. This product is an elasticized synthetic yarn
which replaced rubber thread. At one point there were four or five additional producers,
all of which have discontinued production because of the limited market. The market is
now saturated and shows little signs of growth. The raw materials are similar to those for
other polyurethane plastics. There is only one grade although it is made available in
different deniers. DuPont, of course, is a major producer of other synthetic fibers. Globe
Manufacturing and Ameliotex only produce Spandex fibers for their own use.
The process of manufacturing these fibers is proprietary and we are not certain that
Globe and Ameliotex use the same process as DuPont. There would, however, appear to
be little difference in water pollution between the different producers.
The product was developed for use in bathing suits, foundation garments, support
hose, etc. It was originally estimated that these fibers would be used for suits and dresses;
however, these markets have been taken over by knitted fabrics. The only possibility of
significant growth in this industry would be due to a change in women's fashions. How-
ever, since there is excess capacity today, we do not visualize additional
plants being constructed even with increased demand.
We believe these plants are approximately 10 years of age. We do not believe that
there has been any change in technology in recent years nor do we expect any future
change. We estimate that there are less than 100 people employed in the total industry.
We do think there might be differences in the significance of pollution control costs
between DuPont which is by far the major producer and the two smaller producers, who
probably have higher production costs.
B. FINANCIAL PROFILES
There is no available data on the profitability of producing Spandex fiber. Our
estimate of the profitability is shown below:
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Income 100
Cost
Fixed 25
Variable 6Q_
Total 85
Return before tax1 15
% Return on Sales 15
We expect that DuPont makes a considerably better profit than the two small indepen-
dent producers. There is little or no salvage value for the assets because the equipment is
highly specialized and cannot be used for the production of other fibers.
The major factor affecting the price of Spandex fiber is the relationship between
supply and demand. Supply has generally exceeded demand which tends to keep the
price down. Serious competition from other products, the only one of which is rubber
thread, is unlikely since Spandex is a superior material. We do not expect any significant
price changes other than necessary to cover raw material and pollution abatement costs.
C. METHODOLOGY
The economic impact of water pollution controls will depend on the extent to
which these costs can be passed through to the customer.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant.$1000 24 48
Annual Cost^/lb 0.10 - 0.30 0.10- 0.50
Annual Cost as a % of Sales Price 0.1-0.3 0.1 - 0.5
There are only three producers of Spandex fibers and 90% of the waste is controlled
by in-plant water treatment; 10% of the waste is handled by municipal sewerage. All
wastes have primary treatment. Sixty percent have industrial biological treatment. The
estimated annual cost to the industry to meet 1977 standards is only $40,000,
and $80,000after 1983. It is estimated that the industry already spends
$20,000/year.
1. Excludes freight, state and local taxes.
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E. IMPACT ANALYSIS
1. Price Effects
We believe that the costs to meet effluent guidelines will be added to the price of
the fiber. These price increases will have minimal effect considering that Spandex
fibers are used where they are definitely required. There is no competing material and,
therefore, the price increase will have no effect on demand.
2-7. Profitability, Plant Closures, Production, Employment,
Community, Industry Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, and any required increases can be passed on to the consumer, there will be no
effect on profitability, plant closings, employment, communities, industry growth or the
balance of trade.
F. LIMITS TO THE ANALYSIS
We know of no critical assumptions which would affect our overall conclusions, and
there are no questions remaining to be answered.
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ETHYL CELLULOSE
A. INDUSTRY SEGMENTS
Ethyl cellulose., the only cellulosic except cellulose nitrate used as a plastiCj was
originally produced during World War II and was used because of its toughness at low
temperatures. The major applications were flashlight cases and chess pieces. The material
is now available as pellets for molding and extrusion and as a transparent sheet. This resin
has good electrical properties and excellent toughness. At present there are two pro-
ducers, Dow at Midland, Michigan, and Hercules at Hopewell, Virginia, where other
cellulose derivatives are also produced. The water wastes are combined with those from
other cellulose-based products and the costs will be difficult to allocate between these
products.
No figures have ever been released on the size of plants or production capacity. Our
estimate is that less than 5 million pounds per year are produced and that the plants
employ less than 25 people. We do not believe that water pollution costs will have a
material effect on the future of this limited industry. We foresee no growth for the
product and cannot visualize that there would be any new producers. Discontinuance of
production at either Dow or Hercules would have no significant effect on either com-
pany.
B. FINANCIAL PROFILES
No data is available on costs. Our best estimate is that producers earn a 25% pre-tax
return on sales excluding costs for freight and local taxes.
C. METHODOLOGY
The impact will be based on the ability to pass pollution control costs on to the
consumer through price increases and, thus, the effect on the plant's profitability.
D. POLLUTION CONTROL COSTS
BPT BAT
Capital Cost per Plant,$1000 360-530 750-- 1386
Annual Cost tf/lb 0.55-1.0 1.65-2.84
Annual Cost as a % of Sales Price 1.1-2.0 3.3-5.7
The costs for water pollution abatement for ethyl cellulose has been combined with
the manufacture of other cellulose derivatives since they cannot be separated. All plants
have primary treatment and all plants treat their own wastes; thus they do not discharge
to municipal sewers. It is estimated that the industry already spends approximately
$540,000/year for pollution control.
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E. IMPACT ANALYSIS
1. Price Effects
The costs to meet 1977 and 1983 pollution controls will be added to the price of
the ethyl cellulose resin with a resultant minor price increase. This price increase is
achievable due to the inelasticity of demand^
2-7. Profitability, Plant Closures, Production, Employment,
Community, Industry Growth, and Balance of Trade Effects
Since the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required increases can be passed on to the consumer, there will be no effect on profit-
ability, plant closings, employment, communities, industry growth or the balance of
trade.
F. LIMITS TO THE ANALYSIS
These estimates are believed to be accurate. We know of no assumptions which
would affect the validity of our conclusions and there are no questions remaining to be
answered.
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OTHER RESINS
Although not a part of this contract and not the subject of current study by Arthur D.
Little, Inc., we have been asked to comment on the economic impact of the costs of
meeting the guidelines for epoxy resins, urea and melamine resins, and
phenolic resins, since these guidelines are currently being reproposed.
Our comments are included below.
UREA AND MELAMINE RESINS
The new costs of meeting guidelines for melamine and urea resins, are higher than
previously estimated for BPT standards, and somewhat lower for BAT standards. Further,
they are still a relatively small percentage of the selling price, i.e., 0.3 - 0.4% to meet BPT
and 0.7 - 0.8% to meet BAT standards.
The cost of pollution control for 1977 standards is small. The costs to meet 1983 levels
are not significant for the larger plants using standard amounts of water. Small plants using
high amounts of water would have some problem, especially those plants making urea resins
whose profit margins are minimal. There are a number of captive urea resin plants used to
make resin for particle board and adhesive which might also find it difficult to install new
capacity considering the investment required and the overall cost. Under these circum-
stances it might be cheaper for those producers to buy resin rather than manufacture their
own.
EPOXY RESINS
The cost to meet the revised guideline standards for epoxy resins are higher than the
previously proposed BPT standards and about the same for the BAT standards. In both
cases, these costs are a relatively small percentage of the selling price, i.e., 0.2 - 0.8% to
meet BPT and 0.7 - 2.3% to meet BAT standards. We,therefore,do not see that there will be
any significant impact on the industry as a result of these annual costs.
The investments necessary in a high water usage plant to meet BAT standards ($1.4
million) might cause some problems. Older plants might shut down in favor of construction
of newer plants depending upon the degree of obsolescence of the older units. There are
plants whose age and high water use might cause a problem. There are about 20 com-
pounders and a large number of captive producers and most discharge to sewers.
PHENOLICS
The costs to meet water effluent guideline standards for phenolics are high. They do
present a problem and the impact on the industry may well be significant, since the cost is
very high for an industry which has relatively modest profit margins (6 to 10 percent of
selling price). It is our understanding that the costs to meet these guidelines are still under
review at the time of printing of this document. Until final cost figures are available,
estimates of the potential impact cannot be made. An addendum analysis of this segment
will be conducted in the near future to assess these potential impacts.
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II ( IINK Al HI I'OK I
DAI A I'A(,I
I Report No
EPA 230/1-74-044
3. Recipient's Accession No.
4 I ill .ind Subhtle
Economic Analysis of Proposed Effluent Guidelines - The Plastics and
Synthetics Industry Phase II
5. Report Date
September 1974
6.
8. Performing Organization Rept. No.
C-75913
i l' l'i i Inniiiiif: Orgimi/.ihon Name anil Address
! Arthur D. Little, Inc.
Acorn Park
Cambridge, Mass. 02140
10. Projcct/Task/Work Unit No.
Task Order No. 13
11. Contract/Grant No.
68-01-1541
I 2 Sponsoring Orj;am/alion Name and Address
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D.C. 20460
13. Type of Report & Period Covered
14
Siip|>lemcnl.ir> Notes
Id Abstracts
We expect little economic impact from the imposition of proposed effluent guidelines on the manufacture of the specialty
resins with the exception of unsaturated polyester resins and thermoplastic polyester resins. The small producers of un-
saturated polyester resins will face some difficulty and might close. This would affect less than 1% of the industry capacity.
Costs of meeting guideline standards might slow the growth of saturated polyester resins. Phenolic resins will likely be
affected depending on final costs yet to be developed.
I 7 Ke\ Words and Document Analysis.
Cellulose Nitrate
Nitrile Barrier Resins
Fluorocarbons
Ethylene Vinyl Acetate
Unsaturated Polyester Resins
Saturated Polyester Resins
Polypropylene Fibers
Methylmethacrylate
17b. Identifiers/Open-linded Terms
17a. Descriptors
Alkyd Molding Resins
Polyvinyl Butyral
Polyvinyl Ethers
Polyvinylidene Chloride
Silicone Resins
Polyamides
Spandex Fibers
Ethyl Cellulose
Other Resins
I7i COSAII I icId/C.roup
IK Availability Statement
Limited availability through U.S. Environmental Protection
Agency Information Center, Waterside Mall,
Washington, D.C. 20460
19. Security ("lass (Iliis
Report)
UNC1 ASSI1 11 [)
2(}. Secuntx ( lass ( This
Pace)
IMM( 1.ASSI1 II I)
21. No. ot IVe
80
22. Price
I OKM N1IS-1S
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