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 E.   FINDINGS
     1.   Plant  Closure  Analysis
         The  overall results of the plant closure  analysis  are presented
 in  Table 3.   Plant and production line closures have  been  identified in
 the Primary and  Secondary Tin, and  Secondary Precious Metals  subcate-
 gories.
    2.   Other  Impacts


         a.   Increase in  Cost  of Production
            The   increase   in   cost   of   production   resulting  from  an
increase  in compliance costs,  for  both  direct and indirect  dischargers
in the nonferrous manufacturing industry,  is  summarized  in  Table 4.   The
results show that most of the plants  experience a  minimal  (less  than 2$)
increase  in the  cost of production.   Of the 38 indirect dischargers in
the  whole industry,  five plants  at  Option C are  expected  to  incur  more
than  a 2%  increase in  production cost.   Most  direct  dischargers  are
expected  to incur insignificant cost  increases.
        b.  Price Change
            The  change  in price  under  the  assumption  of  full  pass-
through  of costs  is  closely linked  to  the  increase  in the  cost  of
production.  The results of price increase are, therefore, quite  similar
to  the  results of increased  production costs.   Table  4  shows that  the
price increase  is  insignificant under  each  option  for  most plants  even
if  all  costs  are passed on  to  the  consumers.  It  should be noted  that
the assumption  of  full cost  pass-through  was  not used  in the screening
or  closure analyses.
        c.  Change in Return on Investment
            The  return on  investment  is  a  good measure  of  a firm's
profitability.   The  control costs of  this  regulation  cause less than a
10$ decrease  in the profitability  of most of the firms  that have been
analyzed; approximately 80% of  both  direct and indirect dischargers are
thus not affected significantly.   Only a few firms experience decreases
in  the   1Q%-20%  range.   The majority of  these plants  experiencing a
decrease in ROI  of  more than 20%  are  identified as  potential closures.
These results are shown in Table 1.
                              -9-

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        d.  Average Investment Cost as a Percentage of
            Capital Expenditures
            The  additional  investment cost  required  to comply with  the
effluent guidelines  has  been studied in relation  to  the annual capital
expenditures  of  the  plants.   Of  the  33  indirect dischargers  in  the
industry,  21  producers under Option  C  are  expected  to commit at  least
20%  of their average  capital  expenditures to the  new investment  cost.
For  most of  the remaining firms, investment  costs  are less than 10?  of
the  average capital  expenditures.   A majority of the direct dischargers
fall  into  this  category.   Details  under  each option  are  presented  in
Table  4.
        e.  Employment Impacts
            The  employment  impacts  of the  regulatory costs  have been
examined  in  the context  of plant closures.   Potential  plant and line
closures  have  been  identified in  the  Primary  and  Secondary  Tin and
Secondary Precious  Metals subcategories (see Table  3).   These closures
could  cause  an  employment loss  of  about  4? workers.    Th.e remaining
subcategories  are  not  impacted  sufficiently  to  cause  plant closures.
Given  the low price  and  production effects  in  these  subcategories,
employment  effects  are  expected to be  minimal.    Minor   production
decreases  could be  brought  about  by shifts  in  capacity utilization
rather than loss of capacity.
        f.  Foreign Trade Impacts
            The foreign  trade  impacts are analyzed  with  respect to  the
effect  of  regulatory costs  on the  balance  of  trade.    The  closure of
high-impact plants could result in a  loss  of capacity of over 650 short
tons.   However,  the  impact could be  minimized  if other plants increase
their production levels.   To the  extent  that the existing or new plants
make  up for   the  lost  capacity,  the  balance   of  trade  will not be
adversely impacted.
    3.  Small Business Impacts
        Small business impacts are analyzed using  two  tests:   (1) total
annual  compliance  costs  as a  percentage  of  total  revenues;  and   (2)
compliance   investment   cost,  as  a   percentage  of   average  capital
expenditures.  The results  of the  tests  show  that  small businesses will
not be significantly impacted by this  regulation.  These results and  the
definitions  used  for classification  of small  businesses are  found in
Chapter XXIV.  Table 5 highlights the  results  of the closure analysis as
it pertains to small businesses.


                              -12-

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                     TABLE  5
RESULTS OF CLOSURE ANALYSIS FOR SMALL BUSINESSES
Industry
Subcategory
Primary and Secondary Tin
Primary and Secondary
Titanium
Primary Zirconium/Hafnium
Secondary Precious Metals
Secondary Tungsten/Cobalt
Number of
Plants Incurring
Costs
5
6
2
32
4
Number of
Small Plants
Incurring Costs
3
1
1
8
1
Number of
Small Plants/
Production Lines
Projected to
Close
3
0
0
1
0
                   -13-

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        New Source Impacts
        The  basis  for  new  source  performance  standards  (NSPS)   and
pretreatment  standards  for  new  sources  (PSNS)  as  established under
Section 306  of the Clean  Water Act is  the  best available  demonstrated
technology.    For  regulatory  purposes  new  sources  include greenfield
plants and major modifications  to  existing plants.
        In  evaluating the  potential economic  impact of  the NSPS/PSNS
regulations on new sources, it is necessary to consider the costs  of the
regulations relative to the costs incurred by existing sources under the
BAT/PSES regulations.
        The  Agency  has determined  that  the new  source regulations  for
most  subcategories  are   riot   more  costly  than  those  for   existing
sources.  The technology basis of the new source regulations is  the  same
as  for  BAT.   Since there  is  no incremental  cost associated  with  the
technology,  new  sources will  not  be operating  at a  cost disadvantage
relative to existing sources due to the regulations.
        For  those  subcategories  for  which  new source  limitations  are
based on a  more  costly technology or  there  are no existing discharging
sources,  it has  been  determined that  the  incremental  costs  are  not
sufficient to cause barriers to entry for new sources.
                             -14-

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              CHAPTER I
ECONOMIC IMPACT ANALYSIS METHODOLOGY

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                 I.   ECONOMIC IMPACT ANALYSIS METHODOLOGY
 A.   OVERVIEW
     This  section  describes  the  analytical  approach   to  estimate  the
 economic  impacts  of  effluent  guidelines  controls  on  the  nonferrous
 metals  manufacturing  industry.    The  nonferrous  metals  manufacturing
 category   includes  plants   that  produce   primary   metals   from   ore
 concentrates  and  plants  that  recover  secondary  metals  from  recycled
 metallic  wastes.   For regulatory purposes,  the category  is  divided  into
 two  separate  segments.  This  report  covers the Phase  II  segment, which
 consists  of 24  subcategories:
         Primary  Antimony
         Bauxite  Refining
         Primary  Beryllium
         Primary  Boron
         Primary  Cesium/Rubidium
         Primary  and Secondary
          Germanium/Gallium
         Secondary  Indium
         Primary  Lithium
         Primary  Magnesium
         Secondary  Mercury
         Primary  Molybdenum/Rhenium
         Secondary  Molybdenum/
          Vanadium
Primary Nickel/Cobalt
Secondary Nickel
Primary Precious Metals/
  Mercury
Secondary Precious Metals
Primary Rare-Earth Metals
Secondary Tantalum
Primary and Secondary Tin
Primary and Secondary
  Titanium
Secondary Tungsten/Cobalt
Secondary Uranium
Secondary Zinc
Primary Zirconium/Hafnium
    The  Agency  is  proposing  to  completely  exclude  three  of  these
subcategories  (Secondary Zinc, Primary  Lithium, .and Primary Magnesium)
from  regulations  because the plants in  these subcategories are at  zero
discharge and  new  facilities are  not expected.  The economic impacts  on
the  remaining  21  metal  subcategories  have been  evaluated for specific
regulatory  options  that  correspond  to  varying   levels  of  effluent
controls.  The general approach consists of two parts:

    •   assessing  the potential for plant closures;  and

    •   determining the general industry-wide  impacts, including changes
        in prices, employment, rates of return on investment, balance  of
        trade, and small business impacts.

    The  assessment of  plant closures  is  made  by   using  two  financial
analysis tests:  (1) a net present value (NPV) test, and (2) a  liquidity
test.   The  NPV test  evaluates the impact of pollution  controls  on the
long-term viability of  a plant;  the liquidity test  measures  the short-
term solvency.
    Production and capacity utilization behavior of the industry between
1978-1982  form the  basis of  assumptions  used  in  the  analysis.   The
approach  also  considers  updated  information on  industry  conditions
                                   1-1

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obtained  from industry  and  government sources.   The approach  proceeds
with  the  following steps:

    1)  description of the industry structure:
            raw materials and production processes
            description of plants
            U.S. production, consumption, and trade
            end uses and substitutes;

    2)  trends in prices and capacity utilizations and consideration of
        baseline population;

    3)  calculation of annual compliance costs;

    ^)  assessment of plant closures;

    5)  determination of industry-wide impacts;

    6)  new source impacts; and

    7)  small business analysis.

    Each of these steps is described  below  to provide a broad framework
for the analysis.  The details of the calculations, including associated
equations,  are  given  in  four  appendices.    The broad  framework  is
designed  to  allow  the  reader   to   read   and  understand  the  basic
methodology quickly.   The appendices provide details on the methods used
to implement the NPV and the liquidity equations.


    The major sources of data used in this study are listed below:

    •   U.S.  Environmental   Protection  Agency:    EPA industry  surveys
        conducted in 1982 under Section 308  of  the Clean Water Act.  Of
        particular importance are  data  on products produced,  production
        volume, value of regulated products, value of plant  shipments,
        capacity  utilization,  total employment,  and  employment  in the
        regulated sector.

    • ___U.S. Department  of  Commerce:  Census of Manufacturers, U.S.
        Industrial   Outlook,    Quarterly    Financial    Report    for
        Manufacturing, Mining and  Trade Corporations.

    •   U.S.  Department  of  the Interior:    Mineral  ' Industry  Surveys,
        Mineral  Facts  and  Problems,  Minerals   and  Materials,  Mineral
        Commodity Summaries,  and Mineral Industry Profiles.

    •   Trade  and  business  publications:    American  Metal  Market  and
        Modern Metals.

    •   Interviews with  trade association  and industry personnel.
                                  1-2

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     o   Annual  and  10-K  reports  of   companies   engaged   in  mining,
         smelting,  and refining nonferrous metals.

     In  some instances, these  sources  indicate that the Agency  may have
 underestimated the  number  of  plants  in  a  subcategory.    We  solicit
 information or comment  on  any  plant  not  covered in  the analysis.

 B.   STEP 1:   DESCRIPTION OF INDUSTRY STRUCTURE
     1.   Raw  Materials  and  Production  Processes
        Nonferrous  metals are  produced in  a  series of  steps that  may
 include    smelting,    refining,    alloying,    and    producing  metallic
 chemicals.   Some  of  these  steps  are  covered  by  existing  regulations
 (such  as  effluent  guidelines  for  inorganic  chemicals  manufacturing).
 The  purposes  of this  section are  to describe the production technology
 in  simple  terms and indicate the  steps involved in producing metal  and
 metal products  from ore as well as  from recovered materials  (scrap),  and
 to  identify the stages covered  by this regulation.  This  information is
 used  to  provide relevant information  regarding the industry structure
 and to classify plants into various  categories.
    2.  Description of Plants
        Plants have  been  classified  on the basis of:   (1) raw material,
 (2)  outputs,  and (3)  the use of outputs.   Some  plants use ore;  others
use  recycled  materials;  and  others use  byproduct ores.   A few  plants
produce metals;  others produce  formed product  and metallic chemicals.
Some  plants use  the output  captively,  while  others  sell  products  to
outside companies.
        The  descriptions of  plants,  along  with  the  structure  of the
companies  that  own the  plants,  are used to analyze the  effects of the
regulations  in  terms  of potential plant closures.    For most  cf the
metals  covered   in  this analysis,  the  following  types  of producers
exist:  (1) large integrated companies that produce metals from ore from
their own  mines;  (2)  integrated  metals producers who  also produce final
products;  (3) independent  firms; and  (4)  recyclers and  smelters.   The
characteristics  of each type of manufacturer are also taken into account
in analyzing the economic effects.
        For purposes  of conducting the two financial  tests,  each plant
is first  placed into  one  of eight  business  groups.   Business segment
information given  in  financial  reports of almost 30  metals  companies
forms the data base for this classification.   Two broad criteria — type
of metal and  type  of manufacturing processes —  have  been used to form
the groups.  For example, primary production  is separated from secondary
                                  1-3

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production.    The  secondary production  is  divided  into  two  groups:
reclamation  of  precious metals and  reclamation of non-precious  metals.
Primary  production is  divided  into  six  groups  based on  metal  types.
Analysis  of the  financial  data  shows  that  significant  differences  in
financial   characteristics   exist  among   groups.     For  details   see
Appendix B.   After  a  plant has  been  classified  into  a group it  is
evaluated by using the financial characteristics of the group and plant-
specific information.
        This  analysis  uses  business  segment  information  rather  than
corporate income information.   This  is because the business segments  of
a  corporation  can  be  associated  closely  with  the  operations  of  a
plant.   A corporation,  especially a  large one,  is  often an amalgam  of
diverse  businesses,  and corporate  ratios  based  on  corporate financial
data  may  not have  much relevance to  the financial  performance of  its
business  segments.    For  this  reason,  business  segment  information  is
used  to the  extent  possible.,   However,  the business segment information
does  not  contain  data  on taxes  and  current  assets.   Thus,  corporate
taxes and current  assets  must be allocated  to  business segments.   This
procedure is described in Appendix B.

    3.  U.S. Production, Consumption and Trade
        Time series data on production,  consumption,  and trade are used
to discuss the importance of imports, the relationship between secondary
and  primary production,  and  changes  in  the  basic  structure   of  the
industry.   For  many  of these metals, imports  of either raw material or
finished  metals  constitute  a  significant  part,  of  total  production.
Further, secondary metal industry production forms a large part of  total
production.   High  regulatory  compliance  costs  can have  significant
effects  on the  future  income of  domestic producers  if imports  are a
large part  of  total  consumption.  Similarly,  secondary metal producers
may  find  themselves  at a  competitive disadvantage  if their compliance
costs are disproportionately high.

    4.  End Uses and Substitutes
        Changes  in  major end  use markets  of  a  metal  cause  long-term
structural changes in its demand.  Such structural changes are likely to
affect  the  long-term .profitability  (and hence economic  viability)  of
existing plants.  This section  in  each  chapter discusses the historical
trends in the size of each major end-use market and assesses the impacts
of the trends on overall demand.

C.  STEP 2;   TRENDS IN PRICES AND CAPACITY UTILIZATION
    AND CONSIDERATION OF BASELINE POPULATION

    Prices of  metals and  metal products  depend  to  a large  extent  on
final demand.  When  the  demand  is  high,  an  industry operates its plants
at a relatively high capacity,  the prices are high, and operating income

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 is  also high.   On the other hand, when  demand  is  low,  capacity,  prices,
 and income are generally  low.   The  trends in capacity  utilization  and
 prices,   in   general,  parallel   the   trends   in   general   economic
 conditions.  In this  study,  the  trends over the five-year period  between
 1978-1982 were used to help  determine economic  impacts.
     In  order  to  estimate  the  effects  of regulations,  a  methodology
 usually requires yearly projections  of product  prices,  number of plants,
 and  total production at the  estimated time of compliance.   However,  as
 discussed  below  the methodology used  for  this  analysis avoids  the  need
 for  such  projections.   The  analysis in this report uses  the  NPV and the
 liquidity  tests  to  determine potential plant  closures.   The NPV  test
 uses  long-term "constant" income for the analysis.  For purposes of  this
 report,  this  income is  taken to  be  the  average of  operating  income
 between  1978-1982.   This  period is considered  representative  because  it
 covers a complete business cycle; the  peak  in production  occurred during
 the  early  years  and the trough took place in  1982.  Hence,  averages  of
 prices  and capacity utilization  during this period,  used to  calculate
 income of  plants, will provide reasonable  estimates of  constant income.
    The  liquidity  test evaluates the  short-term viability of plants  by
examining  their  cash  flows.   The short-term period over which financial
conditions  are  tested is  five  years.   Since  constant income estimates
are  used to conduct  the  test,  price  and production  forecasts  are not
required.
    During  the  1982  recession,  the capacity  utilization  in most of  the
nonferrous  industries  was  extremely low.   It was accompanied by a high
level of  inventories  and a low level  of profits.  In fact, many plants
were unprofitable  during 1982.   However,  the plants  that have  survived
the  1982  recession  are now  operating  at higher  capacity utilization
levels  and  in  many  cases  have  started earning  profits  again.   It is
expected  that  the economic  recovery will  continue,  even  if  at a slow
pace,  and  that  the  general  economic  conditions during  the  compliance
period  will be  somewhat better than those  in 1982,  but probably not as
good as those at  the  peak  of  1978-1979.  Therefore, it is reasonable to
assume  that:   (1) most  plants  will operate  at  less  than full  capacity
(this  implies  that   companies   will  not   add  new  capacity  to  their
operations); and  (2)  plants  that  survived  the  1982 recession  will be
operating during the compliance period.   Hence,  this  study assumes that
the plant population and the  total  capacity in an industry segment will
remain the  same as they were in 1982.

D.  STEP 3:   COMPLIANCE COST ESTIMATES
    Pollution control  technologies  result  in  two  types  of compliance
costs:   (1) capital costs  for  the  control  equipment,  and  (2)  annual
costs  for  operation and  maintenance.   Compliance costs  are  based on
engineering  estimates  of  specific  treatment  alternatives  and  were
                                   1-5

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developed  for  each  plant   after  accounting  for  wastewater  treatment
already in place.   Descriptions  of the costing procedures and  treatment
alternatives are presented in the Development Document.  These  costs  are
used in this  report  to  determine economic impacts.  The increased  costs
have the  following  effects  on  the capital  structure  of a  plant:    (1)
increased  tax  benefits  due  to  investment  tax  credits   and greater
depreciation;  (2)  reduced overall  taxes  due  to additional operating  and
maintenance costs;  (3)  increased asset base;  and (4)  increased overall
production costs.   These costs  and  benefits can  be  converted to  total
annual costs of controls as follows.

    •   The net present  valae of the  tax  benefits due to depreciation,
        which  occur  over  the  depreciable  life   of  the  equipment,   is
        calculated.

    •   Tax benefits  due to  depreciation  and investment tax credits  are
        subtracted to obtain effective capital costs.

    •   Effective  capital  costs  are  amortized  over the useful life  of
        the assets to obtain annualized capital costs.

    •   Total  annual costs   are  calculated  by  adding the annualized
        capital costs and  annual operating  and maintenance  costs after
        taking  into  account  tax  effects  of  increased  operating  and
        maintenance costs.

    Estimated  compliance  costs  for  this  regulation  are based on  1982
production  levels   (flow   rates)   as  explained   in   the  Development
Document.    For those subcategories  where  operating conditions  in  the
impact  period  are  expected  to be an  improvement  over  those experienced
in 1982,  compliance costs have been increased to account for higher flow
rates.   The factor by which  costs  are adjusted is the ratio of expected
production  at  the  time  of  compliance  (based   on  average  capacity
utilization from 1978 to 1982) to actual (1982) production levels.
    The detailed  procedures for calculating  annual costs are  given in
Appendix  C.    Plant-specific  costs  and  cost  adjustment   factors  are
included in the confidential record of this proposed rulemaking.

E.  STEP 4:  PLANT-LEVEL ECONOMIC IMPACTS
    Pollution controls  affect plants  in different  ways.   Some plants
bear  relatively  high costs  in order  to comply  with  the  regulations;
others incur  much  smaller costs.   It  is reasonable to  assume that the
plants incurring relatively  small costs will  not close  as  a result of
the regulations.   Therefore,  the  analysis  is  conducted in  two steps.
First, a  screening  analysis  is conducted to  identify plants  that will
not be seriously affected  by the regulations.  Second,  the  NPV and the
liquidity tests  are  carried  out  to  determine  whether plants  that fail
the screen  will  close.   The  screen  and  the  two  closure  tests  are
discussed below.
                                   1-6

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     1.   Description of Screening Analysis
         Total  annual costs  as  a percent  of annual revenues  is  used  as
 the  screening  criterion.   The  threshold value chosen for  the screen  is
 1.0?,  that  is,  if the compliance costs  for a plant are  less than  1.0$  of
 the  revenues,   it  is not  considered  to be  highly affected,  and  is  not
 analyzed further.
         The  screening analysis  is  conducted  for each plant  expected  to
 incur  compliance  costs.   Total  annual  costs are  calculated  by adding the
 amortized   portion  of  capital  costs  to  the  annual  operating   and
 maintenance  costs.   Annual revenues  are  calculated by multiplying  the
 price  of the product  by  estimated production of  the  plant.   Price  values
 for  each product are generally  based  on an average of  1978-1982  prices
 for  the  metal  product.    The   specific values  and their  sources  are
 presented in each  chapter.


         The  production  level  for  a  plant is estimated by  multiplying
 plant  capacity  by  a subcategory  capacity  utilization  rate.   Plant
 capacity data  were  generally  available  from  public  sources.    The
 capacity utilization  rate is based  on  an average  of  1978-1982  values for
 each  subcategory.    The  subcategory  rates used in  the  analysis  are
 identified in  each chapter.
    2.  Discussion of Plant Closure Tests
        Pollution  control  expenditures result  in  a reduction of  income
(when costs cannot  be  passed through).  These expenditures may create a
permanent change  in income levels and  thereby  reduce  average income in
the future.  The expenditures may also adversely affect a plant's  short-
term cash flow.  The consideration of cash flow becomes important  when a
plant is  already  in poor financial health.   It should be expected that
such a  plant  will  have to  finance  the pollution  control expenditures
through a bank and  that the bank will not lend money for a period  longer
than five years  — the depreciable life of  the asset  for tax purposes.
Negative  cash  flows may be created by  principal  and interest payments;
however,  there  will also  be  positive cash  flow  due  to  tax benefits.
These long-term and short-term effects of pollution control expenditures
are analyzed  by  conducting  the  net  present value (NPV) test  and the
liquidity  test.     The  NPV  test  is  used  to  determine  the  long-term
viability of a plant;  the  liquidity  test  addresses potential short-term
cash flow problems.
                                  1-7

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        a.  Net Present Value Test
            The net present value test is based on the assumption  that  a
company  will  continue  to  operate  a  plant  if  cash  flow  from  future
operations  is  expected  to exceed  its  current  liquidation  value.    This
assumption can be written mathematically as follows:


                      I   U
                     t=1   fc
Where:  Ufc = cash flow in year t =
             earning before interest but after taxes (EBIAT) =
             revenues - all operating expenses including deprecia-
             tion at book value - taxes

        LQ = current liquidation value

        Lj = terminal liquidation value, i.e., liquidation value at  the
             end of the planning horizon of T years

         r = cost of capital.

            In order to use  this  formula  in this form, forecasts of the
terminal liquidation  value  and earnings  (U-)  in every year during the
planning period (T) have to  be made.   However,  the equation shown above
can be  simplified (and  the  need to  make forecasts avoided)  by making
several assumptions.   The  simplified  formula  and the assumptions are
given   in   Appendix A.     The   NPV  test,  after   simplification  and
consideration  of annual  costs  (see Appendix  C),  can  be written as
follows:

If,          0 - APC

                L     ~
then the plant will stay in operation.

Where:  U,  L , and r  are,  respectively, real earnings, real liquidation
        value, and real cost of capital (definitions  of these variables
        are given in Appendix A);  and

        APC  = total annual costs as given in Appendix C.

            This  equation  states  that  if  the  rate  of  return on  the
liquidation value U/L    is greater  than or equal  to  the  real after-tax
rate of return on assets (which corresponds  to  r ),  then  the plant  will
continue in operation.                                             '

            This  test  is carried  out  for  every  plant  that  fails  the
screen  —  that  is,  where total annual  costs  are  greater  than 1 percent
of  revenues.    In  order  to  conduct  the  test,  each plant   is  first
classified  into  one  of  the  eight  groups  discussed in   Appendix B.
                                   1-8

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Then,  U and L    are calculated (for  each  plant)  by using various  group
ratios.   The ^otal annual costs  are  subtracted from real earnings (U),
and  the _ratio  (U  - APC )/L   is  compared  with  the  groups'  cost  of
capital (r).            p   ฐ

            By  subtracting  the appropriate  compliance  cost  (APC ),  the
NPV  test  implicitly  assumes  that  increased costs  will not be passed
through  to consumers.    This  assumption  avoids  overlooking  potential
impacts  by incorporating  the  full  effect  of the  costs on a plant's
earnings.
        b.  The Liquidity Test
            The basic premise of this test is that a plant will close  if
pollution control  expenditures  result  in net negative cash flows in the
foreseeable future.  It is assumed that  pollution control equipment will
be financed over five years; the associated  total annual costs represent
cash  outflows.   The test can be  stated  in simple terms as follows (see
Appendix C for details):
If
            U - APC  < 0,
then, the plant will close.

Where:     U = real earnings (as defined above)

        APC   = total annual costs for the liquidity test (see Appendix
                C; note that there is a difference between APC  and
                APCq.)

            The treatment of cost pass-through for the liquidity test is
the same as for  the  NPV test;  the full compliance cost is assumed to be
absorbed by the plant and is subtracted from the plant's earnings.
            Interpretation of Plant Closure Tests
            A potential plant closure is projected  if either of the two
tests is failed.   The  identification  of plants as potential closures in
this step is interpreted as an  indication  of the extent of•plant impact
rather  than  as a  prediction of  certain  closure.    The  decision  by  a
company  to  close  a  plant  also involves  other considerations,  such as
non-competitive  markets   for  products,   degree  of  -integration  of
operation,  use  of  output  of plants  as intermediate  products (captive
markets), and existence of specialty markets.  Most of these factors can
only be  evaluated  qualitatively and are  taken into  account  only after
the quantitative results of the two financial tests have been obtained.
                                  1-9

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            For   some   of  the   facilities   included  in  this   study,
production  of the  relevant  nonferrous metal represents  only a  limited
portion of  total production capacity at the plant.  If the closure tests
are failed  by a plant meeting this description, the analysis  suggests  it
would be unprofitable for the plant to continue operations for  the metal
associated  with  the  compliance  cost.   In  this case,  the  effect  is
identified  as a production line closure.  It is riot reasonable  to  extend
this conclusion to  the entire production facility because the compliance
costs, sales, and plant closure tests are all based on production  of the
one metal.

F.  STEP 5:  INDUSTRY-WIDE IMPACTS
    As compared  to the plant-level closure analysis,  this step focuses
on  impacts  that  are likely  to  occur at an industry-wide level.  These
impacts  include  effects  on:  (1)  cost  of  production;  (2)  prices;   (3)
return  on  investment;   (4)  capital  expenditures;  (5)   employment   and
communities  where  plants and   their  suppliers  are  located;  and   (6)
balance of trade.
    Each of  these  impacts is  calculated  for each  subcategory,  and the
results are  presented  in Chapter  XXII.   The calculations  rely on both
group  ratios and  plant-specific  information.    The  equations  used  to
calculate the impacts are shown in Appendix D.
    1.  Changes in the Cost of Production
        The  financial impact  of  the  regulatory  alternatives  on each
industry is  evaluated in terms  of the increase to  cost of production.
This  impact  is  measured  by  calculating  the  ratio  of  total  annual
compliance  cost  to  total  production  cost,  where  production  costs are
calculated  as  plant  revenues  less  operating  income.    This  ratio
represents the percentage increase  in  operating  costs  due  to compliance
expenditures.
    2.  Price Changes
        The price change is the ratio of total annual compliance cost to
annual  plant  revenue.   This  ratio represents  the maximum  percentage
increase  in  price  that would  be  required  to naintain  pre-compliance
income levels. It is calculated with the assumption of full pass-through
of costs.   This  assumption of  full pass-through  is not  used  in the
closure analysis, but only in the calculation of price changes.
                                  1-10

-------
     3.   Changes in Return on Investment
         Return  on  investment  is  -calculated   before  and  after  the
 imposition  of  compliance  costs.    The  return  on   investment  before
 compliance costs is the value  "r,  which is computed for each group.  The
 return  on investment after compliance  costs accounts  for  the  effect of
 these costs on  both income and assets.   Annual  compliance costs act to
 reduce   income,   while   capital  costs   increase  the  asset  base.    A
 percentage change in return  on investment is then  derived from the two
 values.    The  change in  return on  investment  represents  the  change in
 earnings per  dollar of  assets that  is expected  to  result under each
 treatment option.
         Effects  on  Capital  Expenditures
         This  impact  compares  the  capital  compliance  cost  to  expected
 capital   expenditures.     This   ratio  represents  the   percentage  of
 additional  capital  expenditure  needed  to  comply  with  each  treatment
 option while maintaining  previous investment  programs.
    5.  Employment  Impacts
        Employment impacts are measured by  the  total  number of jobs lost
at  plants  expected  to  close.    Employment  estimates  for  production
facilities  projected  to close are  based  on individual plant  production
data  obtained  from the Agency's survey of  the industry and an estimate
of production per employee.
    6.  Effects on the Balance of Trade
        The economic  impact  of this regulation  on  foreign trade is  the
combined effect of  price  pressure from higher costs and production  loss
due  to  potential  plant   closure.    The  impact  on  foreign  trade  is
discussed in the context of these two effects.

G.  STEP 6:  NEW SOURCE IMPACTS
    New   facilities  and   existing   facilities   that   undergo  major
modifications are subject  to  NSPS/PSNS guidelines.   Compliance costs of
new  source  standards have  been  defined as  incremental  costs  over the
costs of  selected  standards for  existing sources.   The purpose of this
approach  is  to  determine  if  control  costs  constitute  significant
barriers to the entry of new sources into the industry.
                                  1-11

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H.  STEP 7:  SMALL BUSINESS ANALYSIS
    The Regulatory Flexibility Act  (RFA)  of 1980 (P.L. 96-354) requires
Federal regulatory agencies  to consider  "small entities" throughout the
regulatory process.   In  this  study, an  initial screening  analysis is
performed to determine if a substantial number of small entities will be
significantly  affected.    This  step  identifies  the economic  impacts
likely  to  result   from   the  promulgation  of  regulations  on  small
businesses.  The  primary  economic  variables that are covered are those
that  are  analyzed in  the general  economic impact  analysis, including
compliance  costs,  plant   financial  performance,  plant  closures,  and
unemployment.   Most  of the information and  analytical techniques in the
small  business analysis  are  drawn  from  the  general  economic  impact
analysis which is described above.
                                  1-12

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                 CHAPTER II
EFFLUENT GUIDELINE CONTROL OPTIONS AND COSTS

-------

-------
            II.   EFFLUENT GUIDELINE CONTROL OPTIONS AND COSTS

    The alternative water treatment" control systems, costs,  and effluent
limitations  for  the  nonferrous manufacturing industry are enumerated  in
the  Development  Document.    The  Development  Document  also  identifies
various   characteristics  of   the   industry,   including  manufacturing
processes;   products  manufactured;   volume   of  output;   raw  waste
characteristics; supply, volume, and discharge destination of  water used
in the  production  processes;  sources of waste  and wastewaters;  and the
constituents  of wastewaters.   Using  these  data,  pollutant  parameters
requiring limitations or standards of performance were selected by EPA.
    The EPA Development  Document  also  identifies and assesses the range
of  control  and   treatment   technologies   for  the  industry.    These
technologies  are   evaluated   for  existing  surface  water  industrial
dischargers to determine  the  effluent  limitations required for the Best
Practicable Control  Technology Currently Available  (BPT),  and the Best
Available  Technology  Economically Achievable  (BAT).   Existing  and new
dischargers to  Publicly Owned  Treatment  Works  (POTWs)  are  required to
comply  with  Pretreatment  Standards  for New  Sources  (PSNS), and  new
direct  dischargers  are required  to  comply  with  New Source Performance
Standards  (NSPS),   which  require  Best  Available Demonstrated  Control
Technology (BDT).  The identified technologies are analyzed to calculate
cost above treatment in place and performance.
    Brief  descriptions  of the  various  treatment  options are  listed
below.  These descriptions do not necessarily correspond to the specific
options considered for a particular subcategory.  A complete description
of the options can be found in the Development Document.

    •   Option A - End-of-pipe   treatment    consisting   of   chemical
                   precipitation  and   sedimentation,   and  preliminary
                   treatment,    where   necessary,   consisting  of   oil
                   skimming,   cyanide  precipitation,  and  ammonia  steam
                   stripping.    This combination  of  technology  reduces
                   toxic   metals,   conventional   and   nonconventional
                   pollutants.

    •   Option B - Option  B   is  equal  to  Option  A  preceded  by  flow
                   reduction   of  process wastewater  through the use  of
                   cooling towers for contact  cooling  water and  holding
                   tanks  for  all  other process  wastewater subject  to
                   recycle.

    •   Option C - Option  C   is  equal  to  Option  B  plus  end-of-pipe
                   polishing   filtration for  further reduction of  toxic
                   metals and  TSS.
                                  II-l

-------
     •   Option E - Option E  consists  of Option  C  plus activated carbon
                    adsorption applied  to the  total plant discharge as a
                    polishing    step    to    reduce    toxic    organic
                    concentrations. '

     •   Option G - Option G  consists  of  chemical oxidation  applied to
                    the total plant discharge,  as a step to reduce toxic
                    organic concentrations,  without any other end-of-pipe
                    treatment or pretreatment.

     For each  subcategory,  limitations  were  based on  one of  the above
 treatment  options.    For  three  subcategories  (Primary  and  Secondary
 Germanium/Gallium,    Primary   and   Secondary   Titanium,   and   Primary
 Zirconium/Hafnium),  however, two  types of plants  have been identified.
 Therefore,   two   levels  of  limitations  were   developed  and  are  being
 proposed for each of these subcategories.
     For  plants   in   the   Primary   and  Secondary   Germanium/Gallium
 subcategory,  Level A limitations are based on lime and settle technology
 for plants that  only reduce germanium  oxide in a  hydrogen  furnace and
 then wash  and  rinse the  germanium product in  conjunction with  zone
 refining.   Level B limitations  are proposed for facilities which perform
 any  other  operations,   or  any  additional   operations  besides  those
 described above.
     Level 'A limitations for plants in the Primary and Secondary Titanium
 subcategory which do not practice electrolytic recovery of magnesium and
 which use  vacuum distillation  instead of  leaching to  purify  titanium
 sponge as  the  final product  are based  on  lime and  settle technology.
 Level B limitations for all other titanium  plants  are based on lime and
 settle,  flow reduction, and filtration technology.
     For the Primary  Zirconium/Hafnium  subcategory, Level  A limitations
 for  plants which  only produce zirconium  or zirconium-nickel  alloys by
 magnesium  reduction  of  ZK>2 are  based  on lime  and  settle and  flow
 reduction.   Level B limitations apply to  plants  which  produce zirconium
 or hafnium from zircon sand  or from the  tetrachloride  using any other or
 any  additional operations to those described above.  The  proposed Level
 B limitations  are  based  on  lime  and  settle,  flow  reduction,  and
 filtration.
     Pollution  control  technologies  result  in  two  types of  compliance
 costs: -- (1)  capital^ costs  for  the  control equipment,  and  (2)  annual
.costs  for  operation  and  maintenance.    Compliance  costs  are based  on
 engineering estimates of the treatment alternatives described above and
 were developed for each plant after accounting for  wastewater treatment
 already  in  place.    These  costs are used  in this  report  to determine
 economic  impacts.
                                  11-2

-------
     The   additional   costs  result  in  annual  cash  outflows  to  cover
.increased operating  costs, increased  maintenance expenditures,  and  the
 initial   capital  outlay  to  purchase  control equipment.   Tax  benefits
 accrue  from  the  Investment  Tax Credit  and from  the deductibility  of
 additional  operating and  depreciation  expenses.   These  effects  are
 combined  in  the computation of annual compliance  costs,  as  described in
 Appendix  C of the methodology.
    Estimated  compliance  costs  for  this  regulation  are  based  on  1982
 production   levels  (flow   rates)   as  explained  in   the   Development
 Document.    For  those  subcategories  where operating  conditions  in  the
 impact  period  are expected  to be  an improvement over  those  experienced
 in  1982, compliance  costs  have been  increased  to account for  higher  flow
 rates.   The  factor by which costs are adjusted  is  the ratio  of expected
 production   at   the   time   of  compliance   (based  on   average  capacity
 utilization  from 1978  to  1982) to  actual  (1982)  production levels.
    Table II-1 presents  the annual  compliance  costs  and  investment costs
for  those  subcategories  containing plants incurring  costs.   The  costs
are  summarized  by  discharge  mode  and  totalled  for  each  of  these
subcategories.
    For    existing    discharging   germanium/gallium,   titanium,    and
zirconium/hafnium plants, only one cost level  (Level  A  or  B)  is  shown in
Table  II-1.    The  cost  level is  dependent on  the  type  of  production
process used.   For  plants  currently at Level A, the  corresponding  Level
B costs are available in the confidential rulemaking  record.
                                  II-3

-------
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tQ
-------
CHAPTER III
 OVERVIEW
-------
                             Ill.  OVERVIEW
    There are  24 nonferrous metals"manufacturing subcategories covered
by this regulation.  The Agency is proposing to completely exclude three
of  these   subcategories  (Primary  Lithium,   Primary  Magnesium,  and
Secondary Zinc) from regulation.  Primary Lithium and Secondary Zinc are
excluded  because  these subcategories  contain  plants  using  only  dry
processes.   Primary Magnesium plants  are  exempt because  no  treatable
concentrations of  pollutants were  detected  in  their wastestreams.  Each
of  _the  remaining  21   subcategories  are   discussed   in the  following
chap'ters.   The discussion  begins  with the structure of  the industry,
which  includes  descriptions of raw  materials  and production processes;
plants   in   the   subcategory;  production,   consumption,   and   trade
characteristics;  and  end   uses  and  substitutes.    Market   trends  and
developments  are  discussed  next.    Finally,  a  brief assessment  of
economic impacts on discharging plants  is presented.   Note that not all
of  the  remaining  metal   subcategories   contain  discharging  plants.
Chapters on  subcategories  that contain no  dischargers  —  i.e., Primary
Cesium/Rubidium; Secondary  Mercury;  and Primary  Boron  —  discuss only
raw materials,  production processes,  and plants.
    In order  to facilitate  the  presentation of  information concerning
industry  structure  and processing  technologies,   certain  subcategories
have  been combined on  the  basis  of  processing  characteristics.   For
example,   molybdenum and  rhenium are  combined in one  chapter because
rhenium  is  processed  only  as  a  byproduct  of molybdenum  production.
These combinations  are  distinct  from and do  not  necessarily correspond
to those groupings developed for  purposes of economic analysis.
                                 TTT-l
-------
         CHAPTER IV
PRIMARY ANTIMONY SUBCATEGORY
-------
-------
                    IV.  PRIMARY ANTIMONY SUBCATEGORY
 A.   STRUCTURE  OF  THE  INDUSTRY
     1.   Raw Materials and  Production  Processes
        Antimony  is  found in several  minerals,  but its most  common  ore
 is  stibnite (antimony  sulfide).   Preparation  for smelting varies  with
 the  grade  of  ore.     Low-grade  ores  containing  5%-25%  antimony  are
 concentrated by roasting, which removes sulfur and other  impurities,  to
 yield volatile  trioxide or nonvolatile tetroxide.  Ores containing  45%-
 65%   antimony   are  liquated   to   separate  antimony  from   the   other
 constituents.   The ore  is heated in a crucible or  reverberatory furnace
 until  the  fused  antimony  collects  at  the  bottom  of  the  ore  mass.
 Antimony trioxides, tetroxides, and fused antimony  are  then treated  in a
 reverberatory furnace with coke and  other charge materials  such as  soda
 ash and briquetted  flue  dust,  to yield  antimony metal.   Water-jacketed
 blast furnaces  are used in several  modern plants to  reduce intermediate
 grades, residues,  mattes, and  slags.   High-grade ores, containing  more
 than  65%  antimony,   are  directly  reduced  to  metal  by  iron  precip-
 itation.   Fine  iron  scrap, when added to molten  antimony  sulfide,  forms
 metallic antimony and iron sulfide.
        Antimony  metal  is also  prepared  at  several  lead  refineries.
Used  or  discarded battery  plates,  type metal,  and  bearing metal  scrap
are  first treated  in a  blast furnace  and then  further  refined  in  a
reverberatory furnace to yield antimonial  lead,  which generally  contains
3%-12% antimony.
    2.  Description of Plants
        Antimony  metal and  oxide  producers  in  the United  States  are
large, integrated  companies  with a wide  scope  of activity in marketing
and manufacturing  base metals and  chemicals.   Antimony  oxide has  been
produced from both  domestic  and  imported ores,  from antimony metal,  and
from  South  African  crude   antimony  oxide.    Sunshine  Mining   Co.  at
Kellogg,  Idaho and  U.S. Antimony Corporation  at Thompson Falls,  Montana
are the two major  domestic mine  producers of antimony.  Sunshine Mining
Co. produces antimony as a byproduct of the treatment of tetrahedrite, a
complex silver-copper-antimony  sulfide.   The  U.S.  Antimony Corporation
produces antimony  from the  stibnite  mined at  the  Babitt,  Bardot,  and
Black Jack mines at  Thompson Falls, Montana.   Asarco, Inc. has recently
completed  construction of a new  antimony  smelter  at  El  Paso,  Texas.
Asarcofs Denver,  Colorado plant  produces high purity  antimony  used  in
the electronics  industry.   The  other major primary antimony producers
are  Anzon   America,  Inc.,   Laredo,  Texas;   AMSPEC  Chemical  Corp.,
Gloucester City, New Jersey;  M&T Chemical Co.,  Baltimore, Maryland;  and
Chemet Co., Moscow, Tennessee.
                            IV-1
-------
        The  one   plant   under   analysis  is  a  direct  discharger   of
effluents.
    3.  U.S. Production, Consumption, and Trade
        The   United   States   mines  less   than   10/5   of  its  domestic
requirement for primary antimony.   Imports, largely in the form of ores
and  concentrates,  have come mainly  from the Republic  of South Africa,
Bolivia, and mainland China.,  Domestic metal imports have fallen sharply
from  1978  levels  since the  introduction of maintenance-free batteries.
Exports have  been small and mainly  in the form of alloys.   Table IV-1
shows  that exports  have  been  insignificant  between  1978-1982.   Old
scrap, predominantly battery plates, has been  the  source of most of the
secondary output.  Essentially,  all  the  reduced  demand for antimony has
been   absorbed   by  the  secondary  sector;   primary  demand  remained
relatively  constant.    Most  primary  antimony  produced  from  domestic
sources is  a  byproduct or coproduct of  silver,  copper, or lead mining,
smelting,  and refining.
        End Uses and Substitutes
        'Antimony metal and its various  compounds  have a wide variety of
industrial uses.   The metal  has been  used principally  as  an alloying
constituent  of lead  and other  metals,  primarily for  use  in storage
batteries.   Antimonial  lead is  also  widely used  in  the manufacture of
chemical  pumps and  pipes,  tank  linings,  roofing  sheets,   and  cable
sheath.  Non-metallic antimony is used  principally as a flame-retardant
in  textiles  and  plastics,   as   a  decolorizing  and  refining  agent  in
ceramics and glass,  and  as  a vulcanizing  agent  in the rubber  industry.
Various chemical  compounds  of antimony are used  in  camouflage paints.
The table below lists the major  end-use markets  for antimonial products
in 1982.
              End-Use Market
           Flame retardants
           Transportation, including
             batteries
           Ceramics and glass
           Chemicals
             TOTAL
    % 1932 U.S.
Antimony Consumption
        60

        15
        10
       	!>
       100
        Substitutes exist for antimony in  all  its  major uses.  Selected
organic  compounds  which  are  less  toxic  and  cheaper  are  used  as
substitutes in flame-retardant systems.  However, antimony is still used
as  a  flame-retardant  in  the  plastic  insulation  of electric  cables
                            IV-2
-------
                               TABLE IV-1


            U.S. ANTIMONY PRODUCTION, CONSUMPTION, AND TRADE

                     (short tons of antimony content)

Production
Mine
Primary plants3
Secondary plants
Consumption
Trade — Metal Imports
Trade — Metal and
Alloy Exports
1978
798
14,110
26,456
40,536
4,178
556
1979
722
15,062
24,155
42,846
3,022
485
1980
343
16,062
19,893
33,817
2,590
453
1981
646
17,761
19,856
35,296
2,631
324
1982
503
12,282
16,596
31,199
1,900
830
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

alncludes antimony recovered as antimonial lead from smelting lead ore.

 Derived from both primary and secondary sources.
                              IV-3
-------
because  alternative  materials  affect  plastic's  mechanical qualities.
Calcium combined with a  little  tin is rapidly replacing antimony in  car
batteries since the introduction of .maintenance-free batteries, in spite
of the fact that calcium-lead batteries are more difficult  to charge.

B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        There  is an  active  free  market  in antimony  metal,  ore,  and
trioxide, but  the  prices of these three  items  have little relationship
to  each  other in the  short run.  The  antimony metal  market is rather
volatile and attracts speculation, mainly from the merchants  who deal  in
it.    The   unpredictable marketing  policy  of  China,   the   main  metal
producer,  further  reinforces  this  feature.    Changing  patterns   of
distribution  have  also  resulted  in  fluctuations  in   antimony  price.
Since  1978, prices  for  antimonial  lead  or "antimony in  alloy" have been
quoted by major domestic secondary lead smelters.
        The  plant  under  analysis  is  a  major  metal  producer.    The
estimated revenues of this plant  have  been calculated using the average
price  of the  1978-1982  period,  $1.519  per  pound.    Although domestic
demand  has  declined  in  recent  years,  demand  by   foreign  automobile
manufacturers has kept plants operating  at normal levels.  With overall
demand remaining relatively constant, prices are not expected to deviate
from average levels.   Table  IV-2 lists  published antimony metal prices
between 1978 and 1982.
    2.  Capacity Utilization.
        U.S. demand  for  antimony has remained  relatively constant over
the past  decade.   Antimony  has  a specialized  consumption  pattern that
does not  conform  to  general economic patterns, but  to  specific end-use
markets such as storage batteries, textiles, plastics, and rubber.  Over
the past  four  or  five  years demand  patterns have  changed noticeably.
Consumption  of   antimony   by   the   automobile  industry  has  declined
substantially  due  to  lower  use  in  the  manufacture  of  automotive
batteries.   Demand  for  antimony oxide,  on  the  other  hand,  has risen
significantly,   for use  in  flame-retardant formulations.   Most  of the
antimony  chemicals also  fall into established  use patterns.   The U.S.
Bureau of Mines forecasts that with increased demand for colored enamel,
glass, color television,  and other appliances, antimony will continue to
be  used  by the  ceramics  and  glass  industries.    Industry  capacity
utilization  rates are  listed  in Table  IV-3.    The average  capacity
utilization  rate  over  the  1978-1982  period,  45*,  is  used  in  the
analysis.
                             IV-4
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                     TABLE IV-2
             U.S. ANTIMONY METAL PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price, Dollars per Pound
Actual
1.145
1.107
1.508
1.355
1.050
Average
1982 Dollars
1.578
1.783
1.749
1.436
li05JD
price = '$1 .519
SOURCE:  Mineral Commodity Summaries,
         U.S. Department of the Interior,
         Bureau of Mines, 1983.
                      IV-5
-------
                     TABLE IV-3

       ANTIMONY METAL — CAPACITY UTILIZATION
Year
1978
1979
1980
1981
1982
Production
(short tons)
1,108
2,642
507
790
539
Capacity
(short tons)
2,200
2,800
2,300
2,300
2,300
Average capacity utilization
Capacity
Utilization
($)
50
94 ,
22
34
23
= 45?
SOURCE:  Capacity data — Personal communication,
         U.S. Department of the Interior,  Bureau of
         Mines, February 1984.

         Production data —Minerals Yearbook,  U.S.
         Department of the Interior, Bureau of
         Mines, 1982.
                     IV-6
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C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on plants in the Primary Antimony subcategory.  Results of the screening
test show that annual compliance costs exceed 1? of revenues for the one
plant  identified  as  a  discharger   of   effluents.    However,  closure
analysis  indicates  that   this  plant  will  not  close.    In  addition,
compliance costs for this  subcategory  are less  than 3.^ under the most
stringent option.
                            IV-7
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          CHAPTER V
BAUXITE REFINING SUBCATEGORY
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                     V.  BAUXITE REFINING SUBCATEGORY


 A.   STRUCTURE OF THE INDUSTRY


     1.   Raw Materials and Production Processes
         The  term "bauxite" refers to aluminous  mixtures  rich in alumina
 and  low in alkalis, alkaline  earths,  and silica.   The bauxite refining
 process removes impurities in the ore, and  converts bauxite to aluminum
 oxide,  or alumina  (A120,).   The principal  ore from  which  alumina and
 aluminum  are   made  is  composed  of  aluminum  hydroxide  minerals  and
 impurities,  such   as   silicon  dioxide,   ferrous  oxide,  and  titanium
 dioxide.    There   are   three   major  types   of  bauxite:  (1)  gibbsite
 (A1203*3H20),  (2)  monohydrate  (AIO(OH)),  and (3) a  mixture  of gibbsite
 and  monohydrate.  Economically minable  bauxites  contain 30$-60? alumina,
 32-25$  iron  oxide,   M.-'dl  combined silicon  dioxide  (silica), 1.5%-3*5%
 titanium dioxide, and a  large  amount of water.
        The  Bayer  process   is   the   only   commercial-scale  method  of
converting metallurgical-grade bauxite to alumina.   In the classic Bayer
process, aluminum and  other  soluble elements in  bauxite are dissolved at
elevated  temperatures  and   pressures  in   a strong  alkali  solution,
generally NaOH,  to  form sodium aluminate (NaAlCX,).   After separation of
the "red mud" tails, the sodium aluminate solution  is cooled and seeded,
and  aluminum trihydrate  is  precipitated   in a  controlled  form.    The
trihydrate is dewatered and  calcined  to the  anhydrous  crystalline form,
alumina.
        Alumina  plants  are  designed  to  process  specific  grades  of
bauxite.  Depending  on  the mineral content of the ore,  variations  occur
in  the  digestion temperature, pressure,  and  caustic concentration.   In
addition, higher silica ores (greater  than  856 Si02) require  additional
steps,  known  as  the lime-soda-sinter  process,  to  recover alumina  and
soda  lost  by combination  with  silica;  this  procedure  is  known as  the
Combination  process.   There  are  two  other  variations  of  the  Bayer
process: the  American Bayer process,  which  refines  trihydrate ore,  and
the European  Bayer  process, which  refines monohydrate  ore.   Trihydrate
ores containing  up to 25%  monohydrate recently have been processed  by  a
method  known  as  the Modified Bayer process.  The  vast majority of  the
alumina produced, and for  several of  the  plants  the total output,  goes
directly to aluminum smelters for  primary metal  production.   Alumina  is
also  used  for nonmetallurgical  purposes  in  ceramics  and  refractories
production.
                            V-l
-------
    2.  Description of Plants
        Domestic  alumina plants  produce  calcined  alumina,  commercial
alumina  trihydrate  and  other  specialty  alumina  forms.    The  Alcoa
facility at  Point  Comfort,  Texas, and the  Kaiser  facility at Gramercy,
Louisiana also  produce alumina trihydrate.   Two  Arkansas plants  (Alcoa
and Reynolds) use  bauxite mined in the general  vicinity of the plants;
all other refineries use  imported  bauxite.   Kaiser,  at Baton Rouge, and
Reynolds, at  Corpus  Christi,  use bauxite from mines which they own and
operate in Jamaica.  Bauxite from Guinea is now used exclusively at both
Martin  Marietta's St.  Croix  and  Alcoa's  Point  Comfort  plants.   In
previous years,  Alcoa  relied heavily  on  ore from its  mines  in Surinam
for  its  U.S.  refineries.    Bauxite  for  Ormet's  Burnside,  Louisiana
refinery is from several sources.
        Four  of  the  eight   alumina   producers  do  not  produce  any
wastewater; consequently,  they will not  be  analysed any  further.   All
the remaining plants are direct dischargers  of effluents.  One of these
plants was  shut  down  in  1983; however, normal operations may resume at
some later date.  In addition.,  large  amounts of wastewater still remain
in holding ponds.
    3.  U.S. Production, Consumption, and Trade
        Domestic production  of bauxite has  declined  continuously since
1979-    Table  V-1  shows  that  1982  production  was  estimated   to  be
approximately 62% below  1979 levels.  The decline  has  been largely due
to the high cost of mining operations.  Domestic alumina production.also
registered a  fall of  about 35% from  the  1980  level of 8,09^,000 metric
tons.  Thus,  the U.S. has  relied  heavily  on  imports of refractory-grade
and abrasive-grade aluminous materials.  Alumina imports, primarily from
Australia (76$), Jamaica (15$), and Surinam (8%), ranged between 3.0-4.5
million metric  tons between  1978  and 1982.   Domestic  consumption and
exports also  registered  declines  in  1982;  the 3-7 million  metric tons
consumed was approximately 3^% below the 1981 level, and exports, though
limited, fell approximately  ^3% below  the  1978 level,  to 500,000 metric
tons.
    4.  End Uses and Substitutes
        The U.S. alumina  industry  produces  nonmetallurgical alumina and
aluminum hydroxide  for  various industrial  applications.   Approximately
90$ of  the  alumina  produced is used to make  primary aluminum.  Most of
the  remainder  is  used  by  the  abrasive,  refractory,  and  chemical
industries.  As a  refractory material, it  is  used  to line the furnaces
and  ladles  of   the  steel,  copper,  aluminum,   and  glass-producing
industries.    Abrasive-grade  calcined  alumina  is   used  for  precision
                             V-2
-------
                                TABLE V-1
                          •     —"^•••^^^••"•^^^


       U.S. BAUXITE AND ALUMINA PRODUCTION. CONSUMPTION.  AND  TRADE

                      (thousands of dry  metric tons)

Production
Bauxite
Alumina
Consumption
Bauxite and alumina
Imports
Bauxite
Alumina
Exports
Bauxiteb
Alumina
1978
1,669
7,220
5,300
14,500
3,967
13
878
1979
1,821
7,3^5
5,106
14,800
3,837
15
849
1980
1,559
8,094
5,824
14,700
4,358
33
1,138
1981
1,510
7,120
5,555
13,300
3,978
52
737
1982a
700
5,265
3,700
12,500
3,200
50
500
SOURCE:  Mineral Commodity Summaries,  U.S.  Department of the Interior,
         Bureau of Mines, 1983.

Estimated.

 Includes all forms of bauxite.
                               V-3
-------
grinding,  surfacing,  and polishing  metal goods.   Alumina hydrates  are
widely   used   as  fire-retardants   in   carpet-backing,   plastics,   and
furniture  upholstery.    Activated alumina,  which  is highly  porous  and
absorbent,  is  used to dehydrate  liquids and gases  in  the chemical  and
petroleum industries.  There are no satisfactory substitutes.

B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Most  world  trade  transactions  in  alumina   involve   long-term
contracts or  intra-company  transfers.   Consequently,  prices, other  than
for spot  sales  or special  grades,  are not quoted  in  trade journals as
they are for commodities traded on the open market.  As Table V-2 shows,
domestic shipments  of calcined alumina  were  valued at  $236 per ton in
1981  and at  $260  per ton  in  1982.    The  average  value  of  domestic
shipments  for  the  1978-1982  period  was   estimated  at  $242  per   ton.
Imported alumina was  valued  at  $222  per ton at U.S. ports  in  1981.  The
corresponding  figure   for  1982  was  $268   per  ton.   In  spite  of the
recession,  alumina prices   rose  in   1982  as  a  result  of escalating
domestic  mine  development  costs  following  the  increase  in energy
costs.   Some  countries have also imposed  production  levies, which  have
pushed up alumina  prices.   The continuing  high  demand for the  aluminum
metal ensures a sustained growth rate in the demand  for  alumina.   The
1978-1982 average price of $242 per ton is used in the analysis.
    2.  Capacity Utilization
        Most of  the alumina  consumed  in  the  United States  is used  to
make aluminum metal.  The alumina plants have, therefore, adjusted their
operating capacity according  to conditions in  the aluminum market.  The
high demand  for  aluminum metal has  enabled domestic alumina plants  to
operate  at  80$-90J  of  their  capacity.    Table  V-3 indicates  that the
industry operated at an  average capacity  of 80?  between 1978-1982.  The
United States  is  expected  to continue to  produce a major proportion  of
the  primary   aluminum   metal  it   consumes,  although  an  increasing
proportion of  the metal demand  is  expected  to  be met  by  imports  from
countries with low-cost electric energy.
        The Bureau  of Mines estimates that  demand  for primary aluminum
metal  in  the  United  States  will  increase  at  an  annual rate  of H.5%
through 1990  from a  1978  base.   The  increasing imports  of metal will
result  in  a  somewhat  low  annual   rate  of  increase   in  demand  for
alumina.    Nevertheless,  the  increasing  demand   should help  alumina
producers  to  at  least  maintain  their  historical  average  capacity
utilization rates.  The  average capacity utilization rate between 1978-
1982, 80%, is used in the analysis.
                             V-4
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                      TABLE V-2
                   ALUMINA PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price, Dollars per Ton
Actual
164
173
218
236
260
Average
1982 Dollars
226
219
253
250
260
price = $242
SOURCE:  Minerals Yearbook,  U.S. Department of
         the Interior,  Bureau of Mines, 1982.
                      V-5
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                    TABLE  V-3
          ALUMINA CAPACITY UTILIZATION

 (thousands of metric tons of calcined alumina)
Year
1978
1979
1980
1981
1982
Production
5,960
6,450
6,810
5,960
4,130
Capacity
7,208
7,208
7,208
7,420
7,495
Capacity
Utilization
(*)
83
89
94
80
I5_
Average capacity utilization = 80$
SOURCE:  Minerals Yearbook, U.S. Department of
         the Interior, Bureau of Mines, 1982.
                    V-6
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C.  IMPACT ASSESSMENT
        The Agency  is presently  proposing  only technical amendments  to
existing   Bauxite  regulations;   however,   it   is   considering   toxic
limitations  on  the  net  precipitation discharges  from  Bauxite  redmud
impoundments.      The   toxic   limitations   under   consideration,   if
implemented, are  not  expected  to  have a significant impact on plants  in
the Bauxite  Refining subcategory.   Results of  the  screening test  show
that annual compliance costs do not  exceed  1$ of revenues for any plant
in  the  subcategory.   No  plant   is  projected  to  close.    In addition,
compliance costs  are  less than 0.4/5  of production  costs under  the  most
stringent  treatment  option.   Comments are  solicited  on the  limitations
under consideration and their potential impacts.
                             V-7
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          CHAPTER VI
PRIMARY BERYLLIUM SUBCATEGORY
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                    VI.   PRIMARY BERYLLIUM  SUBCATEGORY
 A.  STRUCTURE OF THE  INDUSTRY
     1.   Raw Materials and  Production  Processes
        The  U.S.  is currently the  only market economy nation  producing
beryllium  products  from  beryllium minerals.   There  are two  principal
beryllium  minerals:    bertrandite  and  beryl.    Bertrandite  is   the
principal   beryllium  mineral  produced  domestically;   beryl   is   the
principal  beryllium mineral  produced  in the  rest of  the  world.   U.S.
beryllium  production is derived from  both  domestic bertrandite  ore  and
imported  beryl ore.    In both  cases,  the  ore  is first  converted  to
beryllium  hydroxide  and then to beryllium oxide.   The oxide is  further
processed   into   beryllium  metal  or  directly   into  beryllium-copper
alloy.  Due  to the difficulty of fabricating beryllium metal parts,  cast
ingots  are machined into  chips  and  then ground  into  powder,  which  is
then  compacted  by hot-pressing under  vacuum.   A  significant  amount  of
metallic beryllium is also produced from  used and  discarded materials.
        • Beryllium-copper  alloy  is the  most  commonly produced  beryllium
alloy.    Other  alloys  are  beryllium-aluminum  and  beryllium-nickel.
Beryllium-copper  alloys  usually  contain  about  2%-i\%  beryllium.    The
production   of  beryllium   alloys   is  covered   under  copper-forming
regulations.

    2.  Description of Plants
        Brush Wellman, Inc.  (BWI)  and  the Cabot Berylco Division of  the
Cabot Corp.  have  been identified as domestic  beryllium producers.    BWI
mines bertrandite  ore in  Utah and  converts  it to  an  impure beryllium
hydroxide.  The hydroxide is then sent to the BWI plant in Elmore, Ohio,
or to  the Cabot Berylco plant in Reading, Pennsylvania  for conversion
into beryllium  products.   The  BWI  .plant converts  beryllium hydroxide
into beryllium oxide, which is then used to produce both beryllium metal
and alloy  products.   The plant also manufactures  high  purity beryllium
oxide  for  various  applications  in  ceramics.    One  plant  in  this
subcategory has been identified as a direct discharger of effluents.


    3.   U.S. Production,  Consumption, and Trade               ~~
        The  U.S.  is  both  a  major  world  producer  and  consumer  of
beryllium minerals.   The Agency's data indicate  that  domestic industry
relies  primarily on  domestically mined  bertrandite  ore,  but  has,  in
recent  years,   become increasingly  dependent  on  imported  beryl  ore.


                             VI-1
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Table  VI-1  shows  that  between 1978  and  1982,  beryllium produced  from
imported  beryl  ore increased  from  15%  to 33?  of domestic consumption.
Further  development  of the bertrandite  deposit in Utah  mined by Brush
Wellman,  Inc.  could  make  the  U.S.  self-sufficient in  beryllium by  the
year 2000.   However,  BWI has  initiated  a program to stimulate domestic
and foreign beryl mining in order to extend the  life of the Utah  deposit
and to make full use of the company's beryl ore processing capacity.   As
a  consequence  of this effort,  beryl  imports are  expected to become  an
increasingly  important  raw ciaterial for  beryllium  production.    The
government  currently  stockpiles  beryl  concentrate,  beryllium-copper
master alloys, and beryllium metal.

    4.  End Uses and Substitutes
        Copper-based   beryllium  alloys  are   the:  most   widely  used
beryllium-containing  products.    As  shown  in  the  table  below, various
uses  in  the aerospace,  electrical  equipment, and  electrical  component
markets account  for  most  domestic consumption.   Beryllium-copper alloys
and  beryllium  oxide  ceramics  have  been  used  increasingly  in  the
electronic  and  electrical equipment  industries.   Beryllium metal, with
its  high  stiffness-to-weight  ratio  and excellent thermal  conduction
properties, has found numerous applications in aerospace fields.
               End-Use Market
           Aerospace
           Electrical equipment
           Electrical components
           Other
              TOTAL
    % 1982 U.S.
Beryllium Consumption
           38
           36
          - 17
          	9
          100
        Steel, titanium, and graphite  composites  may be substituted for
beryllium  metal.    Phosphor bronze  may be  substituted  for  beryllium-
cop'per  alloys.    However,   these  substitutions  generally  result  in  a
substantial loss of performance.

B.  MARKET TRENDS ANH DEVELOPMENTS
    1.  Prices
        Because  of  the  health  and  environmental  dangers  involved  in
producing this  toxic metal,  and  the  small  markets which  exist for it,
beryllium is manufactured by only a few  producers.   Consequently, these
producers can effectively control market  prices.  Prices in 1982 dollars
are  shown  in  Table VI-2  for   the  years  1978-1982.    Bureau  of Mines
estimates of steady  demand growth, coupled  with rigid  price controls by
producers,  suggest that prices  will not fall below these levels.
-------
                               TABLE VI-1
                  U.S. BERYLLIUM CONSUMPTION AND TRADE
                   (short  tons  of contained  beryllium)

Consumption
Trade — Imports
(beryl ore)
Trade — Exports
(metal and alloy)
1978
271
42
41
1979
303
43
36
1980
321
74
— b
1981
303
87
__b
•
1982^
328
108
__b
SOURCE:  Mineral Commodity Summaries, U.S. Department of the
         Interior, Bureau of Mines, 1983.

^Estimated.

 Data not available.
                              VI-3
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                     TABLE VI-2
               BERYLLIUM INGOT PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price
Actual
120
120
140
173
205
Average
, Dollars per Pound
1982 Dollars
165
152
162
183
205
price = $173
SOURCE:  Mineral Facts and Problems. 1980 and
         Mineral Commodity Summaries,
         U.S. Department of the Interior,
         Bureau of Mines, 1983.
                         VI-
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    2.  Capacity Utilization


    The Agency's  data  indicate  that  during  1982  the  only discharging
plant  operated  at almost  full capacity.   Indications  are  that demand
growth  will support  this  level  of  operations  into  the  near future.
Therefore,  the  value  of products  produced  in  1982 will  be used in the
following analysis as a proxy for sales.

C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in  the  primary  beryllium   subcategory.    Results  of  the
screening  test  show that  annual compliance  costs  do not  exceed  1$ of
revenues  for  the  one  plant  identified  as  a discharger  of effluents.
This plant is not projected to close.  In addition, compliance costs for
this subcategory are less  than 0.1? of  production  costs  under the most
stringent treatment option.
                            VI-5
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                    CHAPTER VII
PRIMARY AND SECONDARY GERMANIUM/GALLIUM SUBCATEGORY
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        VII.  PRIMARY AND SECONDARY GERMANIUM/GALLIUM^. SUBCATEGORY
 A.   STRUCTURE OF THE INDUSTRY
     1.   Raw  Materials  and  Production Processes
         a.   Germanium
             The  principal source  of raw  material for domestic  primary
 germanium  production  is  residue from zinc  processing.   U.S.  germanium
 production  is,  therefore,  dependent  on  the  rate  of zinc  processing.
 Domestic  producers also  produce germanium  by  recycling scrap  obtained
 from  manufacturing processes.   Germanium oxides are recovered  from zinc
 residues  and then chlorinated  to  produce  germanium tetrachloride.   The
 tetrachloride  is  hydrolyzed  to  obtain  germanium  dioxide,  which  is-
 reduced with hydrogen  to  yield germanium powder.   Germanium is  available
 in a  wide variety  of forms.
        b.  Gallium
            Gallium  is  found in  most  bauxite and  zinc  ores.   However,
because  gallium usually occurs in  very  low concentrations,  recovery  is
expensive and  not often undertaken.   Gallium is recovered from  caustic
soda  solution  used  in  the  conversion of bauxite to alumina or  recovered
from  zinc processing residues.   Small  quantities are also produced  from
scrap.
    2.  Description of Plants
        a.  Germanium
            In 1982,  the  domestic  germanium industry consisted of three
producers.  The  Specialty Materials  Division of Eagle-Picher Industries
recovered  germanium from  stockpiled  zinc  smelter  residues  in Quapaw,
Oklahoma.   Two  other companies  also  produced germanium:   they are the
Cabot Corporation  in Revere,  Pennsylvania and Bunker  Rare Metals, Inc.
in Irving, Texas.   Bunker Rare  Metals produces germanium from germanium
dioxide.    One   of these  plants  has been  identified  as an  indirect
discharger of effluents and will be further analyzed.
                             VI I-1
-------
        b.  Gallium
            One  domestic  company  produced  primary  gallium  in   1982.
Eagle-Picher Industries in Quapaw, Oklahoma produced gallium, along with
germanium,  from  stockpiled zinc  smelter  residue.   Secondary production
was  performed  by Canyonlands 21st Century  in  Blanding,  Utah and Callus
in San Jose, California.   Because no gallium facility was identified  as
a discharger of  effluent  waste,  further analysis of this subcategory  is
not  required.
            Two  types  of  plants,   Level  A  and   Level  B,  have  been
identified  in  this subcategory  (see  Chapter II).    The  one discharging
germanium  plant  and  the  zero  discharging  gallium  plants have  been
identified as Level A plants.  The Agency has considered the possibility
that these  Level  A plants  may  at some point engage  in Level B processes
and therefore  be  subject  to Level B  limitations.   The impacts of these
limitations  have   been  estimated  and  are   discussed  in Chapter XXV—
Limitations of the Analysis.
    3.  U.S. Production, Consumption, and Trade
        While  only  estimates  are  available,  it  appears  that  U.S.
germanium production increased  at  an average annual rate  of 8% between
1978 and 1982.  During  this  same  period,  however,  consumption increased
at an average annual rate of about 16%.  Table VII-1 shows that in order
to meet this growing demand,  imports doubled as a percentage of domestic
consumption, rising  from 12$  in  1978 to  2H%  in 1982.   The abnormally
large tonnage  imported  in 1981 was  primarily in the  form of low-grade
waste and scrap.  Germanium is not stockpiled by the U.S. government.
        End Uses and Substitutes
        For many years, germanium was used chiefly in the manufacture of
various semiconductor  devices.   Recently, silicon  has  largely replaced
many  of  these  traditional  applications.   However, new  and developing
applications  in  infrared optic  systems,  such as  nightsighting systems
for tanks and  aircraft,  and in fiber optics,  where germanium increases
the   efficiency  of   long-distance  transmissions,   have   more   than
compensated for  this  lost demand.   The  table  below shows the breakdown
of germanium consumption by  major end uses in 1982.
                            VII-2
-------
                               TABLE  VII-1

            U.S.  GERMANIUM PRODUCTION.  CONSUMPTION.  AND  TRADE
                   (kilograms of contained germanium)

Production3
Consumption3
Trade — Imports^
1978
19,200
22,900
2,657
1979
23,000
24,000
4,029
1980
27,000
32,000
3,329
1981
28,000
38,000
22,350
1982
26,000
42,000
10,000
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
          Bureau of Mines, 1983.
3Estimated.
 Gross weight of wrought metal,  waste,  and scrap.
                             VII-3
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                 End-Use Market
               Infrared optics
               Semiconductors
               Fiber optic systems
               Radiation detectors
               Other
                  TOTAL
     % 1982 U.S.
Germanium Consumption
            43
            18
            16
            12
           —11
           100
    While  silicon   has   been   substituted  for  germanium  in  certain
electronic applications,  germanium  is  still  more reliable in some high-
frequency  and  high-power applications,  and  is more  economical  as a
substrate  for  some  light-emitting diode  applications.    In  infrared
guidance  systems  zinc selenide  can substitute  for  germanium  metal  but
results in a lower level of performance.

B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Producer list  prices  for zone-refined ingot  are  shown in Table
VII-2.   Zone-refined ingot is  a commonly produced high-purity form of
germanium metal.   Prices  rose  dramatically  during  1980 and  1981 when
zinc residue shortages  constrained  supply.   However,  during 1982  demand
slowed as a  result  of both the  spreading out of military purchases and
the* improvement in fiber optic  production  techniques  and products.  The
strength  of  the dollar induced  lower-priced imports,  especially from
Belgium,  which  increased  competition and caused  further downward price
pressure.  Nevertheless,  the  list  price  has been maintained  at  $1,060
per  kilogram,  and  buying  at  discount  is  now  standard.    The average
producer price between 1978-1982, $847 per kilogram,  will be used  in the
analysis.
    2.  Capacity Utilization
        The   capacity ' utilization   of  domestic   germanium-producing
facilities is computed  from  industry  operational capacity and estimated
industry production  data.   These  figures  are summarized  for  the 1978-
1982 period in Table  VII-3.   Capacity utilization rates, which had been
held down  by zinc  residue shortages  in  1980 and  1981, were  kept  low
during 1982  as  the demand for  germanium  slowed.   The average capacity
utilization between 1978-1982, 60%, will be used in the analysis.
                             VI1-4
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                      TABLE VII-2
             ZONE-REFINED GERMANIUM PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price, Dollars per Kilogram
Actual
348
522
784
1,060
1,060

1982 Dollars
479
662
909
.1,124
1 ,060
Average price = $847
SOURCE:  Mineral Commodity Summaries, U.S. Department
         of the Interior, Bureau of Mines, 1983.
                       VI I-5
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                      TABLE  VII-3


            GERMANIUM CAPACITY UTILIZATION
Year
1978
1979
1980
1981
1982

Estimated
Production
(kilograms)
19,200
23,000
27,000
28,000
26,000
Average
Capacity
(kilograms)
40,000
no, ooo
40,000
40,000
44,500
Capacity
Utilization
(%)
48
58
68
70
58
capacity utilization = 60?
SOURCE:  Production data — Mineral Commodity
         Summaries, U.S. Department of the. Interior,
         Bureau of Mines, 1982.

         Capacity data — Personal communication,
         U.S. Department of the Interior, Bureau of
         Mines, January 1984.
                       VTI-6
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C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  the  germanium  facilities  in  this  subcategory.    Results  of  the
screening test  show that annual compliance costs  exceed 1/5 of revenues
for  the  one plant  identified  as  a  discharger of  effluents.   However,
closure analysis indicates that this plant will not close.   In addition,
compliance costs for this  subcategory  are  less than 1.25? of production
costs under the most stringent treatment option.
                             VII-7
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        CHAPTER VIII
SECONDARY INDIUM SUBCATEGORY
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                   VIII.  SECONDARY INDIUM SUBCATEGORY


A.  STRUCTURE OF THE  INDUSTRY

    1.  Raw Materials and Production Processes
        Indium  is  usually recovered as  a  byproduct of zinc  processing.
However,  most   zinc   is   so  poor  in  indium  that  recovery   is   not
attempted.   At  those  facilities  that  do  recover  indium,  the value  of
indium  recovered  is  negligible  in  relation  to  the   value of  zinc
production.
        In the zinc  refining  process,  indium is removed along with  lead
from  crude  zinc  by  fractional  distillation.   Crude  indium  is  then
recovered from the lead through an involved procedure of pyrometallurgy,
leaching,  purification,  and cementation.   Secondary indium is produced
by  dissolving indium  scrap  in acid  and chemically  precipitating  the
crude  indium.   Because  almost all uses  require a  high  purity form  of
indium, crude  indium,  either  primary  or  secondary, is  then refined  by
electrolytic methods.

    2.  Description of Plants
        One  company  in the  United  States produced  indium during  1982.
The Indium Corporation of America in Utica, New York refined indium from
crude  indium metal.    This  crude metal  is purchased  from domestic and
foreign  sources  on  the  open  market.    The  Agency  has  identified this
plant as an indirect discharger of effluents.

    3.  U.S. Production,  Consumption, and Trade
        Very  little production,  consumption,  and trade  information is
available on indium.  Agency data indicate, however, that imports supply
approximately  three-fourths  of domestic  demand.    Indium refiners have
had to  rely  increasingly  on imports of crude  indium due to the paucity
of  suitable  domestic  residues.   As  shown  in  Table VIII-1,  imports,
primarily in  the form  of crude  metal,  increased at  an  average annual
rate of 35%  between 1978-1982.   It  is  estimated  that the U.S. consumes
30% of world production.  Indium is not stockpiled by the government.

    ty.  End  Uses and Substitutes
        The table  below presents a  breakdown of indium  consumption by
end-use market.  Indium end uses  continue  to evolve as new applications
and substitutes  develop.   Domestic  usage is  now dominated  by various
solder, alloy,  and coating applications.  Indium's low melting point and

                          VIII-1
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                              TABLE VIII-1
                   U.S.  INDIUM  CONSUMPTION  AND  IMPORTS

                       (thousands of troy ounces)

Consumption
Imports
1978
630
206
1979
650
294
1980
_..b
299
1981
__b
446
1982a
__b
685
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

Estimated.

 Data not available.
                             VIII-2
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corrosion  resistance  are  crucial to many of these applications.   Indium
is  also  required  by  the electronics  industry;  however,  use  by  this
industry has declined  in  recent  years due to substitution.
                 End-Use Market
            Electrical and electronic
              components

            Solders, alloys, and
              coatings
            Research and other

               TOTAL
   % 1982 U.S.
Indium Consumption
        40


        40

        20

       100
        Alternate  materials  are  readily  available  for  most  uses  of
indium.   In  the electronics  industry,  silicon  has  generally  replaced
germanium-indium components.   In some alloys,  if cost permits, gallium
is  used  as  a  substitute.    Boron  carbide  and  hafnium  have largely
replaced indium in nuclear reactor control  rods.

B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Table VIII-2  shows  that  indium prices fluctuated widely between
1978 and  1982;  however, supply  and demand remained  roughly in balance
throughout  this  period.   The 67%  price  increase from  1978  to 1980 is
believed to have  been fueled  by  expectations of increasing applications
for  indium,  and  related   expectations  of  increasing   demand.    When
expected  demand   did   not  materialize,  prices  fell  80%  in  just   two
years.   Increased imports,  slight  over-production,  and  flat demand  led
to a  1982  year-end price of  $2.60  per  troy ounce and an average annual
price  of  $4.20  per  troy  ounce.    Uncertain demand  arising  from   the
variability of end  uses and  substitutes and  an  adequate world capacity
are expected to hold prices at this low level in the immediate  future.
    2.  Capacity Utilization
        The value of products produced  in  1982  is available for the one
discharging  plant   under  consideration.     Because   current  market
conditions are expected  to  persist,  this value  of  revenue will be used
in the analysis as a proxy for sales.
                           VIII-3
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                      TABLE VIII-2
                      INDIUM PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price,
Actual
8.56
13.^8
17.00
7.53
4.20
Average
Dollars per Troy Ounce
1982 Dollars
11.79
17.09
19.71
7.98
4.20
price = $12.15
SOURCE:  Mineral Commodity Summaries,
         U.S. Department of the Interior,
         Bureau of Mines, 1983.
                       VIII-4
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C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on plants in the Secondary Indium subcategory.  Results of the screening
test show that annual compliance costs exceed 1$ of revenues for the one
plant  identified  as  a  discharger   of   effluents.    However,  closure
analysis  indicates  that  this  plant  will  not  close.    In  addition,
compliance costs for  this subcategory are less than  1 .^%  of production
costs under the most stringent treatment option.
                           VIII-5
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          CHAPTER IX
PRIMARY MOLYBDENUM/RHENIUM AND
SECONDARY MOLYBDENUM/VANADIUM
        SUBCATEGORIES
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                   IX.  PRIMARY MOLYBDENUM/RHENIUM AND
                  SECONDARY MOLYBDENUM/VANADIUM SUBCATEGORIES
 A.   STRUCTURE  OF  THE  INDUSTRY
     1.   Raw  Materials  and  Production  Processes
        a.   Molybdenum
            Molysulfide  (MoS2)  is the principal raw material  from  which
molybdenum  and  molybdenum   products   are   obtained.     Molysulfide  is
obtained  from two  sources.   About  70% of  the  molysulfide used in  the
U.S.  is produced  from primary  molybdenite  ore.   The  remaining 3Q%  is
recovered  as  a byproduct  of copper ore  concentration  operations.   The
Agency  has identified  11!  U.S.   firms  which  produced molysulfide  during
1982.   Climax  Molybdenum Co.  and  Molycorp,  Inc., which  mine  primary
molybdenite  ore,   and  Duval  Corp.  and  Kennecott  Corp.,  which  recover
molybdenum from copper ore,  are  the  principal producers of  molysulfide.
            As a first step in  the production of molybdenum, molysulfide
is  "roasted"  to produce  technical-grade molybdic  oxide ("tech oxide")
that  has  a minimum  molybdenum  content of 57%.   Then,  depending on  the
markets  (customers)  they  serve,  U.S.  plants produce  several  products
from  technical-grade oxide.  These include:

        •   pure molybdic oxide;
        •   ammonium and sodium molybdate;
        •   ferromolybdenum;. and
        •   molybdenum metal.

            Small  quantities   of  molybdenum  are  also  recovered  as
byproducts from tungsten and uranium operations.

        b.  Rhenium
            Rhenium  is  produced  commercially  only as  a  byproduct  of
molybdenum production.  Production is made possible by the large tonnage
involved  in  the  mining and  processing  of  copper ores.    At  standard
molybdenum roasting  temperatures,  rhenium oxides  are carried  off with
roaster flue gas.  These oxides are then recovered from the gases (using
wet scrubbers  and electrostatic precipitators) in  the form of ammonium
perrhenate.  High  purity rhenium metal powder  (99.99?)  can be produced
from ammonium perrhenate through two-stage hydrogen reduction.
                             IX-1
-------
            Despite  the  large scale  of domestic molybdenum operations,
only  a  small amount of  rhenium is actually  produced.   This is because
molybdenum producers often have either  no extraction plant or have  found
extraction uneconomical.   Therefore,  "the U.S. relies heavily on imports
to  satisfy  demand.    These   imports  are predominantly  in  the  form  of
ammonium perrhenate, although some metal products are also imported.

        c.  Vanadium
            Vanadium is  usually  produced  as a byproduct or coproduct of
another  element,  commonly uranium  or phosphorus in  the  United States.
Secondary vanadium  is  recovered  from the residues  of crude oil and tar
sands, spent catalysts,  and  slags.   Vanadium metal extracted from spent
catalysts  is  converted  into  fused  vanadium  pentoxide  or  ammonium
metavanadate.  For  chemical  purposes,  these  two vanadium compounds are
the ones most frequently demanded.

    2.  Description of Plants


        a.  Molybdenum
            Molybdenum  plants   can   be  classified   into  four  major
categories.  Plants in the first category process molysulfide.  Although
they  produce  other  products  and  metals,  most  of  their  output  can be
attributed to molybdenum  production.   The only  exception  in this class
is  the  Magna,  Utah  plant of the  Kennecott  Corp.  Here,  molybdenum is
produced as a byproduct of copper  production  and accounts  for less than
2% of the value of plant shipments.
            Seven  plants converted  molybdenite  (MoSp)  concentrate  to
molybdic  oxide   (MoO,)  in  1982.    These  plants  have  the  capacity  to
produce about  125 million  pounds of  molybdic oxide.   The  two plants
owned by  AMAX  alone  have a  total capacity of almost  90  million pounds
(or about 70% of  the industry's capacity).   The  plant owned by Molycorp
currently has a capacity  to produce  6  million pounds per year; however,
the company  was  planning to  expand the  capacity to  20  million pounds
before the 1981-1982 recession started.   The  S.W.  Shattuck Co. plant in
Denver  and   the  M&R  Refractory  Metals   Co.  plant  in  New Jersey,  in
general,  process  moly  concentrate  on a  toll basis  — that  is,  these
companies process  concentrate  owned  by other companies.   The  M&R plant
is somewhat  unique in that  it also  produces molybdenum  in  pure metal
form by  removing  oxygen  from  MoO,.   Furthermore, it  produces tungsten
and cobalt  from  the respective metallic  oxides by  employing  processes
that are  identical to  the process  used  to create molybdenum  from tech
oxide.
                               IX-2
-------
     Five   of  the  plants  have  been   identified   as   zero-discharging
 facilities.   Two plants  have  been  identified as direct  dischargers  and
 will be analyzed further.   These  two plants have  been  determined  to be
 identical  to plants in  the  metallurgical acid plant subcategory of  the
 recently  promulgated  regulations  for   Nonferrous  Metals  Manufacturing
 Phase  I (49  FR  8742).   Consequently,  this rulemaking proposes to include
 the  two plants  in that subcategory.  The  limitations proposed  for  these
 plants  (and  the  recommended  technologies on which they are based)  are
 identical  to those  promulgated for the Phase .1 metallurgical acid  plant
 subcategory.  As  a  result,  there  is no  difference in the manner in  which
 compliance costs  were  estimated for plants in the two subcategories.
            Plants  in  the  second  category  have  the  following  general
characteristics:

        •   they do not process molysulfide;

        •   they produce  molybdenum in pure metallic form  and  transform
            it into formed product; and

        •   they  produce  other  metals and  metallic products  in  large
            quantities.

Hence,  molybdenum  refining  operations constitute a very small part  of
the  total  operations.   As a  result,  the  value of shipments that  can  be
attributed to molybdenum production is likely  to  be  less  than  10$  of the
value  of  shipments  from  a  plant.    Correspondingly,  the molybdenum
employment is also very small.
            At  these  plants,  molybdenum  is  generally recovered  as  a
byproduct  of  other  operations.    For  example,  at  the  GE  plant  in
Cleveland, Ohio and  the  North  American Philips Corp. plant in  Lewiston,
Maine, molybdenum is obtained as a byproduct of tungsten production.   In
fact,  it  must be removed  from  tungsten ore before  the ore can be  used
for  tungsten  production.   The  molybdenum  produced  at  these plants  is
normally  used  "captively"  to produce  products  for electrical and other
applications.   Two  plants  in  this  category  have  been  identified  as
direct dischargers and will be analyzed further.
            Plants  in  the  third  category  recover  oxides  from spent
catalysts used  by  the oil and gas industry.   Only a few years ago,  two
or  three  plants  produced  molybdic  oxide  from  recycled  materials.
However, Gulf  Chemical and Metallurgical Company  in  Freeport,  Texas is
the only plant  in  operation today.   This  plant recovers molybdic oxide
and vanadium pentoxides  from  petroleum refining catalysts.  The  plant's
major  customers are  catalyst  manufacturers.   This  plant is  a  direct
discharger and  will  be  analyzed  in  the Secondary Molybdenum/Vanadium
subcategory.
                               IX-3
-------
            Plants  in  the  fourth  category  produce  molybdenum  as  a
 byproduct  of  uranium  operations.    The  total  amount  of  molybdenum
 produced in this  way,  however,  is rather small.  Because  no  plants  have
 been  identified as  dischargers  in  this category,  further  analysis  of
 plants in this category is not  required.
        b.  Rhenium
            During  1982,  the bulk of domestic  rhenium was processed by
two  plants.   The  Kennecott  Corp.  in  Magna,  Utah  produced ammonium
perrhenate  from  domestic  porphyry  copper  ores.    The  S.W. Shattuck
Chemical  Co.  plant  in Denver,  Colorado  recovered  rhenium,  in various
forms, from Canadian molybdenite concentrates.
            The Agency has determined that these plants do not discharge
effluents.   Therefore,  analysis of  the  impacts of  Phase II regulation
will not be performed for these plants.

        c.  Vanadium
            The  Agency  has  identified  one  plant  in  the  Secondary
Molybdenum/Vanadium  subcategory.     Gulf  Chemical  and  Metallurgical
Company  in Freeport,  Texas  recovers  vanadium pentoxides  and molybdic
oxides from spent catalysts supplied by oil refineries and petrochemical
plants.   The  plant's  major customers are catalyst  manufacturers.  This
facility is a direct discharger.

    3.  U.S. Production, Consumption, and Trade


        a.  Molybdenum
            The  U.S.  is  the  world's largest  producer and  exporter of
molybdenum.     Between   1978   and   1981,   domestic   consumption  was
approximately equal to exports.  Of these exports, about 97% were  in the
form  of  concentrate  or  technical-grade oxide.    Table  IX-1  presents
domestic molybdenum production, consumption, and  trade figures.   As can
be seen,  1982  production fell  to  about  half of  1980  production  due to
the worldwide  economic  recession.   Because  there are  ample supplies of
molybdenum, it is not stockpiled by the U.S. government.
        b.  Vanadium
            Small quantities  of spent catalyst-containing  vanadium are
purchased by dealers and sold to processors for recovery.  Trade figures
concerning this activity are not compiled.
                              IX-4
-------
                               TABLE IX-1


           U.S.  MOLYBDENUM  PRODUCTION,  CONSUMPTION,  AND  TRADE3

                (thousands of pounds molybdenum content)

Production
Consumption
Trade — Exports
(concentrate
and oxide)
Trade — Imports
(concentrate)
1978
131,813
67,724
69,150
2,705
1979
143,967
73,682
72,242
2,329
1980
150,686
60,754
68,217
1,825
1981
139,900
61,103
52,436
1,988
1982b
75,000
33,000
45,000
3,400
SOURCE:  Mineral Industry Surveys — Molybdenum, U.S. Department of
         the Interior, Bureau of Mines,  December,  1982.

^Unprocessed molybdenum ore;  large quantities of the concentrate
 (concentrated molysulfide)  are exported without processing.

bEstimated.
                               IX-5
-------
        End Uses and Substitutes
        a.  Molybdenum
            Steel   alloys   account   for   about   70$   of  molybdenum
consumption.  Technical-grade molybdic oxide and ferromolybdenum are  the
principal  forms  of  molybdenum  used  to   make  steel.    Metallurgical
applications, which include the use of molybdenum in steels, cast irons,
alloys, and as a refractory metal, are common to the machinery and tool,
oil   and   gas,   and   transportation   equipment   industries.     Among
nonmetallurgical  uses,  the  principal  applications  are  in lubricants,
catalysts, electrical products, and pigments.  The table below shows  the
breakdown of molybdenum consumption by major end markets in 1982.
                  End Market
     % 1982 U.S.
Molybdenum Consumption
             Machinery and tools
             Oil and gas industry
             Transportation equipment
             Chemicals
             Electrical
             Other
               TOTAL
         20
         17
         13
          8
        _8
        100
            Molybdenum's availability, low cost, and overall performance
have provided little impetus for the use of substitutes.  Potential sub-
stitutes do  exist however,  including:   chromium,  vanadium,  columbium,
and boron in alloy steels;  tungsten  in  tool  steels;  graphite, tungsten,
and  tantalum  for refractory  materials  in   high  temperature  electric
furnaces; and  chrome-orange, cadmium-red,  and organic-orange  pigments
for molybdenum orange.
        b.  Vanadium
            While the main use of vanadium  is  as  ah alloying ingredient
in steel,  the metal  plays  an important role  as  a catalyst  in certain
chemical  reactions.    Vanadium  catalysts  are   used   mainly  in  the
production of sulfuric acid.   Platinum  may  replace  vanadium  in some
catalytic processes,  but  the relative  cost of the materials influence
their usage.
                               IX-6
-------
 B.   MARKET  TRENDS  AND DEVELOPMENTS
     1.   Prices
        The  U.S.  is by far  the  world's largest producer  of molybdenum.
Domestically,  only  a  few  companies  produce  the  bulk of  output,  and
therefore  these   companies   possess   significant   control  over  market
prices.   These large  producers,  traditionally led by  Climax  Molybdenum
Co.,  publish an industry  standard list price  for major  products  which
has generally  been accepted  by smaller producers.
        Demand  for  molybdenum  from  every  sector  increased  markedly
during  late  1979  and 1980.   This  rise in demand outstripped  supply  and
caused  major shortages and  resulting  price  increases.   In 1982,  industry
supply  responded slowly  to  falling  demand,  thus  causing oversupply and a
rapid decline  in  prices from  the  1980 high.  However,  depressed  demand
is  not  expected  to  persist.   In fact,  demand has  already  increased
substantially since  the  general  economic  recovery started in 1983.
        Table  IX-2  presents  the  price  of  molybdenum  technical-grade
oxide  for  the years  1978-1982  in 1982 dollars.   The average price  for
this  period,  $8.36  per pound,  will be  used  in  this  analysis.    This
assumption is supported  both by expectations of steady  growth in  demand
and  by an  industry  pricing structure  which  is  likely  to  respond  to
increases in production  cost.
        This  price  has also  been  used in  the  analysis of those  plants
proposed  for  inclusion  in  the  Molybdenum   Acid   Plant  subcategory.
Because   the   methodologies   used   to  determine  impacts  in   the   two
subcategories  do not differ,  this price is  applied to  these two  plants.
    2.  Capacity Utilization
        The   capacity  utilization   of   domestic  molybdenum-roasting
facilities  is  computed from industry  operational  capacity and industry
production data.  These figures  are  summarized for the 1978-1982 period
in Table  IX-3-   The average capacity  utilization  rate for this period,
72$, is  used  for the  purposes  of our analysis, on the assumption  that
capacity  utilization  in   a  stable  market  will  roughly  parallel  the
average of capacity utilization in periods of over- and undersupply.
        Several plants  in  the study produce  high  purity metal products
for  specialty  markets.     At   these   plants,   molybdenum  operations
constitute  a  small  percentage  of  total  operations,  and  capacity and
production  fluctuate  with  the  volume  of orders  and  with  product mix
                              IX-7
-------
                     TABLE IX-2
      MOLYBDENUM TECHNICAL-GRADE OXIDE PRICES

       (price per  pound  contained  molybdenum)
Year
1978
1979
1980
1981
1982

Average Annual Price
Actual
4.86
6.07
8.99
8.50
7.99
Average
, Dollars per
Pound
1982 Dollars
6.70
7.69
10.42
9.01
7.99
price = $8.36






SOURCE:  Mineral Facts and Problems,  1980 and
         Mineral Commodity Summaries,
         U.S. Department of the Interior,
         Bureau of Mines, 1983.
                         IX-8
-------
                           TABLE IX-3


                 MOLYBDENUM CAPACITY UTILIZATION
Production
Year (million pounds)
1978
1979
1980
1981
1982

103
110
116
87
52
Average
Capacity
Capacity Utilization
(million pounds) (percent)
125
125
125
125
125
capacity utilization
82
88
93
70
_42
= 72%
SOURCE:  Personal communication, U.S. Department of the
         Interior, Bureau of Mines, January 1984.
                            IX-9
-------
decisions.     At   the   facility  identified  in  the  Secondary  Molyb-
denum/Vanadium  subcategory,  similar  problems  exist  with  respect   to
capacity and product mix.  Consequently, it is necessary to use the 1982
value of products produced as a proxy'for sales at these plants.

C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in  the  Primary Molybdenum/Rhenium subcategory,  nor  is  it
expected  to have  a  significant  impact  on  the  two  metallurgical   acid
plants  proposed   for  inclusion   in  the  Metallurgical   Acid  Plant
subcategory.  Results of  the  screening  test  show  that annual compliance
costs  do  not  exceed  1% of revenues for any plant  in this subcategory.
No plant  is projected to  close.   In addition,  compliance costs  for  this
subcategory  are   less  than  0.5%  of production  costs  under  the   most
stringent treatment option.
    Results of the  screening  test  indicate  that annual compliance costs
exceed  1?  of  revenues  for  the  one plant  identified in  the Secondary
Molybdenum/Vanadium subcategory.   However,  closure  analysis  shows that
this plant  will  not close.   Compliance costs  for  this  subcategory are
less than  1.5%  of  production  costs  under the  most  stringent treatment
option.
                                IX-10
-------
                 CHAPTER  X
PRIMARY NICKEL/COBALT AND SECONDARY NICKEL
               SUBCATEGORIES
-------
-------
              X.   PRIMARY NICKEL/COBALT AND SECONDARY NICKEL
                              SUBCATEGORIES
 A.   STRUCTURE  OF  THE  INDUSTRY
     1.   Raw  Materials  and  Production  Processes
        a.   Cobalt
             Cobalt  is usually mined as  a  byproduct of either  nickel  or
copper.    A  variety  of  techniques  are  used  in  processing  nickel,
depending  on  the  type  of  ore.    The  ore  is  first  concentrated  by
crushing,  grinding,  and  flotation.   This concentrate  is leached  with
ammoniacal  solution  and  acid  is  added  to  precipitate  the  nickel  and
other  impurities.   Cobalt powder  is obtained  through electrolytic  or
hydrogen  reduction  of  the  remaining  solution.   Nickel  and  copper  are
generally produced  as byproducts during  cobalt  processing.
        b.  Nickel
            Primary nickel is produced in the U.S.  from laterite  ore  and
imported matte, and as a byproduct of copper refining.  Secondary nickel
is recovered from nickel-bearing alloys, stainless  and alloy  steels,  and
residues  from  copper  smelters and  refineries,  foundries,  and  steel
mills.
            The  laterite  ore  is   first  concentrated  to  yield higher
nickel-bearing  matte,  by  smelting  and  subsequent  flotation  of  the
residue.    The  residue,  consisting  of high-grade  nickel  sulfide,   is
roasted  to  nickel  oxide and  reduced  to  impure  nickel  by smelting  or
leaching,  and  finally  refined  electrolytically   to  yield  pure nickel
metal.   Copper  and cobalt  are produced as  byproducts  after the nickel
sulfide solution is further processed.
    2.  Description of Plants
        a.  Cobalt
            AMAX Nickel, Inc.  operates  the  only primary cobalt refinery
in the U.S.,  at  Braithwaite,  Louisiana.  However,  cobalt operations at
AMAX accounted  for  only  a small  portion  of  their total  shipments in
terms of value.  The AMAX  plant  is also the largest primary producer of
nickel in the U.S.

                               X-l
-------
            Nickel
            AMAX  Nickel,  Inc.,  at  its  Braithwaite,  Louisiana plant,  is
the  only domestic  primary producer  of nickel.   AMAX  extracts  nickel
metal  from  laterite ore concentrates.   GTE  in Warren, Pennsylvania  and
Huntington  Alloys in Huntirigton, West  Virginia  have been identified  as
secondary producers of nickel.
            The one primary nickel/cobalt plant has been identified as  a
direct discharger of effluents.   In the secondary nickel subcategory,  a
zero  discharger  and an indirect  discharger have been  identified.   The
discharging  facilities will  be  analyzed  in  their  respective subcat-
egories.
    3.  U.S. Production, Consumption, and Trade
        a.  Cobalt
            The  U.S.  consumes, directly  or indirectly,  more  than one-
third of the world's cobalt production.  Although the U.S. has extensive
domestic cobalt  resources, domestic  mine  production  is insignificant.
Consequently,  domestic  industry  relies   almost entirely  on  imports,
primarily from Zaire  and Zambia,  for  its  supply.   Table X-1  shows that
the   recent   recession   significantly   affected   U.S.   production,
consumption,  and trade.   Between  1980  and  1982,  consumption  fell  by
approximately 3^%-  This  decline  in  demand resulted in a 26% decline in
domestic production and a 21? decline in imports.
        b.  Nickel
            Domestic  nickel  is  produced  primarily  from  imported  raw
materials (W% of  1982  production)  and scrap  (52$).   Of a total 76,903
short tons of  nickel  produced in 1982, only  3,203  short tons, or ^% of
total production,  were  produced from  domestic  ore.   As shown in Table
X-2, this figure represents a substantial decline  from  the 10,305 tons
produced in
            U.S.  nickel  consumption  has decreased  steadily  in recent
years,  from  a  high  of 273,000  tons  in 1978 to  only 198,000  tons in
1982.  Nickel imports, while  somewhat  erratic, have  also  declined,  from
234,352 tons in  1978  to  144,000 tons  in 1982.   U.S.  nickel exports, in
the  form  of  refined  metal,   increased  approximately  38$  during   this
period.
                             X-2
-------
                                TABLE X-1


             U.S. COBALT PRODUCTION, CONSUMPTION. AND TRADE

                     (short tons of cobalt content)

Production (secondary)
Consumption
Trade — Imports
Trade — Exports3
1978
518
10,182
9,515
774
1979
585
9,403
9,999
363
1980
592
8,527
8,151
292
1981
486
6,266
7,797
417
1982
436
5,592
6,435
250
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

aEstimated.
                                  X-3
-------
                                TABLE X-2


             U.S. NICKEL PRODUCTION, CONSUMPTION. AND TRADE

                     (short tons of nickel content)

Production
Mine
Refinery (primary)
Domestic ore
Imported matte
Refinery (secondary)
Consumption
Trade — Imports
Trade — Exports
1978
13,509
11,298
26,000
44,182
273,000
234,352
16,599
1979
15,065
11,691
32 , 500
57,404
226,000
177,205
23,949
1980
14,653
11 ,225
33,000
49,291
206,000
189,188
19,463
1981
12,099
10,305
38,500
52,000
197,000
200,348
19,616
1982
400
3,203
33,700
40,000
198,000
144,000
23,000
SOURCE:  Mineral Commodity Summaries, U.S. Department, of the Interior,
         Bureau of Mines, 1983.
                                  X-4
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         End  Uses  and  Substitutes
         a.   Cobalt
             Cobalt   is   used   principally   in   heat-  and   wear-resistant
 materials,  cutting  tools,  high-strength  materials,  permanent  magnets,
 and  in  %rarious chemical applications.  More than 25? of  cobalt  consumed
 is  processed  into  non-metallic compounds.   Two major  uses for  cobalt
 metal aro  in superalloys used extensively in the aircraft-  industry,  and
 in turbines.   The  table  below presents  a breakdown  of cobalt consumption
 by major end-use markets in  1982.
                 End-Use Market
   % 1982 U.S.
Cobalt Consumption
               Gas turbine  engines
               Magnetic materials
               Driers
               Catalysts
               Metal cutting and
                 mining tools
               Other
                  TOTAL
        37
        16
        11
        10

         7
        19
       100
            The  following  materials  may  be  substituted  for  cobalt:
nickel,  platinum,  barium  or  strontium ferrite,  and iron  in magnets;
tungsten, molybdenum  carbide,  ceramics, and nickel in machinery; nickel
and ceramics in  jet  engines;  nickel in catalysts; and copper, chromium,
and manganese in paint.   However,  such substitutions normally result  in
a decreased level of performance of these products.
        b.  Nickel
            Nickel's  ability  to impart  corrosion  resistance, strength,
and specific physical properties in alloys commends its wide use in many
producer and  consumer goods.   More  than 90% of nickel  consumed in the
U.S.  is  in  the  form  of alloys.   Superalloys  that  resist  stress  and
corrosion at  high  temperatures account  for  most of  the  nickel  used in
aircraft.   Nickel  alloys are  also  commonly  used  to  make stainless and
other  high-strength,  heat-resistant  steels  such  as  those  used  in
machinery,   construction,  and  metal  products.   It  is  also  used  as  a
catalyst in a  large  range of inorganic  chemical reactions.   Resistance
alloys containing up  to  80$ nickel account  for  most  of  the  nickel used
in electrical equipment.  Some  types of  batteries  use nickel with iron,
cadmium,  and zinc.  The  distribution of  U.S. nickel  consumption  in 1982
among major end-markets is reported in  the following  table.
                               X-5
-------
                 End-Use Market
            Transportation
            Chemical industry
            Electrical equipment
            Construction
            Fabricated metal products
            Petroleum
            Appliances
            Machinery
            Other
               TOTAL
   % 1982 U.S.
Nickel Consumption
        24
        15
        11
         9
         9
         8
         8
         8
         9
       100
            With few  exceptions,  substitutes  for nickel would result  in
increased cost  or  some sacrifice  in  the economy  or  performance of the
product.   Potential  nickel substitutes are aluminum,  coated steel, and
plastics in the  construction  and  transportation industries; nickel-free
specialty steels in  the power generating,  petrochemical,  and petroleum
industries; titanium  and plastics  in  severe corrosive applications; and
platinum, cobalt, and copper in catalytic uses.
B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
            Cobalt
            Cobalt  is  traded  mainly in  the  form  of  cathodes  with a
minimum purity of  99.6$.   Until the disruption  of  supplies from Zaire,
90$ of all cobalt  produced was  marketed  on  a producer price basis.   The
sudden  price  rise during  1978-1980  and  the  subsequent  rapid  fall,
however, have encouraged a very active free  market  in the metal.  Table
X-3 presents  U.S.  prices between  1978-1982.  With  increasing demands,
higher cobalt  prices  are expected in  the near future.   An estimate by
the Bureau of  Mines  indicates that the domestic  demand  for cobalt will
increase at  an average  annual  rate  of  2.5$ through  1990;  significant
increases are  expected in the  transportation and  industrial  machinery
sectors.  The  average  price  of the  1978-1982  period,  $21.97 per pound,
will be used in the analysis.
        b.  Nickel
            Historically,  nickel had  been produced by  a  limited number
of powerful groups  led  by International Nickel of  Canada,  which at one
stage had  over  80$ of  the western  market.   However, the  last  10 years
                             X-6
-------
                      TABLE  X-3


                    COBALT PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price, Dollars per Pound
Actual
11.53
2U. 58
25.00
19.73
12.90

1982 Dollars
15.89
31.15
28.99
20.91
12.90
Average price = $21 .97
SOURCE:  Personal communication,  U.S.  Department of
         the Interior,  Bureau of  Mines,  December
         1983.
                      X-7
-------
have  seen dramatic  changes  in  the  structure of  the  industry with  the
entry  of  newcomers;  International Nickel's share  is  now less  than  35?.
The  LME  is now  by  far the biggest  influence on nickel price, although
most of the  larger  consumers  still TDuy their requirements directly  from
producers.
            As  Table  X-4  shows,  the  price  of  nickel  has  remained
comparatively steady over  the  last  few years.  This has  been  due  partly
to  increased  competition  from smaller producers  and  partly to  the  fall
in  demand during  the current  recession.   With steady economic  recovery,
the price of  nickel  is  expected  to  rise gradually to match  the  increase
in  demand.    Estimates  by  the Bureau  of Mines  indicate that  domestic
demand will increase at 2.'l% per year,  from a 1981 base, through  1990.
The average price between '!978-1982, $3.36  per  pound,  will be  used  for
the purposes of analysis.
    2.  Capacity Utilization
        a.  Cobalt
            Demand  for  cobalt  has,   in  general,   outstripped   supply.
Information  from  the Bureau  of Mines indicates  that  primary producers
operated at  an average rate  of 87% between  1978-1982.   Operations  are
expected to  continue at  this -rate  in the  near  future  to  satisfy  the
large demand for cobalt products.  This rate is used in the analysis.
        b.  Nickel
            Nickel  is  vital  to many  strategic  industries.    The U.S.
nickel  industry   has   operated  at  fairly   high   rates  of  capacity
utilization  in  the  past.    Agency  data  and  Eiureau  of  Mines  sources
indicate that  nickel  metal and  ferronickel  producers  together operated
at an average rate of approximately 85$ between 1978-1982; this rate has
been used in the  analysis.  Their  total  capacity has been approximately
5^,000  short  tons  and  production  has  averaged between 40,000-52,000
short tons.  The Bureau of Mines estimates that demand for high-strength
nickel  alloys  will rise  gradually at  an annua.1  rate of  2.1$  through
1990.   With  the  economy  showing  definite  signs  of  improvement,  the
nickel industry is expected to continue operating at high rates.
                               Xo
                              — o
-------
                      TABLE  X-4
                    NICKEL  PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price,
Actual
2.08
2.49
3.41
3-43
3.20
Dollars per Pound
1982 Dollars
2.87
3.16
3.95
3.64
3_^20
Average price = $3-36
SOURCE:  Personal communication, U.S. Department of
         the Interior,  Bureau of Mines,  December
         1983.
                     X-9
-------
C.  IMPACT ASSESSMENT
    The proposed regulation i3 not expected to have a significant impact
on  plants  in  the  Primary  Nickel/Cobalt  subcategory.   Results  of the
screening  test  show that  annual  compliance  costs  do not  exceed 1J of
revenues for  the  one  plant  identified  as a discharger  of effluents.
This plant is not projected to close.  In addition,  compliance costs are
less than 0.1? of total production costs for this subcategory.
    Results  of  the  screening  test  show  that  annual  compliance  costs
exceed  1?  of revenues for  the  one discharging plant  identified in the
Secondary Nickel subcategory.   However,  closure analysis indicates that
this plant will  not close.  Additionally, compliance costs are less than
3.0? of revenues under the most stringent treatment option.
                              X-10
-------
               CHAPTER  XI
  PRIMARY PRECIOUS METALS/MERCURY AND
SECONDARY PRECIOUS METALS SUBCATEGORIES
-------
                 XI.  PRIMARY PRECIOUS METALS/MERCURY AND
                    SECONDARY PRECIOUS METALS SUBCATEGORIES
 A.  STRUCTURE OF THE INDUSTRY
     1.   Raw Materials and Production Processes
         a.  Gold
             Gold occurs mainly as a  native  metal,  combined with silver,
 copper,  or  other  metals.   Gold  is  also  associated with  iron,  silver,
 arsenic,  antimony,  and  copper sulfides.   Weathering and  erosion  cause
 gold in free or metallic  form to be  released  from primary deposits and
 to  accumulate as nuggets  and grains.   In the U.S.,  about 60$ of domestic
 production  comes from gold ores;  the  remainder  is  a byproduct of copper
 or  other metal  production.   Most  of  the  ore is  recovered  from  deep
 narrow  veins or  from thin layers called reefs.  The remaining ore  comes
 from open pit mining.
             Gold  is recovered  from ore  concentrates  by leaching  it  in
 cyanide  solution.   Zinc dust  is  added  to  the solution to  precipitate
 gold  and  any silver  present  in  the  concentrate.  The precipitate is then
 smelted  to  oxidize  any  base  metals  present  and  then  resmelted in  a
 chlorine  atmosphere.   The chlorine  converts  any other  impurities present
 into  chlorides,  which  float on  the liquid metal and  can be  skimmed  off
 to  yield  commercial grade  gold.   Further  refining  can be  achieved  by
 electrolysis to produce  up to 99.98? pure gold.  In  the  refining of gold
 from  ore, silver  and platinum group metals are  also  recovered.
            Secondary  gold  is  recovered  from  industrial  scrap,   gold
plated materials,  or  plating solutions.   Scrap is dissolved  in  a strong
acid  and  sulfur dioxide is  bubbled  through  the solution to  precipitate
gold.  Gold may also be dissolved in a cyanide  solution  and  recovered  by
electrolysis.   In  the case of  recovery from plating bath solutions,  zinc
or aluminum  is  added  to precipitate gold.   The precious metal  is again
refined electrolytically.


        b.  Silver
            Silver  occurs  in several minerals.   In  the  U.S.,  the most
common sources of silver are from ores containing gold, lead, copper,  or
zinc.  Most extraction in the U.S. is from tetrahedrite (Cu,(Sb,AS) S,),
which is mined  by  sinking vertical shafts and  then excavating the sub-
surface deposits.
                            XI-1
-------
             In the production  of primary silver, silver  containing ore
 is  first  concentrated  by  a  flotation process.    This  concentrate  is
 smelted  to  remove base metals  which, oxidize  and  form  a •• scum.   The
 partially  refined  metal  is  resmelted  with  chlorine gas and the silver is
 removed  as silver  chloride.   Silver chloride is  then leached with dilute
 hydrochloric   acid,   and  iron  or  a  ferrous   solution   is   added  to
 precipitate  the  silver.   The  crude silver  is refined electrolytically to
 99.95?  to  99.99? purity.   Gold and  copper  are usually recovered in the
 silver refining  process.
            Secondary   silver   is   recovered   from   industrial   scrap
 containing  gold and  silver,  by  dissolution  of  the  scrap in acids  and
 precipitation  of  first  gold and then  silver.   The  silver is  refined
 electrolytically to higher purity levels.
        c.  Platinum-Group Metals
            The  six  metals which comprise the closely related  platinum-
group   metals   (PGMs)   are  platinum,  palladium,  rhodium,   ruthenium,
iridium,  and  osmium.   These  elements generally  occur  together and  are
sometimes  associated with  gold.   Occasionally  they  are  found in  coal
deposits  with  nickel and copper.  Nickel,  copper,  cobalt, and gold  are
common  byproducts  of platinum mining.  However,  in most cases the  PGMs
are byproducts of nickel and copper mining.
            The  PGMs  are recovered  from anode slimes  during copper  or
nickel   extraction.     The  anode   slimes   also   contain  gold;  after
precipitation  of gold, ammonium  chloride is  added  to  the  solution  to
precipitate platinum  and  palladium.   Secondary PGMs  are also recovered
in a similar manner by first  dissolving scrap in  aqua regia  (if gold  is
also  present)   and then  selectively  precipitating  gold,   silver,  and
finally PGMs.
        d.  Primary Mercury
            Mercury  deposits  occur  in  many  minerals,   but   the  most
commonly known is  the  red  sulfide  or  cinnabar (HgS).  It contains about
86.2$ mercury and  13'.8?  sulfur.   Cinnabar may either be disseminated in
fine-grained  rocks or in  fissures and cracks  of country  rocks,  or as
almost pure cinnabar, sharply separated from the gangue.  Mercury ore is
mined by both surface and underground methods, though the larger part of
the  ore  has been  produced  by  the latter.   The ore  is  beneficiated by
crushing and  flotation.   The  beneficiated  ore is heated  in retorts or
furnaces to liberate  the metal as vapor, which when cooled collects as
condensed  metal.    For  larger  operations,   either  rotary  or  multiple-
hearth  furnaces  may  be  used.    The  soot  may be  treated  with  lime to
recover mercury contained in it.
                              XI-2
-------
             Other  non-commercial methods  of  mercury recovery  have  also
 been  developed.   One  method  dissolves  mercury  ore  in  a  solution  of
 sodium  sulfide and sodium hydroxide.   The mercury is leached,  and  then
 recovered  as metal by  precipitation  with aluminum, or by electrolysis.
 In  another  process,  mercury  in  the  ore   is  dissolved  in  a  sodium
 hypochlorite  solution.    Mercury absorbed in  activated  carbon, used  to
 treat the  solution, is  recovered by subsequent  heating.
    2.  Description of  Plants


        a.  Primary Producers
            Since gold and silver generally occur  together  in  most  ores,
producers  usually  recover both  these precious  metals  as coproducts  of
ore  refining.   Producers which recover  gold  and silver  from  their  ores
are  the Homestake  Mining Company  at  Lead,   South  Dakota  and  Creede,
Colorado;  Sunshine  Mining  Company  at  Kellogg,  Idaho  and  Silver  Peak,
Nevada;  and  the  Cortez  Gold  Mines  at  Cortez,  Nevada  and  Whitehall,
Montana.   The Homestake  Mine  at  Lead,  South  Dakota,  has accounted  for
more than  10J& of all U.S. gold production.
            Gold  and  silver are also  recovered  as byproducts of copper
refining  operations.    The  Amax Corporation  at  Carteret,  New Jersey;
Asarco  at  Amarillo,   Texas and  Tacoma,  Washington;  Duval  at Battle
Mountain,  Nevada;  and Kennecott Refineries at  Magna,  Utah each recover
gold and silver as byproducts of their copper refining operations.
            The  Carlin  Gold Mining  Company at  Carlin,  Nevada recovers
gold  and  mercury  from  a  gold-mercury  ore;   and  McDermitt  Mine  at
McDermitt, Nevada recovers mercury from mercury  ore.
            Of the plants  within  the  scope of the proposed regulations,
only one  plant  is  a  direct discharger.   The  other 12 plants are either
zero or dry dischargers and are therefore not analyzed further.  Because
no  discharging   plant  produces  mercury,  this  metal  is  not  discussed
further.
        b.  Secondary Producers
            The Agency has identified 48 domestic secondary producers of
precious metals.  Of  the  48  secondary  producers,  20 plants consume part
or all  of their  production  captively.   Most of  these  plants purchase
electronic, jewelry,  or  dental  scrap and refine and  realloy  it for use
in  jewelry or  dental  alloy.    Some  of  the plants  engaged  in  these
operations  are  J.M.  Ney, Bloomfield,  Connecticut;  Martin  Metal,  Los
Angeles,  California;  Hoover  &  Strong,   Richmond,  Virginia;  Dentsply,

                               XI-3
-------
York,  Pennsylvania;  Pease  4  Curren,  Warwick,  Rhode Island; L.S. Plate ,&
Wire,  Woodside, New  York; and Handy & Harinan, Attleboro, Massachusetts.1',
            Other  companies  simply melt electronic,  jewelry, or dental
scrap and  form  an impure bullion.   They  then either realloy the metals
themselves  or  send  the  impure  bullion  to  a  refiner   for   further
refining.   For instance,  the Behr  Metals  plant  at  Rockford,   Illinois
makes  a copper-based  alloy  consisting of  gold,  silver,  and platinum-
group metals and sends it to Amax for refining.
            There  are  a few  plants which  refine  mainly platinum-group
metals.  The Johnson Matthey plant at West Deptford, New Jersey recovers
platinum  and  palladium  from  various  spent   catalysts  and  platinum-
containing glasses.  Johnson  Matthey  subsequently  uses the platinum and
palladium  for  making  automotive  catalysts.   The  Engelhard  plant  at
Newark,  New Jersey and  the  Gemini  Industries  plant at Santa  Ana,
California are also engaged ii similar operations.,
            Another  class  of  secondary  refiners  recovers  gold  and
platinum-group metals for use in making cyanid solutions or plating bath
chemicals.     The   Occidental  Chemical  Corp.   plant  at  Chatsworth,
California recovers gold and ?GMs from gold solutions, plated parts, and
scrap and uses the metals  for  making  chemical solutions.  The Engelhard
plant at  Anaheim,  California,  recovers gold  from electronic  scrap and
produces both  potassium cyanide gold  solution  and  electronic contacts.
The Nassau Recycle plant at Staten Island, New York makes gold slats for
plating baths.
            Twenty  plants  are   secondary   refiners.     Starting  from
electronic,  dental  or  jewelry scrap,  these plants  sell  their output
without any  self  consumption  or  further conversion.   A large number of
these plants work on a regular "toll" basis  for  end users from whom they
obtain scrap and send back refined precious  metals.
            There are 3 direct dischargers,  29 indirect dischargers, and
16 zero  dischargers  of effluents.   Secondary silver  production  is not
covered under this regulation and will not be discussed further.
    3.  U.S. Production,  Consumption,  and Trade


        a.  Gold
            Secondary gold production accounts for a significant portion
of domestic supply.  Secondary production was quite stable between 1978-
1982.  As  shown  in Table XI-1 , while consumption  fell  32$  from 1978 to


                               XI-4
-------
                               TABLE XI-1


              U.S. GOLD PRODUCTION, CONSUMPTION, AND TRADE

                 (million  troy  ounces  of contained  gold)

Production:
Mine
Refinery (domestic ore)
Refinery (imported ore
and base bullion)
Secondary
Consumption
Trade — Imports
(refined bullion)
Trade — Exports
(refined bullion)
1978

1.00
0.96

0.071
3.08
5.10

4.45

5.02
1979

0.96
0.80

0.083
2.88
5.12

4.37

15.59
1980

0.97
0.77

0.014
3.82
3.60

4.09

4.70
1981

1.38
0.80

0.004
3.06
3.50

4.16

5.24
1982

1.44
0.72

0.001
3.02
3.45

4.24

1.64
SOURCE:  Mineral Commodity Profiles and Mineral Industry Surveys,  U.S.
         Department of the Interior,  Bureau of Mines,  1983-
                              XI-5
-------
 1982,  secondary  production  dropped  just 2%.    Imported  ore  and  base
 bullion  play an  insignificant  part in  the  domestic  supply  of  refined
 production.   However,  imports  of refined  bullion  continue  to  be  an
 important  source  of  domestic   supply.    Since  1978,  refined   bullion
 imports have averaged around ^ million troy ounces.
        b.  Silver
            U.S.  production,  consumption,  and  trade  of  silver  are
significantly affected by movements in the price of silver.  As shown  in
Table  XI-2,  silver  production  and   exports   rose   17.7$   and  268.2$,
respectively, from  1978  to  1930,  following the rise  of silver prices  to
their 1980 record high.  Both production and exports then declined 36.8$
and  71.6$,  respectively, from  1980  to 1982,  following  the  collapse  in
silver prices.
        c.  Platinum-Group Metals
            U.S. mine production, derived as a byproduct or coproduct of
copper refining,  forms  an insignificant part of  the  domestic supply of
PGMs.    As  shown  in  Table  XI-3,  imported  primary  metal  provides
approximately  90$  of domestic  requirements;  the  remainder  is produced
primarily from  domestic  secondary  sources,  such as petroleum catalysts,
chemical catalysts, glass-fiber bushings, and electronic scrap.  Between'
1979-1982 consumption fell about 33$, primarily due to slower industrial
activity  in  the  automotive and  chemical  industries,  which  are  major
platinum catalyst consumers.   This  decline  in  demand  had a major impact
on  imports  but little  impact  on  domestic  production.    In  fact,  while
imports  fell  40$  over  this  period,  domestic  secondary  production
actually rose 11$.
        End Uses And Substitutes
        a.  Gold
            In addition  to jewelry,  gold  has many  industrial,  dental,
and  defense  applications.   Of  the  industrial  applications,  the  most
important  has  been  in modern  solid-state  electronic  devices  such  as
miniaturized  circuitry connectors  and  switch  contacts.   Gold's  high
conductivity  and  corrosion  resistance  are  important  to  these  uses.
Gold's  reflectivity  of  infrared  radiation  has  led  to  use  as  an
insulating device in large buildings and spacecraft.   Gold has also long
been   used  in   dentistry  for   its   non-allergenic  and   malleable
properties.   Jewelry  and  arts,   however,  continue  to  be  gold's  major
market.    As  shown  in the  table  below,   a small  percentage  is  also
purchased for investment.


                               XI-6
-------
                               TABLE XI-2


              U.S.  SILVER  PRODUCTION  CONSUMPTION,  AND  TRADE

                (million troy  ounces  of  contained  silver)

Production3
Consumption
Trade — Imports
Trade — Exports
1978
113
143
77
22
1979
124
131
92
36
1980
133
91
79
81
1981
103
169
94
28
1982
84
144
97
23
SOURCES:  Non-Ferrous Metals Data — 1982,  American Bureau of
          Metal Statistics.

          Mineral Commodity Summaries,  U.S.  Department of the Interior,
          Bureau of Mines,  1983.

aRefined production from ore,  concentrates,  coins,  and old scrap.
                              XI-7
-------
                               TABLE XI-3


                        U.S.  PLATINUM-GROUP  METAL

                   PRODUCTION, CONSUMPTION,  AND TRADE

                         (thousand troy ounces)

Production
Mine
Refined (primary)
Refined (secondary)3
Consumption
Trade — Imports
(refined metal)
Trade — Exports
1978

8
10
257
2,260

2,723
702
1979

7
9
309
2,756

3,311
900
1980

3
3
331
2,206

3,125
765
1981

6
7
392
1 ,921

2,612
863
1982

8
7
3^3
1,855

1,976
862
SOURCE:  Mineral Commodity Profiles and Mineral Industry Surveys,
         U.S. Department of the Interior,  Bureau of Mines, 1983.

aToll-refined material is excluded.
                               XI-8
-------
                 End-Use Market
               Jewelry and arts

               Industrial  (mainly
                electronic)

               Dental

               Small bars  (mainly
                for investment)

                  TOTAL
  % 1982 U.S.
Gold Consumption
        61


        29
         9

       	1_

       100
            Although  no  metal   or  alloy  has all  of  gold's desirable
properties, several  substitutes have been developed  as  a result of  the
high  prices  of  gold   in  recent  years.    Platinum  and  palladium  can
substitute  for  gold  in  many   applications, but   there  still  exists
established consumer preference  for gold.   Silver  may  substitute  for
gold in electrical end uses, but is  less corrosion-resistant.
        b.  Silver
            Silver  is  critical  to  the production  of many manufactured
products.    It  provides  high  electrical  conductivity,   resistance  to
oxidation,  and  strength  at  a  wide  range  of  temperatures.    Silver
consumption in  many end  uses  is based  upon  the superior performance of
the  metal  or  one  of its compounds.   Silver consumption  by  end-use is
presented below.
                 End-Use Market
      %  1982  U.S.
  Silver  Consumption
           Photography
           Electrical and
             electronic components
           Sterlingware and jewelry
           Brazing alloys and solders
           Other

               TOTAL
           39

           29
           14
            7
           11

          100
            Silver's metallurgical properties and  consumer appeal limit
substitution in  most  uses.   However, technological  developments  in the
photography industry have led to a minor decline in silver usage in that
industry.
                            XI-9
-------
        G.  Platinum-Group Metals
            PGMs are valued for their refractory quality, their chemical
inertness   at  high   temperatures,   and   their   excellent  catalytic
activity.    These  properties  make  PGMs  particularly  suitable  for  a
variety  of  industrial  uses.   The  table  below shows that the automotive
industry  is  the  principal consumer, using PGMs  as  catalysts to control
automobile exhaust emissions.  PGMs are also used in electrical contacts
and relays in telephone systems.  PGM catalysts are used by  the chemical
industry  to produce acids  and  organic  chemicals,  and to  upgrade  the
octane rating of  gasoline.   Because of their high prices, PGMs are used
only where well-justified both technically and economically.
End-Use Market
Automotive
Electrical
Chemical
Dental supplies
Other
TOTAL
% 1982 U.S.
PGM Consumption
33
28
15
9
15
100
            In  automotive. catalysts,   platinum,  palladium,  and  rhodium
have had  no  competition from  substitutes  in recent years.   Molybdenum
and chromium can substitute  for  PGMs  in  petroleum refining,  but only by
sacrificing yield and  catalyst life.   In  recent  years,  the  combination
of rhenium with platinum in petroleum-reforming  catalysts has resulted
in a significant improvement :.n  performance  and  durability.   Silver and
gold  often substitute  for  platinum   and  palladium  in  electrical  end
uses.   For PGM alloys  requiring  wear  resistance,  such  as electrical
contact points, ruthenium has  been  used  as a more effective  and cheaper
hardening agent than iridium.
B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Precious metals  are generally  sold in  their pure  form.   The
major producers  publish  an official,price for virgin,  unwrought ingots
with a minimum purity of 99.,5%.   This  price  is  applicable to industrial
accounts and long-term purchases.   The  dealers'  price, as quoted by U.S.
producers, is applicable to spot purchases.  Prices may also be affected
by premiums for higher purity,  different shapes,  long-distance delivery,
speculation, and exchange-rate  fluctuations.  The  free  market prices of
gold and platinum usually  follow  each  other  upward  or downward.  Tables
                              XI-10
-------
 XI-4  and XI-5 show  that  prices for refined gold,  silver,  platinum,  and
 palladium have  fallen in  recent  years  due to  lower  demand  for  these
 metals.    However,  with  the  growth of  the economy,  demand  for  these
 metals  is expected  to increase,  resulting in  higher  prices.   Average
 prices over  the  1978-1982 period will  be  used  in this analysis.
         A  small  part  of  the  market  is  concerned  with  the  trading  of
 unrefined  metals by small secondary producers who sell  their  product  on
 a  toll or non-toll basis.   Prices for such  inter-company  transfers are
 not  quoted  in  the market.    Therefore,  information  supplied by  these
 plants  regarding 1982 revenues  and production  levels  has  been  used  to
 analyze  the  impact  of  environmental regulations  on  these  producers.
     2.   Capacity  Utilization
         Capacity  utilization  rates  for  gold,   silver,  and  PGMs  have
 fallen  significantly  since  1980.    However,  these  conditions  are  not
 expected  to persist.    Platinum-group  metals are  critical to  industry
 because  of their  extraordinary  physical and  chemical  properties.   The
 Bureau  of  Mines estimates that  the  domestic  production of platinum  and
 palladium  will double,  in  the  near  future  as  a  result  of  increasing
 demand  for automotive  catalytic converters.   Steady demand growth  for
 gold  is  expected  in  electronics,  telecommunications,   robotics,   and
 computers.    Steady   demand   for   silver   is  also   expected  in   these
 electronics-related  fields.   Therefore, plants producing these  precious
 metals  are  expected  to generate  higher revenues in the near future  with
 higher  prices  and higher  capacity  utilization rates.   Tables  XI-6  and
 XI-7  list   the  capacity utilization  rates  between  1978-1982  for  gold,
 silver,  and PGMs.   The  average rates,  77$   for  gold  plants,  70$  for
 silver  plants,  and 72$ for PGMs, have been used for  this analysis.   For
 those   secondary  producers  who  trade  unrefined  metals,  information
 supplied on capacity utilization in  1982 has  been used  in this analysis.

 C.  IMPACT  ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in the  Primary Precious  Metals/Primary  Mercury subcategory.
Results of  the  screening test show  that  annual  compliance costs do not
exceed  1$  of revenues for  the  one plant identified  as  a discharger of
effluents.   This-  plant   is  not  projected  to'close.   Results  of the
screening  test   indicate  that  annual  compliance  costs  exceed  1$  of
revenues  for one  of  the  32 plants  incurring  costs in  the  Secondary
Precious MetaLs  subcategory.  The closure analysis identifies this plant
as  a  potential  closure  candidate.   However,  compliance  costs  are less
than  0.25$  of  total production  costs  for both  subcategories  under the
most stringent  treatment  option.
                            XI-11
-------
                           TABLE XI-4


           U.S. GOLD,  PLATINUM, AND  PALLADIUM  PRICES

                    (doHairs per troy ounce)
Year
1978
1979
1980
1981
Gold
Actual
194
308
613
460
1982 376
Average price
1982
Dollars
266
390
710
487
J76
= $446
Platinum
Actual
237
352
439
475
475
1982
Dollars
327
446
509
504
475
$452
Palladium
1982
Actual Dollars
71
113
214
130
110
$
98
143
248
138
110
147
SOURCE:  Mineral Commodity Profiles, U.S. Department of the
         Interior, Bureau of Mines, 1983.
                          XI-12
-------
                 TABLE XI-5
             U.S.  SILVER PRICES

          (dollars per troy ounce)
Year
1978
1979
1980
1981
1982
Actual
5.40 •
11.09
20.63
10.52
7.95
Average price
1982 Dollars
7.^4
14.06
23.92
11 .15
7.95
= $12.90
SOURCE:  Non-Ferrous Metals Data — 1982,
         American Bureau of Metal
         Statistics, Inc.
               XI-13
-------
             TABLE  XI-6
   GOLD  AND  PLATINUM-GROUP METALS

     CAPACITY  UTILIZATION RATES
Year
1978
1979
1980
1981
1982
Average
Platinum-Group
Gold Metals
86%
78$
96$
54$
.53$
= 77$
80$
80$
100$
50$
50$
72$
SOURCE:  Personal communication,
         U.S. Department of the
         Interior,  Bureau of
         Mines, January 1984.
            XI-14
-------
                         TABLE XI-7
               CAPACITY UTILIZATION ~ SILVER
Year
1978
- 1979
1980
1981
1982

Production3
(million
troy ounces)
113
124
133
103
84
Average
Capacity Capacity
(million Utilization
troy ounces) (%}
160
160
160
160
160
capacity utilization
71
78
83
64
51
= 70*
SOURCE:  Production data — Non-Ferrous Metals Data -- 1982,
         American Bureau of Metal Statistics, Inc., and
         Mineral Commodity Profiles, U.S. Department
         of the Interior, Bureau of Mines, 1983.

         Capacity data — Personal communication,  U.S.
         Department of the Interior, Bureau of Mines,
         January 1984.

aRefined production from ore,  concentrates, coins,  and
 old scrap.
                         XI-15
-------
-------
             CHAPTER XII
PRIMARY RARE-EARTH METALS SUBCATEGORY
-------
               XII.  PRIMARY RARE-EARTH METALS SUBCATEGORY
 A.   STRUCTURE OF THE INDUSTRY
     1.   Raw  Materials and  Production Processes
         The  rare-earth minerals group consists of  16  chemically similar
 elements,  which  generally  occur  together  in  various  ore  deposits.
 Bastnasite  and monazite  are the  principal raw  sources  from which  the
 rare-earth materials are obtained.   Bastnasite  is the major  source  for
 the  cerium  subgroup elements such as lanthanum,  samarium,  and neodymium
 (the  light  subgroup).   Since  1979,  bastnasite  has  accounted  for  more
 than  50$  of  the   world  production  of  rare-earths.   Monazite is  the
 principal  source  of  the  heavy  or  yttrium  subgroup  elements  such  as
 gadolinium,  terbium,  and  dyspromium.   Monazite  has  certain  production
 limitations  because thorium and  other  radioactive components are  often
 associated with the mineral  and are produced  as byproducts.
        The  extraction  of   rare-earth  metals   is   achieved   by  first
converting  the  oxides  present  in  the  ore  into  chlorides  and  then
reducing the chlorides electrolytically to yield  rare-earth  metals.   The
concentrates  are converted  to  chlorides by  leaching with  hydrochloric
acid;  next,  the concentrates are  fused and  electrolyzed in a  graphite-
lined  iron  cell to produce  the  rare-earth  metals and chlorine.   Carbon
monoxide and carbon dioxide  are  produced as byproducts.
        Rare-earth   minerals   are   produced   in  various   forms   and
combinations:     as  chlorides,  as   oxide  metals,   individually,   as
"mischmetal"  (the proportion  of each  metal in mischmetal is the  same as
the proportion  in ore), and  as mixtures  of  compounds  and  metals.   The
currently proposed  regulations  cover  only the electrolytic reduction of
the rare-earth chlorides (REC)  to the rare-earth metals  (REM).
        Description of Plants
        The  four  plants  identified  in  this  subcategory are  Ronson in
Newark, New Jersey; Remacor, in West Pittsburgh, Pennsylvania; Molycorp,
Inc.  in  Washington,  Pennsylvania;  and  Research  Chemicals  in Phoenix,
Arizona.    Two  of  these  facilities  use  a  process  that   produces no
wastewater.
        The  two   discharging   plants  recover   rare-earth   metals  by
electrolysis of the fused chloride, which  is  an intermediate product in
the extraction of rare-earth metals from  their  ores.   One plant imports


                            XII-1
-------
most  of  the  rare-earth  chlorides  required  to  manufacture  rare-earth
metals.   This  plant  also produces  alloys  for use  in  flints and  other
industrial  and  mining  purposes,  and  is   an  indirect   discharger   of
effluents.  The other plant is a direct discharger,,
    3.  U.S. Production, Consumption, and Trade
        The U.S. is the world's principal producer and consumer of rare-
earth  metals,  and  is a  major exporter  of rare-earth  concentrate and
compounds.  Domestic  consumption  in 1982 was  estimated  at 21,500 tons,
18,500  tons  of  which  was  to be  supplied  largely  by  domestic  pro-
duction.   Table  XII-1  shows  net  increases   in  all  categories  except
exports of  ore and concentrate, which  declined  approximately 54$,  from
6,452 short tons to 3,000 short tons,  between 1978-1982.
    4.  End Uses and Substitutes
        Industrial applications of  the  rare-earth metals have increased
markedly in  recent  years, and  the  usage pattern  of  these elements has
changed radically.    Although  traditional uses  for  lighter  flints and
carbons, polishing  compounds,   and  glass-ceramic additives  continue to
constitute  significant   markets,   the   manufacture  of  catalysts  for
petroleum refining and  use  in  ductile iron and  steel are currently the
major markets for rare-earth metals.
        The table  below  represents the percentage  of rare-earth metals
used by individual industries in 1982.
                End-Use Market
              Petroleum catalysts
              Metallurgical
              Ceramics and glass
              Other
                 TOTAL
   % 1982 U.S. Rare-
Earth Metal Consumption
          43
          34
          21
         	2
         100
        Substitutes are  available for  the  rare-earth metals,  but they
are  generally  significantly  less   effective.    Arsenic  and  selenium
perform  similar  functions  in the  ceramics  and  glass  industry;  rouge
replaces the  metals in  polishing  compounds;  iron and calcium fluoride
substitute in carbon-arc electrodes;  boron may be substituted in thermal
neutron  absorbers;  and  palladium  performs as  a catalyst  in petroleum
refining.
                               XII-2
-------
                               TABLE XII-1


                         U.S. RARE-EARTH  METALS

                   PRODUCTION, CONSUMPTION. AND TRADE

                     (short tons of  rare-earth oxide)

Production
Consumption
Trade — Imports
Monazite
Metals, alloys,
oxides and compounds
Trade — Exports
Ore and concentrate
Ferrocerium and
pyrophoric alloy
1978
15,595
17,400
4,241
1,766
6,452
17
1979
18,205
17,600
3,812
1,107
4,777
37
1980
17,622
20,000
3,121
1,790
5,226
15
1981
18,830
22,100
4,528
1,798
5,573
10
1982a
18,500
21,500
4,300
2,300
3,000
30
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

Estimated.
                                  XII-3
-------
 B.   MARKET TRENDS AND DEVELOPMENTS
     1.   Prices
         Trade   in   rare-earth   materials   involves   a   wide   variety  of
 products ranging from  concentrates and intermediate  production  compounds
 to  high-purity compounds and metals; hence,  no single price exists for
 rare-earth  minerals.   Monazite concentrates are generally sold  directly
 to  processors,  Bastnasite  commands a  higher price,  because  it has  a
 more   useful   mix   of  rare-earth  elements.    In  some  applications,
 bastnasite  concentrates  can   be  used  directly  without   intermediate
 treatment.
        The  price  of  an  element  depends  on  its   grade   and   purity
designation.   No  historical price  information is available for  rare-
earth  metals.    Prices quoted  for most  of the rare-earth  elements  in
1982,  though the  same  as  in 1981, had fallen considerably from the 1979
levels.   Prices  for high-purity  oxides  in  1981  and  1982  ranged  from
$7.00  per  pound   for   lanthanum  to  $900  per  pound  for  europium.
Mischmetal, which  is a  mixture  of rare-earth elements in metallic  form,
was  quoted  at  $5.60 per  pound  through 1981 and 1982.   Because the  two
plants covered  by  the  proposed regulations  produce  mainly  mischmetal,
this mischmetal price has been used to analyze  these plants.
    2.  Capacity Utilization
        Rare-earth  metals  are in abundant supply  in  the United States.
Improved knowledge  of rare-earth properties may  lead  to new industrial
applications.  Therefore,  the  demand  pattern  is expected to continue  to
shift  from  established uses,  such  as  petroleum  refining,  to  new uses
such as steel additives and  phosphors.   Special mixtures, such as" those
used  in  x-ray  screens,   fluorescent  lamps,  permanent  magnets,  and
electronics  are  becoming  increasingly  popular.    The Agency's  data
indicate that most  of  the  plants  operated at  approximately 50% of  their
capacity during the  1982 recession.   For  the  purposes  of this analysis,
it has  been  assumed that  the  plants  will continue operating during the
impact period at existing capacity utilization levels.
C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on plants in the rare-earth  subcategory.   Results  of the screening test
show that annual compliance  costs do not  exceed  1$  of revenues for any
plant in the subcategory.  No  plant  is  expected to close.  In addition,
compliance costs for  this  subcategory are less than  0.7$ of production
costs under the most stringent treatment option.
                               XII-4
-------
         CHAPTER XIII
SECONDARY TANTALUM SUBCATEGORY
-------
-------
                   XIII.   SECONDARY TANTALUM SUBCATEGORY


 A.  STRUCTURE OF THE  INDUSTRY


     1.  Raw Materials and Production Processes
         Tantalum mineral  concentrates  and tin slags are the  predominant
 feed materials for production of tantalum metal and compounds.   Both  raw
 materials  usually  contain recoverable  amounts  of columbium  as  well.
 Many  mineral   concentrates  contain  50%   or   more   of  the   combined
 pentoxides, Ta20c  and  C^Or,  the Ta:Cb  ratio  depending on the  deposit.
 Tin slags generally contain more Ta20  than  C^Ocj .
     In  the  U.S.,  most tantalum  production  is  from  secondary  sources,
 starting with  tantalum scrap, or  tantalum-bearing  sludge.   Tantalum  is
 recovered from  scrap  by  leaching it  with  acid, which  dissolves other
 metals like nickel and impurities,  to  leave  behind impure tantalum.   It
 is then refined by washing, filtering, and cleaning the residue  again  in
 acid and finally drying it to obtain pure tantalum.
     Metallic forms of tantalum are produced chiefly in unalloyed  form or
 alloyed with  up to  10J tungsten.   Tantalum powder of  99.9% purity is
 also produced.
     2.  Description of Plants
         Three plants  in  the U.S. recover secondary  tantalum.   They are
 GTE  Products  Corp.  in  Towanda,  Pennsylvania,  Kennametal,  Inc.  in
 Latrobe,   Pennsylvania,    and   Texas   Instruments    in   Attleboro,
 Massachusetts.   The  recovery process  involves  leaching  with  acid to
 dissolve other  metals and  impurities  and finally washing and cleaning
 the  residue  to  recover   tantalum.     All   three  plants  are  direct
'^dischargers.
     3.  U.S. Production, Consumption, and Trade
         Tantalum raw materials  have  never been produced  in  the U.S. in
 significant quantities.  Domestic  tantalum  deposits  located  in numerous
 pegmatites and  placer deposits  in  Arizona,  Colorado,  North  Carolina,
 South  Dakota,   Utah,  New  Mexico,  and Alaska  are  low  in  grade,  and
 therefore are not  economical  to mine.  Thus,  the  U.S. has historically
 relied on imports of tantalum concentrates  and  tin slags from Thailand,
 Canada, Malaysia,  and  Brazil for  its primary  tantalum supply.   Table


                              XIII-1
-------
XIII-1 shows  that consumption of raw materials,  imports,  and  exports all
rose   from   1978  to   1981;  however,   the   1981-1982   recession   caused
precipitous  declines  in all categories.   The  1982  estimate of  800,000
pounds  of raw  materials  consumed  is  approximately 5^%  below the  1979
level;  imports  declined from the  1980  high  of 2.3 million pounds  to  an
estimated  1.2 million  pounds in  1982;  and  exports,  which had risen  to
substantial  levels,  are estimated  in  1982  to rise Q2%  above the  1981
level of 401,000 pounds, to 732,000 pounds.
        End Uses and Substitutes
        Tantalum  is  used  primarily  by the electronics  industry in  the
manufacture  of  capacitors.  Tantalum  carbide,  usually mixed with  other
metal  carbides  such as  tungsten,  titanium,  and  columbium,  is  used  in
metalworking machinery, including cutting tools, farm  tools,  turning  and
boring  tools,  and  wear-resistant  parts.     A third  application  for
tantalum  is  in  chemical  processing  equipment.    Aerospace  and  other
transportation applications utilize tantalum for its high melting point,
strength  at high  temperatures,  and  corrosion resistance.   Other uses
such as nuclear  reactors  and optical  glass account  for less than  1?  of
total  use.   The  table  below  presents  the  percentage   breakdown   of
tantalum use by its three major markets.
            End-Use Market
         Electronic components
         Machinery
         Transportation
            TOTAL
    % 1982 U.S.
Tantalum Consumption
        70
        22
       	8
       100
        Other metals or minerals may be substituted for tantalum, but at
a performance or  economic  penalty.   Aluminum and  ceramics compete with
tantalum for use in capacitors.  Silicon, germanium, selenium, and other
metals may be substituted  in other electronic uses.   Columbium carbide
may  be used  in  some  machinery,  and  glass,  platinum,   titanium,  and
zirconium  may  substitute  for  tantalum's  corrosion
platinum-group  metals,  colunbium,  molybdenum,  and
substituted in high temperature applications.
                      resistance.    The
                      tungsten, may  be
                              XIII-2
-------
                              TABLE XIII-1


            U.S. TANTALUM PRODUCTION, CONSUMPTION. AND TRADE

                  (thousand  pounds of tantalum content)

Production —
Primary Metal
Consumption —
Raw Materials
Consumption —
Tantalum Metalb
Trade — Imports0
Trade — Exportsd
1978
974
1,571
978
1,409
961
1979
—
1,740
—
1,914
1,051
1980
—
1,863
—
2,327
1,243
1981
—
1,269
—
1,612
401
1982a
—
800
—
1,160
732
SOURCE:  Minerals  Yearbook,  U.S.  Department of  the  Interior,  Bureau of
         Mines, 1982.

aEstimated.

bNo data are available for these categories between 1979-1982.

cMineral concentrate, tantalum metal and tantalum-bearing alloys, and
 tin slags for consumption.

 Tantalum  ore  and concentrate,  tantalum metal,  compounds,  alloys  and
 alloy-powders.  Also includes re-exports.
                          XIII-3
-------
B.  MARKET TRENDS AND DEVELOPMENTS
     1.  Prices
        Tantalum is produced in a wide variety of forms, such as  powder,
rod,  sheet,  and  carbide.    Prices have  historically  fluctuated  with
variations  in  tantalum  supply.   Domestic  price  quotations  for  these
products have generally covered a rather broad range.  The average  price
for  tantalum  carbide  between 1978 and 1982  has  been approximately  $120
per  pound  in  constant 1982  dollars.   During .the  same period, tantalum
metal  prices  have  averaged  $157  per  pound,  and   those    of tantalum
concentrates  have  averaged  around  $90   per pound.    Tantalum  product
prices,  after   rising   rapidly   between   1978  and   1980,   declined
substantially by  the  end  of 1982.  The  average  prices between 1978 and
1982 represent  the  prices expected in  a normal year.   The increase  in
demand  in  the  near  future is  expected  to  support  the  average  prices.
Therefore,   the  average prices  have been  used  to  study  the  impact  of
these regulations.
    2.  Capacity Utilization
        The  United  States' has  been  a significant  producer  of tantalum
metal and compounds.   Capacitors  and  converted  carbides — the two most
important  consuming  sectors  —   are  expected   to grow  in  the  near
future.    Other new  applications of tantalum are  expected to be  of a
specialized nature.  Based on  the 1981  trend value, the Bureau of Mines
estimates  that  demand  will  increase at  an  annual rate  of  about  3.1$
through  1990.    Industry  sources  indicate  that  most of  the  plants
operated  at  approximately  H5%-50% of  their capacity  in 1982.    With
technological  advances  promising   to   reduce   the  electrical  energy
consumption  for the  melting  and purification  of tantalum  metal  and
expectations of  price  stability  in  the  near future,  it is  anticipated
that the  industry  shall be  gradually able  to operate  at  higher rates.
For purposes of the analysis,  however,  it has been assumed  that these
plants will operate at 50% of their capacity.
C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in   the  secondary  tantalum  subcategory.   Results  of  the
screening test  show that  annual  compliance  costs  do not  exceed  ^% of
revenues  for  any plant  in the subcategory.   No plant is  projected to
close.  In addition, compliance costs for this subcategory are less than
0.2$ of production costs under the most stringent treatment option.
                             XIII-4
-------
             CHAPTER XIV
PRIMARY AND SECONDARY TIN SUBCATEGORY
-------
-------
               XIV.  PRIMARY AND SECONDARY TIN SUBCATEGORY


 A.   STRUCTURE  OF  THE  INDUSTRY


     1.   Raw  Materials  and  Production Processes
         Cassiterite  (SnOp) is  the  principal ore from which  primary tin
 is  extracted.   Cassiterile  in  placer deposits  is  fairly  coarse-grained
 and  recoveries  range from 90% for gravel pump  mines  to  95% for dredging
 operations.   Cassiterite  is reduced  to  tin by heating with  carbon  at
 1200-1300  degrees  centigrade.    The  impure   tin  is  then  refined  by
 electrolytic methods.
        Most  secondary tin is recovered from bronze  and  brass,  solders,
and  other  alloys.   The  recovery  of secondary tin  from  tin-plated  steel
scrap  is known  as  "detinning," and is achieved  by  removing  the  tin from
steel  by dissolving  it in chemicals and then by electrolytic  separation
to  yield  tin, tin dross,  and tin mud.   The tin dross contains  approx-
imately 80%  tin;  the  tin  mud  contains about 5% tin.  Tin dross  and  tin
mud  are  usually sold  to  primary  tin smelters  for further recovery  of
tin.
        Tin metal is cast and sold as bars,  ingots,  or  slabs.   There  are
several  grades of  tin available,  ranging  from  99% to  99.99?  purity,
depending on end use.
    2.  Description of Plants
        Domestic  mine  production of tin  provides  only a small  fraction
of the  domestic  tin requirement.   Primary  tin was produced by  only  one
company,  Associated Metals  and  Minerals Corporation,  in  the  U.S.  in
1982.   The  company's  plant in  Texas  City,  Texas produces  tin from  a
stockpile  of tin  residues  and  slags,  imported  tin  concentrates,  and
secondary materials.


        Secondary tin is manufactured by detinning plants which  use  tin-
plated  steel  scrap  as raw  material.   Most of  these  plants use the  tin
captively to  make chemicals and  tin  anodes.   Proler International  and
Vulcan  Materials  together  have  eight  plants   engaged   in  detinning
operations.   Of  the twelve plants within  the scope of this regulation,
seven are  zero  dischargers, three  are  direct  dischargers,  and  two  are
indirect dischargers.
                              XIV-1
-------
     3.   U.S. Production,  Consumption, and Trade
        Mine  production  of   tin   in '  the  U.S.   is   negligible;   small
quantities  of tin concentrates have been produced from placer  deposits
in Alaska and as a byproduct of molybdenum raining  in  Colorado.   However,
the  U.S.  continues  to  be  the  world's  largest  producer  of  secondary
tin.  About 14,000 tons of tin were recycled in 1982  —  11,000  tons from
old  scrap,  and 3,000  tons  from new scrap.   The  U.S. imports  virtually
all  primary tin  to meet its requirements.   Metal imports are  the  major
source of domestic supply.  Tin metal imports in  1982  were approximately
56?  of  reported  consumption  and  came  mainly  from  China,   Malaysia,
Thailand, and  Indonesia.  Consumption of both primary and secondary  tin
has  been  on  the  decline  since  1979   because  of the  general  economic
slowdown that  has  affected  most usage  categories..   Consumption in  1982
was  approximately 21*  lower  than  the  1979  levels.    Exports  in  1982
declined by approximately 5% from the 1981 levels.  Table XIV-1  presents
domestic tin production, consumption, and trade information.
        End Uses and Substitutes
        Tin  has  widely  diverse  applications.   Tin  consumption  in  the
United States  has  for several decades  been dominated  by tin plate  and
tin solder.  Primary  tin,  which  comes directly from domestic or foreign
mine sources,  satisfies  most of the  annual  domestic  requirements.   The
important end-use markets for tin are listed below.   Cans and containers
continue  to be  the  primary end-uses  of tin  plate.   The electrical,
construction, and machinery  sectors  use tin  alloys.  The largest  single
use of tin  in  machinery is  as a constituent metal of brass and bronze,
often found in bearings, fittings,  castings, and stampings.
                 End-Use Market
  % 1982 U.S.
Tin Consumption
               Cans and containers
               Electrical
               Construction
               Transportation
               Other
                 TOTAL
       25
       17
       13
       13
      100
        Aluminum is  the  most  effective substitute for  tin  plate in its
traditional  container  markets,.   Non-metallic  substances,   copper,  and
aluminum  compete   with  tin   in   construction  uses.     Although  no
satisfactory  substitute  exists  for  tin  in  solder,   it is  possible to
lower  the  tin content  in  some  applications  by increasing  the  lead or
antimony content.
                              XIV-2
-------
                               TABLE  XIV-1


               U.S.  TIN PRODUCTION. CONSUMPTION.  AND  TRADE

                       (metric tons of tin content)

Production
Smelter
Secondary
Consumption
Primary
Secondary
Trade — Imports
Metal
Ore
Trade — Exports
(ingots, pigs, bars)
1978
5,900
21,100
48,403
13,128
46,776
3,873
4,692
1979
4,600 -
21,493
49,496
12,969
48,355'
4,529
3,417
1980
3,000
18,638
44,342
12,020
45,982
840
4,294
1981
2,000
15,438
40,229
14,144
45,874
232
6,080
1982
3,500
14,283
36,194
13,276
27,939
1,961
5,769
SOURCE:  Mineral Commodity Summaries and Mineral Industry Surveys,
         U.S. Department of the Interior, Bureau of Mines, 1983.
                              XIV-3
-------
B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Tin  prices are  subject to  an  international  agreement between
producing and consuming  nations.   The  agreement seeks to secure a long-
term  balance between  production  and  consumption  and to  avoid severe
short-term  price  fluctuations.    Because Southeast  Asia  produces  the
majority of tin, the Penang market in Malaysia generally establishes the
world  tin  price.    The  Penang market   price  is  determined  daily  by
comparing bids  from dealers and consumers.   Other principal quotations
are  those  of the  London  Metal  Exchange  (LME) and  the New York market,
both of which offer cash and forward metal prices..
        Table  XIV-2  reports  the  net  decrease  in  U.S.  tin  prices
(expressed in  1982 dollars) from $8.68  in  1978 to $6.54  in  1982.   The
decline has occurred mainly as a  result  of  the recent recession and the
growth of substitutes.  The general  economic  slowdown has affected most
usage  categories.    However,  demand  for tin  is  expected  to  stabilize
because of  the price  advantage  over  aluminum and steel.   The average
price of tin between 1978-1982, $8.47, is used in this analysis.
    2.  Capacity Utilization
        Historical information on capacity utilization rates for the tin
industry are  not publicly available.   Plant information  on production
and capacity indicates that the industry operated at an overall capacity
utilization rate  of 66% in  1982.   The major user of tin  is  still the
canning industry.   However,  tin  plate has  lost substantial 'ground to
aluminum in this  traditional market.   Alternative  materials have been a
significant factor in the downward  trend  in  domestic  tin consumption in
the past  two  decades.  Therefore,  although  the economy  is expected to
recover in  the near  future,  it  is assumed, for  the purposes  of this
analysis,   that  the  tin  plants  will  continue  operating  at  the  1982
capacity utilization level of 66%.
C.  IMPACT ASSESSMENT
    Results  of  the  screening test  show that  annual compliance  costs
exceed  1$  of  revenues for  four  of  the  five  plants  subject  to  this
regulation.  Of these four plants,  the closure analysis identifies three
as  potential plant  closure  candidates  and  one  as  a  potential  line
closure candidate.  However,  compliance  costs for  this subcategory as a
whole are  less  than  0.8%  of total production  costs.   A  more detailed
discussion  of  the  closure  analysis  can  be  found  in  Chapter  XXII—
Economic Impacts.
                              XIV-4
-------
                     TABLE  XIV-2
                     TIN PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price,
Actual
6.30
7.54
8.46
7.33
6.54
Dollars per Pound
1982 Dollars
8.68
9.56
9.81
7.77
6.54
Average price = $8.47
SOURCE:  Mineral Commodity Summaries and
         Mineral Industry Surveys,
         U.S. Department of the Interior,
         Bureau of Mines, 1983.
                      XIV-5
-------
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                CHAPTER XV
PRIMARY AND SECONDARY TITANIUM SUBCATEGORY
-------
             XV.  PRIMARY AND SECONDARY TITANIUM SUBCATEGORY
 A.   STRUCTURE  OF  THE INDUSTRY
     1.   Raw  Materials  and  Production  Processes
         The  primary mineral sources of titanium products  are rutile and
 ilmenite.   Rutile  is  generally  preferred for most  applications  because
 of  its much higher titanium dioxide content.   In fact, it  is  the  only
 titanium raw  material  used  for  metal  production in  market  economy
 countries.   However, rutile  is far  less common  than  ilmenite.  Thus, the
 combined conditions  of  high  demand  and  limited  supply  have  led  to
 production of a  synthetic rutile which  is made  from  ilmenite.
        Titanium  tetrachloride  is the intermediate product  used  to  make
titanium  metal.    Titanium  tetrachloride  is  produced  by  a  chloride
process  which  uses  rutile  or  synthetic  rutile  as   its  raw  material.
Sponge  metal   is  commonly  produced  by   reducing   purified   titanium
tetrachloride  with magnesium or  sodium under  an  inert gas  atmosphere.
The sponge can  be  compacted,  usually  with  some  scrap  additions,  and  then
made into titanium ingot by vacuum-arc-melting  operations.
    2.  Description of Plants
        Eight  major  plants  produced  titanium metal  in  the U.S.  during
1982.   Of these eight  plants,  one is a  zero  discharger,  one employs  a
dry  process,   two   are  indirect  dischargers,   and  four  are   direct
dischargers of effluents.   The  plants can be classified  by  processing
characteristics into three main categories.
        The  first  category consists of  those  plants producing  titanium
from titanium  dioxide.   There  are four plants  in  this category.   They
are International  Titanium in  Moses Lake,  Washington;  Kennametal,  Inc.
in I^atrobe,  Pennsylvania;  Morton  Thiokol in Beverly, Massachusetts; and
Timet in Henderson,  Nevada.'   The  Kennametal plant actually manufactures
titanium  carbide  and  the   titanium operations  represent only  a  small
portion  of  total  plant operations.    Because  this  plant  produces no
wastewater,  it will  not  be  analyzed  further.    The Timet  plant  uses
captively  all  titanium  it  manufactures.   The  Mqrton Thiokol plant, in
addition to  producing titanium, manufactures  large amounts of zirconium
using similar facilities and processes.
                            XV-1
-------
        The  second  category  consists  of those  plants  which  process
 titanium   from  titanium  tetrachloride.     These  plants  are   Oregon
 Metallurgical  Corp.  in Albany, Oregon;  RMI  Company in Ashtabula,  Ohio;
 and Teledyne Wah Chang Albany, in Albany,  Oregon.   These plants purchase
 titanium  tetrachloride  from primary manufacturers and recover titanium
 through a reduction  process.  Each of these  plants uses all or  part  of
 the titanium produced for captive consumption.
        The   third   category  consists  of  producers  from  scrap   and
sponge.    The  Lawrence   Aviation  Industries  plant  in  Port Jefferson
Station,  New  York  falls  into  this  class.    This  plant  is   a  zero
discharger and will not be analyzed further.
        Two  types  of plants,  Level A and  Level  B,  have been identified
in  this  subcategory (see Chapter II).   One  of the indirect dischargers
has been  identified as a Level  A  plant.   The Agency has considered  the
possibility  that  the Level A plant may  at some  point engage in Level B
processes and therefore  be  subject  to Level B limitations.  The impacts
of  these  limitations have  been  estimated  and are  discussed in Chapter
XXV—Limitations of  the Analysis.
    3.  U.S. Production. Consumption, and Trade
        The  U.S.  is  one  of  the  world's  largest  titanium-producing
nations, accounting for about 21% of the world's sponge metal production
in 1981.  While  domestic  mines  supply  over half of the U.S. requirement
for  titanium  in   ilmenite   and   slag,   rutile  requirements  are  met
predominantly by  imports  from  Australia.   The  declines in  1982 metal
production  and  consumption,  which  are  shown  in  Table  XV- 1 ,  were  due
primarily  to reductions  in  commercial  aircraft  programs.    Titanium
sponge and rutile are both purchased by the government for stockpiling.
        End Uses and Substitutes
        Only  about  5%  of  the  world's  annual  production  of titanium
minerals goes  to  make  titanium metal.  The  other  9!5$ is used primarily
to make  white titanium dioxide  pigment.    The manufacture  of titanium
dioxide pigment  is not covered  by this  regulation.   In  recent  years,
about 60$ of U.S.  metal consumption has been in aerospace applications,
most  notably   in  jet   engines,   airframes,   and   missiles.     These
applications   demand   titanium's  high  strength-to-weight   ratio  and
resistance  to  heat.   Industrial uses  in  surface  condensers,  chemical
processing,   water   desalination,   and  marine  applications   rely  on
titanium's  high  corrosion  resistance.    The  table below presents  the
breakdown of consumption by end-use market.
                              XV-2
-------
                               TABLE XV-1


         U.S. TITANIUM METAL PRODUCTION. CONSUMPTION, AND TRADE

                              (short tons)

Production3
(sponge metal)
Consumption
(sponge metal)
Trade — Imports
(sponge metal)
Trade — Exports
(mainly scrap)
1978
17,600
19,854
1,^76
7,789
1979
21,100
23,937
2,488
8,602
1980
22,500
26,943
4,777
8,880
1981
26,400
31,599
6,490
9,644
1982
15,600
17,328
1,354
8,096
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

aCalculated production = reported consumption minus imports plus exports
minus beginning inventories plus ending inventories.
                            XV-3
-------
                End-Use Market
        % 1982 U.S.
Titanium Metal Consumption
             Aerospace
              applications

             Industrial uses

             Additions to steel
              and other alloys

               TOTAL
             60

             20


             ?0

            100
        Titanium  metal  is  selected  over  other materials  in aerospace
construction  on  a  performance,  not  an  economic,  basis.    Some high-
strength, low-alloy steel, aluminum,  or other metals may be substituted,
but generally  require redesigning and may  result  in  lower performance.
Nickel  steels  are   to  some  extent  competitive.    Stainless   steel,
Hastelloy,  90-copper-10  nickel,  and  certain nonmetals  may  be  used  to
replace  titanium's  corrosion resistance properties,  but  are often  more
expensive.
B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        Unprecedented  demand  for  commercial  aircraft  in  1980 spurred
titanium sponge  prices to the  record  high level  reported  in Table XV-
2.  However,  after  an 80% rise in price  from  1978 to 1980, prices fell
by  32% in  1982  following a  severe  downturn in  the same  commercial
aircraft market.    Demand from  the military  sector  was  a  mitigating
factor  over  this  period  as  purchases  for  fighter aircraft  programs
continued.    The  average  price  over  the  1978-1982  period,  $6.27  per
pound, will be used in the analysis.
    2.  Capacity Utilization
        Capacity  utilization  is  computed  from  industry  capacity  and
production data.  These  figures are  summarized  for the 1978-1982 period
in Table XV-3.   Because manufacturers anticipated a  greater demand for
titanium,  industry  capacity  expanded   almost   ^3%  between  1979-1982.
Additions to capacity satisfied a growing demand until 1982, when severe
cutbacks in commercial  aircraft production  reduced utilization rates to
                            XV-
-------
                     TABLE XV-2
            TITANIUM SPONGE METAL PRICES
Year
1978
1979
1980
1981
1982

Average Annual Price,
Actual
3.28
3.98
7.02
7.65
5.55
Dollars per Pound
1982 Dollars
4.52
5. 04
8.14
8.11
5.55
Average price = $6.27
SOURCE: Mineral Commodity Summaries, U.S.
        Department of the Interior, Bureau of
        Mines, 1983.
                      XV-5
-------
                      TABLE XV-3
     TITANIUM SPONGE METAL - CAPACITY UTILIZATION
Year
1978
1979
1980
1981
1982

Production3
(short tons)
17,600
21,100
22,500
26,400
15,600
Average
Capacity
(short tons)
23,000
23,000'
28,000
• 31 ,000
33,000
Capacity
Utilization
(*)
77
92
80
85
47
capacity utilization = 76%
SOURCE:  Production data — Mineral Commodity
         Summaries and Mineral Industry Surveys,
         U.S. Department of the Interior, Bureau of
         Mines, 1983.

        Capacity data — Personal communication,
        U.S. Department of the Interior, Eiureau of
        Mines, January 1984.

aCalculated  production  = reported  consumption  minus
imports  plus  exports  minus  beginning  inventories
plus ending inventories.
                      XV-6
-------
below  50%.   However, recovery  in  the  commercial aircraft and  chemical-
processing  industries  is  expected  to  boost activity  to previous  high
levels.   Therefore,  the average capacity utilization rate for  the  1978-
1982 period, 76%, will  be used  in  the following  analysis.
        Titanium  operations  often coexist with zirconium operations  due
to processing similarities.  At such plants, titanium production  usually
represents a  lesser  part of total  operation,  and capacity for titanium
production fluctuates  with product-mix  decisions.   Because capacity  is
variable in  these operations,  the  reported  1982  value  of production  is
used as a proxy for sales.

C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on plants  in  the titanium  subcategory.   Results  of  the screening  test
show that annual compliance costs exceed "\% of revenues for one plant in
the subcategory.   However, closure  analysis indicates  that  this plant
will not close.  In addition,  compliance  costs  for this subcategory are
less than  0.6%  of production  costs  under the most  stringent treatment
option.
                           XV-7
-------
-------
             CHAPTER XVI
SECONDARY TUNGSTEN/COBALT SUBCATEGORY
-------
-------
                     SECONDARY TUNGSTEN/COBALT SUBCATEGORY
 A.   STRUCTURE  OF  THE INDUSTRY
     1.   Raw  Materials  and  Production Processes
         Secondary   tungsten  metal  is  recovered  from  different  scrap
 sources,  including wire,  hardfacing  materials,  and various  other  metal
 products.   Scrap tungsten is  first  combined with either  sodium nitrate
 or  sodium sulfate  to  produce  an intermediate sodium  tungsten  compound.
 Calcium  chloride  is   then  added  to  form  calcium  tungstate,  which  is
 leached  in  hydrochloric  acid to yield tungstic acid.   The tungstic acid
 is  dissolved in  an ammonia solution  to  produce ammonium paratungstate
 (APT).   APT  is a  major tungsten intermediate  and is  traded as  such.
 Tungsten  metal  powder  is  obtained  by  reducing  APT  with  hydrogen.
 Roughly   two-thirds  of  the  metal  powder  produced   domestically  is
 converted to tungsten  carbide  powder.
        The  facilities  which  perform these  operations  are  generally
equipped to operate on either primary  tungsten ore  or  tungsten  scrap  and
commonly do so  using  separate runs.  The end products are  identical  and
have equal value  regardless  of  the source.  Therefore,  in  the  following
discussions of  price,  production,  and capacity,  the distinction  between
primary and secondary is not made.


        Secondary . cobalt is  recovered from  tungsten carbide  scrap  by
leaching  with  acid  and precipitation  with  ammonia.    The  resulting
ammonium cobalt complex  is  washed  with acid;  sodium hydroxide is  added
to precipitate cobalt hydroxide.   Cobalt is recovered  from  the  hydroxide
by reduction with hydrogen.
    2.  Description of Plants
        The five plants  identified  in  this subcategory are GTE Products
in  Towanda,  Pennsylvania;  Kennametal  in  Latrobe,  Pennsylvania;  Li
Tungsten  in  Glen   Cove,  New  York;  GTE  Specialty Metals   in  Warren,
Pennsylvania;  and Metec  in  Winslow, New Jersey.   Of the five, four are
direct  dischargers   of  effluent   waste.     One   plant   produces  no
wastewater.   All four dischargers produce tungsten  products.   Two also
recovered cobalt and tungsten carbide from cemented carbide scrap.
                              XVI-1
-------
     3.   U.S.  Production, Consumption, and Trade
        During  1981, the U.S. tungsten industry reached an  all-time  high
 in  production.   Production  and consumption  figures are  presented  in
 Table  XVI-1.   Demand  for  tungsten,  primarily  in the  form of  carbide
 powder,   extended  well  into   the  recession   because   tungsten   has
 applications  in  so  many industries.   However,  in  1982,  metal  powder
 production  and  tungsten consumption  declined  32? and 35%  respectively.
 Imports  and  exports  of  both  metal  and  carbide  powder  have  been
 negligible  and  are usually  in  the  form of  specialty grades.  The  U.S.
 government  stockpiles various forms of tungsten for defense purposes.
        Cobalt  production,  consumption,  and  trade  are discussed in  the
primary cobalt/nickel and secondary nickel chapters.
        End Uses and Substitutes
        About   two-thirds   of   the   tungsten  metal  'powder  produced
domestically  is  converted  to  tungsten  carbide  and  consumed  in  that
form.   The extreme  hardness  of  tungsten  carbide at  high temperatures
makes it desirable for use  where intense  wear,  abrasion, heat, and  high
speed are  critical  factors.    It is  used  in  a  variety  of  industrial
applications,  especially as  a  coating  for  both machine  tool cutting
edges and  forming and  shaping dies.   About one-third  of the tungsten
powder  produced is  used directly in  electronics,  lighting  filaments,
counterweights, and armor-piercing shells.
        Tungsten's  widespread  availability,  low  cost,  and  physical
properties  have  precluded   most   substitution.     However,  titanium,
tantalum, and columbium carbides can be substituted for tungsten in some
wear-resistant applications.   Slight reductions in use  may result from
improvements  in  coating techniques,  which  would  extend  tool  lives and
slow replacement.
        A description of cobalt's end  uses  and  substitutes can be found
in the primary cobalt/nickel and secondary nickel chapters.
B.  MARKET TRENDS AND DEVELOPMENTS
    1.  Prices
        List prices  for  tungsten metal powder  have  remained remarkably
stable over  the  last five years,  despite fluctuations  in  raw material
costs.   Table XVI-2  presents price  ranges  for  the  1978-1982  period.
                              XVI-2
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                               TABLE XV1-1
                U.S. TUNGSTEN PRODUCTION AND CONSUMPTION

                  (thousand  pounds  of tungsten  content)

Production
(metal powder)
Consumption
(concentrate, scrap,
metal)
1978
16,548
22,353
1979
18,426
23,793
1980
18,116
21,784
1981
19,754
22,767
1982a
13,425
14,800
SOURCE:  Production data — Personal communication, U.S. Department of
         the Interior, Bureau of Mines, December 1983.
         Consumption data — Mineral Commodity Summaries, U.S.
         Department of the Interior, Bureau of Mines, 1983.
aEstimated.
                              XVI-3
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                        TABLE  XVI-2
TUNGSTEN

Year
1978
1979
1980
1981
1982


Average
1
1
1
1


METAL

POWDER LIST PRICES

Annual Price Range,
Actual
3
3
3
3
13
.90
.90
.90
.90
.10
- 15.
- 15.
- 15.
-15.
- 13.
50
50
50
50
72
Average price =




Dollars per Pound
1982 Dollars
19
17
16
14
13
$16
.15 -
.62 -
.12 -
.73 -
.10 -
.14 -
21
19
18
16
13
17
.36
.65
.69
.43
.72
.97
SOURCE:  Personal communicationj  U.S.  Department of the
         Interior, Bureau of Mines,  January 1984.
-------
Because  pricVx varies  with grain  size  3*04  purity,  it  is difficult  to
determine  a single  tungsten  price.   For this  reason,  as  well as  the
difficulty  in  identifying  capacity utilization  noted  below,  the  1982
value  of  products  produced   is  used,   as  a  proxy  for sales  in  this
analysis.
        The  chapters  on  primary  cobalt/nickel  and  secondary  nickel
contain a discussion of cobalt prices.
    2.  Capacity Utilization
        Capacity  utilization is  computed from  industry tungsten  metal
powder  production and  capacity  data.   These figures  are  presented  in
Table WI-3  for  the  1978-1982 period.  The effects of  the  recession  are
readily  observable  in the  thirty-point  decline  in  utilization  which
occurred  during  1982.    However,  recovery  is  expected   as  existing
products wear  out and  as  industrial  activity accelerates,  and  industry
experts predict strong  growth through the  end of the century.
        Table   XVI-i*   presents   production,   capacity,   and   capacity
utilization  data  for  the  domestic  secondary   cobalt  industry.     In
general, capacity utilization  rates  have  been high due to strong demand
for cobalt  products.   The 1978-1982  period  represents peak years,  1979
and 1980, and trough years, 1981 and  1982. .
        Capacity and production figures for plants in this study  are  not
suitable  indicators  of capacity  utilization.   Primary  and  secondary
metal production are  often indistinguishable, and intermediate products
are sometimes removed  from further  processing and -sold.  Therefore,  the
1982 value  of products  produced  is used as  a proxy for  sales  in this
analysis.
C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in   the- seco'ndary  tungsten  subcategory.    Results of  the
screening test  show  that  annual compliance costs  exceed 1$ of revenues
for  three  plants  in  the  subcategory.    However,  closure  analysis
indicates that  no  plant  will close.   In addition, compliance costs for
this subcategory are  less than 1.3? of  production costs under the most
stringent treatment option.
                              XVI-5
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                     TABLE  XV1-3
     TUNGSTEN METAL POWDER CAPACITY UTILIZATION
Year
1978
1979
1980
1981
1982

Production Capacity
(M. Ibs.) (M. Ibs.)
16.5
18. U
18.1
19.8
13.4
Average
20.0
20.0
20.0
21.0
21.0
Capacity
Utilization
(?)
83
92
91
.94
6i
capacity utilization = 85%
SOURCE:  Personal communication, U.S. Department
         of the Interior, Bureau of Mines, January
         1984.
                      XVI-6
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                     TABLE  XVI-1
       SECONDARY  COBALT  CAPACITY  UTILIZATION
Year
1978
1979
1980
1981
1982

Production Capacity
(000 Ibs.) (000 Ibs.)
1,036
1,170
1,184
972
871
Average
1,200
1,200
1,200
1,200
1,200
Capacity
Utilization
($)
86
98
99
81
71
capacity utilization = 87%
SOURCE:  Personal communication, U.S. Department
         of the Interior, Bureau of Mines, January
         1984.
                      XVI-7
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         CHAPTER  XVII
SECONDARY URANIUM' SUBCATEGORY
-------
                   XVII.   SECONDARY URANIUM SUBCATEGORY


 A.   RAW MATERIALS  AND  PRODUCTION PROCESSES
     Uranium  is  derived from many ores.   In  the  United  States, carnotite
 ores of the  Colorado Plateau  and  uraninite  and  coffinite ores  of New
 Mexico  and Wyoming  are  the most important  reserves.  Elsewhere  in the
 world,  pitchblende  has been an  important  source  of uranium.
    The carnotite  ores  are  first  roasted  to  convert  the  vanadium content
 to  water-soluble sodium  vanadate.   After grinding  the  ore, an  acid  or
 alkaline  leaching  process  is  used  to recover  uranium oxide.   Sulfuric
 acid  is  the  most  commonly  used  leaching  agent.    Under  the  solvent
 extraction  method,  uranium is recovered from the sulfuric acid  solution
 by  the  simple  process  of  counter-current  decantation.   Other  metallic
 substances,  not dissolved  in the  sulfuric  acid solution,  go to  waste
 tailings.   Under the resin-in-pulp (ion  exchange)  method,  the  sulfuric
 acid  solution  is  passed  through  beds  of  resin  until  the uranium  is
 absorbed  on the resin.   The uranium is then removed  from the  resin by a
 nitric acid  solution and  is precipitated,  filtered, and  dried.
    The   recovered   uranium  oxide   (U^)   is  converted   to   uranium
hexafluoride  (UFg)  before being  further  processed into nuclear  reactor
fuel.    UFg  contains  enriched  ^235  and depleted  U238 isotopes.    The
enriched  ^235  isotopes are  separated  from UFg  by  a process of  gaseous
diffusion.   Some  of the depleted  UFg  is  reduced to UFjj by  reacting  the
UFg  gas  with  hydrogen gas.   UFjj  is  then  reduced to  impure  metal  by
heating  it with magnesium  fluoride powder.  The  impure  depleted uranium,
or  "derby,"  is roasted  and cleaned  in water  before  being  formed  into
rolls  or  other  desired   shapes.    Depleted  uranium  alloys  are   also
produced and marketed.
B.  DESCRIPTION OF PLANTS
    In  the  U.S.,  uranium  enrichment  is  performed only  at  facilities
which  are  owned  by  DOE  and  operated  by  private contractors.  'Under
current DOE rules,  customers with enrichment work  done by DOE have  the
option  of getting the depleted  uranium  back along  with their enriched
uranium,  but  few  customers  take  the depleted uranium  and ownership  of
most of it has reverted to DOE.
    Three  main   companies  process  depleted   uranium:     TNS,   Inc.,
Jonesboro, Tennessee;  NLO, Inc., Cincinnati, Ohio;  and Nuclear Metals,
Inc., Concord, Massachusetts.  The plants producing depleted uranium use
uranium oxide  (UoOg)  and  other  intermediate products,  such  as uranium
                             XVII-1
-------
hexafluoride  (rJFg)  and uranium  tetrafluoride  (UFi(.).   Magnesium, nitric
acid, and  anhydrous ammonia are  other important raw  materials used  in
the process.  The TNS plant uses all the uranium it produces for captive
consumption.  The uranium  is alloyed  with titanium and other metals and
sent  to   another   plant   for   use  in   the   manufacture  of  military
ammunition.    The   Nuclear  Metals   plant  also  alloys  titanium  and
molybdenum with uranium, apart from aaking pure uranium metal.  NLO Inc.
makes almost twice as much derby as pure metal.
    Only  one  plant  in  this   subcategory   has  been  identified  as  a
discharger of effluents.  This  plant  is  owned by the U.S. Department of
Energy.   Uranium  at  this  plant  is  not  produced  for  sale.   For this
reason the value  of production cannot be calculated.   However, because
all  production  at  this  plant  is  consumed   in  government applications,
this  plant  can   be  assumed  to  be  completely  insulated   from  market
forces.  Therefore, the  limitations determined  for this subcategory are
considered economically achievable.
                             XVTI-2
-------
      CHAPTER XVIII
PRIMARY ZIRCONIUM/HAFNIUM
       SUBCATEGORY
-------
-------
                    XVIII.  PRIMARY ZIRCONIUM/HAFNIUM
                                 SUBCATEGORY
 A.   STRUCTURE OF THE INDUSTRY
     1.   Raw Materials  and  Production  Processes
         Zirconium and hafnium are contained  in the mineral zircon  in a
 ratio  of about  50 to  1.   Zircon  is  recovered  as a  coproduct  or byproduct
 in  the  mining  of the  titanium  minerals, ilmenite  and rutile.   Zircon
 itself is used  extensively  in  foundry  sands,  refractories, ceramics,  and
 abrasives.   Only  about  10$ of  the  zircon  produced is actually  used  to
 make zirconium  and hafnium  products.

         Non-nuclear-grade   zirconium  metal   contains  hafnium  as   an
 impurity.   In many applications  the  hafnium  content,  usually  about  2%,
 does not detract  from  zirconium's  usefulness.  In fact prior to  1950,
 hafnium  was not  removed from  zirconium.   However,  zirconium is  most
 often  used as a  structural material  in  nuclear reactors where its  very
 low  neutron absorption  cross  section  is of  major importance.   Because
 hafnium  has  one of the  highest neutron absorption cross sections of any
 element,  it must  be  removed  from  zirconium  which  is used  for  nuclear
 purposes.   Hafnium is produced only as a byproduct  of the production  of
 nuclear-grade zirconium.  Consequently, the supply of  primary  hafnium  is
 limited  by the  demand for hafnium-free nuclear-grade zirconium.

         Zirconium and hafnium are produced By chlorinating zircon  sand
 and  then  separating  zirconium  and hafnium  compounds  through  liquid-
 liquid   extraction.    Subsequent  recovery   of  zirconium   and   hafnium
 proceeds  separately  but is roughly  the  same.   Oxides are  converted  to
 chlorides  and  then  reduced  with   magnesium  to   yield  metal  sponge.
 Zirconium  sponge  is   crushed,  compacted,  and  vacuum-melted  in an inert
 atmosphere   to  produce  zirconium  ingot.    Hafnium  sponge   is  often
 converted to high-purity crystal bar, which is used  in the production  of
 nuclear  control rods.
    2.  Description of .Plants
        The  three  major plants  producing  zirconium and  hafnium in the
U.S. are Teledyne Wan Chang Albany, in Albany, Oregon; Western Zirconium
in  Ogden,  Utah; and  Morton Thiokol,  Inc.,   in  Beverly,  Massachusetts.
Two  of the  plants  recover nuclear-grade  zirconium  and  hafnium  from
zircon sand.  Both of  these plants use this  production captively in the
manufacture  of  various  end products.   The  other  plant  produces  non-
nuclear  zirconium  from  zirconium  dioxide.    In  all three  instances,
                            XVIII-1
-------
 revenues  from zirconium and hafnium  production  represent less than  65%
 of  total  plant  shipments.    Of  rhe  three  plants,  one  is  a   direct
 discharger, one is an indirect discharger, and one is a zero  discharger.
 Because certain zirconium and titanium production facilities  are  similar
 and can be used interchangeably, two  of the plants also produce titanium
 and discharge titanium effluents.
        Two types  of plants,  Level A and  Level  B,  have been identified
in this subcategory  (see  Chapter  II).   The indirect discharger has been
identified  as  a  Level  A  plant.    The  Agency  has  considered   the
possibility that  the Level  A plant may  at some  point engage in Level B
processes and therefore be  subject  to  Level B limitations.  The impacts
of these  limitations have  been  estimated  and are  discussed in Chapter
XXV — Limitations of the Analysis.
    3.  U.S. Production, Consumption, and Trade
        Table  XVIII-1  shows  imports  of  zirconium  metal  for  the years
1978-1982.   During the  past  four years,  the domestic  nuclear  reactor
program has  experienced  significant  setbacks,  and  the  decline in this
major market  segment  has affected both  imports  and  domestic production
of zirconium.   Imports fell  53%  between 1978 and  1982.  Additionally,
the  fast-paced construction  of  nuclear  reactors overseas  is  of only
limited  consequence  to   U.S.  zirconium producers.     Some  countries,
particularly  Japan,  which has  16 new reactors  planned,  have specified
that' certain  reactor parts, notably "those containing  zirconium, must be
manufactured domestically.  U.S. zirconium metal production is currently
estimated to be about 4,000 tons per year.
        Table XVIII-2  presents hafnium  crystal  bar production  for the
same  period.   Because  hafnium  control  rods  have  been  used  almost
exclusively  in military  reactors,  production  has been  largely insulated
from market  forces  and hence  Is  quite  stable.   Imports  of hafnium are
negligible  and  there  have been  no exports.    There  are  no stockpile
objectives for either zirconium or hafnium.
    4.  End Uses and Substitutes
        During 1982, about- 60% of  domestic  zirconium consumption was in
the  form  of  hafnium-free  nuclear-grade  alloys.    The  remainder  was
consumed in various non-nuclear  industrial  applications.   For instance,
zirconium  is  commonly   added  to  magnesium,   aluminum,   and  steel.
Additions of less than 1% increase the strength and corrosion resistance
of these metals.                         >
                            XVIII-2
-------
                              TABLE XVIII-1
                      U.S. ZIRCONIUM METAL IMPORTS

                              (short tons)

Imports
1978
990
1979
916
1980
721
1981
513
1982a
420
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983.

aEstimated*
                            XVIII-3
-------
                              TABLE  XVIII-2
                   U.S.  HAFNIUM CRYSTAL  BAR  PRODUCTION

                              (short tons)

Productions
1978
40
1979
45
1980
45
1981
50
1982
50
SOURCE:  Mineral Commodity Summaries, U.S. Department of the Interior,
         Bureau of Mines, 1983-

^Estimated.
                             XVIII-4
-------
        Stainless  steel is  often substituted  for  zirconium  in  nuclear
 reactor    structures.       Substitutes    also    exist    for   industrial
 applications.    Stainless   steel,   titanium,   and   tantalum  are  often
 suitable  where  corrosion resistance  is  required.
        Virtually    all    hafnium    metal    is    consumed    in   nuclear
applications.   Hafnium's high neutron absorption cross  section  commends
its  use  to the U.S.  Navy,  its  largest consumer, in the construction  of
smaller reactors,  such as those on ships and submarines.   Small amounts
of hafnium are also  used  in refractory alloys and in cutting  tool alloys
where numerous substitutes exist.
B.  MARKET TRENDS AND DEVELOPMENTS
     1.  Prices
        Unlike most metals studied, zirconium and hafnium have  no  quoted
prices  and  are  not  traded  in  any  commodity  markets.     Prices   are
negotiated between the supplier and the customer and depend on  the grade
and  quantity produced.   Nevertheless, prices  in  reported transactions
are  compiled.    The  reported  price  ranges  for  zirconium  and hafnium
sponge over  the 1978-1982 period are found  in Tables XVIII-3  and XVIII-4
respectively.     These  ranges  reflect  prices   paid  only   in  those
transactions  reported  and   do not  make  any  distinction between   the
various grades  bought and sold.   Therefore, trends  in price  cannot be
obtained through analysis of this data.
    2.  Capacity Utilization
        The value of  products  produced  in 1982 is known for each of  the
two  plants  under analysis.   Because demand  is  so closely  tied to  the
proliferation of nuclear power plants, the low utilization rates of 1982
are  expected  to  persist  for  both zirconium   and  hafnium  into   the
immediate future.  Therefore, the 1982 production values will be used in
the analysis.
C.  IMPACT ASSESSMENT
    The proposed regulation is not expected to have a significant impact
on  plants  in  the  zirconium/hafnium  subcategory.    Results  of  the
screening test  show  that  annual compliance costs  exceed  1$  of revenues
for the  two plants  identified  as dischargers  of effluents.   However,
closure analysis indicates that neither plant  will close.   In addition,
compliance costs for  this  subcategory are less  than  2.5%  of production
costs  under the most stringent treatment option.
                            XVIII-5
-------
                      TABLE XVIII-3
                 ZIRCONIUM SPONGE PRICES
Year
1978
1979
1980
1981
1982

Average
Annual Price Range
Actual
9
9
10
12
12

.00 -
.00 -
.00 -
.00 -
.00 -

15
12
14
17
17

.00
.00
.00
.00
.00
Average price =
, Dollars
per
Pound
•1982 Dollars
12.40 -
11.40 -
11 .60 -
12.70 -
12.00 -
$12.00 -
20.
15.
16.
18.
17.
17.
70
20
20
00
00
40
SOURCE:  Minerals Yearbook, U.S. Department of the
         Interior, Bureau of Mines, 1979-1982.
                        XVIII-6
-------
                      TABLE XVIII-4
                  HAFNIUM SPONGE PRICES
Year
1978
1979
1980
1981
1982

Average
Annual Price
Actual
55
60
55
70
80

.00 -
.00 -
.00 -
.00 -
.00 -

110.00
90.00
110.00
135.00
150.00
Average price
Range ,
1982
75.
76.
63.
74.
80.
= $74.
Dollars
per Pound
Dollars
80 -
10 -
80 -
20 -
00 -
00 -
151
114
127
143
150
137
.60
.10
.60
.10
.00
.30
SOURCE:  Minerals Yearbook, U.S. Department of the
         Interior, Bureau of Mines, 1979-1982.
                        XVIII-7
-------
-------
       CHAPTER XIX
PRIMARY BORON SUBCATEGORY
-------
-------
                     XIX.  PRIMARY BORON SUBCATEGORY


 A.   RAW MATERIALS  AND  PRODUCTION  PROCESSES
    Boron and  its  compounds  are  obtained  chiefly from two ores — sodium
 borate  (tincal)  and calcium borate (colemanite).  In  the United States,
 the  sodium  borate ore  is  crushed and  floated  to  raise the  anhydrous
 borax   (BpO-O   content   to   approximately   ^0%.     Further   refining,
 principally  by  calcining,  yields various  grades  of  borax  hydrates.
 Boric acid is  obtained  by  treating the hydrates  with  sulfuric  acid or by
 treating  the calcium borate ore  directly with sulfuric  acid.   The B-O
 and  anhydrous  boric  acid   (Nap02B20^)  are  obtained  by a  process  o
 combined  acidification and  fusion.  Elemental  boron, which  is  a  dark
 brown powder in  the  amorphous form, is derived from anhydrous  boric acid
 by  reducing  it  with magnesium.    Magnesium  reacts with  B20o  to  become
 magnesium  oxide.    Elemental  boron  is  recovered  by  dissolving  the
 magnesium  oxide  in hydrochloric  acid  and  filtering and  washing  the
 residue, which is  pure  boron.
    Lake  brines  processed for boron  also  provide other compounds,  such
as  sodium carbonate,  sodium  sulfate, potassium  sulfate,  and  potassium
chloride.  From the upper structures  of brines, borax and  other elements
are obtained  by  the  evaporative  or "trona" process.  Soda ash  and  borax
from  the lower  structures are  recovered  by  the  carbonation  process,
wherein  carbon  dioxide from calcining limestone  is used  to  precipitate
soda ash  from the mixed brines.
    Secondary recovery  and  re-use of boron  compounds  is conducted on  a
very  small  scale, as  almost all  of the compounds  go into dissipative
uses.  Boron is recovered from boron bromides or fluorides by vaporizing
these chemicals and collecting the vapors on a hot surface.
B.  DESCRIPTION OF PLANTS
    U.S. production of boron minerals, primarily sodium borate  (tincal),
is centered in southern California.  Kerr-McGee Chemical Corporation has
two facilities  which  extract sodium borates,  boric  acid,  borax powder,
and other  compounds  from  the subterranean brines  of Searles Lake.  The
Mine Safety  Appliances  Company produces  boron from  decomposed diborane
gas (BoHg).   Its  main line of business,  however,  is the manufacture of
safety equipment, gas masks, and  protective  clothing.  These two plants
are zero dischargers.  Therefore,  further analysis will not be performed
for existing sources.
    Economic impacts  for  new sources in  this  subcategory are discussed
in Chapter XXIII — New Source Impacts.

                               XIX-1
-------
-------
            CHAPTER XX
PRIMARY CESIUM/RUBIDIUM SUBCATEGORY
-------
-------
                 XX.   PRIMARY CESIUM/RUBIDIUM SUBCATEGORY


 A.   RAW MATERIALS  AND PRODUCTION PROCESSES
     Cesium is derived principally from pollucite  (20?-40?  cesium oxide)
 ore,  which itself is recovered as a coproduct  in  mining pegmatites from
 lithium minerals  and  beryl.    Rubidium  is   derived  principally  from
 lepidolite ore,  which  is  recovered  from the  same kinds of  lithium-
 bearing pegmatite  deposits  as  is  cesium.    Rubidium  has  also  been
 recovered  as  a byproduct of  the  processing of pollucite for  its cesium
 content.   Strontium  is  recovered  from  celestite (SrSOjj)  and strontionite
 (SrC03).


     Cesium and   rubidium   are  produced   by   similar  processes.    The
 respective ore  concentrates  are digested  in sulfuric   acid  and  the
 impurities are removed  by filtration.  The cesium  and rubidium chemicals
 are  dissolved  in  hydrochloric acid to  form chlorides.  The  metal is then
 recovered  by  a thermochemical reduction process.
    Strontium  is  recovered  from  celestite  or  strontionite  by  first
converting  the  ore to strontium  oxide  and then reducing the  oxide  with
metallic aluminum.   The  metal is also produced through  the  electrolysis
of  fused  strontium  chloride.   Strontium  carbonate is  one  of  the  many
strontium chemicals  that are  in demand.
    Cesium  and  rubidium are  produced  in the  form of metal,  compounds,
and  oxide.   Cesium  metal  is sold  in  two  purities:  standard  (99.5?
minimum   cesium  content)   and   high-purity   (99.9?   minimum   cesium
content).   Rubidium metal  is  also available  in two purities:  standard
(99.5? minimum rubidium content) and high-purity (99.8? minimum  rubidium
content).   Compounds are also available in two  grades: technical  grade,
99?  minimum;  and   high   purity,   99.9?  minimum   (99.8?  mininum   for
rubidium).    Available   compounds  are  acetate,   bromide,   carbonate,
chloride, chromate, fluoride, hydroxide, iodide,  nitrate, and  sulfate.
B.  DESCRIPTION OF PLANTS
    The Agency has  identified the KB I Division  of Cabot Corporation as
the  only  producer   in  this  subcategory.     Its   plant  at  Revere,
Pennsylvania  produces cesium  and rubidium  mainly from  imported  ores.
This  plant   is   a   zero  discharger.     Because   of  limited  demand,
manufacturing capacity  is very  flexible and normally  does  not greatly
exceed demand.  The  Cabot  plant  also produces germanium for which it is
a  zero  discharger.    Because  this plant does not  discharge effluents,
further analysis will not be performed for existing sources.
                               XX-1
-------
                                                               >,
    Economic impacts  for  new sources in  this subcategory are discussed
in Chapter XXIII — New Source Impacts.
                              XX-2
-------
         CHAPTER XXI
SECONDARY MERCURY SUBCATEGORY
-------
                   XXI.  SECONDARY MERCURY SUBCATEGORY
A.  RAW MATERIALS AND PRODUCTION PROCESSES
    Secondary  sources  are  an  important  component  of  mercury  supply.
During the past several years, dental amalgams have been  the most common
single  source  of  mercury.    Industrial wastes,  especially  from chlor-
alkali plants and  mercury  batteries,  have also become important  sources
of  secondary  recovery.   Virtually  all  metal can  be  reclaimed when  the
plant  or  equipment  is  dismantled or scrapped.    Mercury is  decomposed
from scrap by  distillation or retorting.   Subsequent  washing in dilute
nitric acid and distilled water yields 99.9? pure  mercury.
B.  DESCRIPTION OF PLANTS
    Four  plants   have  been   identified   in   the   Secondary  Mercury
subcategory.   Mercury Refining  Co.  in  Albany,  New York  and Bethlehem
Apparatus Co.,  Hellertown,  Pennsylvania are  both zero  dischargers and
are not  analyzed  further.   D.F.  Goldsmith Chemical and  Metal Corp. in
Evanston, Illinois  and  Kahl  Scientific Instrument  Corp.  in  El Cajon,
California   both   use   processes   which   produce   no   wastewater.
Consequently,  further  analysis is not  performed  for  existing sources.
Economic impacts  for  new sources  in  this  subcategory are  discussed in
Chapter XXIII — New Source Impacts.
                              XXI-1
-------
-------
  CHAPTER XXII
ECONOMIC IMPACTS
-------
-------
                          XXII.   ECONOMIC  IMPACTS
     The economic  impact of  the  proposed effluent  limitations  has been
 performed  by  first   screening  plants  for  potential  impact  and  then
 analyzing  the  impacted plants  to  identify  possible  closures.   The
 screening analysis compares  a plant's total  annual compliance  costs to
 its  annual  revenues.   If  the ratio  of compliance costs  to  revenues
 exceeds 1$,  the plant  is identified  as  a high impact  plant.   The high
 impact  plants are  evaluated with  the  help  of  the NPV  and  liquidity
 tests.   Plants  failing either  of  these tests  are  potential closure
 candidates.
 A.  PLANT-LEVEL ECONOMIC IMPACTS
     The analysis is conducted in two steps.  First, a screening analysis
 is conducted to identify  plants that will not  be  seriously affected by
 the regulations.   Second,  the  NPV and liquidity  tests  are performed to
 determine whether  plants  that  fail  the  screen will close.   Results of
 the screen and  closure tests are discussed below.
     1.   Results of Screening Analysis
         Total annual costs as a percentage of annual revenues is used as
 the screening criterion.   The  threshold value chosen  for  the screen is
 1%.  In other words,  if the compliance costs  for  a  plant  are less than
 1%  of the  revenues,  it is not considered to be highly affected.
         Tables XXII-1A and XXII-1B present  the  results  of the screening
 analysis for  direct  and  indirect dischargers  respectively.   Of  the  71
 plants  incurring costs,  12 plants fail the screen at Option A, 5 fail at
 Option  B,  and  15  plants  fail at Option C.  No  plants fail  at Option E.
 No  more than one plant fails the  screen at  any option for the following^.
-subcategories:       Primary    Molybdenum/Rhenium,   Secondary    Molyb-
 denum/Vanadium,    Primary   Nickel/Cobalt,    Secondary  Nickel,   Primary
 Beryllium,  Primary  and  Secondary  Germanium/Gallium, Secondary  Indium,
 Primary  and   Secondary   Titanium,   Primary   Precious   Metals/Mercury,
 Secondary   Precious   Metals,   Primary   Rare-Earth  Metals,   Secondary
 Tantalum,   Bauxite  Refining,  and  Primary  Antimony.     Total  annual
 compliance  costs for three tungsten/cobalt plants, two zirconium/hafnium
 plants,  and four  tin  plants  exceed  1% of revenues  at Option  C.   Plants
 failing the  screen  are  analyzed further  using  the  NPV and  liquidity
 tests.
                            XXII-1
-------
                                                  TABLE XXII-1A
                                 RESULTS OF CLOSURE ANALYSIS — DIRECT DISCHARGERS
Subcategory
Primary Antimony3
Option A
Option C
Bauxite Refining13
Option E
Primary Beryllium0
Option 3
Option C
Primary and Secondary
CermaniuM/Calliun3
Option A
Option C
Secondary lodlum3
Option A
Option C
Primary Molybdenum/Rhenium
Option A
Option B
Option C
Secondary Molybdenum/
Vanadium*
Option A
Option C
Primary Nickel/Cobalt3
Option A
Option C
Secondary Nickel3
Option A
Option C
Primary Precious Metals/
Mercury3
Option A
Option C
Secondary Precious Metals
Option A
Option B
Option C
Primary Rare-Earth Metals
Option A
Option B
Option C
Option E
Secondary Tantalum2
Option A
Option C
Primary and Secondary Tlna
Option A
Option C
Primary and Secondary Titanium
Option A
Option B
Option C
Secondary Tungsten/Cobalt
Option A
Option B
Option C
Secondary Uranium3
Option A
Option C
Primary Zirconium/Hafnium
Option A
Option 3
Option C
Number of
Plants
Incurring
Costs

1
1

14

1
1


0
0

0
0

1
1
l|


1
1

1
1

0
0


1
1

3
3
3

1
1
1
i

3
3

3
3

14
14
1

1
1
1|

1
1

1
1
1
Total
Investment
Cost
(1982 Dollars)

36,631
11,137

3,^90,029

W
V








208,55'
208,55'
3ซ7,313


W
V

W
V





27,500
29,975

299,535
299,535
306,816

V
V
V,
V

7,270
15,137

829,757
938,773

1,221,289
1,225,075
1,331,831

93,912
103,165
135,118

28,600
51,313

W
W
W
Total Annual
Cost
(1982 Dollars)

13,698
16,767

2,103,082

W
W








338,199
338,199
111,072


W
W

W
W





8,610
9,755

210,155
212,505
251,131

W
H
W
W

11,708
18,962

318,121
381 ,108

519,237
519,898
558,753

272,620
283,711
295,353

19,301
58,379

W
W
W
Number of
Plants
Failing Soreen

0
0

0

0
0








0
0
0


1
1

0
0





0
0

0
0
0

0
0
0
0

0
0

2
2

0
0
0

2
2
3

NA
NA

1
1
1
Potential
Closures

0
0

0

0
0








0
0
0


0
0

0
0





0
0

0
0
0

0
0
0
0

0
0

2
2

0
0
0

0
0
0

MA
NA

0
0
0
Employment
Loss

0
0

0

0
0








0
0
0


0
0

0
0





0
0

0
0
0

0
0
0
0

0
0

29
29

0
0
0

0
0
0

NA
NA

0
0
0
'Treatment Level B is not a viable option.
&The Agency Is presently proposing only technical amendments to existing Bauxite Regulations; however,  it  Is
 considering toxic limitations on the net precipitation discharges from Bauxite redmud impoundments.  The  Bauxite
 numbers in this table and elsewhere In this document refer to the toxic limitations under consideration by  the
 Agency.
ฐTreatment Level A is already in place.
W — Withheld to avoid disclosing company proprietary data.
NA -- Not applicable.
                                                     XXII-2
-------
                                                    TABLE  XXII-IB
                                 RESULTS  OF CLOSURE  ANALYSIS -- INDIRECT DISCHARGERS
Subcategory
Primary intimoay*
Option A
Option C
Bauxite Refining
Option E
Primary Bซrylliuปb
Option B
Option C
Primary and Secondary
Cermanium/tUlllUM3
Option A
Option C
Secondary ladluar3
Option A
Option C
Prlaary Molybdenum/Rhenium
Option A
Option B
Option C
Secondary Molybdenum/
Vanadium3
Option A
Option C
Primary Nickel/Cobalt3
Option A
Option C
Secondary Kiclcel3
Option A
Option C
Primary Precious Metals/
Mercury2
Option A
Option C
Secondary Precious Metals
Option A
Option B
Option C
Primary Rare-Earth Metals
Option A
Option B
Option C
Option E
Secondary Tantalum3
Option A
Option C
Primary and Secondary Tlna
Option A
Option C
Primary and Secondary Titanium
Option A
Option B
Option C
Sซoondtry Tungsten/Cobalt
Option A
Option B
Option C
Secondary Uranium
Option A
Option C
Primary Zirconium/Hafnium0
Option C
Nunber of
Plants
Incurring
Costs

0
0

0

0
0


1
1

1
1

0
0
0


0
0

0
0

1
1


0
Q

29
29
29

1
1
1
1

0
0

2
2

2
2
2

0
0
0

0
0

1
Total
Investment
Cost
(1982 Dollars)










W
W

W
W












W
U





1,731 ,216
1,736,619
1,8HU,518

W
W
W
W




W
W

W
W
W








W
Total Annual
Cost
(1982 Dollars)










W
W

W
W












W
W





856,333
866,895
916,176

W
W
W
W




W
W

W
W
W








W
Number of
Plants
Falling Screen










0
1

1
1












1
1





1
1
1

0
0
0
0




2
2

1
1
1








1
Potential
Closures










0
0

0
0












0
0





1
1
1

0
0
0
0




2
2

0
0
0





.


0
Employment
Loss










0
0

0
0












0
0





it
t)
t)

0
0
0
0




11
111

0
0
0








0
 Treatment Level B is not a viable option.
^Treatment Level A is already in place.
 Treatment Levels A and B are already in place.
W - Withheld to avoid disclosing company proprietary data.
-------
    2.  Results of the Closure Analysis
        The  NPV  test examines a plant's  long-term viability, while the
liquidity  test measures a  plant's ability to  generate  sufficient cash
flow  to  cover compliance costs in the  short  run.   A plant is projected
as a  potential closure if it fails either of the two tests.
        Results of  the  closure  analysis  are presented in Tables XXII-1A
and XXII-1B for direct and indirect dischargers respectively.  Potential
plant  closures have  been identified  in only  two  subcategories.   One
secondary  precious  metals  plant  fails  the   NPV  test  at  all  three
treatment options.  Of the four tin plants, three fail both tests at all
three options, while one fails only the NPV test.
        One  plant  has  been  identified  as  a  potential  closure  in the
Secondary Precious Metals subcategory.  However, analysis shows that the
Secondary  Precious  Metals subcategory  as  a whole  is  not significantly
affected by  the pollution control  costs.   This plant  represents about
0.02?  of  the  total   capacity   of  plants  incurring  costs  in  this
subcategory.    Built  about   25   years   ago,   this  plant  added  a  new
nonferrous metal process line in 1982.
        Of the  four tin plants  that  have been  identified  as potential
closures, three have been classified  as  plant  closures and one has been
classified as a line closure.  Tin operations at the plant identified as
a  line  closure  accounted  for  only  .3%  of total  plant  shipments  in
1982.    The   four   tin  facilities  represent  about  12$   of   the  total
subcategory capacity.   One plant began  nonferrous  metals manufacturing
in the early  1950s.  The other  three plants are relatively new, having
commenced operations about  20 years  ago.   All  four  plants produce tin
primarily from  tin scrap,  tin sludge,   and  tin slurry.   Tin  metal  as
ingot and powder, tin dross, and tin mud are the chief products of these
plants.  Tin  metal  commands  a higher  market price  than  the  other tin
products because of its high purity.
        The identification of plants as potential  closures in this step
is  interpreted  as. an  indication  of the  extent  of plant  impact rather
than as a  prediction  of certain closure.   The decision  by a company to
close  a   plant  also   involves   other  considerations,   such  as  non-
competitive markets  for products,  degree  of integration  of operation,
use of output of plants as intermediate products  (captive markets), and
existence of specialty markets.
-------
 B.   OTHER  IMPACTS
     The  general industry-wide impacts of the  effluent  guidelines  on the
 nonferrous  metals  manufacturing  subcategories  covered in this rulemaking
 have been  determined  using  the  procedure  outlined  in  Chapter  I  —
 Methodology.    Each  of  the  impacts  that  have been  evaluated for  the
 different subcategories  is  described  below.
     1.  Average  Change  in  Return  on Investment
        The  return  on investment  (ROI)  is  an  accurate measure  of  a
 firm's profitability.  Therefore,  the  post-compliance  ROI for  each  plant
 was  calculated  and  compared   to  the  pre-compliance   ROI  to  find  out
 whether   the  proposed   regulations   would  significantly  affect   the
 profitability  of plants.   The  results of this analysis are presented in
 Tables XXII-2A and  XXII-2B.
        The  decline  in ROI is  expected  to  be minimal (less than  3%)  in
the  Primary  Molybdenum/Rhenium,   Primary   Nickel/Cobalt,   Primary   and
Secondary Titanium,  Primary Beryllium, Primary Precious Metals/Mercury,
and  Secondary Precious Metals  subcategories.  The  decrease in profit-
ability   in   the  Primary  Rare-Earth  Metals,  Primary  and   Secondary
Germanium/Gallium,   Secondary   Indium,  Secondary  Tantalum,   Secondary
Tungsten/Cobalt, Bauxite  Refining,  and Primary Antimony subcategories is
expected  to  be  less than  10% even  under the most costly option.  Firms
belonging to the Primary  and Secondary  Tin, Primary Zirconium/Hafnium,
Secondary Molybdenum/Vanadium,  and Secondary Nickel subcategories will
experience greater  decreases in  profits under the  most  costly option,
due  to the combined  effect  of higher  costs and lower margins.
    2.  Average Increase in Production Cost
        A change  in production  cost  directly affects the profitability
of"  a  firm.    This measure  summarizes  the  financial  impact  of  the
regulatory  alternatives on  the  firms  in  the nonferrous  metals manu-
facturing industry.  The analysis presented in Tables XXII-2A and XXII-"
2B  does  not show  a. marked  increase  in production  cost in  any of the
subcategories.  In  fact,  there  is only a  small increase (less than 1$)
for most of the firms.  Primary  Zirconium/Hafnium, Primary and Secondary
Tin,  and  Secondary Nickel  are  the  only subcategories  incurring costs
greater than  2%.    The  maximum  increase occurs  in  the Secondary Nickel
subcategory (about
        The  discharging  plant  in  the  Secondary  Nickel  subcategory
produces high-purity  alloys  from  both  primary  and  secondary sources.
The  proposed  effluent  guidelines  regulate  only  waste  recovery  of
                           XXII-5
-------
                                                  TABLE mi-2A
                                       OTHER IMPACTS — DIRECT DISCHARGEES
Subcategory
friamrr intiaooy1
Option A
Option C
Bauxite Refining13
Option E
Primary BeryUlua0
Option 8
Option C
Priaซry and Secondary
GeroanlUB/CaXllia3
Option A
Option C
Secondary lodlua*
Option A
Option C
Prlaary Molybdenuo/Hhenlua
Option A
Option 3
Option C
Secondary Molybdenum/
Vanadium3
Option A
Option C
Prijnary Nickel/Cobalt3
Option A
Option C
Secondary Nickel*
Option A
Option C
Primary Precious Metals/
Mercury3
Option A
Option C
Secondary Precious Metals
Option A
Option B
Option C
Primary Hare-Earth Metals
Option A
Option 3
Option C
Option E
Secondary Tantalua3
Option A
Option C
Prlaary and Secondary Tin3
Option A
Option C
Primary and Secondary Tltanlun
Option A
Option B
Option C
Secondary Tungsten/Cobalt
Option A
Option B
Option C
Secondary Urtuium
Option A
Option C
Primary Zirconium/Hafnium
Option A
Option B
Option C
Number of
Plants
Incurring
Costs

1
1

1

1
1


0
0

0
0

It
1
It


1
1

1
1

0
0


1
1

3
3
3

1
1
1
l

3
3

3
3

U
1
14

it
14
1

1
1

1
1
1
Average J Change
In Return on
Investment

-4.99
-6.06

-5.3*

-0.07
-o.n








-0.36
-0.36
-0.41


-It. 91
-16.18

-0.01
-0.05





-0.87
-0.97

-0.28
-0.28
-0.29

-3.68
-3.68
-4.19
-6.40

-6.03
-6.61

-22.75
-21.91

-0.91
-0.95
-1.02

-7.65
-7.98
-8.11

NA
NA

-16.17
-16.17
-16.66
Average J
Increase in
Production Cost

0.90
1.10

0.31

0.01
0.02








0.08
0.08
0.09


1.36
1 .11

0.01
0.01





0.20
0.23

0.02
0.02
0.02

0.27
0.27
0.32
0.46

0.17
0.18

0.60
0.65

0.13
0.13
0.11

1.22
1.27
1.32

NA
NA

2. '11
2.11
2.18
Average J
Price Change

0.7;!
0.8(1

0.2
-------
                                                  TABLE XXII-2B
                                      OTHER IMPACTS -- INDIRECT DISCHARGERS
Subcatซgory
Primary Antimony1
Option A
Option C
Bauxlt* Refilling
Option E
Primary Beryllium6
Option B
Option C
Primary and Secondary
Option A
Option C
Secondary Indium1
Option A
Option C
Primary Molybdenum/Rhenium
Option A
Option 3
Option C
Secondary Molybdenum/
Vanadium3
Option A
Option C
Primary nickel/Cobalt3
Option A
Option C
Secondary Mlckela
Option A
Option C
Primary Precious Metals/
Mercury*
Option A
Option C
Secondary Precious Metals
Option A
Option B
Option C
Primary Rare-Earth Metals
Option A
Option B
Option C
Option E
Secondary Tantalum3
Option A
Option C
Primary and Secondary Tlna
Option A
Option C
Primary and Secondary Titanium
Option A
Option B
Option C
Secondary Tungsten/Cobalt
Option A
Option B
Option C
Secondary Cranium2
Option A
Option C
Primary Zirconium/Hafnium0
Option C
Number of
Plants
Incurring
Coats

0
0

0

0
0

1
1

1
1

0
0
0


0
0

0
0

1
1


0
0

29
29
29

1
1
1
1

0
0

2
2

2
2
2

0
0
0

0
0

1
Average 5 Change
In Return on
Investment









-3.31
-9.18

-8.36
-9.12












-33.21
-39.63





-1 .11
-1.15
-1.53

-1.91
-6.22
-6.71
-9.92




-71.10
-79.20

-1.86
-1.96
-2.51








-11.17
Average J
Increase In
Production Cost









1.12
1.23

1.23
1.33












2.27
2.80





0.11
0.11
0.11

0.35
0.11
0.15
0.66




1.99
2.11

0.10
0.11
0.51








2.10
Average J
Price Change









0.96
1.05

1.05
1.11












2.08
2.56





0.05
0.05
0.06

0.28
0.30
0.31
0.19




0.65
0.71

0.12
0.12
0.13








2.12
Average Investment
Cost as a $ of
Capital Expenditure









13.63
21.11

11.72
13.36












117.09
175.13





19.33
19.39
20.60

2.57
1.01
1.22
6.63




311.28
322.07

2.79
3.21
1.75








19.16
treatment Level  B  is  not a  viable option.
bTreataent Level  A  is  already  in place.
 Treatment Levels A and  B are  already in place.
                                                    XXII-7
-------
nickel.   The  value of nickel  in  the  slag  is  only a small percentage  of
the total value of shipments from this plant.  The large increase  in  the
cost  of producing nickel  from waste  does  not,  therefore,  represent  a
significant increase in the total cost of production at this facility.
    3.  Price Increase
        The immediate response  to  an  increase  in the cost of production
is generally  an attempt to  increase  the price  of  the  product.  Often,
producers  try to  pass  all  costs  on  to the  consumers.   A  full pass-
through  of costs  may  not be  possible at all times and  is especially
difficult  in  a competitive market.   Although  no cost  pass-through was
assumed for the closure analysis,  it  is  useful to examine the  increases
in price that would be necessary if a plant elected to do so.   The ratio
of annual compliance cost to revenues gives a reasonable estimate of the
increase in  price  required to  cover  compliance costs.   The results  in
Tables XXII-2A and XXII-2B are similar to the results for change in cost
of production.
        The minimal changes in  price  may  appear markedly different from
those for the change in ROI.  This apparent discrepancy can be explained
by examining industry profit margins.  For example:, the Secondary Indium
subcategory is  characterized  by low  profit  margins.    Looking  at Table
XXII-2B, it can  be seen that even though  a  price  increase of less than
2% would be  sufficient  to pass through the  compliance  costs, plants  in
the  subcategory  are expected  to  experience a  change in  ROI of nearly
10%.  It should  be noted that  no plant closures  are  identified for the
Secondary Indium subcategory,  indicating low overa.ll impact.
        Average Investment Cost as a Percentage of Capital Expenditures
        The analysis compared  the  required  pollution control investment
cost  to  the pre-compliance average  annual  capital  expenditures  of the
firms.    The  results  show  that  the  Primary  and  Secondary  Tin  and
Secondary  Nickel  subcategories are  expected  to incur  relatively high
control   costs   in   relation   to   their    existing    annual   capital
expenditures.  This effect could be due to high control costs as well as
to low annual capital expenditures.  Low annual capital expenditures can
be attributed  to  the fact  that these  industries are  not  experiencing
rapid  growth.    The  new  control  expenditures  are  expected  to  have  a
minimal impact on most subcategories, as  is  shown in Tables XXII-2A and
XXII-2B.
                             XXII-8
-------
     5.   Employment  Impacts
         The   employment   impacts   of  the   regulatory  costs  have  been
 examined in  the  context of  plant closures.   Potential plant and  line
 closures have  been  identified  in  the  Primary  and  Secondary  Tin  and
 Secondary  Precious Metals  subcategories.    The  closure of  these  plants
 could  cause  an  employment  loss  of about  47  workers.   The  remaining
 subcategories are  not  impacted  sufficiently  to  cause plant  closures.
 Given  the  low  price and  production  effects   in  these  subcategories,
-employment  effects   are  expected  to  be  minimal.    Minor  production
 decreases  could  occur  as a  result  of  shifts  in  capacity  utilization
 rather than loss  of capacity.
     6.  Foreign Trade  Impacts
        The  foreign  trade  impacts  are  analyzed  with respect  to  the
effect  of regulatory  costs on  the  balance of  trade.   The closure  of
high-impact  plants  could  result in a loss of capacity  of  over  650  short
tons.   However,  the impact  could  be minimized if other plants  increase
their production  levels.   To the extent that the existing  or new plants
make  up  for  the  lost  capacity,   the  balance  of  trade  will  not  be
adversely impacted.
                            XXII-9
-------
-------
   CHAPTER  XXIII
NEW SOURCE IMPACTS
-------
-------
                        XXIII.   NEW SOURCE IMPACTS
    The   basis  for   new  source   performance  standards   (NSPS)   and
pretreatment  standards  for  new sources  (PSNS),  as  established  under
Section  306  of the Clean  Water  Act, is the  best available demonstrated
control  technology.   Builders of new facilities  have  the  opportunity to
install  the best available production processes and wastewater treatment
technologies,   without  incurring   the  added   costs   and  restrictions
encountered  in retrofitting  an  existing facility.  Therefore,  Congress
directed  EPA  to require that the best demonstrated  process changes,  in-
plant  controls, and  end-of-pipe treatment technologies be  installed in
new facilities.  For  regulatory purposes new sources  include greenfield
plants and major modifications to existing  plants.
    The  potential  economic impact  of concern  to  EPA in  evaluating  new
source regulations  is  the extent to which these regulations  represent a
barrier  to the  construction of  new  facilities  or  exert pressures  on
existing plants to modernize, and thereby  reduce the  growth potential of
the industry.
    In  evaluating  the  potential   economic   impact   of  the  NSPS/PSNS
regulations on new sources,  it  is necessary to  consider  the  costs  of the
regulations relative to the  costs incurred by  existing sources under the
BAT/PSES regulations.  For most subcategories  with  existing  sources, new
source  technologies  are  the same  as those  for existing sources  and,
therefore,  no  incremental cost will be  incurred by  new  source plants.
For  this   reason,  new   sources   will  not  be  operating   at  a  cost
disadvantage relative to existing sources due  to  this  regulation.
    For  the  Secondary Indium subcategory, the selected  treatment  option
for existing  sources  consists of lime and  settle technology only.   New
indium plants will  be required  to add filtration to the  lime and  settle
technology  to  meet  effluent  limitations.    Table  XXIII-1   shows  a
comparison between the economic impacts associated with  selected options
for existing  sources  versus new  sources.   The table shows  that neither
the existing  nor  the  new source  would be expected to incur significant
impacts.   The  incremental impact for new sources over existing sources
is also very small.   These additional costs should not pose  a barrier to
entry for new indium  plants.
    There  are  three  subcategories   for  which  there  are  no  existing
dischargers:   Primary  Cesium/Rubidium,  Secondary Mercury,  and Primary
Boron.   Economic  impacts  have been calculated  based  on model plants  in
these subcategories.   The model plants  represent  average production  of
existing  nondischarging plants.   The production  levels  used for  each
subcategory are withheld to avoid disclosing company proprietary data.
                             XXIII-1
-------
                              TABLE XXIII-1
                    COMPARISON OF ECONOMIC IMPACTS FOR
                      EXISTING AND NEW INDIUM PLANTS

Total Investment Cost (1982 $)
Total Annual Cost (1982 $)
Number of Plants Failing Screening
Number of Plants Failing NPV Test
% Change in Return on Investment
% Increase in Production Cost
% Price Change
Investment Cost as a % of Capital Expenditures
Existing
Sources
W
W
1
0
-8.36
1.23
1.05
11.72
New
Sources
20,487
18,562
1
0
-9.12
1.33
1.14
13-86
W — Withheld to avoid disclosing company proprietary data.
                               XXIII-2
-------
    The  economic impact analysis  used  for existing sources  is  employed
to  assess  the  impact  for  the  new  source  subcategoriea;  namely  a
screening  analysis  is  performed  and   a NPV  and  liquidity  test  are
conducted for  those  plants  projected  to  incur annual compliance  costs in
excess of 1$ of  plant  revenues.
    The  economic impacts  for  each new source  subcategory are  shown  in
Tables  XXIII-2,  XXIII-3,  and  XXIII-4.    The  results  show  that  the
estimated annual compliance costs do not exceed 1% of  plant  revenues  in
the Primary Cesium/Rubidium or  Secondary Mercury subcategories.   Other
impacts  in  these  subcategories   are  also   snail.     The   new  source
limitations  for the  Primary   Cesium/Rubidium  and  Secondary  Mercury
subcategories  are based  on lime  and  settle plus  filtration.    In  both
instances,  contract hauling is  assumed to be the most  economical method
of  attaining  the  required limitations.   For  this  reason,   contract
hauling costs are used in  the economic  analysis.
    Annual  costs as  a  percent of  plant revenues  exceeds  1$  for  the
Primary  Boron  subcategory.    However,   the  results  of  the  NPV  test
indicate that after-compliance  income to  liquidation _value  for  the model
plant  exceeds   the   required   cost   of  capital   (r) .     New   source
limitations  for  the  Primary Boron  subcategory are  based  on  lime  and
settle technology.
    The economic impacts  calculated  for these new source categories  are
not significant  and,  therefore, are  not expected to  pose  a barrier  to
entry.
                             XXIII-3
-------
                         TABLE  XXIII-2
                 SUMMARY OF  NEW SOURCE  IMPACTS
                    PRIMARY  CESIUM/RUBIDIUM
  Annual Production of Model Plant (Ibs./yr.)
    Cesium
    Rubidium
  Total Investment Costs (1982 $)
  Total Annual Costs (1982 $)
  Screening Analysis (%)
  % Change in Return on Investment
  % Increase in Production Cost
  % Price Change
  Investment Cost as a % of Capital Expenditures
    W
    W
    W
    W
 0.11
-0.79
 0.13
 0.11
    0
W — Withheld to avoid disclosing company proprietary data.
                   XXIII-4
-------
                          TABLE  XXIII-3

                  SUMMARY  OF  NEW SOURCE  IMPACTS
                        SECONDARY MERCURY
  Annual Production of Model Plant (Ibs./yr.)              W
  Total Investment Costs (1982 $)                          0
  Total Annual Costs (1982 $)                            396
  Screening Analysis (%)                                0.07
  ^-Change in Return on Investment                     -2.73
  % Increase in Production Cost                         0.08
  % Price Change                                        0.07
  Investment Cost as a % of Capital Expenditures           0
W — Withheld to avoid disclosing company proprietary data.
                   XXIII-5
-------
                          TABLE  XXIII-4
                 SUMMARY  OF  NEW  SOURCE  IMPACTS
                          PRIMARY BORON
  Annual Production of Model Plant (Ibs./yr.)              W
  Total Investment Costs (1982 $)                          W
  Total Annual Costs (1982 $)                              W
  NPV Test:
    Income to Liquidation Value (U/L)                  31 .33
    Real Cost of Capital (F)                           14.66
  % Change in Return on Investment                     -9.98
  % Increase in Production Cost                          1.17
  % Price Change                                         1.01
  Investment Cost as a $ of Capital Expenditures       35.17
W — Withheld to avoid disclosing company proprietary data.
                    XXIII-6
-------
      CHAPTER  XXIV
SMALL BUSINESS ANALYSIS
-------
-------
                     XXIV.  SMALL BUSINESS  ANALYSIS
    The  Regulatory Flexibility  Act  (RFA) of  1980  (P.L. 96-35*0,  which
amends  the Administrative  Procedures Act,  requires  Federal  regulatory
agencies   to   consider  "small   entities"  throughout  the   regulatory
process.  The RFA  requires an initial screening analysis to  be performed
to  determine  whether  a substantial  number of  small  entities will  be
significantly affected.   If  so,  regulatory alternatives that eliminate
or  mitigate the  impacts must  be considered.   This  chapter  addresses
these objectives  by identifying  and  evaluating  the economic  impacts  of
the   effluent   control   regulations   on   small    nonferrous   metals
manufacturers.   As described in  Chapter  I,  the  small business  analysis
was  developed  as  an   integral   part  of  the  general  economic  impact
analysis  and  was based  on  an examination of  plant capacity  levels  and
compliance costs incurred as a result of  the regulations.  Based on this
analysis, EPA has  determined  that a substantial number  of small entities
will not be significantly affected.
    For  purposes   of  this  small  business  analysis,   the   following
alternative  approaches  were  considered  for defining  small  nonferrous
metal smelting and refining operations:

    •   the Small Business Administration  (SBA) definition;

    •   annual plant capacity; and

    •   annual plant production.


    In  the  nonferrous  metals smelting  and  refining  industry,  the SBA
defines as  small those  firms  whose employment is  fewer than 2,500 for
primary producers  and  fewer  than  500 for  secondary  producers.   This
definition is, however, inappropriate because this analysis  is concerned
only with  plants  operating  as  distinct units  rather  than  with  firms
composed of  several  plants.   Many  of  the  plants  are, in fact, owned by
firms that produce  metals not covered by  this  regulation.  In order to
avoid confusion  and  to maintain consistency, annual  plant capacity was
used as an indicator  of size.   Because industry segments are assumed to
operate at uniform capacity utilization levels during the impact period,
annual plant  production yields the same classification as annual  plant
capacity.

    In order to designate large and small plants for this small business
analysis,  all plants   in  a  subcategory were  first  ranked  by  annual
capacity.   This  ranking revealed a clear distribution between large and
small plants.    The  following definitions of  small  plants  are derived
from this  review of annual plant capacities.
                             XXIV-1
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             Industry Subcategory
Annual Plant Capacity
          Primary and Secondary Tin
          Primary and
            Secondary Titanium
          Primary Zirconium/Hafnium
          Secondary Precious Metals
          Secondary Tungsten/Cobalt
   1,000,000 pounds

   1,000,000 pounds
   1,000,000 pounds
       1,1500 pounds
     500,000 pounds
    Small plants  subject  to  this regulation were  not  identified in  the
other  subcategories.    The  following  table  shows  the number  of small
plants identified.


Industry
Subcategory
Primary and Secondary Tin
Primary and
Secondary Titanium
Primary Zirconium/Hafnium
Secondary Precious Metals
Secondary Tungsten/Cobalt
Number of
Plants
Incurring
Costs
5

6
2
32
4
Number of
Small Plants
Incurring
Costs
3

1
1
a
1
Number of
Small Plants
As a % of
Total
60

17
50
25
25
    EPA  guidelines  on  complying  with  the  Regulatory  Flexibility Act
suggest several ways to determine  what  constitutes a significant impact
on a  substantial  number  of  small businesses.   Evaluation  pursuant to
these specific  criteria  are  not required by  the  Regulatory Flexibility
Act,  nor suggested  in  the legislative history.   However,  the Agency is
examining impact criteria beyond those  used  in its economic analysis in
order  to  investigate  fully  whether  this  regulation  could  have  a
significant impact  on  small  businesses.  These additional  criteria for
the small business analysis are:

   •     Annual  compliance  costs as a  percentage  of revenues  for  small
        entities are at least 10% higher than annual compliance costs as
        a percentage of revenues for large entities, or
        Annual compliance  costs  increase total costs  of  production for
        small entities by more than 5%.
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    Table XXIV-1  presents  a comparison of  annual  compliance costs as  a
percentage  of  revenues  between  small  and  large  plants.    In  most
instances, annual compliance costs as a percentage  of revenues for small
plants are  more than  10ฃ  higher than the  same  ratio for large plants.
Despite  this  difference between small  and  large plants,  the ratios of
compliance  costs  to revenues  for  small  plants  are quite  low and thus
indicate minimal impact.  In the Primary and Secondary Titanium, Primary
Zirconium/Hafnium,   Secondary   Precious    Metals,    and   Secondary
Tungsten/Cobalt  subcategories,  only   one   small  plant,   a  secondary
precious metals  plant, is identified as  a  potential closure.   Closure
analysis  identifies both  large  and small closure  candidates  in  the
Primary and Secondary  Tin  subcategory.   Analysis of this ratio provides
no  clear  indication  of  the   relative   magnitude   of   costs  to  small
businesses.
    Annual compliance  costs as  a  percentage of  total  production costs
has also  been  analyzed to  determine  the magnitude  of  impacts on small
entities.  The  results of this analysis  are  presented  in Table XXIV-2.
In no instance does the ratio exceed the 5% threshold value used here as
an indicator of significant impact on small businesses.
                           XXIV-3
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                           TABLE XXIV-1
                    ANNUAL COMPLIANCE COSTS  AS
                   A PERCENT CF ANNUAL REVENUES
                    FOR LARGE AND SMALL PLANTS
                             (percent)
Subcategory
Primary and Secondary Tin
Small
Large
Primary and Secondary Titanium
Small
Large
Primary Zirconium/Hafnium
Small
Large
Secondary Precious Metals
Small
Large
Secondary Tungsten/Cobalt
Small
Large
Option A
2.68
1.82
2.27
0.26
N/Aa
2.07
0.81
0.09
0.73
1.39
Option B
2.68
1 .82
2.27
0.27
N/Aa
2.07
0.82
0.09
0.73
1.1*1
Option C
2.98
1.93
2.31
0.30
1 .80
2.12
0.88
0.10
1.16
1.48
SOURCE:  Policy Planning & Evaluation, Inc. estimates.
aNot a treatment option.
                              XXIV-4
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                         TABLE XXIV-2
             ANNUAL COMPLIANCE COSTS A3 A PERCENT
                   OF TOTAL PRODUCTION COST
                       FOR SMALL PLANTS
                           (percent)
Subcategory
Primary and Secondary Tin
Primary and Secondary Titanium
•
Primary Zirconium/Hafnium
Secondary Precious Metals
Secondary Tungsten/Cobalt
Option A
2.75
2.65
N/Aa
1.02
0.85
Option B
2.75
2.65
N/Aa
1.03
0.85
Option C
3.06
2.70
2.10
1.11
1.35
SOURCE:  Policy Planning 4 Evaluation, Inc. estimates.
aNot a treatment option.
                           XXIV-5
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        CHAPTER XXV
LIMITATIONS OF THE ANALYSIS
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                    XXV.   LIMITATIONS OF THE ANALYSIS
    This chapter  discusses  the  major limitations of the economic  impact
analysis.  It focuses on the limitations of data and methodology and  the
key assumptions and estimations made in these areas.
    DATA LIMITATIONS
    Economic  theory dictates  that  the  financial  health of  the major
impacted  industries is  determined by the  volume  of  economic activity
(e.g., value of  shipments),  capacity utilization,  and  prices.  Economic
analyses  also  generally  distinguish between  long-run   and  short-run
effects.   Decisions regarding variable  costs,  capacity,  and relatively
small amounts of resources are generally made on short-run criteria.  On
the other hand, decisions regarding large investment in fixed assets are
made on the basis of long-run expectations.
    In  the  absence  of  complete  and  current  plant-specific  financial
data, a financial profile  of  the  various metal industry segments plants
was  developed  based  on an  extensive  review  of  trade  literature and
published financial  reports.   This financial  profile  is  subject to the
following major assumptions and limitations:

    •   A  "normal"   or  average  year,   in 'terms  of aggregate   economic
        conditions  and  financial  performance,  has  been  used   as  a
        baseline in  the economic impact  analyses.  Therefore,  estimates
        of price, capacity utilization,  real  durable goods sales,  fixed
        'investment,   and  total corporate profits have  been based on the
        assumption that economic conditions in the impact period will be
        an average  of conditions in the 1978-1982 business cycle.  In
        general,  due  to adverse  conditions  in 1982,  this implies that
        macroeconomic conditions during the impact period will be better
        than those in 1982.

    •   The  industry-  capacity  is  assumed"  to  be  constant  at  1982
        levels.     Industry   sources   indicate  that  firms   are  not
        contemplating  any  major  expansions   in  capacity  in  the  near
        future.

    •   Plant-specific  economic  variables have  been  estimated   using
        financial ratio  analysis.   Financial information  was  obtained
        from the  annual and  10-K reports of companies engaged  in the
        smelting  and refining of nonferrous metals.  It was assumed that
        the  •  financial   characteristics   of   each   plant  could  be
        approximated  by   the  average   financial   characteristics  of
        corporate segments operating  in  like  industries.   Hence, the
        financial characteristics of the  plants were estimated  by  using
        corporate and segment information.


                              XXV-1
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    •   The  time value of  money was  taken into account  by baaing  the
        analysis  on  constant prices and  constant  income.    Current  cost
        information presented in annual reports was utilized in  order to
        create  financial ratios consistent  with this approach.
B.  METHODOLOGY LIMITATION


    Two  types  of  performance  measures have  been used  in  the  economic
impact analysis:

    •   liquidity  (short-term analysis); and

    •   solvency (long-term analysis).
    The  liquidity  and solvency  (net  present value)  measures are quite
rough, primarily because of the lack of data.  Industry-wide  information
has been  used  to analyze the firms in both  the  short term and the  long
term because the forecasting of firm-specific economic and institutional
variables is  extremely difficult.  The  analysis described  here  is  not
intended  to   be   a   structural   specification   of  the  profitability,
liquidity,  or  solvency of  the  industries.   Rather, it  is  designed to
demonstrate that  variations in the performance  of  the  firms over  time
are likely  to  reflect  general  industry  trends.   The difference,  if  any,
may  be explained  by  a  number  of factors  that were  not  explored in
greater  detail,   such as   capital-output  ratios  or technological   and
market changes.
C.  SENSITIVITY ANALYSIS
    Sensitivity  analysis  is  used  to  determine  whether  variations  in
certain  key  factors  significantly  affect the  results of  the economic
impact  study.    Several parameters  of  the  study  have  been  varied  to
assess the sensitivity of the study's results.  The following paragraphs
address the question of changes to the study's assumptions.
    1.  Monitoring Costs
        A  sensitivity  analysis of  monitoring costs  was  performed for
each subcategory.   For  the  original impact analysis,  monitoring costs
were  based  on  the  specific  circumstances of  each  plant.    For  the
sensitivity analysis,  it was assumed that additional monitoring would be
required.   The  results of  the  sensitivity  analysis  show  that three
additional closures would  occur,  in addition to the  closures mentioned
in  Chapter XXII:  one   additional  closure  in  each of  the  Primary and
Secondary  Titanium,  Secondary Precious  Metals,  and  Secondary Tantalum
subcategories.
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    2.  Changes in Production Process
        Currently   several  plants   engaged   in   the   manufacture  of
germanium/gallium,  titanium,  and  zirconium/hafnium  utilize  Level  A
processes.    A  sensitivity  analysis  was  performed  to  determine the
expected impacts  if these  plants  change  to level B processes.  Only one
zirconium/hafnium plant is projected  to  close  if the plant changes from
Level A to Level B processes.
        If the existing discharger was  identified  as a Level B plant, a
sensitivity  analysis was  not  performed  to  determine  the  impacts  of
converting to  Level  A.   This  was not necessary,  because  Level A costs
are less than  Level  B costs.   For a  more complete discussion of Level A
and Level B production processes, see the Development Document.
                             XXV-3
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BIBLIOGRAPHY
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                              BIBLIOGRAPHY
1.  Mineral Commodity Profiles, U.S.  Department  of the Interior,  Bureau
    of Mines,  1983-

2.  Mineral Commodity Summaries, U.S. Department of the Interior,  Bureau
    of Mines,  1983.

3.  Mineral Facts and Problems, U.S.  Department  of the Interior,  Bureau
    of Mines,  1980.

4.  Mineral Industry Surveys,  U.S.  Department of the Interior,  Bureau of
    Mines,  1982 and 1983.

5.  Minerals Yearbook,  U.S.  Department of the Interior, Bureau  of Mines,
    1979,  1980,  1981,  and  1982.

6.  Non-Ferrous  Metals   Data   —   1982,   American  Bureau   of   Metal
    Statistics.
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                    APPENDIX A
DESCRIPTION OF THE NPV TEST AND ITS SIMPLIFICATION
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                                APPENDIX  A

           DESCRIPTION  OF  THE  NPV  TEST AND  ITS  SIMPLIFICATION
A.  THE BASIC NPV TEST
    The net present value  test  is  based  on  the  assumption  that a company
will continue  to operate a plant  if  the  cash  flow from future operations
is  expected  to exceed  its current  liquidation  value.  This  assumption
can be written mathematically as  follows:
                         ut (i7r-)  + LT (T)1  Lo
where:  (L = cash flow in year t

        L  = current liquidation value

        L-, = terminal liquidation value of  the plant  at  the  end  of
             a planning horizon of T years

         r = cost of capital.
    In order to use  this  formula,  in this form, and  in  nominal  dollars,
forecasts  of  the  terminal  liquidation value  (Lm)  and  income in  every
year during the planning period (IL) have to be made.  However,  the need
to make the forecasts  can  be avoided by using a simplified  NPV  formula,
which is discussed in the following section.
B.  SIMPLIFICATION OF THE NPV TEST
    Equation  (1)  can  be  simplified  by   making  the   following  three
assumptions:             "~~

    o   the equation  considers real  dollars,  that  is,  the income,  the
        liquidation value,  and  the rate of  return  are  all expressed  in
        real terms (see Section C for definitions);

    o   IL = U^  = 0,  that  is,  real cash flows over  the planning  horizon
        are constant (or income in any given year is equal  to  the income
        in any other year); and

    o   the  current   liquidation   value   is   equal  to   the  terminal
        liquidation value, that is, C_ = C  .
                                    A-1
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Based on these assumptions,  equation  (1) can be rewritten as:

                I  D/_!_\t + /_1_\T E >  c

               t.-i  l(u?)/    l-  -J    ฐ-  ฐ
This expression can be simplified  in  the following manner.  Let
    k =
          1
        (u?)


Equation (2)  may be written:


        T
     U  E

     L-  t=1
              k1  C   > C
                 0—0
Redefining the  first  bracket, and combining the two L  terms:
-
U
     f~ ฐฐ    t     ฐฐ      t
       E   kC  -   E    kC

     Lt=1        t=T+1

Using the expression  for  the sum of a geometric series,


                  T+1
    U
             k

             d-k)J
                                                                    (2)
    n   k      r  •
    u d-k)  i  V
       > r.
                                                                (3)
Where:   r = real  after-tax cost of capital


         D = real  cash  flow


        L  = current  liquidation value in real terms.
         o



    These terms  are defined in more detail in Section  C below.
                                   A-2
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     Equation  (3) states  that  if the  rate  of return  on  the liquidation
 value  (U/L )  is  greater  than  or  equal to  the  real  after-tax  rate  of
 return on "assets, then  the  plant  will continue in  operation.   Equation
 (3)  is the same test as  expressed  in Equation  (1),  but is  simpler  to
 use.   It  does not require the  forecasts of income  and liquidation value.
     The  real rate of  return  on assets can  be  shown to be  equal  to the
 cost of capital.   This relationship  is  explained in Section  C.   Thus,
 the  methodology employed  for  the  NPV test uses  the  rate  of  return  on
 assets as a  proxy  for  the  ccst  of capital.
 C.   DISCUSSION  OF  REAL  CASH  FLOWS,  COST  OF  CAPITAL,  AND
     LIQUIDATION VALUE
    1.  Real Cash Flows


        The difference between nominal cash flows and real cash flows is
in the calculation of depreciation.  While depreciation is calculated at
book value for nominal cash flows, it is calculated at replacement value
for real cash  flows.   In  accordance  with the definition of nominal cash
flows used in Section II-G, real cash flows are as follows:

                                  All Operating Expenses
                                   Including Depreciatic
                                   at Replacement Value
         P,     /TJ\   =  Revenue   -   Including  Depreciation   -   Taxes
        Normally,  depreciation  is not taken into account  in  calculating
cash flows; however,  it  is  included in the cash flow  definitions.   This
inclusion  means  that  a  plant  continuously  maintains  or replaces  the
capital equipment.   The cost of  maintaining  and/or replacing  equipment
is  equal  to  the  depreciation.    In order  to  calculate real cash  flow,
depreciation  is taken  at  replacement  value, not book value.  Using  this
approach implies  that  the value of  a plant's equipment  remains  constant,
and  therefore,  the  current  liquidation  value  (L  )   is  equal  to  the
terminal liquidation value (L,).
    2-  Real Cost of Capital
        This report  uses rate of  return  on assets  as  a substitute  for
cost  of capital.    However,  the  cost  of  capital can  be  shown  to be
equivalent to the rate of return on assets as follows.   According to  the
Modigliani-Miller model  (M-M model)  the  value  of a leveraged  firm is
calculated by the formula:


        v = X(1K" t} +
                u
                                    A-3
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Where:  V  = value of the firm
        X  = operating income before taxes
        t  = tax rate
        K  = cost of capital of an unleveraged firm
        D  = debt.
The cost of capital of a leveraged firm in the M-M model is given by the
formula:
        KL = Ku(1 - t|)                                 '             (2)

Where:  K^  =  cost of capital of a leveraged  firm.   By  solving  Equation
(2) for Ku,  we get

                     KL
       •'    K  =
Using this value of K  in equation (1),  and  simplifying,  we  get:

        V = - - - — ^ (D)(t)                                 (4)
                   KL
Dividing the whole equation by V,  we get:
                  VK,          •  V
Therefore,
            i    X(1  - t)
              -
       ..   VKL = x(1  - t)
or
                                                                     ...
                                                                     (5)
                                    A-4
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Since the value  of the firm  =  Equity  + Debt = Assets, Equation CO can
be rewritten as:

                                   X(1  - t)
Where:  A = assets of the firm,
The equation above says that cost of capital to a leveraged firm  (K, ) is
equal to the  after-tax rate of return  on  assets.   The return on assets
for a firm  or a group  of firms can be  calculated  by using information
from  financial  statements.   For  the purposes  of  this  report  the  real
rate of  return is calculated as follows:
    _,                       ,-.           ' real cash  flows (0)
    The  real rate of return (r)
                                    total assets at replacement value
                                    A-5
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          APPENDIX B
IMPLEMENTATION OF THE NPV TEST
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                                APPENDIX  B

                      IMPLEMENTATION OF THE  NPV TEST


A.  PRIMARY PROBLEM  IN  IMPLEMENTING THE  TEST


    The NPV formula  reduces  to  the  following  equation:
                                 Lo
 If  there  were  no  limitations  to  the  availability  of  plant-specific
 financial  data,  the  values of these three variables could be  calculated
 for  each  plant.    The data  collected  in  the  Agency's  survey  of  the
 industry,  however, is  limited with  respect  to  current  financial and  cost
 information.   Information  on  income, depreciation,  capital expenditures,
 cost of  capital  and future sales  are  needed  to carry out the NPV  test;
 hence,  it must  be  estimated for  each  plant from  publicly available
 information.
    The  nonferrous  Phase II  metals  industry consists  of  more than 200
plants.   The task  of  estimating the data  for  each plant is  simplified
by:

    •    classifying the  nonferrous metals industry  into eight  groups;

    •    estimating  the  values  of  ratios   such  as:   operating  income/
         sales,  operating   income/assets,   current  assets/sales,  non-
         current assets/sales,  and  capital  expenditure/sales for  each  of
         the eight groups; and

    •    classifying a  plant into one of the  eight groups, and applying
         the ratios associated with the group  to  the plant.
B.  ORGANIZATION OF THIS APPENDIX
    Section C  below  describes the method used  to  classify the industry
into eight  groups,  defines the groups,  and  describes, the applicability
to the specific metals  covered  in this report.   Section D discusses the
procedure used to calculate group ratios.  Section  E presents the method
used  to   estimate  sales  of  each plant,  and  Section  F  discusses  the
methods used to estimate operating income, current assets, fixed assets,
capital expenditures, and  the liquidation value of each plant.  Section
G summarizes the earlier sections with an overview of the NPV test.
                               B-l
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C.  DEVELOPMENT OF GROUPS AND APPLICATION TO METALS
    1.  Definition of Groups
    The eight groups were formed by using the following steps:

    •   The  annual  and  10K  reports  of 30  companies  engaged  in the
        production of nonferrous metals were obtained.

    •   Most  annual  and  10K  reports  provide  financial  information
        pertaining   to   major  lines  of   business   (business   segment
        information).    The   30  annual  reports  contained  data  on  40
        business segments.   (Some companies  had  more than  one line of
        nonferrous metal business.)

    •   These 40 business segments were classified into eight relatively
        homogenous  groups  by  examining  qualitative  descriptions  of
        business segments, and  by calculating  average group ratios and
        evaluating the differences among groups.
    Data for the  years  1980,  1981, and  1982  were  used to establish the
eight groups.  These groups, representing similar business and financial
characteristics, are as follows:

    •   Group 1 :   Smelting  and  Refining of Primary  Base  Metals — This
        group includes  the mining,  smelting,  and  refining  of  primary
        base metals,  such as copper,  lead,   zinc,  and aluminum.   Many
        large-scale  companies  such  as Asarco,   Alcoa,   and  Amax  are
        primarily engaged in the production of such metals.

    •   Group 2.    Smelting and  Refining  of Precious  Metals  —  Four
        companies have concentrated their  operational  activities in the
        mining,  smelting, and refining  of  precious  metals such as gold,
        silver,  and platinum.

    •   Group 3.  Smelting and  Refining  of Other  Nonferrous  Metals (not
        included in Groups I and II)  —  About six  companies  are engaged
        in the  mining, smelting, and  refining of other metals,  such  as
        lithium, molybdenum, columbium,  tungsten,  zirconium,  beryllium,
        nickel,  cobalt,  and  chrome.   Such metals generally  have  anti-
        wear, anti-corrosion  characteristics.   They  also enhance  the
        toughness and strength of ferrous-based alloys.

    •   Group 4.   Reclamation  of  Precious and Semi-Precious Metals  —
        Reclamation of such metals from scrap, jewelry,  and  electronic
        components  is  being  undertaken on   a  large  scale  by  various
        companies such as  Handy and Harman,  Refinemet  Corporation,  and
        Diversified  Industries,   Inc.     The  value   of   shipments  of
        reclaimed metals  is a  significant portion  of shipments for these
        companies.
                              R-?
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•   Group 5.   Smelting  and  Refining for Producing Alloys — Mining,
    smelting, and refining for the  purpose of producing alloys  is an
    important  segment  for  many  companies,  including Foote-Mineral
    Co.,  Cabot Corporation,  and 'Hanna  Mining  Co.   These products
    include  ferro-alloys,  tantalum alloys,  columbium  alloys, and
    nickel alloys.   Reclamation  of alloys from  metal scrap is also
    included  in  this segment  because  it  constitutes a significant
    part of business operations for these companies.

•   Group 6.   Reclamation of  Base  and  Other  Nonferrous Metals  — In
    addition  to producing metals such  as copper, aluminum, and zinc
    from  their respective  ores,  companies  may  also  reclaim   these
    metals   from   scrap,   junked   automobiles   and   electronic
    appliances.  This group covers  reclamation  activities for  these
    and other nonferrous metals.

•   Group  7.    Production  of  Metal  Products,   Alloys,   and   Metal
    Powders — The combination  of metal products, alloys, and  metal
    powders is  considered  one  segment.   It does  not  involve, any
    mining  or recycling.    Companies  engaged   in  such  production
    purchase raw  materials to  manufacture such items.

•   Group 8.   Production of Rare-Earth  Metals — Rare-earth metals
    have special  characteristics of their  own.   They  improve many
    common items; for  example,  some help polish  glass,  decolor it,
    or  tint   it,  and   others  filter  out   or  absorb  light   rays.
    Examples of such  metals are mischmetal,  cerium,  lanthanum, and
    didymium.     Because  of   these  special  characteristics,  the
    production of  rare-earth  metals  has been  taken  as  a separate
    segment.
                           3-3
-------
    2.  Application of Groups to Subcategories
        Twenty-one  metal  sufccategories  are  included  in  the  economic
analysis.    The  plants  in  these  subcategories  are  evaluated  with
financial  ratios  from  the groups  defined  above.    The  assignment  of
plants  to  specific groups  is  based  on business  considerations.   The
following list identifies the assignments.
      Subcategory
Group Used for
Financial Ratios
      Primary Antimony
      Bauxite Refining
      Primary Beryllium
      Primary Boron
      Primary Cesium/Rubidium
      Primary and Secondary
        Germanium/Gallium
      Secondary Indium
      Secondary Mercury
      Primary Molybdenum/Rhenium
      Secondary Molybdenum/Vanadium
      Primary Nickel/Cobalt
      Secondary Nickel
      Primary Precious Metals/
        Mercury
      Secondary Precious Metals
      Primary Rare-Earth Metals
      Secondary Tantalum
      Primary and Secondary Tin
      Primary and Secondary Titanium
      Secondary Tungsten/Cobalt
      Secondary Uranium
      Primary Zirconium/Hafnium
Group 3
Group 1
Group 3
Group 7
Group 7

Group 7
Group 7
Group 6
Groups 3 arid 7
Group 5
Group 3
Group 5

Group 2
Group 4
Group 8
Group 6
Group 6
Groups 3 and 7
Group 7
Group 7
Group 7
-------
D.  PROCEDURE FOR CALCULATING GROUP RATIOS
    Each  of  the  eight  groups  defined  above  is  comprised  of several
business segments.  Group financial ratios are calculated as  follows:

    •   calculate  financial ratios  for each  segment within  the  group
        over several years; and

    •   average segment ratios over all segments and all years.

The  details of  the  calculations  for  each  group  ratio are presented
below.  The results' of these calculations (the  group ratios) are shown
in Table B-1, at the end of this appendix.
    1.  Calculation of Operating Income/Sales
          g _ real cash flow of group g
         S  ~      sales of group g
          o

         U    .    T   ,   M   Um ,t
         _ฃ . 1   z   1   .E     S
         Sg   T  t=1  M  m=1  Sm 't
                                O


Where:   U      = real cash flow of segment m in group g in year
           g'   t (calculated from business segment information of
                annual reports).

        Sm  j. =  sales of segment ra in group g in year t (given
          S'     in business segment information of annual reports).

            M =  number of segments in group g.

            t =  1978, 1979, 1980,  1981,  1982.
-------
    2.  Operating Income/Assets  (Real Cost of  Capital)


                      _ real cash  flow of group  g __
          g ~ A(adj)  " adjusted assets of group g
                     O
                                   M
          g   A(adj)g   T      M      A(adj)m  ^
                                             O

Where:  A(adj)   ,  = adjusted value of assets of segment m  in  group
               g'    g in year t.
        ^J'mg.t =  \,t •


Where:
                              ,   depreciation at replacement
, 1   ป     current costs	J_    	value in  1982	.
        historical costs  ~ h .    depreciation at book
                                       value in  1982

h = Number of companies in the data base.
A_  L. is obtained  from  business  segment information contained  in  annual
 mg,t
reports.
    3 .  Current Assets/Sales

         (CA)
         _ _   current assets of group
          S    ~     sales of group g
           O

         (CA)        T       M  (CA)m ,t
         __„_-.__ง   _L   Y       y       K
          S    = T  t \  M    ,  S
           g        t=1     m=1   m ,t
Where:  (CA)   ,  = current assets of segment m in group g in year  t.
                              B-6
-------
        The  business  segment information contained  in  corporate annual
 reports  does  not  give  any  information  on  current  assets  of  the
 segments.  Therefore, current assets of the segments have been estimated
 based on the characteristics of the company to which they belong.
                       (CA)
                           V*
                            mg,t
Where:  (CA)   ,  = current assets of the company c (to which the
             S'    segment m belongs) in group g in year t.
           SG  ,  = sales of company c (to which the segment m
             &'    belongs) in group g in year t.
           Sm  .  = sales of segment m of company c in group g in
             S1    year t.
        Non-Current Assets/Sales
         (BV)

          S
book value of plant and equipment of group g
              sales of group g
         (BV)
           g
    T       M
T       M        S
1  t=1  "  M=1    m ,t
Where:  (BV)m ,t = book value of segment m in group g in year t,
        The business segment information contained  in  annual  reports  of
companies  does  not give   information  on  book  values  of  plant  and
equipment  of  segments.   Hence,   they  have been  estimated  by  the  same
method used for estimating current assets  of segments.
                              B-7
-------
                        (BV)

Where:  (BV)
            Q
              '
                   book value of the company c  (to which  the  segment
                   m belongs) in group g in year t.
    5.  Capital Expenditure/Sales
         (CE)

          S
                 capital expenditures of group g
                        Sales  of group g
         (CE)
           g
                     T       M   (CE)    ซ.
                 1   I   1   ?       V
                 T  4- 1   M  U 1    S
                    t=1      M=1     m ,t
                                    o
Where:  (CE)m  .  = capital expenditures of segment m in group g in
             S'    year t.  (Provided for each business segment in
                   corporate annual reports.)
E.  ESTIMATION OF ANNUAL REVENUES (SALES) OF EACH PLANT
     ,   D = sales of plant i in group g in the year D
      CT f
    S,
     VD '
             C       x  (CU)     P
             11982        1
Where:   C.-     = Capacity of plant i in 1982 (assumed to be the same
          X       in 1985).
          (CU)i
             PT =
                  Average  capacity  utilization  of plant i belonging to
                  industry I  between  1978  and  1982.

                  Average  real  (inflation  adjusted)  price of metal in
                  industry I  under  between 1978 and  1982.
                              B-8
-------
    The  above  equation  simply  states  that  capacity  multiplied  by
capacity  utilization,  which  equals  production,   multiplied  by  price
equals sales.
F.  ESTIMATION OF  PLANT LEVEL  OPERATING INCOME.  CURRENT  ASSETS,  PLANT
    AND EQUIPMENT.  CAPITAL EXPENDITURES. AND LIQUIDATION VALUE

    It is assumed  that  each plant possesses  the  characteristics of the
group  in  which  it  falls.   Hence,  group  ratios  are  used  to  estimate
plant-level  variables.    The  values of most  of  these  variables  are
calculated by multiplying a group  ratio  (as  defined in Section D above)
by the plant's sales (Section E above).
    1.   Calculation of Operating Income of Plants
     U.   n  = real cash flow of plant i in group g in the year D.

      i ,D    i ,D
       ฃ       g

    2.  Calculation of Current Assets of Plants
             - current assets of plant i in group g in the year D.
           D

                        (CA)
    (CA)ig,D = Sig,D x   Sg


    3.  Calculation of Plant  and Equipment of Plants

           ^  p =  adjusted book value of plant and equipment of plant
            g'     i in group g in  the year D.
    (BVadjh   D =  (BV).   D x  (Ux)
            g'          g'

                    .     t •,   \      current  costs
                   where  (1+x)  =
                                 historical  costs

                        (BV)g
           i  ,D  =  Si  ,D   S
           g       g    g
                              B-9
-------
    4.  Calculation of Capital Expenditures of Plants

        (CE).  jj = capital expenditures of plant i in group g in
             S'     the period D.

                            (CE),

        (CE)vD = svD x  V

    5.  Calculation of Liquidation Value

             L   ,D =  = real liquidation  value cf plant  i  in group  g  in
               i         period D.
                S
        Under  the  assumption  that  plant  and  equipment  have  no  scrap
value except as a tax write-off (a common practice  in  the  industry),  the
liquidation value is calculated as follows:
         Lo.  'D * ฐ'7(CA)i ,D + fc (BV)i  ,D
           ig             g           g

Where:  t = tax rate.
        Only a portion  of the value  for'  current,  assets is included  in
the  liquidation  value  because only  a certain amount  can  be  recovered
when  the  plant  is  liquidated.    Financial  literature  suggests  this
portion to be approximately 70 percent of  current  assets.

        Neither  short-term nor  long-term  liabilities  are  taken  into
account while calculating  the liquidation value of plants, because  they
do not affect the plant closure decisions.  Whether the plant  is  closed
or is kept operating, liabilities will have to be paid, and so they are
not crucial decision factors in plant-closure  analysis.
G,  IMPLEMENTATION OF NPV TEST
    The general form of the  NPV test  is
                             B-10
-------
    In order  to  implement  the  NPV test,  the annual compliance cost  must
be subtracted  from  the  real cash flow of the plant.  Thus,  the NPV  test
for each plant can be written as:


     Ui ,D(adj)   _
     L

      V
where
     U.   n(adj) = U.  n - (Total Annual Cost).
      1 • JJ         1 • L)                      1
       g            g
     L      = liquidation value of plant i
       i ,D   (defined above in Section F.5)
     r  = real cost of capital for group g (defined above in
      g   Section D.2)

    The  procedure  for  calculating  total  annual  cost  is  explained  in
Appendix C.
                              B-ll
-------
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-------
            APPENDIX C
 CALCULATION  OF  TOTAL  ANNUAL  COSTS
FOR THE TWO CLOSURE ANALYSIS TESTS
-------
                                APPENDIX C

                    CALCULATION OF TOTAL ANNUAL COSTS
                    FOR  THE  TWO CLOSURE ANALYSIS TESTS
     Both  the Net Present  Value test  (NPV  test)  and the  liquidity  test
 deduct   the   incremental  compliance  costs   from   revenues   (operating
 income).  While  the  NPV  test  judges  the  firm  from the  long-term point of
 view,  the  liquidity  test appraises  the  short-term viability  of  the
 firm.    The   incurrence  of  pollution  control  expenditures,   therefore,
 calls  for an  adjustment  to  the  real  cash  flows discussed in  Appendix
 A.   The  additional  costs  result  in  annual cash outflows  — as  a  result
 of  increased  operating costs, maintenance  expenditures,  and payments  for
 the  initial  capital outlay.   However,  these  costs  also  result in  some
 tax  benefits, as  taxable  income  is  determined after  the deduction  of
 both  operating and  depreciation  expenditures.   The firms also benefit
 from  the  Investment Tax  Credit (ITC).  For  purposes of  estimating  the
 pollution  control costs  for the  two  tests,  all tax  benefits must  be
 considered.
A.  CALCULATION OF TAX BENEFITS DUE TO  INCREASED  DEPRECIATION


    Since depreciation is  an  allowable  expense for tax purposes,  it has
the effect  of reducing taxes.  If  the  tax rate  is  assumed  to be t and
depreciation  is D, taxes decrease by  (t)(D) every year.  The tax  savings
are in  nominal dollars;  hence,  the  present  value  of  the tax benefits
must be calculated by discounting the nominal tax savings  by the  nominal
rate of return.

    The depreciation tax benefit in year k = t(D,  )


Where:  Dk = dk x 0.95P1

        dk = depreciation rate in year k

         P = capital cost to the plant.


    The present value of the depreciation tax shelter =

     K       t(D^)
     r
    k=1
 In accordance with the  terms  of  the  Tax Equity and Fiscal Responsibil-
ity Act  of  1982,  only  95%  of the  capital  costs  can  be  depreciated.
Thus,  the amount P, which is the initial capital cost, is adjusted to 95
percent of its value.
                               C-l
-------
Where:  r = real cost of capital (as defined in Appendix B, Section D.2;
            this value varies by group)

        g = inflation rate (assumed to be 6 percent)

        K = taxable life of the asset.
The  capital  expenditures  required  to  install  the  necessary treatment
equipment have been depreciated over the taxable life of five years.  In
accordance with  the Tax  Equity  and Fiscal  Responsibility Act  of 1982
(TEFRA), capital equipment can be depreciated as follows.

    1)  15% of the depreciable assets (95% of ?) equals the depreciation
        in the first year.

    2)  The remaining  portion of  the  asset  (85$)  is depreciated  on a
        straight-line  basis  over  the   remaining  four years.   In this
        study, the depreciation rates are taken to be 22% for the second
        year and 21% for each of the last three years.
B.  CALCULATION OF EFFECTIVE CAPITAL COST (NPV TEST)
    The effective capital cost is calculated after  the  deduction of the
following items from the capital costs of pollution control equipment:

    1)  Investment  tax credit  (ITC), which  in  accordance  with  TEFRA
        equals 10% of capital costs;

    2)  Present value of depreciation and interest tax shelters.
         5

        k=1

Therefore,
          Effective
        Capital Cost
P - 0.1P -  E    tD,  x
                                   k=1
                  k
                              C-2
-------
 C.  CALCULATION OF ANNUALIZED  CAPITAL  COSTS_0PV  TEST)
     The  effective capital  expenditures  are  amortized  over  the  useful
 lifetime of the asset  to obtain annualized  capital  costs as  follows:
The annualized capital costs (ACC)  = <0.9P -  I  tD ,  x - - • — -—> x — _ +r'
 where n = 10 = the assumed lifetime of  the  equipment.

     Note  that  the  annualized  capital cost  ACC  is  the  product  of  the
 effective capital cost and a capital recovery  factor

      ~ / i   ~\n
      r(1 + r)
      (1 + r)" - 1

 D.  CALCULATION OF TOTAL ANNUAL COSTS (NPV TEST)

     The  annual pollution  control  expenditures  (APC )   are  calculated  as
 follows:

     APC  = ACC + (l-t)AAC

 Where:   ACC = annualized capital cost (see Section C)

         AAC = annual operating costs.  The term (1-t) takes into account
               the tax effect of increased expenses.
 E.  THE NPV TEST
     The  NPV  test,  which  now  takes  into  account  the  pollution  control
 expenditures,  can now be stated as follows:

 If,
      0 - APC
      	p_
               >  r
         C
          o
     Then,  a plant will continue in operation.
                               C-3
-------
F.  CALCULATION OF ANNUAL POLLUTION CONTROL EXPENDITURES
    (LIQUIDITY TEST)
    The  liquidity  test is  designed  to measure  the short-term  solvency of
the firm.  The  basic  premise  of this  analysis is  that  a plant will close if
pollution control expenditures  cause  negative cash  flows in the foreseeable
future.    The  cash   flows  are  defined  as   earnings   after  all  operating
expenses (including depreciation), interest,  and taxes.
    The  effective  capital  cost  is,  therefore,  amortized  over  a  shorter
period of five years.  The annualized capital cost (ACC ) in this case is
Total  annual  pollution  control  expenditures  (APC )  in  the  case  of  the
liquidity test are, therefore, greater than in the case of the NPV test.
G.  THE LIQUIDITY TEST


    The liquidity test can now be stated as follows:
If,
     U - APC  10
            q
    Then, the plant will close.
                               C-4
-------
                  APPENDIX  D
PROCEDURE FOR CALCULATING INDUSTRY-WIDE IMPACTS
-------
                               APPENDIX D

             PROCEDURE FOR CALCULATING' INDUSTRY-WIDE IMPACTS
    This  appendix briefly details  the  procedures followed in  computing
certain  ratios used  to analyze  industry-wide impacts.   These  impacts
concern:    (1) changes  in  production  costs;  (2)  price  changes;   (3)
changes   in   return   on  investment;   and  (4)   effects   on   capital
expenditures.
A.  CHANGES IN PRODUCTION COSTS

                                      n
                                      Z (APC.)
                                     i=1    """
    Changes in production costs =

                                       (S  - U )
Where:  APC^ = annual pollution control expenditures of plant i

          S^ = annual sales of plant i

          U. = real income of plant i

           n = number of plants in subcategory


B.  PRICE CHANGES
Changes in price =
                         n
                         ฃ  APC.
                        1=1    X
                        -
                          n
                          I  S.
                         1 = 1   i
Where:  APC^ = annual pollution control expenditures of plant i
          S^ = annual sales of plant i

           n = number of plants in subcategory
                               D-l
-------
C.  CHANGES IN RETURN ON INVESTMENT
                                       (r' - r)
    Changes in return on investment =	L
Where:   r  = precompliance real rate of return for each subcategory,

              as defined in Appendix A.



         r1 = postcompliance real rate of return for each subcategory
     rf is computed as follows:


           n   _

           E  (U  - APC.)

          1=1
     r' =
           n

           Z  (A. + CC )

          1=1


Where:     U. = real income of plant i



         APC. = annual pollution control expenditures of plant i



           A. = assets of plant i, which equal  U../r



          CC. = pollution control capital costs of plant i



            n = number of plants in subcategory
D.  EFFECTS ON CAPITAL EXPENDITURES
    	     n

                                        z  cci


    Effects on capital expenditures =  —	
                                        n

                                        E  CE.

                                       1=1   X
Where:  CC^ = pollution control capital costs of plant i



        CE. = estimated capital expenditure budget, of plant i



          n = number of plants in subcategory
                               D-2
-------