United States
Environmental Protection
Agency
Office Of Air Quality
Planning And Standards
Research Triangle Park, NC 27711
EPA-452/R-00-003
July 2000
Air
P DA Economic Impact Analysis for the Final
L rM primary Copper Smelting NESHAP
U.S. Environmental Protection Agency
Region 5, Library (PL-12J)
77 West Jackson Bpulevard, 12th FkW
Chicago. IL 60604-3590
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Acronyms
CAA Clean Air Act
EIA Economic Impact Analysis
EPA United States Environmental Protection Agency
HAPs Hazardous Air Pollutants
ISEG Innovative Strategies and Economics Group
MACT Maximum Achievable Control Technology
MRR Monitoring, Recordkeeping, and Recording
NAICS North American Industry Classification System
NESHAP National Emission Standards for Hazardous Air Pollutants
OAQPS Office of Air Quality Planning and Standards
O&M Operating and Maintenance
RFA Regulatory Flexibility Act
SBREFA Small Business Regulatory Enforcement Fairness Act
SIC Standard Industrial Classification
SX-EW Solvent Extraction Electrowinning
TAG Total Annual Costs
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TABLE OF CONTENTS
Section Page
Executive Summary iv
1 Introduction 1-1
1.1 Scope and Purpose 1-1
1.2 Organization of the Report 2-1
2 Production Overview 2-1
2.1 Product Description 2-2
2.2 Stages of Production 2-2
2.3 By-Products, Co-Products, and Substitution Possibilities 2-6
2.4 Costs of Production 2-6
2.5 Production of Primary Copper 2-7
3 Uses, Consumption, and Demand 3-1
3.1 Uses of Copper 3-1
3.2 Consumption of Copper 3-3
3.3 Trends in Copper Consumption 3-5
3.4 Market Prices for Copper 3-6
4 Industry Organization 4-1
4.1 Market Structure 4-1
4.2 Manufacturing Facilities 4-2
4.3 Firm Characteristics 4-4
4.4 Foreign Trade 4-6
5 Regulatory Costs 5-1
6 Economic Impacts 6-1
7 References 7-1
11
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LIST OF FIGURES
Number Page
2-1 Flow Diagram of Primary Copper Production 2-3
2-2 Flow Diagram of Primary Copper Smelting 2-5
3-1 Consumption of Copper Products By Major Market: 1997 3-2
LIST OF TABLES
Number Page
2-1 Production Costs for the Primary Copper Smelting and Refining
Industry ($106) 2-7
2-2 Domestic Production of Primary Copper Using Smelters:
1991 - 1998 2-8
3-1 Consumption of Refined Copper by Copper Fabricators (103 short tons):
1992 - 1998 3-4
3-2 Consumption of Copper Mill Products by End Market (106 million pounds):
1992 - 1998 3-5
3-3 Historical Price Data for Refined Copper ($ per pound): 1990 - 1998 3-6
4-1 Estimated Production, Design Capacity, and Employment of U.S. Copper
Smelting Facilities: 1996 4-3
4-2 Estimated Sales of Primary Copper from Smelters ($ 106 per year):
1996 4-4
4-3 Characteristics of Companies Owning Primary Copper Smelters: 1996 4-5
4-4 Characteristics of Companies Owning Primary Copper Smelters:
1998/1999 4-5
4-5 Foreign Trade and Foreign Trade Concentration Ratios of Refined Copper
(103 metric tons): 1991 - 1998 5-1
5-1 Emission Control Costs for the Primary Smelting Facilities: (1997$) 5-2
5-2 Monitoring, Recordkeeping, and Recording Costs for Primary Smelting
Facilities: (1997$) 5-3
5-3 Total Annual Capital Costs for Primary Smelting Facilities: (1997$) 6-1
6-1 Estimated Economic Impacts of the Primary Copper Smelting NESHAP:
1997 6-3
in
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EXECUTIVE SUMMARY
Pursuant to Section 112 of the Clean Air Act, the U.S. Environmental Protection Agency
(EPA) is developing National Emissions Standards for Hazardous Air Pollutants (NESHAP) to
control emissions released from the primary copper smelting operations. The Innovative
Strategies and Economics Group (ISEG) of the Office of Air Quality Planning and Standards
(OAQPS) has developed this economic impact analysis (EIA) to support the evaluation of impacts
associated with the regulatory options considered for this NESHAP. By controlling emissions of
HAPs from primary copper smelting, EPA is protecting and enhancing the quality of the nation's
air resources, as stated in Section 101(b) of the Clean Air Act.
The general purpose of this rule is to reduce the flow of the HAPs from potential emission
points within primary copper smelting facilities. Eighty percent of the HAPs released are lead and
arsenic. The other HAPs include cadmium, cobalt, manganese, nickel selenium, antimony,
beryllium, and mercury. The potential production stages during which emissions are released
include the concentrating, smelting, and drying stages. The facilities in the primary copper
smelting source category are controlling HAP emissions from their smelting operations, as
required, to meet maximum achievable control technology (MACT) standards.
There are seven facilities in the primary copper manufacturing source category, six of which
are major sources. Since the proposal of this NESHAP, three of the six facilities have shut down
and have not resumed operation. Reasons cited for the facility shutdowns include buildups of
inventories in 1999 and a shortage of copper concentrates used in primary copper production.
The seven facilities included in this source category were owned by five companies when this
NESHAP was originally proposed. Since then, the industry has consolidated so that only four
companies own the seven facilities that produce primary copper. According to the Small Business
Administration size standards, none of these companies are considered small businesses. This rule
is therefore not expected to have any significant impacts on small businesses.
The total annualized cost of meeting the MACT standards for these facilities is approximately
$1.85 million. The impacts of this NESHAP are determined by comparing the annualized costs
faced by each facility to their estimated annual copper production revenues. The share of costs to
estimated revenues for the affected facilities range from a low of 0.004 percent to a high of 0.209
percent. Thus, compared to the estimated production revenues for each affected facility, the total
annualized costs are minimal. Based on the facility-level TAC/sales ratios, impacts of the
NESHAP on the companies owning smelting facilities are anticipated to be negligible.
iv
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ECONOMIC IMPACT ANALYSIS: PRIMARY COPPER SMELTING
1 INTRODUCTION
Pursuant to Section 112 of the Clean Air Act, the U.S. Environmental Protection Agency
(EPA or the Agency) is developing a national emissions standard to control emissions of
hazardous air pollutants (HAPs) released from domestic primary copper smelting operations.
Production of commercial grade copper entails smelting, a process that results in emissions of
several HAPs. Primary copper is produced using mined ore material. The National Emissions
Standard for Hazardous Air Pollutants (NESHAP) which this economic impact analysis (EIA)
supports was proposed in April of 1998 and is scheduled to be promulgated in November of
2000. The Innovative Strategies and Economics Group (ISEG) of the Office of Air Quality
Planning and Standards (OAQPS) has developed this analysis to assist in the evaluation of impacts
associated with the regulatory options considered for this NESHAP.
1.1 Scope and Purpose
The purpose of this report is to evaluate the economic impacts of pollution control
requirements on primary copper smelting operations. The Clean Air Act (CAA) was designed to
protect and enhance the quality of the nations's air resources and Section 112 of the Act
establishes the authority to control HAP emissions. Eighty percent of the HAP compounds
released from primary copper smelters consists primarily of lead and arsenic. Other HAPs
released include lead, cadmium, cobalt, manganese, nickel, selenium, antimony, beryllium, and
mercury.
To reduce HAP emissions, the Agency establishes maximum achievable control
technology (MACT) standards. The term "MACT floor" refers to the minimum control
technology on which MACT standards can be based. Normally, the MACT floor is set by the
average emissions limitation achieved by the best performing 12 percent of existing sources in a
category when the category contains at least 30 sources. When fewer than 30 sources exist in the
source category being regulated, the floor is based on the emission limitations achieved by the
best performing 5 sources. The primary copper smelting source category contains only six
affected facilities at the time of proposal, therefore the MACT floor was based on the limitations
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achieved by the top 5 sources in the source category. The estimated costs for individual primary
copper smelters to comply with these standards are inputs to the economic impact analysis
presented in this report. Though this industry currently does not exhibit signs of future growth, a
new source MACT is also being established in case new facilities are built. Any new source is
expected to have a vastly different production technology than the existing sources. For this
reason, the MACT standard for existing sources would not be applicable to new sources.
1.2 Organization of the Report
This report is organized as follows. Section 2 describes primary copper, how it is
produced, and how much is produced domestically, while Section 3 describes the characteristics,
uses, and consumers of copper. This section also provides data on the price of copper as well.
Copper is initially sold to intermediate consumers who then use it to manufacture copper
products. These copper products are used as inputs to the production of final goods that then are
consumed by final purchasers. Section 4 provides a summary profile of the copper smelting
industry. Since the proposal of this rule, there has been a reorganization and consolidation of the
industry. This section provides facility-level data on the quantities produced at each smelter, sales
and employment data of the owning entities of the facilities, and international trade data. Small
business considerations are also made in this section as required by the Regulatory Flexibility Act
(RFA) as modified by the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA). Section 5 describes the facility-level costs of complying with this NESHAP, and
Section 6 provides facility- level impacts of compliance with this rule.
2 PRODUCTION OVERVIEW
Primary copper production begins with the mining of copper ore that only has a copper
content of 1 percent and ends with commercial grade copper that is 99.99 percent pure. There
are several stages involved in the production of commercial grade copper, but only the smelting
stage is covered by this NESHAP since this is the stage in which the most HAPs are released. A
description of Copper and its production are provided in this section of the report. Section 2.1
explains what copper is and Section 2.2 provides an overview of how it is produced. Emphasis is
placed on the smelting stage of production. The major by-products, co-products, and substitution
possibilities in the production process are provided in Section 2.3, and Section 2.4 describes the
costs of production. Last, Section 2.5 presents the quantity of primary copper produced in the
U.S. during the 1990s.
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2.1 Product Description
Copper is a metallic element first used over 10,000 years ago. It was the only metal
available for close to five millennia, therefore it was used in all metal applications until gold,
silver, and iron were discovered (Copper Development Association2, 1997). Due to its low
chemical reactivity, copper is corrosion-resistant. It is an excellent conductor of heat and
electricity and is also known for its combination of strength and flexibility. All of these
characteristics make copper, and its principle alloys, brass and bronze, useful for several
applications such as electrical wiring, plumbing, cookware, metalwork, and refrigerator and air
conditioning coils. In addition, copper compounds are found in fertilizers, insecticides,
fungicides, and as pigments in chemical and manufacturing industries. Copper is found in mines in
the form of copper ore, a relatively impure product. The ore is purified through a process which
involves smelting and refining. Smelting of primary copper falls under the Standard Industrial
Classification (SIC) code 3331, Primary Copper Smelting and Refining and under the North
American Industry Classification System (NAICS) code 331411, Primary Smelting and Refining
of Copper (U.S. Department of Commerce, 2000).
2.2 Stages of Production
The following discussion of the production processes for primary copper is derived from
EPA's Sector Notebook on Nonferrous Metals (1995). Primary copper production starts with
the mining of copper ore which has a copper content of only 1 percent and ends with commercial
grade copper that is 99.99 percent pure. The production process involves a number of steps to
remove virtually all impurities present. Once the ore is mined, it is concentrated, smelted into
matte copper, converted into blister copper, and then further refined into commercial grade
copper. As shown in Figure 2-1, each successive stage in the production process results in a
purer form of copper.
All copper is produced from mined copper ore. This ore, containing approximately 1
percent copper, is crushed and ground into a powder. The ore proceeds to the concentrating
stage, where it is slurried in floatation cells by adding water and chemical reagents. Air is blown
through the slurry to form bubbles that attach to the copper minerals. As the air bubbles float up,
they create a froth that contains copper on top of the floatation cells. This froth, or concentrate,
is skimmed off of the top of the cells. The concentrate is 20 to 30 percent copper, while the
remaining 70 to 80 percent is made up of a number of impurities such as sulfur, iron, and several
metal HAPs. The copper concentrate then proceeds to the smelting stage of production.
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Stage of Production Copper Product
(copper content)
Mining
v
Crushing and Grinding
±
Concentrating
Smelting
Converting
Refining
Mined copper ore
(1% copper content)
Copper ore powder
(1% copper content)
Copper concentrate
(20% - 30% copper content)
Matte copper
(50% - 75% copper content)
Blister copper
(98.5% copper content)
Commercial grade copper
(99.99% copper content)
Figure 2-1. Flow Diagram of Primary Copper Production
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The traditional smelting process is shown in Figure 2-2. Its purpose is to further eliminate
impurities present in the copper concentrate. Before the concentrate can be fed into the smelting
furnace, it must be processed further. The concentrate is crushed and milled to obtain the proper
sized material to smelt and fluxes are added to facilitate the smelting process. This material is
then dried to reduce its moisture content and fed into the smelter furnace. As the material is
heated, it becomes molten and collects in a bath at the bottom of the furnace. This molten
material separates into lighter density slag, which contains impurities such as iron silicates, and
heavier density matte copper, which has a copper content of approximately 50 to 75 percent.
Both the slag and matte copper are tapped from the bottom of the furnace every few hours. The
slag is disposed of and the matte copper is charged to the converters. The converting operations
further removes sulfur, iron, and other impurities in the form of slag. It is an oxidation process in
which matte copper is poured into large cylindrical steel vessels that are fitted with a row of pipes.
The pipes are used to inject air into the converters. As air is blown in to the molten matte copper,
the furnace is rotated so that any remaining iron sulfide can react with oxygen to form iron oxide
and sulfur dioxide. Lime and silica are added to react with the iron oxide that formed. The result
is a slag that is removed. This process is repeated until all of the iron is eliminated and a relatively
pure product of copper sulfide remains. A final blow of air oxidizes the remaining sulfur to form
blister copper. This product has a copper content of at least 98.5 percent.
The blister copper is further refined into commercial grade copper in two steps. First, the
blister copper is fire refined. This requires pouring the blister copper into a furnace in which air
and natural gas are blown through to eliminate any remaining sulfur and oxygen. The resulting
molten copper is cast into anodes for electrolytic refining. Electrolytic refining separates out any
remaining impurities from copper through electrolysis in a solution that contains copper sulfate.
Copper anodes are loaded into electrolytic cells that contain cathodes. A DC current is passed
through the cells causing the copper to dissolve from the anodes, transport through the solution,
and re-deposit on the cathodes. Any impurities contained in the anodes fall to the bottom of the
cell in the form of sludge. These cathodes are the product and they contain 99.99 percent copper.
This copper can then be refined and used as an input to produce final products. The primary
copper smelting NESHAP only affects smelting operations and is not applicable to the mining,
concentrating, or electrolytic refining of copper (EPA, June 1997).
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Crushed/Milled Concentrate
Dryer
Reactor/Furnace
Matte
Converter
Blister
Anode Furnace
Slag
Slag
Figure 2-2. Flow Diagram of Primary Copper Smelting
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SX-EW is an alternative method of producing purified copper from oxidized ores. In this
process, a solution of sulfuric acid is poured over the copper concentrate, leaching the copper out
in the form of a solution. This copper-rich solution is then passed into an electrowinning cell. An
electrowinning cell differs from an electrorefming cell because it uses a permanent insoluable
anode. In the cell, the copper is attracted out of the solution to a charged cathode. The cathodes
produced using the SX-EW method are as pure as those produced using the smelting method
discussed above. Approximately 30 percent of copper is produced using SX-EW, while the rest is
produced using the traditional smelting process.
2.3 By-Products, Co-Products, and Substitution Possibilities
The copper smelting and converting processes generate slag, which is waste material that
remains after the copper is concentrated and converted. Most of the slag is stored or discarded
on site, but a small amount is sold for use as sand blasting grit and for railroad ballast. Smelters
also generate air emissions, a large amount of which are HAPs. The HAPs emitted from primary
copper smelters consist of close to 80 percent lead and arsenic compounds. The other 20 percent
of HAP emissions are antimony, beryllium, cadmium, chromium, cobalt, manganese, mercury,
nickel, and selenium. Sulfur dioxide is another by-product of the production process. The sulfur
dioxide is captured and converted to sulfuric acid at all the smelters in co-located acid plants.
Input substitution possibilities are limited. Scrap copper can be substituted for the matte
copper in charging the converter, however the final copper product is no longer primary copper,
but rather secondary copper. In addition, the SX-EW process can be substituted for the
traditional smelting process for oxide ores and secondary sulfide ores. It is not suitable for
primary sulfide ores however, which predominate in many U.S. mines (Hillstrom, 1994).
2.4 Costs of Production
This section discusses the costs of primary copper production, which include labor costs,
cost of materials, and capital expenditures. Labor costs are those associated with workers
involved in primary copper production. Cost of materials includes the cost of parts, containers,
fuels, electricity, and contracted work used in the smelting and refining of primary copper.
Capital expenditures refer to the costs of equipment and its installation. The production costs
incurred by the Primary Copper Smelting and Refining industry (SIC 3331) are available from the
U.S. Census Bureau and are categorized in Table 2-1 for the years 1990 through 1997. It is
evident from this table that material costs account for the largest share of the value of shipments
over this time period, followed far behind by both capital expenditures and labor costs. On
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average, material costs represent 80 percent of the value of shipments while capital expenditures
and labor costs are both approximately 4 percent of value of shipments.
Upon further examination of the production cost data for primary copper production,
there is evidence of an increase in costs through the early 1990s. Capital expenditures and cost of
materials reached their peaks in the years 1994 and 1995, respectively. Both categories of costs
started to fluctuate after 1995 through 1997. Labor costs have increased over the 1990s and
continued to do so up through 1997.
Table 2-1. Production Costs for the Primary Copper Smelting and Refining Industry
($106)
Year
1990
1991
1992
1993
1994
1995
1996
1997
Average
Labor Costs
$145.5
$152.5
$188.6
$199.6
$238.9
$254.1
$268.0
$287.4
$216.8
Material Costs
$3,216.2
$2,987.0
$4,598.7
$4,527.3
$4,719.4
$6,858.4
$4,964.7
$5,459.3
$4,666.4
Capital Expenditures
$95.5
$110.3
$195.5
$312.8
$702.7
$179.7
$235.9
$184.6
$252.1
Value of Shipments
$4,201.2
$3,898.1
$5,578.2
$5,596.0
$6,185.1
$8,660.9
$6,089.6
$6,540.4
$5,843.7
Source: U.S. Department of Commerce, Bureau of the Census. 1992 Census of Manufactures: Industry Series,
Smelting and Refining of Nonferrous Metals and Alloys, Industries 3331, 3334, 3339, and 3341. 1995.
U.S. Department of Commerce, Bureau of the Census. 1997 Economic Census: Primary
Smelting and Refining of Copper. 2000.
2.5 Production of Primary Copper
Table 2-2 shows that the quantity of domestic primary copper produced using smelters
steadily increased over the 1990s but fell to its lowest level in 1999. In 1991,1.12 billion metric
tons of primary copper were produced through smelting and by 1998, total production increased
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by 37 million metric tons to 1.49 billion. The average annual growth rate from 1991 to 1998 is
approximately 4.3 percent. Following 1998, the year in which the largest quantity of copper was
produced, production fell to its lowest level in the 1990s. In 1999, only 1.08 billion metric tons of
primary copper were produced through smelting operations. This represents a 27.5 percent
decrease from the quantity produced in 1998.
Growth in smelted primary copper production over most of the 1990s can be attributed to
a number of factors including the increased use of copper in the building construction and
automotive industries. Both homes and automobiles have grown in size, therefore the amount of
copper used in these products has increased. While demand for copper has remained strong over
the 1990s, a dramatic reduction in the quantity produced did occur in 1999. This was partially
due to the shut down of three copper smelters that took place in 1998 and 1999, which is further
discussed in Section 4 of this report.
Table 2-2. Domestic Production of Primary Copper Using Smelters: 1991 - 1998
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
Quantity (103 metric tons)
1,120
1,180
1,270
1,310
1,240
1,300
1,440
1,490
1,080
Note: Production data rounded to three significant digits.
Source: Edelstein, Daniel." Copper," Minerals Yearbook 1998. U.S. Geological Survey.
Edelstein, Daniel. "Copper," Minerals Yearbook 1995. U.S. Geological Survey.
Edelstein, Daniel. "Copper in December 1999," Mineral Industry Surveys, 2000. U. S. Geological Survey.
2-8
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3 USES, CONSUMPTION, AND DEMAND
Copper is widely used in industrial and consumer applications. Initially, copper products
are used by manufacturing industries to produce final goods. These final products are then sold to
consumers. For example, copper plumbing pipes and electrical wiring are used by the building
construction industry. Construction companies use copper pipes and electrical wiring to build
homes that are then sold to consumers. This section further elaborates on the uses and consumers
of copper, as well as the demand for copper. Section 3.1 begins with a description of the various
uses of copper. In Section 3.2, the domestic consumption of copper is discussed and the
immediate and final consumers of copper are identified. Also provided in this section is a
description of the available substitutes for copper. Section 3.3 provides the trends in copper
consumption by the various end markets and last, market price data for copper are presented in
Section 3.4.
3.1 Uses of Copper
Copper products are generally used as inputs to produce several types of end products for
the building construction market, the automotive market, the transportation products market, the
electrical and electronic products market, the general consumer products market, and the major
appliances market. A sample of these markets are described here.
In 1997, approximately 8.5 billion pounds of copper products were consumed in the U.S.
During this year, the largest share of copper products was consumed by building construction
market, as shown in Figure 3-1 (Copper Development Association4, 2000). The construction
market consumed 3.5 billion pounds of copper products, which represents 42 percent of all
copper products consumed in 1997. Following the construction market, the electrical and
electronic products market consumed about 2.1 billion pounds, or 25 percent, of all copper
products consumed in 1997. The transportation products market consumed 1 billion pounds and
the consumer and general products market consumed almost 800 million pounds. The
transportation market did not consume the largest share of copper, but it is the fastest growing
market of those using copper products as inputs. Growth of any of these markets positively
impacts demand for copper products as inputs to production.
The largest market for copper is the residential and non-residential construction market.
Home construction involves the use of electrical wiring, plumbing, architectural detailing, heating
units, and cooling units, all of which rely on copper as an input. Construction companies and
contractors purchase these copper-containing products to use in the building of homes, structures,
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and buildings. The amount of copper used in construction has increased since 1970 because the
size of the average home has grown. Larger buildings and homes require more wiring, plumbing,
and larger air conditioning units, therefore the amount of copper found in the average house
increased from approximately 280 pounds in the 1970s to approximately 450 pounds in the 1990s
(Copper Development Association4, 2000).
Consumer and
General Products ^^^^^^^^^^^^^
9% / ^^^^HH^^H^, Building
Construction
42%
I ^-— ^^^M^^MM^B
Transportation |
Products
12%
Electrical and
Electronic Products
25%
Figure 3-1. Consumption of Copper Products by Major Market: 1997
8.5 billion pounds
The electrical and electronic products market is made up of four market segments, which
include power utilities, telecommunications, business electronics, and lighting and wiring devices.
Two key segments that drive the consumption of copper for this market are electrical distribution
and telecommunications. Electrical distribution and control products include switchgear and
industrial circuit breakers, fuse equipment, and transformers. Building codes have become more
rigorous over time by requiring residences to include more circuits. This increases the demand for
electrical distribution products, most of which contain copper. The telecommunications market
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segment relies on copper for telephone equipment. The popularity of the Internet has led to an
increase in demand for phone lines. In fact, many households now install second lines so that
phone access can be maintained even when the Internet is being used.
Copper is not only used in the construction of homes and buildings, but also in the
manufacture of transportation products such as automobiles, trucks, buses, aircraft, aerospace,
and railroads. In 1997, the transportation products market used approximately 12 percent of the
annual quantity of copper consumed. Most of this is consumed in automobile production. The
average amount of copper used in automobiles has increased to approximately 55 pounds in 1991
from about 36 pounds in 1980 (Copper Development Association4, 2000). The quantity of
copper used has risen for a number of reasons, including the increase of the use of electronics and
wiring in automobiles and an increase in popularity of larger sized automobiles in the form of
sports utility vehicles (SUVs). As SUVs have become more popular, their production has
included upgraded features such as power locks, power steering, power windows, and
intermittent windshield wipers. All of these upgrades rely upon electrical wiring, of which copper
is an input.
3.2 Consumption of Copper
Several intermediate consumers use copper and copper products to produce final goods.
The output of primary copper producers, mostly refined cathode copper and wire rod, is initially
consumed by copper fabricators. Copper fabricators, in turn, use copper in wire mills, brass mills,
foundries, and powder plants. The fabricators produce copper and copper alloy mill and foundry
products, such as electrical wire, strip, sheet, plate, rod, bar, mechanical wire, tube, forgings,
extrusions, castings, and powder. These products are then sold to a variety of users: chiefly the
construction industry and manufacturing industries. Final products are then sold to consumers in
households (Copper Development Association2, 1997).
Table 3-1 shows the U.S. consumption of refined copper by copper fabricators from 1992
to 1998. The largest share of refined copper was purchased by wire mills followed by brass mills.
-On average, wire mills consume close to 77 percent of the total quantity of refined copper
consumed. They consume the largest quantity of copper due to the nature of the products they
produce, which includes building wire, insulated wire and cable, and telecommunication wire.
Wire and cable allow for the transference of electricity, communication, and information. Brass
mills consume about 22 percent of the total quantity of copper consumed by copper fabricators.
These fabricators produce plumbing tube and pipe, strip, sheet, plate, foil, and mechanical wire.
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Table 3-1. U.S. Consumption of Refined Copper by Copper Fabricators (103 short tons):
1992 -1998
Year
1992
1993
1994
1995
1996
1997
1998
Average
Wire
Mills
1,846.3
2,006.2
2,270.8
2,145.1
2,188.1
2,336.5
2,390.9
2,169.1
Brass
Mills
505.4
554.5
626.1
587.2
647.9
656.6
746.0
617.7
Ingot
Makers
5.6
5.3
7.5
5.1
5.0
4.8
5.2
5.5
Foundries
15.3
13.6
19.0
13.1
12.8
12.3
11.1
13.9
Powder
Plants
8.0
7.1
10.0
6.8
6.7
6.4
5.7
7.2
Other
16.7
14.8
20.8
14.3
13.9
13.4
12.5
15.2
Total
2,397.3
2,601.5
2,954.2
2,771.6
2,874.4
3,030.0
3,171.4
2,828.6
Source: Copper Development Association1. "Consumption of Refined Copper in the U.S.," 2000.
http://marketdata.copper.org/annual 98/01 Item 16.htm
Once copper fabricators produce copper-containing products, these products are then sold
to different end markets for use in production of final goods that individual households,
businesses, and governments will purchase. Households are major purchasers of homes, while
both businesses and government purchase buildings where they can conduct business. Included in
homes and buildings is copper in the form of wiring for electricity and telephones, plumbing for
running water, commercial equipment and appliances for the purpose of manufacturing end
products by governments and businesses, and consumer appliances for the simplification of
household chores.
Copper is not the only input available for use in the production of wiring, plumbing, and
automobile parts. A common substitute is aluminum for electrical equipment, refrigerator tubing,
and automobile radiators. Aluminum long ago replaced copper as the primary input used to
manufacture radiators. Though this is the case, copper still is the main component for electrical
systems in automobiles. This explains why the amount of copper used in automotive production
has increased over the years even though it is no longer used for radiators. Other materials used
instead of copper are titanium and steel for the production of heat exchanger systems. For
applications involving telecommunications, optical fiber replaces copper and in plumbing
3-4
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applications, plastic is a common substitute. Copper is a common input to the production of a
variety of goods, but other materials can easily substitute for many of these applications.
3.3 Trends in Copper Consumption
Overall, there has been an increase in the quantity of copper used in the domestic end
markets. Table 3-2 shows the amount of copper consumed by various end markets over the years
1992 to 1998. Each of the markets represented generally used increasing amounts of copper over
time, as shown by the positive average annual growth rates of copper use. The market that
increased the amount of copper used at the fastest rate over this time period is the transportation
equipment market followed closely by the electrical and electronic products market, both with
average annual growth rates over 5 percent.
Table 3-2. Consumption of Copper Mill Products by End Market (106 million pounds):
1992 - 1998
Year
1992
1993
1994
1995
1996
1997
1998
1992-1998
Building
Construction
2,705
2,828
3,217
3,104
3,237
3,478
3,572
4.87%
Electrical and
Electronic
1,650
1,757
1,980
1,955
2,079
2,160
2,247
Average Annual
5.36%
Industrial
Machinery
858
825
965
934
967
984
967
Transportation
Equipment
774
878
960
943
979
1,049
1,068
Consumer
Products
638
611
732
746
759
794
782
Growth Rates
2.25%
5.63%
3.72%
Source: Copper Development Association5. "Supply of Wire Mill, Brass Mill, Foundry, and Powder Products
and their Consumption in the End-Use Markets," 2000
http://marketdata.copper.org/annual 98/Table4.htm
As mentioned earlier in Section 3.1, both the electronic and transportation equipment
markets have consumed increasing amounts of copper over the 1990s. This is mostly due to the
3-5
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increased size of homes and automobiles. Not only have the end products of these markets
increased in size, but both types of products rely more heavily on electrical systems than before.
Now homes must include more circuits and cars include more elaborate electrical systems.
3.4 Market Prices for Copper
Table 3-3 provides the historical price data of refined copper from 1990 to 1999. While
the average price of copper over this time period was $1.05, the price of copper has fluctuated
from a high of $1.38 in 1995 to a recent low of $.76 in 1999. The high price in 1995 can be
attributed to a global supply deficit that occurred in 1994. World production of copper at this
time was on the rise, however world consumption was increasing at a faster rate. The resulting
deficit caused copper prices to rise in 1994 and continue to increase through 1995. The recent
low price of copper is a response to a growing oversupply and an increase in inventories.
Table 3-3. Historical Price Data for Refined Copper ($ per pound): 1990 -1998
Year Price
1990 $1.23
1991 $1.09
1992 $1.07
1993 $0.92
1994 $1.11
1995 $1.38
1996 $1.09
1997 $1.07
1998 $0.79
1999 $0.76
Average Price $1.05
Source: Edelstein, Daniel. " Copper," Minerals Yearbook 1998. U.S. Geological Survey.
Edelstein, Daniel. "Copper," Minerals Yearbook 1995. U.S. Geological Survey.
Edelstein, Daniel. "Copper in December 1999," Mineral Industry Surveys. U.S. Geological Survey.
3-6
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Certain large companies ended up with large stocks of copper in their U.S. warehouses, mostly on
the West Coast. A major reason for this inventory buildup was the weakness of the Asian
economy. The Asian economic crisis resulted in fewer copper exports from the West Coast to
Asia because of the weakness of Asian currencies.
4 INDUSTRY ORGANIZATION
Since the proposal of the Primary Copper Smelting NESHAP, the nature of the copper
industry has changed. In 1996, seven smelters owned by five companies were producing 1.3
million tons of copper per year, however, since the end of 1998 three smelters have shut down.
Copper production fell to its lowest level in 1999 as a result. In addition to the smelter
shutdowns, there was a consolidation of the copper industry resulting from the takeover of two
copper companies. This reorganization of the copper industry can be attributed to a number of
factors including the fall in the price of copper due to overstocked inventory during the mid-1990s
and a decrease in Asian demand for copper due to its economic crisis.
This section describes the domestic copper industry and how it has transformed. In
Section 4.1, the market structure of the copper industry is described. Section 4.2 characterizes
the manufacturing facilities in this industry, while the companies that own these facilities are
described in Section 4.3. Last, Section 4.4 provides U.S. data for its foreign trade.
4.1 Market Structure
Market structure is of interest because it determines the behavior of producers and
consumers in the industry. In perfectly competitive industries, no producer or consumer is able to
influence the price of the product sold. In addition, producers are unable to affect the price of
inputs purchased for use in production. This condition most likely holds if the industry has a large
number of buyers and sellers, the products sold and inputs used are homogeneous, and entry and
exit of firms are unrestricted. Entry and exit of firms are unrestricted for most industries, except
in the cases where government regulates who is able to produce output, where one firm holds a
patent on a product, where one firm owns the entire stock of a critical input, or where a single
firm is able to supply the entire market. In industries that are not perfectly competitive, producer
and/or consumer behavior can have an effect on price.
The Herfindahl-Hirschman index (HHI) can provide some insight into the competitiveness
of an industry. The U.S. Department of Commerce reports these indices for industries at the
4-1
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four-digit SIC code level for 1992, the most recent year these measures are available. The criteria
for evaluating the HHI is based on the 1992 Department of Justice's Horizontal Merger
Guidelines. According to these criteria, industries with HHIs below 1,000 are considered
unconcentrated (i.e., more competitive), those with HHIs between 1,000 and 1,800 are
considered moderately concentrated (i.e., moderately competitive), and those with HHIs above
1,800 are considered highly concentrated (i.e., less competitive). In general, firms in less
concentrated industries are more likely to be price takers, while those in more concentrated
industries have more ability to influence market prices. The HHI for the Primary Copper Smelting
and Refining industry (SIC 3331) is equal to 2827. By the Horizontal Merger Guidelines, this
industry is considered highly concentrated. Recently, this industry has become even more
concentrated due to two separate mergers that occurred in the late 1990s.
4.2 Manufacturing Facilities
In 1996, seven smelters were in operation in the U.S. Two smelters are located in New
Mexico, three are in Arizona, one is in Texas, and the final smelter is in Utah. All of these
smelters are major sources of HAPs except for the facility located in Utah. The Utah facility is
considered an area source because it emits less than 10 tons per year of any single HAP or less
than 25 tons per year of any combination of HAPs. Table 4-1 provides 1996 facility employment
data and estimated production quantities for the six major sources. The smelter in Utah is omitted
from this table due to a lack of facility-level data. As the table shows, each of the smelters
potentially affected by this regulation was operating near design capacity in 1996. The smelter
operated by ASARCO, Inc. in Hayden, Arizona has the largest number of employees, but BHP
Company, Ltd. operates the smelter estimated to produce the largest quantity of copper due to its
production capacity.
Table 4-2 shows the 1996 estimated sales of primary copper that was produced at each of
the six major source smelters. Facility sales data were estimated by first converting the estimated
copper production quantities from metric tons to pounds. The annual number of pounds
produced at each smelter was then multiplied by the 1996 average price of refined copper, $1.09
per pound. The total estimated sales figure for the 1.27 million pounds of copper produced by
these six smelters is approximately 2.78 billion dollars. This total sales figure is based on the
quantities produced by the smelters, not on the final quantity sold. In many cases, companies that
own copper smelting operations also operate facilities that manufacture copper products. The
facilities retain some share of the primary copper produced in-house for use in the production of
copper products.
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Table 4-1. Estimated Production, Design Capacity, and Employment of U.S. Copper
Smelting Facilities: 1996
Estimated Estimated
Smelter Location Production Design Capacity Employment
(tons/year) Capacity Used (%)
ASARCO, Inc.
ASARCO, Inc.
BHP Co., Ltd.
Cyprus Amax
Phelps Dodge
Phelps Dodge
Total
El Paso, TX
Hayden, AZ
San Manuel, AZ
Globe, AZ
Hidalgo, NM
Hurley, NM
6 locations
126,000
193,500
368,000
188,258
224,000
177,800
1,277,558
126,500
220,000
374,000
198,000
242,000
187,000
1,347,500
99.6%
90%
98%
95%
72%
73%
avg = 95%
450
1,658
1,000
993
500
550
5,151
Note: Total 1996 estimated production of primary copper smelters does not equal the 1996 total
production of 1.300 billion metric tons shown in Table 2-2 because the smelter in Utah is not
included in this table and production data for 1996 is rounded to three significant digits.
Source: Dun & Bradstreet. 1997. "Dun's Market Identifiers," On-line database, accessed through EPA's
National Computation Center computer, FINDS system.
Edelstein, Daniel. U.S. Geological Survey Tele-conference with Jean Domanico, Research Triangle
Institute. October 9, 1997.
Since the end of 1999, the smelters located in El Paso, TX, San Manuel, AZ, and Hidalgo,
NM have ceased operation. ASARCO, Inc. shut down its smelter in El Paso in November 1998.
Next, BHP Company, Ltd. closed its facility in May of 1999 for regular maintenance and has not
resumed operation since. Last, the Phelps Dodge facility in Hidalgo, New Mexico shut down
during the third quarter of 1999. Since two facilities closed during 1999 and one facility did not
even operate for that entire year, the domestic quantity of primary copper produced in 1999
dropped to its lowest level of the 1990s. Reasons cited for the facility shutdowns include
buildups of inventories in the first half of 1999 and a shortage of copper concentrates used in the
production of commercial grade copper (Virta, 1998). Since the regulation has only been
proposed, none of the facilities have faced increased costs of production due to compliance with
this rule. Also, it is unlikely that the smelters ceased operation in expectation of the compliance
costs they would face after the promulgation of this NESHAP, as the economic impacts in
Section 6 will show.
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Table 4-2. Estimated Sales of Primary Copper from Smelters ($106 per year): 1996
Smelter Location Estimated Copper Sales
ASARCO, Inc. El Paso, TX $274.79
ASARCO, Inc. Hayden, AZ $422.00
BHP Company, Ltd. San Manuel, AZ $802.56
Cyprus Amax Minerals Co. Globe, AZ $410.57
Phelps Dodge Corp. Hidalgo, NM $488.52
Phelps Dodge Corp. Hurley, NM $387.76
Total 6 locations $2,786.2
Note: Sales estimates are based on production estimates, which vary based on capacity utilization rates and 1996
production capacity. Estimated 1996 production was multiplied by the 1996 average price of refined
copper, $1.09 per pound.
Source: Edelstein, Daniel. " Copper," Minerals Yearbook 1998. U.S. Geological Survey.
4.3 Firm Characteristics
In 1996, the seven copper smelters that were in operation were owned by five companies.
Table 4-3 shows the sales and employment data for the parent companies of the smelters at this
time. All of the copper smelting operations in the U.S. are owned by large mining companies.
According to the Small Business Administration, small primary copper smelting and refining
companies (SIC 3331) are defined as those having 1,000 or fewer employees. This rule is
therefore not expected to have significant impacts on small businesses.
Since the proposal of the Primary Copper Smelting NESHAP, there has been a
consolidation of the industry. On September 30, 1999 Phelps Dodge, Inc. acquired Cyprus Amax
Minerals Co. and its smelting operation in Globe, Arizona. Around the same time, Phelps Dodge
and a Mexican copper mining company, Grupo Mexico, S.A. de C.V., were both attempting to
acquire ASARCO, Inc. Phelps Dodge had gone so far as to sign a merger agreement with
ASARCO, but Grupo Mexico increased its original offer and successfully acquired ASARCO and
its smelter operations in El Paso, Texas and Hayden, Arizona. The smelter in El Paso, was not in
operation when it was acquired by Grupo Mexico and still has not restarted.
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Table 4-3. Characteristics of Companies Owning Primary Copper Smelters: 1996
Parent Company
ASARCO, Inc.
BHP Company, Ltd.3
Cyprus Amax Minerals Co.
Phelps Dodge, Inc.
Rio Tinto pic
Total
Smelter Locations
El Paso TX, Hayden, AZ
San Manuel, AZ
Globe, AZ
Hidalgo, NM, Hurley, NM
Salt Lake City, UT
7 locations
Sales ($103)
$2,696.69
>$926.40
$2,843.00
$3,786.60
$7,076.00
>$17,328.69
Employment
12,000
>5,000
9,700
15,343
34,809"
>76,852
Notes: aSales and employment data for BHP Co., Inc. for 1996 is unavailable, however this information is
available for BHP (USA) Holdings, a subsidiary of BHP Company. This data for BHP (USA) Holdings
is provided in the above table to show that BHP Co., Inc. is not a small business.
bThe employment data for Rio Tinto pic is from 1998 since 1996 employment data was not available.
Source: Dun & Bradstreet. 1997. "Dun's Market Identifiers," On-line database, accessed through EPA's
National Computation Center computer, FINDS system.
Hoovers Online. 2000. http://www.hoovers.com
Now, four parent companies own the seven primary copper smelters, three of which are
still shut down. The 1998/9 sales and employment data for the current parent companies are
provided in Table 4-4 and they show that the smelters are still owned by companies that are not
considered small by the SBA size standard definitions.
Table 4-4. Characteristics of Companies Owning Primary Copper Smelters: 1998/1999
Parent Company
BHP Company, Ltd.*
Grupo Mexico S.A. de C.V.+
Phelps Dodge, Inc.*
Rio Tinto plc+
Total
Smelter Locations
San Manuel, AZ
El Paso, TX, Hayden, AZ
Hidalgo, NM, Hurley, NM,
Globe, AZ
Salt Lake City, UT
7 locations
Sales ($103)
$12,553.0
$1,061.5
$3,114.4
$7,112.0
$23,840.9
Employment
50,000
22,555
16,400
34,809
123,764
Note: indicates company data are from 1999 and + indicates company data are from 1998.
Source: Hoovers Online. 2000. http://www.hoovers.com
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4.3 Foreign Trade
The market for copper spans not only the U.S., but also the world. Copper is exported
and imported worldwide both in the form of commercial grade copper and copper-containing
products. The U.S. is the second largest producer of mine copper, after Chile. Over the years
1994 through 1998, Chile and the U.S. together accounted for approximately 45 percent of world
mine copper production. Over this same time period, the U.S. was the leading producer of
smelted copper followed behind by Chile and Japan.
This section presents historical data on foreign trade including the quantities of refined
copper exported to and imported from other countries. As shown in Table 4-5, the U.S. has
annually imported larger quantities of refined copper than it has exported. The table also shows
that U.S. copper exports have steadily declined while imports they receive have steadily increased.
In fact, imports of copper to the U.S. have increased at a faster rate than exports have decreased.
The average annual growth rate for exports over this time period is -10.6 percent and for imports
the average annual growth rate is 14 percent. The amount of copper consumed domestically has
continued to increase over time with an increasingly larger portion supplied by imports.
In addition to the export and import data, the annual foreign trade concentration ratios
have also been calculated and are provided in Table 4-4. Average foreign trade concentration
ratios determine the share of U.S. refined copper sold abroad and the share of U.S. consumption
supplied from abroad. The average share of refined copper produced in the U.S. and exported
abroad is 6.2 percent and the average share of copper consumed in the U.S. that is supplied from
abroad is 14.4 percent. The table shows that over the time period examined, the share of U.S.
produced copper that is exported has decreased. In 1991, over 13 percent of copper produced in
the U.S. was exported, but by 1999, this fell to 3.5 percent. The opposite trend exists for
imports. In 1991, the share of U.S. copper consumption supplied from abroad was just over 14
percent, and by 1999, just under 24 percent of copper consumed in the U.S. came from foreign
sources.
4-6
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Table 4-5. Foreign Trade and Foreign Trade Concentration Ratios of Refined Copper
(103 metric tons): 1991 -1998
Year
1991
1992
1993
1994
1995
1996
1997
1998
Average
Exports
263
177
217
157
217
169
92.9
86.2
137.91
Exports/Production
13.2%
8.3%
9.6%
7.0%
9.5%
7.2%
3.8%
3.5%
6.2%
Imports
289
289
343
470
429
543
632
683
367.8
Imports/Consumption
14.1%
13.3%
14.5%
17.5%
17.0%
20.8%
22.7%
23.6%
14.4%
Source: Edelstein, Daniel. "Copper," Minerals Yearbook 1998. U.S. Geological Survey.
Edelstein, Daniel. "Copper," Minerals Yearbook 1995. U.S. Geological Survey.
5 REGULATORY COST
A facility may have to purchase and install two types of equipment to comply with this
NESHAP. First, they may have to purchase equipment to control the emissions they release (if
the equipment they currently operate does not meet the MACT floor), and then additional
equipment may have to be purchased for the monitoring, recordkeeping, and recording (MRR) of
emissions. For the primary copper smelters, emissions are generally controlled through the
operation of baghouses and emissions are monitored using leak detector systems installed on the
baghouses. Not all facilities are required to install new emissions control equipment for this rule,
however all facilities are expected to incur costs from the purchase and operation of monitoring,
recordkeeping, and recording equipment. The costs of complying with this NESHAP were
estimated by identifying the capital equipment smelters would be expected to use to control and
monitor the release of HAP emissions. The operating and maintenance costs associated with both
types of equipment were also estimated.
Two types of costs are incurred when equipment is installed and operated in a facility,
regardless of whether the equipment is used for emissions control or monitoring of emissions:
5-1
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capital costs and operating and maintenance (O&M) costs. Capital costs are the lump-sum costs
that are incurred when capital equipment is purchased and installed. O&M costs are those costs
associated with the upkeep and operation of the capital equipment.
To estimate the annual burden of these costs on the smelters, the lump-sum capital costs
associated with both emissions control and MRR are converted to a stream of annualized costs
using a 7 percent discount rate over the expected life of the capital equipment. For primary
copper smelters, the expected life of a baghouse used to control emissions is 15 years and the
expected life of the leak detector systems used for monitoring, recordkeeping, and recording is
estimated at 10 years. Added to the annualized capital costs are the annual costs of operating and
maintaining the capital equipment. Table 5-1 shows the facility-specific total annual control costs
and Table 5-2 shows the total annual MRR costs. The sum of the annual control costs and annual
MRR costs is the total annual costs of complying with this NESHAP, as shown in Table 5-3.
Table 5-1. Emissions Control Costs for Primary Smelting Facilities: (1997$)
Facility
BHP-San Manuel, AZ*
Grupo Mexico-Hayden, AZ
Grupo Mexico-El Paso, TX*
Phelps Dodge-Globe, AZ
Phelps Dodge-Hidalgo, NM*
Phelps Dodge-Hurley, NM
Total
Total Capital
Costs
$0
$4,100,000
$0
$0
$4,100,000
$0
$8,200,000
Annualized
Capital Costs
$0
$450,158
$0
$0
$450,158
$0
$900,316
O&M
Costs
$0
$417,000
$0
$0
$417,000
$0
$834,000
Total Annual
Control Costs
$0
$867,158
$0
$0
$867,158
$0
$1,734,316
Note: ""Currently not in operation
Source: U.S. Environmental Protection Agency. May 3, 2000. Memorandum from Gene Grumpier, Emissions
Standards Division to Aaiysha Khursheed, Air Quality Strategies and Standards Division. "Information
for Development of Costs for the Primary Copper Smelter Standard."
Only two of the six affected facilities incur positive costs associated with emissions control
due to this rule. The other four facilities already have the necessary control equipment installed.
5-2
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Of the two affected facilities, one is currently shut down. This facility would therefore face
emission control costs if it were to resume operation. If these two smelters are in operation, they
would be required to meet the MACT standard. The costs indicated for this facility are an
estimate of the control costs the facility may incur in meeting the standard. This cost estimate
was based on the purchase and installation of a baghouse, which is $4.1 million. This is the
emission control technology used by the operating facilities affected by this MACT standard. The
annual costs of operating and maintenance of a baghouse equal to $417,000. If the smelter in
Hidalgo, NM resumes operation, the total annual control costs are estimated at $1.7 million.
Table 5-2 shows the MRR costs for each of the potentially affected smelters. Costs are
again divided into the initial capital investment, which is annualized over the expected life of the
equipment and the annual costs of operating and maintaining the MRR equipment. For this
NESHAP, the MRR equipment is a leak detector system. Unlike emissions control costs, each
facility potentially affected by this NESHAP has positive MRR costs. However, three facilities are
currently closed. If the three closed smelters begin operations again, the total annual MRR costs
of this NESHAP are $111,290.
Table 5-2. Monitoring, Recordkeeping, and Recording Costs for Primary Smelting
Facilities: (1997$)
Facility
BHP- San Manuel, AZ*
Grupo Mexico-El Paso, TX*
Grupo Mexico-Hayden, AZ
Phelps Dodge- Globe, AZ
Phelps Dodge-Hidalgo, NM*
Phelps Dodge-Hurley, NM —
Total
Total Capital
Costs
$72,000
$36,000
$36,000
$36,000
$48,000
$48,000
$276,000
Annualized
Capital Costs
$10,251
$5,126
$5,126
$5,126
$6,834
$6,834
$39,297
O&M
Costs
$18,783
$9,390
$9,390
$9,390
$12,520
$12,520
$71,993
Total Annual
MRR Costs
$29,034
$14,516
$14,516
$14,516
$19,354
$19,354
$111,290
Note: ""Currently not in operation
Source: U.S. Environmental Protection Agency. May 3, 2000. Memorandum from Gene Grumpier, Emissions
Standards Division to Aaiysha Khursheed, Air Quality Strategies and Standards Division. "Information
for Development of Costs for the Primary Copper Smelter Standard."
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The last table in this section, Table 5-3, provides the total annual compliance costs for the
smelters in the primary copper smelting source category. The nationwide annual compliance costs
are equal to $1,845,606 if all the smelters are in operation. Otherwise, if the smelters permanently
shutdown, the total annual cost of the rule are $915,544. The total annual costs per facility vary
from a low of $14,516 to a high of $881,674. The total annual compliance costs of the facilities
are significantly affected by whether a smelter has to purchase emissions control equipment.
Table 5-3. Total Annual Capital Costs for Primary Smelting Facilities (1997$)
Facility
BHP-San Manuel, AZ*
Grupo Mexico-El Paso, TX*
Grupo Mexico-Hayden, AZ
Phelps Dodge-Globe, AZ
Phelps Dodge-Hidalgo, NM*
Phelps Dodge-Hurley, NM
Total
Total Annual
Control Costs
$0
$0
$867,158
$0
$867,158
$0
$1,734,316
Total Annual
MRR Costs
$29,034
$14,516
$14,516
$14,516
$19,354
$19,354
$111,290
Total Annual
Costs
$29,034
$14,516
$881,674
$14,516
$886,512
$19,354
$1,845,606
Note: *Currently not in operation
Source: U.S. Environmental Protection Agency. May 3, 2000. Memorandum from Gene Grumpier, Emissions
Standards Division to Aaiysha Khursheed, Air Quality Strategies and Standards Division. "Information
for Development of Costs for the Primary Copper Smelter Standard."
6 ECONOMIC IMPACTS
The Agency has estimated the economic impacts of the primary copper smelting NESHAP
by comparing the estimated costs of compliance with the smelters' estimated baseline sales of
refined primary copper. It was assumed that the operating facilities produced the same quantity
of primary copper as they had in 1996 prior to changes in firm ownership. The annual sales for
these firms were calculated by multiplying these estimated production quantities for the facilities
by the 1996 average price of copper, $1.09. These sales figures are provided in Table 4-1. Table
6-1 shows the ratio of total annualized compliance costs (TAG) to the estimated facility sales. As
6-1
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DRAFT
is evident from these compliance cost-to-sales ratios, the estimated economic impacts of the
primary copper smelting NESHAP on smelting facilities appears quite low. In addition, the Rio
Tinto pic smelter in Utah is expected to incur no compliance costs because it is an area source.
This NESHAP is therefore expected to have no direct economic impact on this facility.
Table 6-1. Estimated Economic Impacts of the Primary Copper Smelting NESHAP: 1997
Smelter
BHP, Inc.*
Grupo Mexico, Inc.*
Grupo Mexico, Inc.
Phelps Dodge Corp.
Phelps Dodge Corp.*
Phelps Dodge Corp.
Average
Location
San Manuel, AZ
El Paso, TX
Hayden, AZ
Globe, AZ
Hidalgo, NM
Hurley, NM
TAC/Sales
(percent)
0.004%
0.005%
0.209%
0.004%
0.181%
0.005%
0.068%
Note: * Currently not in operation
The maximum total annual compliance cost-to-sales ratio incurred by any smelter is less
than 0.5 percent. The maximum TAG per refined copper sales ratio of 0.209 percent is incurred
by a facility that is expected to need to install a baghouse, in addition to leak detector systems.
For four of the other facilities, total annual compliance costs are estimated to be less than 0.1
percent of copper sales. Based on the facility-level TAC/sales ratios above, impacts of the
NESHAP on the companies owning smelting facilities are anticipated to be negligible.
On average, the TAC/sales ratios of 0.07 percent are expected for the facilities affected by
the NESHAP assuming all smelters are in operation. With facilities expected to incur such small
impacts, no appreciable impact on international trade in copper, or on other secondary markets, is
anticipated.
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DRAFT
7 REFERENCES
Copper Development Association1. 2000. "Consumption of Refined Copper in the U.S.,"
Copper Development Association2. 1997. "Copper in the USA: Bright Future-Glorious Past,"
Copper Development Association3. 2000. "Copper in the USA: Bright Future-Glorious Past,"
Copper Development Association4. 2000. "Copper Demand in the 1990s,"
Copper Development Association5. 2000. "Supply of Wire Mill, Brass Mill, Foundry, and
Powder Products and their Consumption in the End-Use Markets,"
Dun & Bradstreet. 1997. "Dun's Market Identifiers," On-line database, EPA's National
Computation Center computer, FINDS system.
Edelstein, Daniel. Oct. 1997. Tele-conference with Jean Domanico, Research Triangle
Institute.
Edelstein, Daniel. 1995. "Copper," Minerals Yearbook 1995. U.S. Geological Survey.
Edelstein, Daniel. 1998. "Copper" Minerals Yearbook 1998. U.S. Geological Survey.
Edelstein, Daniel. 1999. "Copper in August 1999," Mineral Industry Surveys. U.S.
Geological Survey,
Edelstein, Daniel. 2000. "Copper in December 1999," Mineral Industry Surveys. U.S.
Geological Survey,
7-1
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Hoovers Online. 2000.
Rio Tinto pic Homepage. 2000. "A World Leader in Mining,"
U.S. Department of Commerce, Bureau of the Census. 2000. "Standard Industrial Classification
System."
U.S. Department of Commerce, Bureau of the Census. 2000. "1997 U.S. North American
Industry Classification System (NAICS) Manual."
U.S. Department of Commerce, Bureau of the Census. "Statistics for Industry Groups and
Industries," M95(AS)-1, 1995 Annual Survey of Manufactures.
U.S. Department of Commerce, Bureau of the Census. "Statistics for Industry Groups and
Industries," M96(AS)-1, 1996 Annual Survey of Manufactures.
U.S. Department of Commerce, Bureau of the Census. 1995. 1992 Census of Manufactures:
Industry Series, Smelting and Refining of Nonferrous Metals and Alloys,
U.S. Department of Commerce, Bureau of the Census. 1999. 1997 Economic Census: Primary
Smelting and Refining of Copper,
U.S. Environmental Protection Agency. June 1997. "Economic Impact Analysis for the
Proposed Primary Copper Smelting NESHAP," Office of Air Quality Planning and
Standards, Air Quality Strategies and Standards Division.
U.S. Environmental Protection Agency. September 1995. Sector Notebook Project - Nonferrous
Metals. "Primary and Secondary Copper Processing Industry," Office of Enforcement and
Compliance Assurance,
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U.S. Environmental Protection Agency. May 3, 2000. Memorandum from Gene Grumpier,
Emissions Standards Division to Aaiysha Khursheed, Air Quality Strategies and Standards
Division. "Information for Development of Costs for the Final Primary Copper Smelter
Standard."
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TECHNICAL REPORT DATA
(Please read Instructions on reverse before completing)
i. REPORT NO.
EPA-452/R-00-003
3. RECIPIENT'S ACCESSION NO.
4. TITLE AND SUBTITLE
5. REPORT DATE
July 2000
Economic Impact Analysis for the Final Primary Copper Smelting
NESHAP
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
8 PERFORMING ORGANIZATION REPORT NO.
9. PERFORMING ORGANIZATION NAME AND ADDRESS
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Research Triangle Park, NC 27711
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
None
12. SPONSORING AGENCY NAME AND ADDRESS
Director
Office of Air Quality Planning and Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, NC 27711
13. TYPE OF REPORT AND PERIOD COVERED
Proposed regulation
14. SPONSORING AGENCY CODE
EPA/200/04
15. SUPPLEMENTARY NOTES
16. ABSTRACT
Pursuant to Section 112 of the Clean Air Act, the U.S. Environmental Protection Agency (EPA) is developing National
Emissions Standards for Hazardous Air Pollutants (NESHAP) to control emissions released from the primary copper smelting
operations. The purpose of this rule is to reduce the flow of HAPs from potential emission points within primary copper
smelting facilities. Eighty percent of the HAPs released are lead and arsenic. The other HAPs include cadmium, cobalt,
manganese, nickel, selenium, antimony, beryllium, and mercury. The facilities hi the primary copper smelting source category
are controlling HAP emissions from their smelting operations, as required, to meet maximum achievable control technology
(MACT) standards.
There are seven facilities hi the primary copper manufacturing source category, six of which are major sources. Since the
proposal of this NESHAP, three of the six facilities have shut down. The seven facilities were owned by five companies when
this NESHAP was proposed. Since then, the industry has consolidated so that only four companies own the seven primary
copper smelters. According to the Small Business Administration size standards, none of these businesses are considered small.
The total annual costs for this rule are $1.85 million. The share of costs to estimated revenues for the affected facilities range
from a low of 0.004 percent to a high of 0.209 percent. Based on the facility-level cost-to-sales ratios, impacts of the NESHAP
on companies owning smelting facilities are anticipated to be negligible.
17
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b. IDENTIFIERS/OPEN ENDED TERMS
c. COSATI Field/Group
air pollution control, environmental
regulation, economic impact analysis,
maximum achievable control technology,
primary copper smelting
18. DISTRIBUTION STATEMENT
Release Unlimited
19. SECURITY CLASS (Report)
Unclassified
21. NO. OF PAGES
34
20. SECURITY CLASS (Page)
Unclassified
22. PRICE
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