ECONOMIC ASSESSMENT OF POTENTIAL HAZARDOUS WASTE CONTROL

     GUIDELINES FOR THE INORGANIC CHEMICALS INDUSTRY
        This final report (SW-134c) describes work performed
   for the Federal solid waste management programs under
   contract no. 68-01-3269 and is reproduced as received
   from the contractor.
        U.S. ENVIRONMENTAL PROTECTION AGENCY

                        1976

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     This report had be:en reviewed by the U.S. Environmental
Protection Agency and approved for publication.  Its publication
does not signify that the contents necessarily reflect the views
and policies of the U.S. Environmental Protection Agency, nor
does mention of commercial products constitute endorsement or
recommendation for use by the U.S. Government.

An environmental protection publication (SW-134c) in the solid
waste management series.
                               I i

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BIBLIOGRAPHIC DATA
SHEET
1. Report No.
 EPA/530/SW-13Uc
3. Recipient's Accession No.
  PB-263 210
4. Title and Subtitle
   Economic  Assessment of Potential Hazardous  Waste Control
   Guidelines  for the Inorganic  Chemicals  Industry
                                                5. Report Date

                                                  October.  1976
                                                6.
7. Author(s)
   R. Williams.  R.  Shame!,  K.  Hallock. B. Stangle, S. Blair
                                                8. Performing Organization Rept.
                                                  No.
9. Performing Organization Name and Address
   Arthur D.  Little, Inc.
   Acorn Park
   Cambridge, Massachusetts   02140
                                                10. Project/Task/Work Unit No.
                                                11. Contract/Grant No.
                                                   EPA  No.  68-01-3269
12. Sponsoring Organization Name and Address
   EPA Hazardous Waste Management Division
   Office of  Solid Waste Management Programs
   Washington,  D.C.  20460
                                                13. Type of Report & Period
                                                   Covered

                                                       Final 1975
                                                14.
15. Supplementary Notes
   E.P.A.  Project Officer  -  Michael Shannon
16. Abstracts
           An  analysis of  the  economic impact  of ootential  hazardous waste  management
   regulations upon inorganic  chemicals was  performed based  on hazardous waste
   management  cost data supplied by the EPA.   The inorganic  chemicals included chlorine
   and caustic soda, hydrofluoric acid, elemental phosphorus,  sodium dichromate,
   titanium  dioxide, aluminum  fluoride, chrome pigments, nickel  sulfate, phosphorus
   pentasulfide,  phosphorus  trichloride, and slodium silicofluoride.  A methodology
   was developed  to systematically judge the broader economic  effects on these chemicals
   resulting from applications of hazardous waste management control, first by assessing
   the likelihood that management costs would  be defrayed through price increases, and
   secondly, if price increases were not likely, the likelihood that plant  closures
   would occur.   Based on  this approach, it was concluded that only hydrofluoric acid
   apoears to  be  susceptible to plant shutdowns as a result  of hazardous waste
   management  control costs.
17. Key Words and Document Analysis.  17o. Descriptors
   Hazardous  Waste Management  Control Guidelines

   Hazardous  Waste Management  Control Costs

   Economic Analysis

   Inorganic  Chemicals Industry




I7b. Identifiers/Open-Ended Terms
I7c. COSATI Field/Group
                                        REPRODUCED BY
                                       NATIONAL TECHNICAL
                                       INFORMATION SERVICE
                                         U. S. DEPARTMENT OF COMMERCE
                                           SPRINGFIELD, VA. 22161
18. Availability Statement
                                    19. Security Class (This
                                       Report)
                                    	UNCLASSIFIED
                                                         20. Security Class (This
                                                            Page
                                                         	UNCLASSIFIED
          21. No. of Pages
             320
                                                          22. Price
rot •.< N ris-35 (REV. 10-73)  ENDORSED BY ANSI AND UNESCO.
                                                   THIS FORM MAY BE REPRODUCED
                                                                               USCOMM-DC 8265-P74

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                          FOREWORD


     Work for this report was conducted by Arthur D. Little, Inc.,

from July 1975 to October 1976.  Since the completion of this

study, the Resource Conservation and Recovery Act of 1976 (RCRA)

was enacted into law on October 21, 1976.  EPA is required to

promulgate hazardous waste management standards within eighteen

months of enactment of RCRA.



     The study was conducted using information that would

realistically reflect economic impacts if there were regulatory

authority.  The information and data contained in the report is

still valid and will be of significant value to EPA in the process

of developing regulations.

                                        Sheldon Meyers
                                Deputy Assistant Administrator
                                  for Office of Solid Waste
                                 i I I

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                                 TABLE OF CONTENTS
                                                                            Page
  List of Tables                                                           viii

  List of Figures                                                           xiv

  I.  INTRODUCTION                                                           1-1


 II.  EXECUTIVE SUMMARY                                                     H-l

      A.   Major Findings                                                    II-1

          1.   Segmentation of the Industry                                  II-l

          2.   Summary of Impacts on Chemical Production                     II-l

          3.   Summary of Industry Economic Impacts                          II-4

      B.   Chapter Summaries                                                 II-6

          1.   Industry Characterization                                     II-8

          2.   Characterization of Primary Affected Chemicals                II-9

          3.   Characterization of Secondary Chemicals                       11-11

          4.   Proposed Regulations and Treatment Costs                      11-13

          5.   Economic Impact Methodology                                   11-13

          6.   Assessment of Economic Impact                                 11-15

III.  INDUSTRY CHARACTERIZATION                                            III-l

      A.   Size and Growth                                                  III-l

      B.   Structure                                                        III-3

          1.   Development of the Chemical Industry                         III-3

          2.   Market Conduct and Performance                               III-6

      C.   Financial Profile                                                111-10

          1.   Profitability                                                111-10

          2.   Investment and Capital Structure                             111-12

          3.   Cost Structure                                               111-17

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                               TABLE OF CONTENTS (cont.)
                               	                            Page





     D.   Employment and Wages                                              111-19




     E.   Company Reliance on Primary Affected Chemicals                    111-21




     F.   Characterization of Production Facilities                         111-24




IV.   CHARACTERIZATION OF PRIMARY AFFECTED CHEMICALS                         IV-1




     A.   Chlorine and Caustic Soda                                          IV-1




         1.   Industry Structure                                             IV-1




         2.   Supply Characteristics                                         IV-6




         3.   Demand Characteristics                                         IV-11




     B.   Hydrofluoric Acid                                                  IV-19




         1.   Industry Structure                                             IV-19




         2.   Supply Characteristics                                         IV-19




         3.   Demand Characteristics                                         IV-21




     C.   Elemental Phosphorus                                               IV-34




         1.   Industry Structure                                             IV-34




         2.   Supply Characteristics                                         IV-37




         3.   Demand Characteristics                                         IV-41




     D.   Sodium Dichromate                                                  IV-49




         1.   Industry Structure                                             IV-49




         2.   Supply Characteristics                                         IV-51




         3.   Demand Characteristics                                         IV-55




     E.   Titanium Dioxide                                                   IV-61




         1.   Industry Structure                                             IV-61




         2.   Supply Characteristics                                         IV-63




         3.   Demand Characteristics                                         IV-67
                                           v i

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                               TABLE OF CONTENTS (cont.)




                                                                             Page




V.  CHARACTERIZATION OF SECONDARY AFFECTED CHEMICALS                          V-l




    A.  Aluminum Fluoride                                                     V-l




        1.  Industry Structure                                                V-l




        2.  Supply Characteristics                                            V-3




        3.  Demand Characteristics                                            V-7




    B.  Chrome Pigments                                                       V-12




        1.  Product Characteristics                                           V-13




        2.  Production Characteristics                                        V-20




    C.  Nickel Sulfate                                                        V-24




        1.  Product Characteristics                                           V-24




        2.  Production Characteristics                                        V-27




        3.  Industry Structure                                                V-28




    D.  Phosphorus Pentasulfide                                               V-31




        1.  Industry Structure                                                V-31




        2.  Supply Characteristics                                            V-31




        3.  Demand Characteristics                                            V-33




    E.  Phosphorus Trichloride                                                V-40




        1.  Industry Structure                                                V-40




        2.  Supply Characteristics                                            V-40




        3.  Demand Characteristics                                            V-43




    F.  Sodium Silicofluoride                                                 V-49




        1.  Product Characteristics                                           V-49




        2.  Production Characteristics                                        V-55
                                          v i i

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                       TABLE OF CONTENTS (cont.)




                                                                          Page




 VI.  PROPOSED REGULATIONS AND MANAGEMENT COSTS                           VI-1




      A.  Proposed Regulations                                            VI-1




      B.  Hazardous Waste Management: Costs                                VI-3




VII.  ECONOMIC IMPACT METHODOLOGY                                        VII-1




      A.  Analytic Framework and Overview                                VII-1




          1.  Short-Run Impacts (1977-78)                                VII-.




          2.  Long-Run Impacts (1980 and beyond)                         VII-1




          3.  Impacts Not Considered                                     VII-1




          4.  Analytical Disciplines                                     VII-1




      B.  Segmentation of Industry                                       VII-2




      C.  Detailed Methodology                                           VII-3




          1.  Microeconomic Theory of Hazardous Waste Control            VII-3




          2.  Econometric Analysis                                       VII-15




          3.  Process Economics                                          VII-23




          4.  Short-Run Economic Impact Analysis                         VII-23




          5.  Plant Shutdown Analysis Methodology                        VII-32




          6.  Long-Run Economic Impact Analysis                          VII-37




      D.  Limitations of Analysis                                        VII-?P




          1.  Segmentation of Industry                                   VII-38




          2.  Sources of Error                                           VII-38




          3.  Other Regulations and Costs                                VII-39




          4.  Microeconomic Model                                        VII-39




          5.  Single Industry                                            VII- 40




          6.  Forecasting                                                VII-40
                                        VII I

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                          TABLE OF CONTENTS (cont.)






VIII.  ASSESSMENT OF ECONOMIC IMPACT




       A.  Primary Affected Chemicals




           1.  Chlorine




           2.  Hydrofluoric Acid




           3.  Elemental Phosphorus




           4.  Sodium Bichromate




           5.  Titanium Dioxide




       B.  Secondary Affected Chemicals




           1.  Aluminum Fluoride




           2.  Chrome Pigments




           3.  Nickel Sulfate




           4.  Phosphorus Pentasulfide




           5.  Phosphorus Trichloride




           6.  Sodium Silicofluoride




       C.  Inorganic Chemical Industry Impact




           1.  Size and Growth




           2.  Employment and Wages




           3.  Community Effects




           4.  Foreign Trade Effects




  IX.  ACKNOWLEDGEMENTS




       APPENDIX A




       APPENDIX B
 Page




VIII-1




VIII-1




VIII-1




VIII-8




VIII-15




VIII-24




VIII-33




VIII-40




VIII-40




VIII-43




VIII-44




VIII-45




VIII-46




VIII-47




VIII-48




VIII-48




VIII-56




VIII-56




VIII-56




  IX-1




   A-l




   B-l
                                        IX

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                               LIST OF TABLES

 Table                                                                  Page

 II-l    SUMMARY OF IMPACT FINDINGS                                      II-3

 II-2    POSSIBLE PLANT CLOSURES RESULTING FROM HAZARDOUS WASTE          H-5
         TREATMENT COSTS

 II-3    INCREMENTAL INDUSTRY INVESTMENT REQUIRED FOR HAZARDOUS WASTE    11-7
         CONTROL

 II-4    CHARACTERIZATION OF PRIMARY CHEMICALS                           11-10

 II-5    CHARACTERIZATION OF SECONDARY CHEMICALS                         11-12

 II-6    INCREMENTAL COSTS FOR ACHIEVING LEVEL III HAZARDOUS WASTE       11-14
         TREATMENT TECHNOLOGY (1975)

 II-7    RELATIVE MAGNITUDE OF HAZARDOUS WASTE TREATMENT COSTS           11-17

 II-8    DEMAND IMPACTS ON PRIMARY CHEMICALS                             11-18

 II-9    POTENTIAL IMPACT OF HAZARDOUS WASTE TREATMENT COSTS ON          11-20
         EMPLOYMENT

III-l    SIZE AND GROWTH OF INDUSTRIAL INORGANIC CHEMICALS INDUSTRY     III-2

III-2    LEADING CHEMICAL COMPANIES                                     III-4

III-3    INDUSTRIAL INORGANIC CHEMICALS  (SIC 281) FINANCIAL PROFILE     III-ll

III-4    INDUSTRIAL INORGANIC CHEMICALS  (SIC 281) FINANCIAL PROFILE     111-13

III-5    INDUSTRIAL INORGANIC CHEMICALS  (SIC 281) FINANCIAL PROFILE     111-15

III-6    INDUSTRIAL INORGANIC CHEMICALS  (SIC 281) COST PROFILE          111-18

III-7    SUMMARY OF WAGES AND EMPLOYMENT IN THE INDUSTRIAL INORGANIC    111-20
         CHEMICALS INDUSTRY  (SIC 281)

III-8    COMPANY DEPENDENCE ON PRIMARY AFFECTED CHEMICALS  (1975)        111-22

 IV-1    TOP TEN 1975 CHLORINE PRODUCERS (PLANTS, CAPACITIES, AND        IV-2
         PROCESSES)

 IV-2    OTHER  1975 CHLORINE PRODUCERS  (PLANTS, CAPACITIES, AND          IV-4
         PROCESSES)

 IV-3    ESTIMATED 1975 COST OF PRODUCING CHLORINE AND CAUSTIC SODA      IV-9
          (DIAPHRAGM)

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                          LIST OF TABLES (cont.)

Table                                                                     Page

 IV-4    ESTIMATED 1975 COST OF PRODUCING CHLORINE AND CAUSTIC SODA       IV-10
         (MERCURY)

 IV-5    U.S. CHLORINE PRODUCTION 1960-1975                               IV-12

 IV-6    U.S. CHLORINE COMMERCIAL SHIPMENT VALUES                         IV-13

 IV-7    U.S. END USES OF CHLORINE, 1974                                  IV-15

 IV-8    CHLORINE IMPORT AND EXPORT PRICES 1960-1975                      IV-16

 IV-9    U.S. CHLORINE PRODUCTION AND TRADE 1960-1975                     IV-18

 IV-10   HYDROFLUORIC ACID CAPACITIES (1975)                              IV-20

 IV-11   ESTIMATED 1975 COST OF MANUFACTURING HYDROFLUORIC ACID (99.95%)  IV-22

 IV-12   INDUSTRY OPERATING CAPACITY - HYDROFLUORIC ACID                  IV-23

 IV-13   U.S. HYDROFLUORIC ACID PRODUCTION 1960-1975                      IV-25

 IV-14   IMPORTS AND EXPORTS OF HYDROFLUORIC ACID                         IV-26

 IV-15   APPARENT CONSUMPTION OF HYDROFLUORIC ACID                        IV-27

 IV-16   U.S. HYDROFLUORIC ACID END USES, 1974                            IV-29

 IV-17   ACTUAL VERSUS LIST PRICES OF HYDROFLUORIC ACID                   IV-31

 IV-18   MODEL PLANT INCOME STATEMENT AND CASH FLOW - 1975                IV-33
         HYDROFLUORIC ACID

 IV-19   ELEMENTAL PHOSPHORUS PRODUCERS                                   IV-35

 IV-20   PRODUCTION, SALES AND CAPTIVE USE FOR ELEMENTAL PHOSPHORUS       IV-36

 IV-21   ESTIMATED COST OF MANUFACTURING ELEMENTAL PHOSPHORUS (1975)      IV-39

 IV-22   INDUSTRY OPERATING CAPACITY - ELEMENTAL PHOSPHORUS               IV-40

 IV-23   U.S. PRODUCTION AND TRADE OF ELEMENTAL PHOSPHORUS (1970-1975)    IV-42

 IV-24   U.S. END USES OF PHOSPHORUS, 1974                                IV-43

 IV-25   ACTUAL VERSUS LIST PRICES FOR ELEMENTAL PHOSPHORUS               IV-46

 IV-26   IMPORT AND EXPORT PRICES OF ELEMENTAL PHOSPHORUS                 IV-47

 IV 27   MODEL PLANT INCOME STATEMENT AND CASH FLOW-1975                  IV-48
         ELEMENTAL PHOSPHORUS

 IV-28   SODIUM DICHROMATE AND CHROMIC ACID  PLANTS AND CAPACITIES- 1975   IV-50

 IV-29   ESTIMATED 1975 COST OF MANUFACTURING SODIUM DICHROMATE           IV-53

                                      xi

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                            LIST OF TABLES (cont.)


Table                                                                      Tage

 IV-30   U.S.  PRODUCTION AND  TRADE  OF SODIUM DICHROMATE  AND CHROMATE          IV-"54
        1960-1975.

 IV-31   ESTIMATED  1974  USE PATTERN  FOR  SODIUM  CHROMATE AND DICHROMATE       IV-57

 IV-32   ACTUAL VERSUS LIST PRICES  FOR SODIUM DICHROMATE 1960-1975           iv-59

 IV-33   TITANIUM DIOXIDE  PLANTS  AND  CAPACITIES-1975                          IV-62

 IV-34   ESTIMATED  COST  OF MANUFACTURING  TITANIUM DIOXIDE BY THE  CHLORIDE     IV-65
        PROCESS  (1975)

 IV-35   INDUSTRY OPERATING RATE  -  TITANIUM  DIOXIDE                           IV-66

 IV-36   U.S.  TITANIUM DIOXIDE PRODUCTION AND TRADE, 1960-1975               IV-68

 IV-37   U.S.  END USE OF TITANIUM DIOXIDE, 1973                               IV-69

 IV-38   TITANIUM DIOXIDE  COMMERCIAL  SHIPMENT VALUES                          IV-71

 IV-39   TITANIUM DIOXIDE  IMPORT  AND  EXPORT  PRICES  1960-1975                  IV-72

 V-l    ALUMINUM FLUORIDE PRODUCERS                                          V-2

 V-2    CAPTIVE/MERCHANT  SHIPMENTS FOR ALUMINUM FLUORIDE                    V-4

 V-3    ESTIMATED  COST  OF MANUFACTURING  ALUMINUM FLUORIDE (1975)             V-6

 V-4    PRODUCTION, FOREIGN  TRADE, AND APPARENT CONSUMPTION OF ALUMINUM     V-8
        FLUORIDE

 V-5    U.S.  CONSUMPTION  OF  ALUMINUM FLUORIDE                                V-9

 V-6    ACTUAL VERSUS LIST PRICES  FOR ALUMINUM  FLUORIDE 1960-1975           V-ll

 V-7    U.S.  PRODUCTION OF CHROME  PIGMENTS, 1960-1975                       V-14

 V-8    U.S.  SHIPMENTS  OF CHROME PIGMENTS,  1960-1975                         V-15

 V-9    LIST  VERSUS ACTUAL PRICES  FOR CHROME PIGMENTS 1960-1975              V-16

 V-10   IMPORTS  AND EXPORTS  OF CHROME PIGMENTS                               V-18

 V-ll   U.S.  PRODUCTION OF NICKEL  SULFATE                                    V-25

 V-12   ACTUAL VERSUS LIST PRICES  FOR NICKEL SULFATE  1960-1975               V-26

 V-13   NICKEL SULFATE  PRODUCERS                                            V-29

 V-14   PHOSPHORUS PENTASULFIDE  PRODUCERS                                    V-32

 V-15   INDUSTRY OPERATING CAPACITY  - PHOSPHORUS PENTASULFIDE               V-34

 V-16   U.S.  PRODUCTION OF PHOSPHORUS PENTASUIFIDE, 1960-1975               V-35


                                    xi i

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                                 LIST OF TABLES (cont.)
  Table

   V-17

   V-18

   V-19

   V-20

   V-21

   V-22

   V-23

   V-24

   V-25

   V-26

  VI-1

  VI-2

  VI-3

  VI-4


 VII-1


 VII-2

 VII-3

VIII-1

VI1I-2


VIII-3

VIII-4


VIII-5
                                                                   Page

PHOSPHORUS PENTASULFIDE CONSUMPTION BY END USE - 1974               V-37

ACTUAL VERSUS LIST PRICES FOR PHOSPHORUS PENTASULFIDE 1960-1975     V-38

PHOSPHORUS TRICHLORIDE CAPACITIES - 1975                            V-41

INDUSTRY OPERATING RATE - PHORPHORUS TRICHLORIDE                    V-42

U.S. PRODUCTION  OF PHOSPHORUS TRICHLORIDE, 1960-1975               V-44

CONSUMPTION OF PHOSPHORUS TRICHLORIDE BY END-USE                    V-46

ACTUAL VERSUS LIST PRICES FOR PHOSPHORUS TRICHLORIDE 1960-1975      V-47

U.S. PRODUCTION AND TRADE OF SODIUM SILICOFLUORIDE 1960-1975        V-50

ACTUAL VERSUS LIST PRICES OF SODIUM SILICOFLUORIDE 1960-1975        V-51

SODIUM SILICOFLUORIDE END USE                                       V-52

1975 TREATMENT COSTS                                               VI-5

METHOD USED FOR UPDATING THE VERSAR TREATMENT COSTS TO 1975 COSTS  VI-7

BASELINE AND PROJECTED TREATMENT/DISPOSAL TECHNOLOGIES             VI-8

INCREMENTAL COSTS FOR ACHIEVING LEVEL III HAZARDOUS WASTE          VI-10
TREATMENT TECHNOLOGY (1975)

PRELIMINARY ECONOMIC IMPACT FACTORS FOR THE INORGANIC CHEMICAL    VII-5
INDUSTRY

RESULTS OF REGRESSION ANALYSIS                                    VII-17

DEMAND ELASTICITIES OF PRIMARY AFFECTED CHEMICALS                 VII-21

PRICE INCREASE CONSTRAINT FACTORS - CHLORINE                     VIII-2

IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND (CHLORINE    VIII-4
MERCURY CELL)
PLANT  SHUTDOWN DECISION FACTORS - CHLORINE
                                                                 VIII-6
SUMMARY OF SOLID WASTE TREATMENT INVESTMENT ANALYSIS FOR MERCURY VIII-7
CELL CHLORINE MANUFACTURE (1975)
PRICE  INCREASE CONSTRAINT FACTORS - HYDROFLUORIC ACID
VIII-9
                                            xi 1 i

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                                LIST OF TABLES (cont.)

Table                                                                         Page

VIII-6     IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND              VIII-10
           (HYDROFLUORIC ACID)

VIII-7     PLANT SHUTDOWN DECISION FACTORS - HYDROFLUORIC ACID              VIII-13

VIII-8     SUMMARY OF SOLID WASTE TREATMENT INVESTMENT ANALYSIS FOR         VIII-14
           HYDROFLUORIC ACID MANUFACTURE - 1975

VIII-9     PRICE INCREASE CONSTRAINT FACTORS - PHOSPHORUS                   VIII-17

VIII-10    IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND              VIII-19
           (ELEMENTAL PHOSPHORUS)

VIII-11    PLANT SHUTDOWN DECISION FACTORS - PHOSPHORUS                     VIII-21

VIII-12    SUMMARY OF HAZARDOUS WASTE TREATMENT INVESTMENT ANALYSIS FOR     VIII-23
           ELEMENTAL PHOSPHORUS MANUFACTURE (1975)

VIII-13    PRICE INCREASE CONSTRAINT FACTORS - SODIUM DICHROMATE            VIII-25

VIII-14    IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND              VIII-27
           (SODIUM DICHROMATE )

VIII-15    MODEL PLANT INCOME STATEMENT- 1975, SODIUM DICHROMATE            VIII-30

VIII-16    SUMMARY OF HAZARDOUS WASTE TREATMENT INVESTMENT ANALYSIS FOR     VIII-31
           SODIUM DICHROMATE  (1975)

VIII-17    PLANT SHUTDOWN DECISION FACTORS - SODIUM DICHROMATE              VIII-32

VIII-18    PRICE INCREASE CONSTRAINT FACTORS - TITANIUM DIOXIDE             VIII-34

VIII-19    IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND              VIII-36
           (TITANIUM DIOXIDE CHLORIDE PROCESS)

VIII-20    PLANT SHUTDOWN DECISION FACTORS - TITANIUM DIOXIDE               VIII-37

VIII-21    SUMMARY OF HAZARDOUS WASTE TREATMENT INVESTMENT ANALYSIS FOR
           TIATNIUM DIOXIDE MANUFACTURE (1975) (CHLORIDE PROCESS)           VIII-39

VIII-22    PRODUCTION AND VALUE OF PRIMARY CHEMICALS - 1975                 VIII-49

VIII-23    DEMAND IMPACTS ON PRIMARY CHEMICALS                              VIII-50

VIII-24    POSSIBLE  PLANT CLOSURES RESULTING FROM HAZARDOUS WASTE          VIII-52
           TREATMENT COSTS

VIII-25    RATIO OF INCREMENTAL HAZARDOUS WASTE TREATMENT COSTS TO MODEL    VIII-53
           PLANT PRE-TAX INCOME

VIII-26    INCREMENTAL INDUSTRY INVESTMENT REQUIRED FOR HAZARDOUS WASTE     VIII-53
           CONTROL
                                         xiv

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                               LIST OF TABLES (cont.)

 Table                                                                      Page

VIII-27   ESTIMATED CAPITAL EXPENDITURES ON POLLUTION CONTROL-1975         VIII-54

VIII-28   POTENTIAL IMPACT OF HAZARDOUS WASTE TREATMENT COSTS ON           VIII-57
          EMPLOYMENT

VIII-29   POTENTIAL IMPACT OF HAZARDOUS WASTE TREATMENT COSTS ON WAGES     VIII-57

VIII-30   BALANCE OF PAYMENTS EFFECTS 1975                                 VIII-58

   A-l    SHORT RUN IMPACT ANALYSIS-CHLORINE-DIAPHRAGM CELL                   A-2

   A-2    SHORT RUN IMPACT ANALYSIS-CHLORINE-MERCURY CELL                     A-3

   A-3    SHORT RUN IMPACT ANALYSIS-HYDROFLUORIC ACID                         A-4

   A-A    SHORT RUN IMPACT ANALYSIS-ELEMENTAL PHOSPHORUS                      A-5

   A-5    SHORT RUN IMPACT ANALYSIS-SODIUM DICHROMATE                         A-6

   A-6    SHORT RUN IMPACT ANALYSIS-TITANIUM DIOXIDE-CHLORIDE PROCESS         A-7

   B-l    NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT FOR         B-2
          CHLORINE/MERCURY CELL

   B-2    NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT FOR         B-A
          HYDROFLUORIC ACID

   B-3    NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT FOR         B-6
          ELEMENTAL PHOSPHORUS

   B-A    NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT FOR         B-8
          SODIUM DICHROMATE

   B-5    NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT FOR         B-10
          TITANIUM DIOXIDE
                                        xv

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                              LIST OF FIGURES

Figure                                                                  Page


  II-l    Economic Impact Priorities of Inorganic Chemicals               II-2

VII-1    Economic Impact Priorities of Inorganic Chemicals              VII-4

VII-2    Total Cost Curve                                               VII-7

VII-3    Average and Marginal Cost Curves                               VII-8

VII-4    Determination of Equilibrium Price and Quantity                VII-10

VII-5    Effect of Pollution Control-Induced Cost Changes on            VII-13
         Equilibrium Price and Quantity
                                         XVI

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       ECONOMIC ASSESSMENT OF POTENTIAL HAZARDOUS WASTE CONTROL




            GUIDELINES FOR THE INORGANIC CHEMICALS INDUSTRY




                                  by




                        Arthur D. Little, Inc.






                           I.  INTRODUCTION






                             Purpose and Scope




     This report was prepared for the U.S.  Environmental Protection Agency




(EPA), Office of Solid Waste Management Programs, Hazardous Waste Management




Division, to assess the economic impact of potential hazardous waste control




guidelines for the inorganic chemicals industry. ^The report provides EPA




with:  (1) a preliminary assessment of the likely economic consequences of




promulgating certain hazardous waste control guidelines, (2) a data base for




further economic analysis of selected industry sectors, (3) a background for




guideline development work pursuant to Section 209 of the Solid Waste Disposal




Act, as amended..  The potential hazardous waste management guidelines




evaluated here have not been promulgated and no regulatory authority exists




for their promulgation.  The economic impact conclusions are those of the




Contractor and not of the EPA.




     The term "hazardous waste", as applied to specific constituents of waste




or by-product streams, is used in a tentative sense.   Final judgements about




the hazardous nature of certain of the chemicals termed "hazardous" in this




report have not been made.  Additional information will be required as to the




actual fate of such material in a given disposal site or situation before a




final decision regarding their inclusion in the definition of "hazardous waste"




can be made by EPA.
                                 1-1

-------
     Hazardous waste management costs have been developed for 11 chemicals:


aluminum fluoride, chlorine (including diaphragm, mercury and Downs cell pro-


cesses), chrome pigments, hydrofluoric acid, nickel sulfate, phosphorus,


phosphorus pentasulfide, phosphorus trichloride, sodium dichromate, sodium


silicofluoride and titanium dioxide (chloride process).


     The economic impact analysis included defining the industry structure,


evaluating the supply and demand relationships for each of the 11 chemicals,


reviewing proposed control technologies and management costs (these costs


have been updated to 1975 values), and estimating the likely economic impacts


of the regulations.   The product of the study is an economic characterization


of the industry and an outline of how key economic impact indicators such as


cost changes, demand loss, plant closures, and job losses would be affected


if the guidelines were promulgated.


     The costs of compliance with designated hazardous waste management


guidelines were developed by the Versar Corporation under contract with EPA's

                                          f\
Office.o-f Solid Waste Management Programs.   The cost estimates of the Assess-


ment Report have been reviewed with firms in the industry and inflated to 1975.


However, no rigorous attempt has been made to verify the costs.  The Report


stated that the accuracy range of the cost estimates was - 20 percent for the


Alkalies and Chlorine Industry, and - 40-50 percent for the Inorganic Pigments


and Industrial Inorganic Chemical Industry.  While many of the important eco-


nomic impacts result from incremental and relative costs rather than total


costs, the overall accuracy of the economic analysis is limited by the accuracy


of the cost information.
     a.  "Assessment of Industrial Hazardous Waste Practices, Inorganic
Chemicals Industry," March, 1975 contract number 68-01-2246.
                                 1-2

-------
                        II.  EXECUTIVE SUMMARY





                          A.  Major Findings




     1.  Segmentation of the Industry.  The Assessment Report developed




costs of waste management for 13 chemicals and chemical processes included




in the Standard Industrial Classification (SIC) 281 - Industrial Inorganic




Chemicals.  The economic impact analysis has been focused on five primary




chemicals likely to experience the greatest impact.  Eight secondary chemicals




and chemical processes likely to experience a lower level of impact have been




treated in less detail.




     The chemicals were segmented (Figure II-l) on the basis of hazardous




waste management costs as a percent of selling price and by market size.




The primary chemicals examined were chlorine made by the mercury cell process,




titanium dioxide made by the chloride process, elemental phosphorus, sodium




dichromate, and hydrofluoric acid.




     2.  Summary of Impacts on Chemical Production.  The impact of the




hazardous waste management costs on the total demand for the primary chemicals




has been estimated using econometrically-derived demand elasticities.




Table II-l summarizes the effect on demand and production of the complete




passthrough of incremental compliance costs.  For example, hydrofluoric acid




could experience a 1.6 percent drop in demand due to the higher prices, which




represents a $2.9 million drop in sales.  The incremental compliance cost




and relative impacts on the secondary chemicals are summarized in Table II-l.




     Using a model plant cost structure for each primary chemical, a discounted




cash flow analysis was performed to test whether manufacturers are likely to




close plants rather than install the required capital facilities and continue




to operate with the higher operating costs.   After a Sensitivity analysis
                                II-l

-------
   1975
Market Size
(Production)
Large
(Over 1 Million Short
Tons)
Medium
(Over 100,000 Short
Tons)
Small
(Under 100,000 Short
Tons)
  Diaphragm Cell
     Chlorine
   Downs Cell
   Chlorine
                           Aluminum Fluoride
(LOWEST PRIORITY)
Sodium Silicofluoride

   Phosphorus
   Pentasulfide

   Phosphorus
   Trichloride
Titanium Dioxide
(Chloride Process)
  Chrome Colors

  Nickel Sulfate
                                 Small
                          (Under 0.5 Percent)
                                Medium
                          (0.5 to 1.0 Percent)
                                                                             (HIGHEST PRIORITY)
                           Mercury Cell
                            Chlorine
  Phosphorus

Sodium Dichromate

Hydrofluoric Acid
                               Large
                           (Over 1.0 Percent)
                                         Treatment Costs As Percent of Selling Price
                  Source: Contractor's Estimates.
                 FIGURE II-l   ECONOMIC  IMPACT PRIORITIES  OF  INORGANIC  CHEMICALS
                                                       II-2

-------
                                TABLE II-l
                        SUMMARY OF IMPACT FINDINGS

Expected

Primary affected
chemicals

Chlorine (mercury cell process)
Hydrofluoric acid
Phosphorus
Sodium dichromate
Titanium dioxide (chloride process)

Demand e
elasticity

-0.36
-1.91
-2.18
-0.50
-0.42
demand
Change in
demand
(percent)
none *
0-1.6
-1.5
-0.4
-0.2
impacts
Value of
a
demand change
($ MM)
none
0-2.9
-6.2
-0.4
-1

Secondary affected
chemicals
Aluminum fluoride
Chlorine (diaphragm, Downs cells)
Chrome pigments
Nickel sulfate
Phosphorus pentasulfide
Phosphorus trichloride
Sodium silicof luoride
b
Market size
Medium
Large
Small
Small
Small
Small
Small
Treatment
costc
Small
Small
Medium
Medium
Small
Small
Small
d
Impact
Limited
Moderate
Limited
Limited
Negligible
Negligible
Negligible

    *Source:  Contractor's estimates.

     a.  Calculated by multiplying drop in demand (metric tons) by average 1975
shipment value ($/ton).
     b.  Large:   over 1 MM tons/year; medium: over 100 M tons/year; small:
under 100 M tons/year.

     c.  As a percent of selling price; medium: over 0.5 percent; small: under
0.5 percent.

     d.  Terms indicate relative rank as well as order of magnitude of impacts.

     e.  The percent change in demand given a 1 percent increase in price.

     f.  The economic impact on mercury cell chlorine, in tarms of demand
changes, is expected to be negligible based on the assumption that manufacturers
will be unable to raise prices to recover hazardous waste management costs.  See
Section VIII. A. 1.
                                     11-3

-------
to test higher waste management costs, it was concluded that only in the

case of hydrofluoric acid was there a possibility of plant closures.  These

results are summarized in Table 11-2.

     With the exception of hydrofluoric acid, the economic impact of the pro-

posed hazardous waste management regulations on the production of inorganic

chemicals appears to be fairly modest.  However, there are two factors working

contrary to this conclusion which have not been quantitatively evaluated.

The first is that there is strong evidence of significant differences among

the costs of compliance of plants producing the same product.  These dif-

ferences can allow one producer to come into compliance at a lower cost level

than another and gain a competitive advantage.  Proximity to an approved

landfill is a good example of one of these differences.

     The second factor is the coincidence of air and water pollution control

costs at the same time as the hazardous waste management costs.  In many cases,

the air and water costs are much greater (generally in the ratios of 1:7:10,
                             f\
hazardous waste: air: water).   The addition of hazardous waste management

requirements can be more important at a time of other significant pollution

control costs than at a time when the firms can deal with the hazardous waste

costs alone.

     3.  Summary of Industry Economic Impacts.  The primary affected

chemicals accounted for about 32 percent of the $8 billion of inorganic
                          b
chemicals shipped in 1975.  The estimated value of shipments which would
     a.  Manufacturing Chemists Association Survey, reported in the Oil and
Gas Journal, September 22, 1975.

     b.  Only $1.3 billion (16%) of the primary chemicals were made in production
 processes with hign hazardous waste costs and whose production was evaluated
 by the primary economic impact analysis.   See Table VIII-22.
                                 11-4

-------
                            TABLE II-2


         POSSIBLE PLANT CLOSURES  RESULTING  FROM  HAZARDOUS
                                           *
                      WASTE TREATMENT  COSTS

Number of existing
Chemicals plants
Chlorine-mercury cell
Titanium dioxide -chloride
Elemental phosphorus
Sodium dichromate
Hydrofluoric acid
Total
27
8
10
3
12
60
Number of possible
plant closures Percent
_ _
-
-
-
1-2 8-16
1-2 2-3

*Source:  Contractor's estimates.
                               II-5

-------
have been lost in 1975 as a result of the passthrough of hazardous waste


management costs to consumers (due to demand elasticity effects) is $8 to


$11 million, or about 0.1 percent of total industry shipments.  This is


equivalent to about 0.4 percent of the 1975 primary affected chemical shipment


value.


     Incremental industry investment required for Level III control of


hazardous wastes from the primary affected chemicals is estimated at $20.1


million, as shown on Table II--3.  This is an investment which would be


required over a period of several years.  While the $20.1 million is low compared


to an estimated $6.3 billion of total capital spending and $684 million spent

                                                                •3
on pollution control by the chemical industry as a whole in 1975, it is high


compared to the apparent level of capital expenditures related to the primary


chemicals.  An estimated $120 million was invested by the chemical industry


in 1975 related to the primary chemicals of which $13 million of capital


expenditures were made for pollution control.  About $1 million was spent


for solid waste including hazardous waste.


     The inorganic chemical industry has experienced long-term growth of 5 to


6 percent per annum.  Annual growth from 1975 to 1985 is expected to average


between 4 and 5 percent.  The growth of the inorganic chemicals industry is


not likely to be significantly affected by the cost of hazardous waste management.


Some small reduction in demand growth is likely to occur as real prices rise;


however, hazardous waste management costs are relatively small when compared to


other increasing cost elements.


                                B.  Chapter Summaries


     A more detailed review of the major findings of this study is presented


here in the form of brief synopses of Chapters III to VIII.  The reader


should understand that in preparing; chapter summaries, generalizations
     a.  Survey of Current Business, Department of Commerce, July 1976, p. 14.



                                       II-6

-------
                                 TABLE II-3
                                                                          #
      INCREMENTAL INDUSTRY INVESTMENT REQUIRED FOR HAZARDOUS WASTE CONTROL
Chemicals
Product capacity
 (1,000's of
  metric tons)
Incremental capital
investment required
 to achieve level
   III treatment
($/ton of capacity)
    Total
Incremental capital
investment required
     for total
      industry
      (000 $)
Chlorine-mercury cell
Titanium dioxide- chloride
Elemental phosphorus
Sodium dichromate
Hydorfluoric acid
2,800
514
560
154
327
a

16.48
9.68
28.72
_
-
9,200
1,500
9,400
                                               20,100
      *Source:   Contractor's estimates.

     a.   Level  III hazardous waste disposal is specified as contract disposal.
                                           II- 7

-------
have been made in the interest of greater ease of understanding;  thus,




statements in the summaries may not fully reflect the complexities of the




issues treated in the individual chapters.




     1.  Industry Characterization. (Chapter III)   The inorganic chemicals




industry had shipments of nearly $8 billion in 1975 and has shown long-term




rea.1 growth of about 5 to 6 percent per annum.  Growth between 1975 and 1985




is expected to average between 4 and 5 percent per annum.  The primary




affected chemicals accounted for about 32 percent of industry shipments in




1975 > while the secondary chemicals accounted for about 2 percent of industry




shipments.





      The structure of the industry markets tends towards oligopoly, i.e.,




 a relatively small number of large, diversified companies account for a




 majority of inorganic chemical production.  The leading firms have enjoyed




 relatively stable market positions over a period of 15 years or longer.




 Among the reasons for this dominance by a relatively few companies are




 economies  of scale, growth by acquisition, and the trend toward greater




 horizontal and vertical integration.




      A financial profile of the inorganic chemicals industry is difficult to




 construct because of the diversity of activities in which the large chemical




 producers are engaged.  In general, the profitability of this capital-intensive




 industry has averaged 6.5 percent of sales over the past ten years.  Return on




 equity has averaged 11.5 percent over the same period.  This is slightly lower




 than  the ten-year record achieved on sales of all chemicals because of the




 commodity nature of many inorganic chemicals.
                                 11-8

-------
     In 1975, new investment in the industrial chemical industry was over $6




billion.  In general, the industry has been unable to finance most of its




capital requirements internally and has relied on outside sources for both




debt and equity funding.  This dependence on outside funds will continue in




the future.






     Employment  and  wages  in  the  industry  totalled  approximately  100,000 and




 $1.35  billion  respectively in 1974.   The primary  affected  chemicals  accounted




 for about 32 percent of wages and  employment,  the secondary  affected chemicals




 about  2 percent.




     The primary affected  chemicals are produced  by 29  companies.  The  prin-




 cipal  companies  are  Allied Chemical (three  primary  chemicals),  DuPont (three),




 Stauffer (three), FMC  (two),  Monsanto (two),  and  Dow (one).   DuPont  is  the




 largest single producer of the  five primary affected chemicals, producing an




 estimated 14 percent of the total.  Dow and Monsanto are second and  third in




 importance, with approximately  11  percent of  primary affected chemical  produc-




 tion each.




     2.  Characterization  of  Primary  Affected  Chemicals.  (Chapter  IV)    The




 economic and competitive environment  for each  of  the primary  chemicals  has been




 defined using published material and  interviews with knowledgeable persons in




 the industry.  Table II-4  lists some  of the parameters  generally  characterizing




 the primary chemicals.   Chlorine and  titanium  dioxide are  growing at  rates above




 the average rate of  growth in U.S. GNP, while  the growth of  the remaining




 products is at a significantly  lower  rate.  Capacity utilization
                                 II- 9

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is generally high and expected to remain so, with the possible exception of




hydrofluoric acid, which is facing increased competition from imports and




which faces the possibility of reduced demand for fluorocarbons.




     Sodium dichromate has only three producers and three plants, with the two




largest of comparable size.  Each of the producers will have a significant




influence on price changes resulting from the compliance costs.   For the





other products, there are enough plants and producers so that price changes




will be a closer reflection of average industry costs.




     Counting only the mercury cell chlorine, there were approximately




5,500 thousand metric tons of the primary chemicals produced in 1975  with




an estimated value of $1.3 billion ($2.4 billion including all chlorine).




The mercury cell chlorine accounted for 38 percent of the product tonnage




and titanium dioxide accounted for another 10 percent.






     3.  Characterization of Secondary Chemicals. (Chapter V)   The competi-




tive environment and industry economics of the six secondary chemicals were




characterized in less detail than the primary chemicals.  Table II-5 displays




parameters generally characterizing the chemicals.  The total production of




the secondary chemicals in 1975 was approximately 344,000 metric tons.




Aluminum fluoride was the largest volume at 118,000 tons, 34 percent of the




total, followed by phosphorus trichloride at 75,000 tons.  Phosphorus pentasulfide




and phosphorus trichloride are projected to have strong demand growth, while




the remaining chemicals will have low or negative growth.




     Most of the producers of the secondary chemicals are also primary




chemical producers.  The reverse is also true among the larger producers.
                                 II-.11

-------
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11-12

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     4.  Proposed Regulations and Treatment Costs. (Chapter VI)   The treatment




costs used in the assessment of economic impact were developed in a separate




Assessment Report for the EPA.  Because EPA does not currently have a




Congressional mandate to promulgate guidelines for the control of hazardous




wastes in the inorganic chemicals industry, the cost data and the impact




assessments derived from them are hypothetical.




     The Assessment Report identified three levels of control technology for




each chemical  corresponding to current practices (I), best currently used




practices (II), and environmentally acceptable practices (III).  For the cal-




culations of price and demand impacts, the incremental cost to the average




plant moving from Level I to Level III was used.  For the worst case  plant




closure analysis, the total Level III costs were used.  Higher costs developed




through industry interviews were used in the sensitivity analysis.  Table II-6




lists the model plant incremental control costs for the five primary chemicals.




     5.  Economic Impact Methodology. (Chapter VII)    The economic impact




analysis evaluated the economic implications of hazardous waste management




control costs in terms of plant closures, cost increases, demand reduction,




and associated effects on industry size,  growth,   employment, wages, local




economies and foreign trade.  The analysis did not include consideration of




secondary effect" on consumers, long-range changes in demand or capital limi-




tations.




     The study methodology involved a segmentation of the eleven chemicals under




study into two categories:  primary affected chemicals and secondary affected




chemicals.  In general, the primary affected chemicals are those with larger




production volumes and larger incremental treatment costs as a percent of




selling price.  The segmentation allowed a greater concentration of effort




on the five chemicals likely to experience the greatest impact.
                                11-13

-------




















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     For the primary chemicals, the demand functions were econometrically




estimated using historical sales and product transaction price values.  The




supply functions were not estimated due to insufficient data, and thus ,




equilibrium prices could not be derived.  However, engineering estimates




were made of production costs at the plant level for use in the plant closure




analysis.




     Through published sources and industry interviews, the competitive




environment of the products was characterized.  These factors




were considered when outlining how producers would probably respond when




faced with the new hazardous waste control costs.




     Having specified pricing strategies, changes, in total demand were esti-




mated using the demand elasticity values.  The plant closure analysis used




updated control costs in a discounted cash flow analysis of the decision to




make the necessary capital investment in control facilities.  For the cases




where Level III was contract disposal, plant cash flow had to remain positive




for the plant to stay open.  Since plant closures are more likely for plants




with higher production and disposal costs, a sensitivity analysis was




performed with higher costs to test the range of potential plant closures.




     6.  Assessment of Economic Impact. (Chapter VII)   Of the five primary




chemicals, only hydrofluoric acid appears to be susceptible to plant shutdowns




as a result of hazardous waste management control costs.  The other primary




chemicals would experience a low level of demand reduction because of the




additional cost of hazardous waste control, but no plant shutdowns would be




expected as a direct result of these costs.
                                   11-15

-------
     The estimated plant level manufacturing costs for the five primary




chemicals are shown on Table II-7,  along with the total and incremental




hazardous waste treatment costs.   The table also shows the incremental costs




as a percentage of plant level pre-tax income.  If corporate overhead costs




are added to the manufacturing costs, the compliance costs become a higher




percentage of income than that shown.  For chlorine and caustic, the incre-




mental costs are 2.8 percent of plant level manufacturing costs and 6.8 percent




of income.  The incremental treatment costs for elemental phosphorus are




$4.43 per ton of phosphorus, which is 1.4 percent of pre-tax income.




     For each of the five primary chemicals, the total product demand reduc-




tion resulting from price increases has been estimated for a range of price




increases.  Table II-8 lists the demand reductions assuming that all of the




incremental compliance costs are recovered in price increases.  In some




instances, competition is not expected to allow price increases in the short




run sufficient to fully recover the costs.  The expected demand losses when




the price constraints are taken into account are also shown on Table II-8.




     The possible early closure of one or two small hydrofluoric acid plants




were the only potential plant closures identified.  An estimated 45 to 90




jobs would be lost if the closures occurred.  If a high production-cost




plant does close because of the hazardous waste costs, the severest impact




will be seen in the community where the plant is located.  Some of the




plant's production would be taken over by the remaining plants, whose employ-




ment would increase.
                                 II- 16

-------
                                   TABLE I1-7

              RELATIVE MAGNITUDE OF HAZARDOUS WASTE TREATMENT COSTS*
                                                      Incremental   Incremental
                                                      treatment    treatment cost
                                                       cost per     as a % of
Chemical                  product ton   product ton   product ton   pre-tax income
                Total
Manufacturing  treatment
 cost per       cost per
product ton   product ton
Chlorine and caustic
(mercury cell)
Titanium dixoide
(chloride process)
Phosphorus
Sodium dichromate
Hydrofluoric acid
$126

744

679
452
485
$4.08

4.32

7.00
8.92
18.90
$3.56

3.16

4.43
3.60
8.28
6.8

8.8

1.4
2.4
7.2

     '"'Source:   Contractor's estimates.

     Notes:   1.   The manufacturing costs and the pre-tax income are for model
                 plants at the plant level and do not include corporate overhead
                 costs.

             2.   Chlorine and caustic are joint products.   The manufacturing and
                 treatment costs include both chemicals.
                                      11-17

-------
                           TABLE
                  DEMAND IMPACTS ON PRIMARY CHEMICALS

1975 demand
Chemical ($MM)
Chlorine b'e 861
Hydrofluoric acid 170
Phosphorus 403
Sodium dichromate 87
Titanium dioxide 426
Total L,947
Demand loss with
0
100% cost passthrough
($MM)
8.4 (1%)
5.8 (3.4,%)
6.2 (1. i%)
0.4 (0.4%)
0.8 (0.2%)
21.6 (1%)
Expected demand
lossa
($MM)
none
0 - 2.9
6.2 (1.
0.4 (0.
0-8 (o.
7.6 - 10
(0.4% - 0,

(1.7%)
5%)
4%)
2%)
.5
.5%)

     *Source:  Contractor's estimates.

     a.  Assumes full cost recovery pricing strategy and lost demand valued
at 1975 prices.

     b.  Total chlorine production is included because a price change for
mercury cell chlorine would have to be matched by increases in other chlorine
prices in order for the change to stick.

     c.  The value of sodium dichromate production in 1975 was- actually
about $68 MM (112,000 metric tons).  The demand impact calculation assumed
144,000 tons as more representative than the actual 1975 value.

     d.  The total titanium dioxide production is included rather than only
 the chloride process prod-action for the same reason all chlorine is included.
 About 60% is chloride process production.

     e.  Price increases for caustic, soda would result in a demand reduction,
 however its magnitude has not been estimated.  Expected demand loss is zero
 because little or no cost passtnrougn is anticipated.
                                 II-

-------
     In addition to the jobs affected by plant closures, a small number of




jobs would be affected by the drop in product demand due to price increases.




Table II-9 summarizes the job impacts.  The 55-65 jobs affected by demand




reduction may not result in any current employees losing their jobs.  In




most cases the effects are so small that they would more likely be seen




in slower employment growth than would have occurred in the absence of the




hazardous waste management costs.
                                 II-] 9

-------
                             TABLE   II- 9




  POTENTIAL IMPACT OF HAZARDOUS  WASTE TREATMENT  COSTS  ON EMPLOYMENT*

Employment loss due to
Number of Plant
Chemicals employees closure
Chlorine-mercury 2165
Titanium dioxide 6165
Elemental phosphorus 2890
Sodium dichromate 850
Hydrofluoric acid 540 45 - 90
Total 12,610 45 - 90
Demand
loss
10
40
3
0-10
55 - 65
*Source:  Contractor's estimates.
                               11-20

-------
                    III.  INDUSTRY CHARACTERIZATION




     Although this study deals with eleven inorganic chemical products,




a discussion of the individual organization of markets for these products




must be placed in a broader context.  For example, it would not be




appropriate to assume that firms buying and selling chlorine constitute




an industry, separate and distinct from the chemical industry as a whole.




Chlorine is simply a sub-category or finer classification of the entire




chemical industry.




     Economic conditions, especially in terms of a common set of supply




technologies, in this larger market certainly affect the supply and




demand for individual product groups.  In order to judge what type of




analytic methods are most appropriate for the estimation of price, output,




and other economic effects of hazardous waste regulation, it is necessary




to characterize both the general nature of the industry as well as the




specific nature of each product.  To this end, this chapter will describe




the inorganic chemicals industry in terms of size and growth, structure,




financial traits,  employment and wages, dependence on affected chemicals




and characteristics of production facilities.




                         A. ' Size and Growth




     As shown in Table III-l, the inorganic chemicals industry accounted




for shipments of nearly $8 billion in 1975.  Industry growth is mixed,




with the largest sectors exhibiting the slowest growth^and vice versa.




The typical inorganic chemical has a growth rate in the range of four to





eight percent per year or 1.5 to 2  times the growth of U.S. GNP.
                                     III-l

-------
                             TABLE III-l


     SIZE AND GROWTH OF INDUSTRIAL INORGANIC CHEMICALS INDUSTRY*
                               1975 value             Growth rate (%/yr.)
Industry sector               of shipments          1974-75        1975-85
                               ($ billions)
Chlor alkali
Industrial gases
Inorganic pigments
Industrial inorganic chemicals
1.15
0.99
1.04
4.73
12
10
5
2
5.7
8.3
6.2
3.9
     A
      Source:  U.S. Industrial Outlook. 1976, U.S.  Department of Commerce.
                                   III-2

-------
                             B.  Structure

                                             •3
     1.  Development of the Chemical Industry.  Markets for individual


chemical products tend towards oligopoly, or a fewness of sellers.   It is


generally true that in most chemical product "sub-industries", over half of


all shipments are accounted for by the largest four sellers.  In all of


these markets, a relatively small number of very large, diversified


companies account for a majority of the output.  Table III-2 shows the


assets of the seven leading chemical companies in 1958 and 1973 and the


sales of the seven leading chemical companies in 1975.  From 1958 to 1973,


many of the firms have more than doubled their size, and the distinctions


between the large firms have narrowed somewhat.  Thus, leadership among the


"Big Seven" has come to be even more evenly shared than was true in the


late 1950's.  However, the most remarkable characteristic of the leading


firms has been the relative stability of each firm's position over a period


of 15 years.


     In addition to these market leaders, there are a number of other large


firms that typically specialize in individual product groups; e.g., Diamond


Shamrock, Hooker, and BASF Wyandotte are all large chlorine producers.  There


are also several large manufacturing corporations and conglomerates which do


not participate primarily in the chemical industry but which do maintain large


chemical divisions.  Again, this point can be demonstrated by referring to


chlorine:  PPG Industries and Occidental Petroleum are among the largest


producers of chlorine (2nd and 4th largest respectively), although they are not
     a.  A significant part of the material in this section is drawn from A.E.
Kahn, "The Chemical Industry," in Walter Adams, ed.,  The Structure of American
Industry, 3rd edition, 1961.
                                    III-3

-------
                             TABLE III-2
                      LEADING CHEMICAL COMPANIES
I.  Assets Basis

Rank in
  1973
Rank in
  1958
  Assets ($, MM)
1958
1973
   1.    E.I. DuPont de Nemours
   2.    Union Carbide
   3.    Dow Chemical
   4.    Monsanto
   5.    Allied Chemical
   6.    American Cyanamid
   7.    Olin

II.  Chemical Sales Basis
   1.
   2.
   3.
   6.
   5.
   7.
   4.
2,649
1,530
  875
  664
  748
  584
  787
4,832
4,162
3,896
2,545
1,763
1,442
1,188
Rank in
1975
1.
2.
3.
4.
5.
6.
7.

E.I. DuPont de Nemours
Union Carbide
Dow Chemical
Monsanto
Exxon
W.R. Grace
Celanese
Chemical
sales ,($,MM)
5,500
3,425
3,360
3,054
2,594
1,800
1,716
Total
sales ($,MM)
7,222
5,665
4,888
3,625
44,864
3,529
1,900

     *Sources:  Moody's Industrials,, and Chemical and Engineering News.
                                     III-4

-------
normally thought of as major competitors in the chemical industry.   Over time,


this trend toward "outsiders" taking significant market positions in certain


products has been increasing.


     There are a number of reasons for the domination of chemical markets by


a handful of large companies.  One industry observer suggests that the


distinctive conditioning influence has been technology, "....the enormous


potentialities of applying chemical science to industry, exploited with


increasing intensity during the last 60 years, have provided favorable

                                                  o
conditions for growth in the scale of enterprise."   In many instances, it


appears that there are substantial economies of scale in the production


of chemicals.  It is a simple fact of nature that many chemical production


facilities exhibit declining unit costs over large ranges of total output.


At some point, however, it is also true that average unit costs probably


begin to increase as the very large size of plants causes some diseconomies


of scale to set in.


     In addition to technology, several other reasons for the existence


of large firm size in the chemical industry may be cited.  First,  chemical


companies tend to be vertically integrated from basic raw materials into


numerous product categories that use an essential resource.  As an example,


it is often said that DuPont went from nitrocellulose explosives backward


into synthetic ammonia, forward and sideways into nitrocellulose lacquers,


artifical leather, plastics, film, rayon,  and cellophane.  Second, large firm


size stems from the historical cumulation of numerous horizontal mergers of
     a.  Kahn, ibid, p. 241.
                                     III-5

-------
competing producers.  This merger movement, the effects of which are still


felt today, was primarily motivated by a simple desire for market control.

Third, the methods of expansion and entry in the industry have usually been

characterized by one firm joining with, or buying out, other firms already

in the industry or which are planning to enter.  Such methods clearly benefit

the firms involved by avoiding duplication of facilities, patent restrictions,

and most importantly, competition.


     Aside from all of these reasons, chemical companies have grown


larger simply by virtue of their size, i.e., "size breeds size."  There

is empirical support for this point of view.  Several studies have found


that large companies appear to earn rates of return on equity that are
                                                        rt
significantly higher than those earned by smaller firms.   One argument


that would explain this phenomenon is that larger firms may have better


access to capital markets or may be more able to finance growth out of

retained earnings.


     2.  Market Conduct and Performance.  An oligopolistic market 'is

characterized by a certain dependence between the business decisions of each

market participant.  Because there are only a few sellers in the market,

in determining what price to set, a given firm will include in its decision

analysis the expected reactions of its rivals.  Such is not the case in a

competitive market where firms have no influence over price and are free

to sell all the output they care to at the prevailing market price.  This


aspect of interdependency between firms in the chemical industry clearly


has profound effects on the conduct and resulting performance of all firms
     a.  Hall and Weiss, "Firm Size and Profitability," Review of Economics and
Statistics, 1967, pp.  319-331.
                                   III-6

-------
within the industry.  Market conduct is generally conservative and


statesmanlike with no firm investing in "too" much capacity nor shaving


prices much below the prevailing market price.  Each firm has a vested


interest in maintaining a certain degree of stability in its market(s).


     It has been noted that chemical companies have employed the following

                                          Q
methods to ensure stable market conditions:


     •  firi's form joint ventures in fields of common interest;


     •  companies use established firms in a given field to market their


        products;


     •  patents are often pooled among companies with an understanding


        that a firm's markets or product areas are to be recognized;  and


     •  chemical raw materials are bought and sold between a small number


        of firms with preferential discounts often involved.


These means offer a company the opportunity to reduce its exposure to


uncertain events in its various markets.


     Price policy is a second aspect of chemical firms'  conduct that


conditions performance.  For the most part, a method of  full cost pricing


is used.  This technique involves a percentage markup over unit costs.  One


industry observer argues that this price policy tends to reduce competition


in the industry for the following two reasons.
     a.  Kahn, ibid, pp. 249-252.


     b.  Kahn, ibid, pp. 252-253.
                                    III-7

-------
     First, there are numerous indirect and discretionary costs like research

and development expense which all lead to a confused determination of


standard costs.  Many of the chemical production processes lead to


joint products with attendant cost allocation difficulties.   As a result,


costs often seem to bear little relation to prices.

     Second, most producers believe that demand for their products is


inelastic, i.e., a given increase in price leads to less than a proportionate


decrease in revenue.  Yet it is rarely the case that a single producer would


unilaterally change his price.  It has been observed that something like a


kinked demand curve is operable in many chemical product markets.  This

construct refers to the condition whereby any price cut in a market will be

matched by competitors, but price increases are not followed, thus conferring


market share losses on the would-be price leader.  Although the abstraction

of a kinked demand curve is appealing in a descriptive sense, it tells


us little about how prices are actually determined.

     Most sales of chemicals are by long-term contract.  This fact seems

to cause buyers to pay more attention to safety of supply and quality rather

than to price differences.  It is not well known whether chemical prices

change very often since there is no equivalent of a "futures market" for

chemical products.  Bureau of Labor Statistics (BLS) price indexes show

a tremendous amount of price inflexibility, but these data may be suspect.


One study has shown that BLS sampling procedures are severely biased towards

                         o
price change infrequency.   To find the true level of price and the rate of
     a.  G. Stigler and Kindahl, The Behavior of Industrial Prices (New
York:  NBER, 1970).
                                  III-8

-------
price change, an independent study would have to poll actual producers for


their long-term contract prices over a number of years.  Without these types


of data, it is extremely difficult to conclude anything about the level


of price and the responsiveness of price to changes in market demand.


     It has been argued that chemical prices are another example of

                    3
administered prices.   By this it is meant that prices slide upward, tending


to remain relatively constant during market contractions and rise slowly


during expansions.  Such behavior is often associated with the presence of


market power.
     a.   Gardiner C. Means introduced this concept in the 1930's.
                                    III-9

-------
                         C.	Financial Profile




     A financial profile of the "inorganic" chemical industry has limited




meaning because of the diversity of chemical activities in which inorganic




chemical producers are engaged.  Most companies, in their financial reporting,




do not break down financial information by product line; this is considered




proprietary information.  In addition, where financial data are broken into




product groups, the data ma)' include a broad range of chemicals other than




simply inorganic chemicals.




     A financial profile of the "inorganic" chemical industry has been de-




veloped based on financial cata reported by the Federal Trade Commission




(FTC) which covers the three;-digit SIC group 281.  It must be recognized




that the financial data are not completely representative of the inorganic




chemical industry because most companies do not report financial data based




strictly on SIC classificatlon.  Also, in the classification of companies for




reporting purposes by the FTC, a company can be included in the industrial




chemical industry, although it may be involved in diversified activities




including non-chemical businesses.




     1.  Profitability.  The industrial inorganic chemical industry is a




cyclical, capital intensive business.  These influences have an important




impact on the profitability of the industry.  Table III-3 summarizes the




earnings pattern of the industrial chemical industry o\ar the 1965-74 period.




The earnings trend indicates; that the leval of profitability closely follows




the economy, with profitability declining in 1967 and 1970, recent recession




years.  Industry profitability is also expected  to decline in 1975.




     The profitability  of  the  industrial inorganic chemical industry has




averaged 6.5 percent of sales  and 11.5 percent return on equity over the past




10 years.  This compares to a  profitability of 7.0 percent of sales and  12.0




percent return on equity over  the 10-year period for all chemicals.  In  general,







                                     111-10

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-------
the profitability of the chemical industry is higher than for all manufacturing



corporations.  The lower profitability reflects the commodity-oriented nature




of a portion of the inorganic chemical business.  Commodity chemicals are large




volume chemicals with limited product differentiation between producers.  As




a result, a primary competitive tool is pricing which results in a lower level




of profitability for commodity chemicals.




     The industrial inorganic chemical industry is a cyclical industry as




reflected by the cyclical trends in the earnings pattern of the industry.  The




profitability of the industry declined from 8.3 percent of sales in 1965 to




5.0 percent of sales in 1971.  During this period, overcapacity was built




in the industry and industry profitability subsequently suffered.  Since the




industrial inorganic chemical industry is capital intensive, a high operating rate




in a chemical plant is necessary to maintain reasonable levels of profitability.




     The overcapacity also caused greater price competition.  Producers strove




to achieve higher operating rates and sales levels through reduced profit margins




which further impacted industry profitability.




     During the early 1970's, operating rates in the industrial chemical industry




improved significantly.  Also, with stronger demand, producers were able to raise




prices and achieve a level of profitability which had not been reached in the




industry since the early 1960's.




     2.  Investment and Capital Structure^  The investment in the industrial




chemical industry was over $25 billLon (in current dollars) in 1974, including




investment in net fixed assets and working capital requirements.  Table III-4




summarizes investment in the industry over the 1965-74 period.
                                 111-12

-------
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111-13

-------
     The industrial chemical industry is capital intensive with significant




investment requirements for both working capital and fixed assets.  Working




capital needs have averaged 23.9 percent of sales over the 10-year period




ranging from 19.0 percent of sales in 1973 to 26.2 percent of sales in 1965.




For all manufacturing working capital was 17.2 percent of sales in 1974




and indicates a slightly higher working capital requirement in the industrial




chemical industry.  Also, investment in fixed assets (property, plant, and




equipment) as a function of sales is higher than all manufacturing corpora-




tions.  For the industrial chemical industry over the 10-year period, 1965-74,




there were $1.96 of sales for every dollar of net fixed investment in plant




and equipment.  This compares to all manufacturing corporations which had a




significantly higher level of sales per dollar of investment, $3.47 of sales




per dollar of net fixed investment over the 1965-74 period.




     The capital intensity of the industrial chemical industry places large




capital needs on the industry.   In general, the industry has been unable to




generate internally its own capital needs through retained earnings,  and it




has relied heavily on outside sources of financing,  including debt and




equity capital.   Table III-5 summarizes the net cash position of the  industrial




chemical industry over the past 10 years.   The analysis compares internally




generated sources of cash to annual cash needs, including dividends and




capital expenditures, in order to determine annual external capital




requirements.  Over the 1965-74 period, the industry has had a net cash




deficit of close to $900 million, which had to be raised from external sources.




In view of high capital needs of the industry to increase future plant




capacity, it is expected that the industry will continue to require




significant amounts of capital from external sources.
                                   111-14

-------



















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       111-15

-------
     The primary sources of raising additional financing for the industry




include long-term debt and equity financing.  The industrial chemical




industry currently has a high level of debt in its capital structure with




a debt/equity ratio of 0.38 in 1974.  This compares to a debt/equity ratio




of 0.32 in 1974 for all manufacturing corporations.  The debt/equity ratio




for the industrial chemical industry reached a peak of 0.44 in 1971 because




of continuing capital needs in view of declining profitability and cash




flow in the industry.  As a result, the industrial chemical producers




relied more heavily on debt capital during this period to finance capital




requirements.  In recent years the debt/equity ratio of the industry has




improved because of improved cash flow.  This has allowed the industrial




chemical industry to bring its reliance on debt in its capital structure




more in line with the level for all manufacturing corporations.




     The industrial chemical industry also has reduced its dividend  payout




significantly in recent years in order to reduce the industry's reliance on




long-term debt, improve liquidity, and provide for additional capital expenditure




requirements.  As shown in Table III-3, the dividend payout has declined in




recent years to 32.6 percent of net income in 1974, which compares to 53.1 percent




of net income over the 1965-74 period.




     Since the industry has historically relied heavily on long-term debt for




external financing and  in recent years has  reduced dividend payout levels,




the industrial chemical industry in the future must have an improved level




of profitability in order to have access to equity financing to provide a portion




of external capital needs.     Access to equity financing will be to a large




extent dependent on the industry achieving profitability above historical levels




in order to attract equity capital.  Factors which reduce the level of profit-




ability in the industry or divert investment needs could limit its




                                    111-16

-------
ability to meet plant expansion requirements.  If the industry is prevented




from expanding at necessary levels to meet demand for their products, the




situation may have long-term economic impacts.




     3.  Cost Structure.  The cost structure of the industry is heavily weighted




to operating costs.  Table III-6 summarizes the distribution of the sales




dollar for the industrial chemical industry over the 1965-74 period.  Operating




costs have increased over the 10-year period from 79.0 percent of sales in




1965 to 82.5 percent of sales in 1974.  Even with the improved level of




profitability in the industry in 1973-74, operating costs have not returned to




levels achieved in the 1960's.  (The data is not completely comparable because




of changes in reporting procedures in 1974.)  The improved levels of profitability




have come, to a large extent, from lower depreciation levels and a reduced




tax rate.   The depreciation level has declined from 6.5 percent of sales in




1965 to 4.9 percent of sales in 1974, and the tax rate has declined from 42.0




percent to 39.3 percent in 1965 and 1974 respectively.  As a result, the level




of profitability in the industrial chemical industry in 1974 is comparable to




the level of profitability in 1965, although operating costs as a percent of




sales in 1974 are substantially higher.
                                     111-17

-------































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111-18

-------
                            D.   Employment and Wages




      The inorganic chemical industry is a major sector of the U.S.  economy in




 terms of employment and industry wages.




      Employment in the industrial inorganic chemical industry (SIC  281)  totaled




 99,700 employees in 1974,  and  wages were an estimated $1.4  billion  in 1974.  A




 summary of wages and employment in the inorganic chemical industry  is provided




 in Table III-7.




      The primary affected  chemicals represent a significant portion of the value of




 shipments of the inorganic chemical industry, which was 15.6 percent of the total value




 of industry shipments in 1974.  Wages and employment related to the manufacture of




 the primary chemicals were an estimated $0.21 billion and 15,500 employees.  Since




 1972 the primary affected  chemicals have become an increasingly important sector




 of the inorganic chemical  industry.  The secondary affected chemicals comprised




 only 2.2 percent of total  inorganic chemical shipments in 1974.  Total wages were




 $30 million and employment was an estimated 2,200 employees.




      In total,  the primary and secondary affected chemicals are an  important




 part of the total inorganic chemical industry.   The primary and secondary




 affected chemicals represented 17.8 percent of 1974 industry shipments.   Wages




 related to the  manufacture of  these chemicals were an estimated $0.24 billion,




 and there were  an estimated 17,700 employees.
a.  Excludes non-mercury cell chlorine production.
                                      111-19

-------
                                 TABLE  III-7

                       SUMMARY OF WAGES AND EMPLOYMENT
                                                                    *
            IN THE INDUSTRIAL INORGANIC CHEMICALS INDUSTRY (SIC 281)
                                              1972
1974
SIC 281
Total wages ($ MM)
Employees (000)
Value of shipments ($ MM)
Primary chemicals
Total wagesa($ MM)
Employees (000)
Value of shipments ($ MM)
% of total
Secondary chemicals
Total wages3 ($ MM)
Employees (000)
Value of shipments ($ MM)
% of total
Primary and secondary
Total wages3 ($ MM)
Employees (000)
Value of shipments ($ MM)
% of total

1078.4
99.4
6126.8

147.7
13.6
841.1
13.7

22.6
2.1
125.5
2.1

170.3
15.7
966.6
15.8

1350e
99.7
7675

210e
15.5
1195.3
15.6

30e
2.2e
167.4
2.2

240e
17. 7e
1362.7
17.8

    *Source:  Census of Manufacturing, Current Industrial Reports M28A,
Department of Commerce, U.S. Industrial Outlook,1976, County Bus. Patterns,
Contractor's estimates.


     a.  1974 employees and wages prorated based on value of shipments.

     Note:  The primary affected chemicals are chlorine, hydrofluoric acid,
elemental phosphorus, sodium dichromate and titanium dioxide.  The secondary
affected chemicals are aluminum fl.unride, cjirome pigments, nicHel sulfate
phosphorus pentasulfide, phosphorus trichloride, and sodium silicofluoride.


                                      111-20

-------
             E.  Company Reliance on Primary Affected Chemicals




     There are 29 companies engaged in the production of the primary affected




inorganic chemicals.  The principal producers of the primary affected chemicals,




with over $100 million of estimated 1975 production value,are Allied Chemical




(three primary chemicals), Dow Chemical (one), DuPont (three), FMC (two),




Monsanto (two), and Stauffer (three).  DuPont is the largest producer of the




primary affected chemicals,with 1975 estimated produced value of $241 million.




     A summary of the producers of the primary affected chemicals and the producers'




dependence on the five chemicals is in Table III-3.  For the five largest




producers the dependence on the primary affected chemicals is high in relation




to each company's industrial chemical sales.  The production value of the




primary chemicals ranges from 18 percent to 46 percent of Monsanto's and DuPont's




1975 industrial chemical sales.  However, the dependence of total company sales




on the primary affected chemicals is 4.9 percent and 3.3 percent of  Monsanto's




and DuPont's total ;L975 corporate sales.  For Stauffer Chemical the  primary




affected chemicals production value equals 35 percent of industrial chemical sales




and 12 percent of total company sales. This  represents a large portion of the




company's sales.




     The estimated production value understates each company's dependence on the




five primary affected chemicals.  A large portion of these products  is used captively




by these producers for the production of other products.  If the sales value of




the end products manufactured from the primary affected chemicals were considered,




the companies' sales dependency on the five primary affected chemicals could be




significantly higher than the sales dependency on the primary affected chemicals




alone.  The primary affected chemicals may be purchased on the merchant market,which




would reduce the dependence of end products.  However, the volume and price of
                                     111-21

-------
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                                   111-22

-------
merchant material available would limit this alternative.  The total sales




dependency of a producer on the primary affected chemicals would have to be




determined on a case-by-case basis depending on the chemical, the availability




of merchant supplies, and the cost of chemicals purchased on the merchant market.





     Other producers for whom the production value of the primary affected




chemicals represents an important portion of total industrial chemical sales



include Allied Chemical, Diamond Shamrock, Essex Chemical, FMC,  Hooker Chemical,




and NL Industries.  The production value of the primary affected chemicals




ranges from 20 percent of industrial chemical sales for Allied Chemical and




Essex Chemical to 33 percent of industrial chemical sales for NL Industries




and Kaiser.  In terms of dependence on total company sales, the production




value of the primary affected chemicals is 4.4 percent, 10.1 percent, 9.5




percent, and 2.0 percent of total company sales for Allied, Essex, NL Industries




and Kaiser, respectively.




     In general, the production value of the primary affected chemicals represents




a small portion of total company sales.  There are only five companies which




have production values of the primary affected chemicals greater than 5 percent




of total company sales.  The companies with the highest dependence are Stauffer




Chemical and Essex Chemical with production values of the five primary affected




chemicals equaling 12.1 percent and 10.1 percent of total company sales.   Other




companies, for which financial data are not available, may have a high level of




dependence on the primary chemicals.  these companies are Electro-Phos Corpora-




tion (47.5 percent owned by Mitsubishi Corporation, Ltd.), Linden Chlorine, and




Sobin Chemical (a subsidiary of International Minerals and Chemicals).  These




are small companies in terms of total sales level and, therefore, their sales




of the primary affected chemicals may represent a major portion of each company's




total sales.

-------
             7.  Characterization of Production Facilities




     Inorganic chemical production facilities are generally capital-




intensive, skilled labor operations, located in the East Coast (Delaware,




New Jersey), Gulf Coast (Texas, Louisiana) or West Coast (California).   The ages




of the plants in the industry are five to thirty years old.  The production




process is typically continuous, rather than batch, and operating levels of




70 to 85 percent of capacity must generally be achieved in order to assure




           and profitability.
     Since major technological developments tend to take place infrequently,




new facilities are built only when market demand justifies capacity




expansions.  In sectors of the industry where demand growth is low, virtually




all of the plants in the sector may have been built prior to 1970, with a




significant number built before 1940.  Accordingly, many existing production




facilities were built with little regard (by today's standards) for




engineering and siting considerations relating to pollution control.




     Because of the relative maturity of this industry, many of the production




facilities are nearly, or fully, depreciated.  A plant owner's willingness to




make an additional investment in pollution control facilities will depend




on a variety of quantitative and qualitative factors.  For example, the




plant may be approaching technological obsolescence and the owners may




decide to close the facility rather than commit fresh capital to the control




of hazardous wastes.  On the other hand, if few substitutes for a given




product are available and a producer is able to pass the added costs on to




consumers — thus maintaining an acceptable rate of return on capital — the




incremental cost of hazardous waste control may simply serve as an inducement




to speed the reinvestment of capital in newer, larger and more efficient production




facilities.
                                     111-24

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          IV.  CHARACTERIZATION OF PRIMARY AFFECTED CHEMICALS




                     A.   Chlorine and Caustic Soda




     1.  Industry Structure.




     a.  Producers.  Producers of chlorine and caustic may be segmented




on the basis of production process.  Approximately 70 percent of U.S.




chlorine and caustic production is via the diaphragm cell; approximately




25 percent via the mercury cell and 5 percent via the Downs  cell or as a




by-product in the manufacture of magnesium, potassium hydroxide and




potassium nitrate.  The technology for both mercury and diaphragm cells




was developed in the United States in the 1880's and, although many




refinements have been made to increase efficiency and reduce pollution,




the technology has remained basically the same.   Both cells produced comparable




grades of chlorine, but the mercury cell produces a more concentrated




caustic solution of higher purity than that obtained from the diaphragm




cell.   A listing of the ten largest U.S. chlorine producers, including




capacity and process information, is presented in Table IV-1.  A similar




listing for twenty-five additional producers is  shown in Table IV-2.




     b.  Integration and Captive Requirements.  The U.S. chlor-alkali




industry exhibits characteristics of both vertical and horizontal integration




to varying degree-^—generally in proportion to the overall size of the




producing companies.  Although the degree of integration varies widely from




company to company, in terms of vertical integration, the average captive




consumption is approximately 60 percent.  In terms of horizontal integration,




the average company depends on chlor-alkali products for approximately
                                    IV-1

-------
                                     TABLE IV-1            *
                            TOP TEN 1975 CHLORINE PRODUCERS
                           (PLANTS, CAPACITIES, AND PROCESSES)
Company/plant
     Capacity
(1,000 metric tons/yr)
         Process
Allied Chemical Corp.

   Acme, North Carolina
   Baton Rouge, Louisiana
   Brunswick, Georgia
   Moundsville, W. Virginia
   Syracuse, New York

BASF Wyandotte Corp.

   Geismar, Louisiana
   Port Edwards, Wisconsin
   Wyandotte, Michigan

Diamond Shamrock Corp.

   Deer Park, Texas
   Delaware City, Delaware
   Mobile, Alabama
   Muscle Shoals, Alabama
   Painesville, Ohio

Dow Chemical - U.S.A.
                   a
   Freeport, Texas
   Midland, Michigan   a
   Oyster Creek, Texas
   Pittsburg, California
   Plaquemine, Louisiana

E.I. duPont
      538.8
      506.1
     1044.9
     1868.4

     1429.4
         Mercury
         Diaph.
         Mercury
         Mercury
         2 Merc/2 Diaph.
         2 Diaph/1 Merc.
         Mercury
         Diaph.
         1 Diaph/1 Merc.
         Mercury
         Mercury
         Mercury
         Diaph.
         Diaph/Magnesium
         Diaph.

         Diaph.
         Diaph.
   Memphis, Tennessee
   Niagara Falls, New York
   Corpus Christi, Texas

Hooker Chemical  Corp.
(Subsidiary Occidental Petroleum)

   Montague, Michigan
   Niagara Falls, New York
   Tacoma, Washington
   Taft, Louisiana

Olin Corp.

   Charleston, Tennessee
   Augusta, Georgia
   Mclntosh, Alabama
   Niagara Falls, New York
      306.9
      843.5
         Downs
         Downs
         Kelchlor
      530.6
         Diaph.
         Diaph.
         Diaph.
Hooker HC-4B, C-60, HC-80
         Mercury
         Mercury
         Mercury
         Mercury
                                        IV-2

-------
                                  TABLE IV-1 (continued)
Company/plant
         Capacity
(1,000 metric tons/yr)
Process
Pennwalt Corp.

   Calvert City, Kentucky
   Portland, Oregon
   Tacoma, Washington
   Wyandotte, Michigan

PPG Industries, Inc.

   Barberton, Ohio
   Corpus Christi, Texas
   Lake Charles, Louisiana
   Natrium, W.  Virginia

Stauffer Chemical Co.

   Henderson, Nevada
   Le Moyne, Alabama
   St. Gabriel, Louisiana
         Total

         All Companies  =
          310.2
          1087.3
          320.0
Mercury
Diaph.
Diaph.
Diaph.
Diaph.
Diaph.
Diaph/Mercury
Diaph/Mercury
                                  Diaph.
                                  Mercury
         8786.1  =  78.3%  total  capacity

      11,223.4
  * Source:  1975 Directory of Chemical Producers.
                                        IV-3

-------
                                  TABLE IV-2
                        OTHER 1975 CHLORINE PRODUCERS
                     (PLANTS, CAPACITIES  AND PROCESSES)
Company/plant
        Capacity
(1,000 metric  tons/yr)
Process
Alcoa
  Pt. Comfort, Texas

American Magnesium Co.
  Snyder, Texas

Brunswick Pulp & Paper
  Brunswick, Georgia

Champion Int'l. Corp.
  Canton, North Carolina
  Pasadena, Texas

Ethyl Corp.
  Baton Rouge, Louisiana
  Pasadena, Texas

FMC
  S.Charleston, W.Virginia

Georgia-Pacific
  Bellingham, Washington
  Plaquemine, Louisiana

B.F. Goodrich
  Calvert City, Kentucky

Hercules Inc.
  Hopewell, Virginia

Inland Chem. Corp.
  Newark, New Jersey

Kaiser
  Grammercy, Louisiana

Linden Chlorine Products
  Linden, New Jersey

Mobay Chem. Corp.
  Cedar Bayou, Texas

Monsanto
  Sauger, Illinois
           153.5

            23.6


            27.2


            16.3
            12.7

           209.0



           253.0


            43.5
           261.3

           261.2


            16.3


            39.2


           174.7

           150.2


            65.3

            82.1
Mercury


Magnesium


Diaph.
Diaph.
Diaph.
Downs/Diaph.
Downs
2 Diaph.
Mercury
NA
Mercury


Diaph.


Diaph.


Diaph.


2 Mercury


(HC1)


Mercury
                                         IV-4

-------
                                  TABLE IV-2 (continued)
Company/piant
                                     Capacity
                              (1>000 metric tons/yr)
                        Process
NL Indust. Inc.
  Rowley, Utah

Velsicol Chem. Corp.
  Memphis, Tennessee

RMI
  Ashtabula, Ohio

Shell Chem. Co.
  Deer Park, Texas

Sobin Chemicals
  Ashtabula, Ohio
  Orrington, Maine

Jefferson Chem. Co.
  Port Neches, Texas

Vicksburg Chem. Co.
  Vicksburg, Mississippi

Vulcan Materials
  Wichita, Kansas

Weyerhaeuser Co.
  Longview, Washington

Hooker Sobin Chemical
  Niagara Falls, New York

Fort Howard Paper Co.
  Green Bay, Wisconsin
144.4


 22.5



  NA


 122.4



  32.7
  68.6


  49.0


  29.9


  83.3


  86.2
                                             NA
                                                                   NA
                                                                  Diaph.
                                                                  Downs
                                                                  Diaph.
                                                                  Mercury
                                                                  Mercury
                                                                  Diaph.


                                                                   NA


                                                                  Diaph.


                                                                  Mercury


                                                                  Mercury


                                                                  Diaph.
 * Source:   1975  Directory  of  Chemical  Producers.
                                       IV-5

-------
10-15 percent of its sales.  These average figures may be misleading,




because captive consumption may reach 100 percent in some cases and horizontal




integration may be nonexistent in other cases.




     c.  Other.  Competition in the chlor-alkali industry is generally




on a price basis since most chlorine is consumed as an intermediate in




the production of other chemicals.




     As with many industries, chlorine producers have been hit by a sharp




increase in energy .prices.  Dependence has been high on cheap sources of




energy for all of the chlorine production processes; thus, with higher energy




costs, manufacturing costs have risen significantly in recent years.   The increased




energy costs have had an adverse impact on chlorine capacity expansion and product




prices.  In the future, the availability of energy and access to relatively low




cost supplies will continue to influence capacity expansion and the competitive




position of producers in the industry, a




     2.  Supply Characteristics.





     a.  Manufacturing Routes.  The diaphragm cell process represents over




two-thirds of U.S. chlorine capacity and, even though conversion to the use




of dimensionally stable anodes is rapidly taking place, the graphite anode




version of the process is still a basis for industry comparison.  The major




raw material for the diaphragm cell process is a nearly saturated solution




of sodium chloride made up by dissolving purchased solid  salt in water or




brine or by injecting water into an underground salt structure.  The crude




brine must be purified before it is introduced to the electrolytic cells.
     a.  The Conference Board, "Energy Consumption in Manufacturing," 1974, p. 184.
                                    IV-6

-------
     In the cells the brine is electrolyzed to produce chlorine, caustic




soda and hydrogen according to the equation:




          NaCl + HO -KL/2 Cl  + NaOH + 1/2 H .





Chlorine is formed at the graphite anode, bubbles to the top of the cell and




is removed by the chlorine header.  The sodium ion migrates to the cathode




where hydroxyl ion and hydrogen are formed, generating a solution containing




10-11 percent sodium hydroxide (NaOH).




     The cell liquor withdrawn from the cathode still contains about




13-15 percent salt because only 50 percent of the salt is decomposed under




optimum cell operating conditions.  This liquor is concentrated in steam-




heated multi-effect evaporators to produce a 50 percent caustic soda




product which contains about 1 percent salt.  The remaining salt crystallizes




out during concentration and is centrifuged from the caustic and recycled




for brine saturation.




     In the mercury cell process, the cathode is a thin layer of mercury




rather than a series of hollow plates supporting an asbestos diaphragm.




A saturated, purified brine is fed to the cell where it is electrolyzed




to chlorine and a sodium-mercury amalgam.  The amalgam is decomposed to form




a 50 percent sodium hydroxide solution and regenerated mercury.




     The Downs cell process involves electrolyzing fused sodium chloride




to produce sodium metal and chlorine.  Because of the relatively higher




value of sodium,  the chlorine which is generated is generally thought of




as a by-product.
                                   IV-7

-------
     Of the three primary technologies, the mercury cell process typically




generates a proportionately greater amount of hazardous wastes per unit of




output.  For this reason, shifts at the margin have been occurring from the




mercury cell to the diaphragm process, and this trend is expected to continue.




Through 1978, shutdowns of marginal mercury cell plants may occur as new




diaphragm cell capacity comes on-stream.  Some industry observers believe




that between 1971 and 1983 mercury cell production in several states will




be completely abandoned.




     b.  Manufacturing Costs.  Estimated 1975 model plant manufacturing costs




for chlorine and caustic from a diaphragm cell and from a mercury cell plant




are presented in Tables IV-3  and  IV-4  .  These manufacturing costs are




based on a large modern plant with a capacity of 453.6 metric tons of chlorine per




stream day for the diaphragm cell plant and 453.6 metric tons per day for the mercury




cell plant.  Coproduced with this chlorine would be 1.1 ton of caustic soda




per ton of chlorine.  As is normal in the industry, in this estimate all




costs are placed on chlorine, or as it is often expressed, the costs are




on an electro-chemical unit  (ECU) basis.  The ECU is one ton  of chlorine plus




the coproduced caustic.  This estimate is based on 360 stream days per year,




normal for the industry, and current- costs for labor and materials.




     c.  Capacity Utilization.  Historically, industry capacity utilization




has remained high for chlorine and caustic soda—often at a level of 90 percent




or higher.  However, the economic downturn of 1975 led to operating rates




averaging approximately half of this level in some periods.
                                     IV-8

-------
                                TABLE  IV-3

                     ESTIMATED 1975 COST OF PRODUCING
                  CHLORINE AND CAUSTIC SODA (DIAPHRAGM)'
                                (METRIC TONS)
              Process

              Plant  capacity
              Annual  production

              Fi xed
Brine el e<- tro Lysis  in graphite
anode diaphragm cells
453.6 T Cl /SD
163,300 t chlorine
172,400 T caustic soda  (100% basis)
Original (1968)     $24,7.00,000
Replacement  (I n 7 r.)  $40,000,000
 Variable  costs
                        -S/Unit
$/T
Salt (100%, as brine)
Power, total AC
Fuel, net
Water makeup
Chemicals & operating supplies
Cell rebuilding materials
Cell license
Craphi te
1.78 '1
3785 kwh
9.4 MMBtu
4.4 Mgal



7.7 lb
2.20
0.012
0.70
0.02



0 . 80
3.92
45.42
6.56
0.09
2.15
0.99
0.53
6.17
Semi- variable costs

Operating  labor
Supervi sion

Labor overhead
Maintenance

Fixed co s t s
Plant overhead
Depreciation
Local taxes & insurance
Total cost of manufacture
   5:> men               12,000/vr
   8 foremen            18,000/yr
   1 superintendent     25,000/yr
   35' of labor & supervision
   V,v of $.'iO,nOO,(H)0'vr
   70/,' of  Labor f.- supervision
   9.1/0 of $28,000,000/yr a
   1 . 5" of ^^O.OO
                                                                       65.83
  3.41
 15.60
  3.67
 22.68
                                                                      107.30
      ^Source:   Contractor's estimates.

      a.   Estimate of  original cost plus capital replacements.
                                    IV-9

-------
                                     TABLE IV-4

                       ESTIMATED  1975  COST OF PRODUCING*
                    CHLORINE AND  CAUSTIC  SODA (MERCURY)
                                 (METRIC TONS)
            Process

            Plant capacity
            Annual production

            Fixed investment
Brine filed roJysi s in graph.! te
anode mercury cells
453 ,,6 T Chlorine/SD
163,300 1 Chlorine
172,400 T C.iuaLir soda  (100%  Basis)
Original (1968)   $25,'.00,000
Replacement  (J975) A3,200,000
Mercury invoiHorv   2,000.000
Variable costs
       Q t '_LZ
$/[lnit
                                     $/T Cl.
Salt, solid
Power, total AC
Fuel, net
Water makeup
Mercury
Chemicals & operat \\\p, Supplies
Graphite

Semi-variable costs

Operating labor
Supervision

Labor overhead.
Maintenance

Fixed costs

Plant overhead
Depreciation
Local taxes & insurance
Total  cost of manufacture
    1.70 1
    4290 kwh
    0.88 MMBtu
    2.42 Mga]
    0.28 Ib

    6.0 Ib
12.22
 0.012
 0. 70
 0.02
 4.08
 0.80
    41 men               12,000/yr
    8  forenu-u            18,000/yr
    1  superintendent     25,000/yr
    J5? of  Labor  & supervision
    5% of  $43,200,000/yr
     70%  of  Labor  f«  supervision
     9.1% of  i?30,000,000/yr
     1.57. of  $43,?.00,000/yr
22.48
51.44
 0.62
 0.05
 1.12
 3.14
 5.29
84.14
             2.83
            16.72
             3.97
            23.52

            126.33
   Source:   Contractor's estimates.
                                    IV-10

-------
     3.  Demand Characteristics.




     a.  Market Size.   U.S. apparent consumption  demand for chlorine has risen




from approximately Z.3 million metric tons per annum in 1951 to approximately




9.7 million metric tons in 1974—a growth rate averaging 6.5 percent per annum




during this period.  The 1975 production level of 8.3  million metric tons represents




a market value estimated at $870 million.




     Historical levels of U.S. production and commercial shipments of chlorine




are presented in Tables IV-5 and IV-6.     U.S. chlorine production volume




has traditionally reflected the performance of the U.S. economy.  On the




basis of a healthy economy between 1955 and 1968, apparent U.S. consumption




of chlorine grew at an average annual rate of 6.3-percent during the period.




However, since 1968, because of the economic slowdown of 1970-71 and recent




capacity constraints,  annual chlorine consumption increases have averaged




only 4.3 percent.




     b.  Growth.  Despite the existence of uncertainties in several important




end uses for chlorine such as fluorocarbons and solvents, market growth is




expected to continue at an average annual rate of approximately 5-6 percent




through 1980.  Over the next several years, the rate of additions to capacity




is expected to exceed demand growth.  Assuming no supply constraints, the




1980 level of U.S. chlorine demand is forecast at about 12 million metric tons.




     c.  Uses.  Approximately 75 percent of U.S. chlorine production is




used in the manufacture of other chemical products, the  most important of




which are vinyl chloride plastics, chlorinated solvents and fluorocarbons.




That portion of chlorine not used as a raw material is used chiefly in the




pulp and paper industries and in water treatment.  Details of this  use
     a.   Apparent consumption equals  production and  imports minus  exports.
                                  IV-11

-------
                                TABLE IV-5
                     U.S.  CHLORINE PRODUCTION 1960-1975
                          (THOUSANDS  OF  METRIC TONS)*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Diaphragm
cells
NA
NA
3557.6
3675.6
4187.6
4415.5
4806.3
5321.3
5482.1
5889.9
6169.0
5926.1
6476.7
6780.3
6738.1
NA
Mercury
cells
NA
NA
863.7
1031.7
1334.0
1500.8
1827.4
2035.5
2302.4
2374.7
2410.8
2309.4
2164.8
2323.1
2390.7
NA
Downs
cells
NA
NA
247.5
253.0
278.4
285.2
262.1
266.8
265.6
246.8
283.6
254.7
304.1
340.0
510.9
NA
Total
4209.4
4176.6
4668.7
4960.3
5799.9
6201.5
6895.7
7623.6
8050.1
8511.4
8863.5
8409.1
8945.7
9443.2
9639.7
8297.0

       *Source:   U.S.  Department of Commerce,  Current Industrial Reports,
Series M28A and  notes  based on Chlorine Institute data on installed capacity.
                                      IV-12

-------
                                 TABLE IV-6
                  U.S. CHLORINE COMMERCIAL SHIPMENT VALUES
                           (THOUSANDS OF METRIC TONS)*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Commercial
shipments
(1,000 metric tons)
1718.4
1790.5
1992.7
1970.1
2200.1
2552.5
2774.8
2748.8
3023.5
2937.0
3028.8
3065.2
3444.9
3689.8
3678.2
3034.5
Total
value
($MM)
112.2
116.9
127.4
124.0
135.6
146.5
157.6
134.2
157.8
154.8
155.1
154.8
162.2
190.1
261.5
318.3
Value per
metric ton
65
65
64
63
62
57
57
49
52
53
51
51
47
52
71
105
List price
($/metric ton)
72
72
71
69
68
63
63
54
57
58
56
56
52
57
125
135
















     *Source:  U.S. Department of Commerce, Current Industrial Reports,  Series
M28A, and Chemical Marketing Reporter.
                                      IV-13

-------
pattern are presented in Table IV-7.     In theory, the use pattern for




mercury cell chlorine is the same as that for diaphragm cell chlorine since




the two processes produce an equivalent product.  However, locational




factors and other market parameters undoubtedly lead to different use




patterns for chlorine produced by these routes.  Further research on the




differences in use patterns is required.




     d.  Substitute Products.  No direct substitutes for chlorine are




available in most of its uses.  The exceptions, which account for less than




20 percent of estimated chlorine demand, are use of chlorine as a bleach




or sanitizing agent in the pulp and paper industry and in water treatment.




Even in these uses the substitutes are not readily available but are in




varying stages of development.  Substitution for chlorine in its major uses




can occur on a secondary or tertiary level.  For example, in the case of




polyvinyl chloride (PVC) derived from chlorine, other plastics or materials




may be substituted for PVC in certain applications and thus affect demand




for chlorine.  Similar examples can be given for fluorocarbons and for




chlorinated solvents.




     e.  Prices.  As indicated in Table  IV-6   , chlorine prices have been




relatively stable over the past decade with a slight decline apparent until




1973.  Since this time the price trend has been upwards.  Current spot




prices for chlorine are about $150/metric ton.  Because of the large volume




of chlorine being sold at much lower prices under long-term contracts, the




average value per ton is much closer to about $100/ton.  Import and




export prices are presented in Table  IV-8
                                    IV-14

-------
                            TABLE IV-7
                    U.S. END USES OF CHLORINE, 1974*
                                       Percent
       Organic chemicals
         (including solvents)            47
       Vinyl chloride                    19
       Pulp and paper                    15
       Inorganic chemicals               10
       Sanitation and water
         treatment                        5
       Miscellaneous                      4
*Source:  Chemical Marketing Profiles
                                 IV-15

-------
                          TABLE IV-8
          CHLORINE IMPORT AND EXPORT PRICES 1960-1975
                        ($PER METRIC TON) *
                       Import                       Export
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
73
80
72
72
75
68
64
68
68
66
79
63
67
73
96
132
65
62
61
65
65
54'
63
64
61
64
76
70
109
119
208
265

*Source:  U.S. Department of Commerce, FT 110, 135, 410.
                                  IV-16

-------
     f.  Foreign Competition.  Very little chlorine moves into or out of




the U.S.  The small amount of trade which does occur is chiefly between the




U.S. and Canada and represents less than 1 percent of U.S. production.




Table IV-9 presents data on foreign trade over the past 16 years.
                                   IV-17

-------
                                 TABLE IV-9
                 U.S.  CHLORINE PRODUCTION AND TRADE 1960-1975
                          (THOUSANDS OF METRIC TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975


Production
4209.4
4176.6
4668.7
4960.3
5799.9
6201.5
6895.7
7623.6
8050.1
8511.4
8863.5
8490.1
8945.7
9443.2
9639.7
8257.0


Imports
24.5
20.0
26.3
23.6
20.0
35.4
65.4
52.7
38.1
22.7
22.7
31.8
34.5
45.4
76.3
67.1


Exports
24.5
29.0
32.7
33.6
39.9
39.0
19.1
32.7
32.7
23.6
14.5
10.0
6.4
11.8
15.4
15.2

    *Source:  U.S. Department of Commerce, Current Industrial Reports, Series
M28A.  U.S. Department of Commerce, FT 110, 135, 410.
                                        IV-18

-------
                         B.  Hydrofluoric Acid




     1.  Industry Structure




     a.  Producers.  Currently eight producers have a capacity of 349,300 metric




tons,as shown in Table IV-10.   The industry is highly concentrated with four




producers having over 80 percent of domestic capacity.  DuPont and Allied have




over 50 percent of the total industry capacity,and they both have large cap-




tive requirements for hydrofluoric acid.  The share of the total market would




be greater if their manufacturing plants in Mexico and Canada were considered.




     b.  Captive Requirements.  Since the two major end-use areas for hydro-




fluoric acid are as chemical intermediates, there is a high level of captive




consumption of hydrofluoric acid production.  Of the eight domestic producers




of hydrofluoric acid, two are producers of both fluorocarbons and aluminum




fluoride, three are producers of fluorocarbons, and two are also producers of




aluminum fluoride.  Only one producer is not forward integrated into the




production of fluorocarbons or aluminum fluoride.  Commercial shipments of




hydrofluoric acid are not reported; however, based on producer capacities of




fluorocarbons and aluminum fluoride, an estimated 60 percent of production is




used captively.




     2.  Supply Characteristics




     a.  Manufacturing Routes.  Hydrofluoric acid is produced by the reaction




of fluorspar and sulfuric acid in a furnace.  DuPont utilizes a proprietary




process which reacts sulfur trioxide and steam with fluorspar.  Hydrogen




fluoride generators may be horizontal, stationary, or a rotary kiln or a




combination of several reactor systems.  The hydrogen fluoride gas which




evolves in the reaction is recovered and condensed by the refrigeration.




By-products of the reaction include calcium sulfate and unreacted calcium




fluoride which creates the hazardous waste disposal problems.  Large, continuous





                                   IV-19

-------
                                  TABLE IV-10
                         HYDROFLUORIC ACID CAPACITIES (1975)*
Producer
        Location
 Annual capacity
(1,000 metric tons)
Alcoa

Allied Chemical
DuPont
Point Comfort, Texas

Baton Rouge, Louisiana
Geismar, Louisiana
Nitro, West Virginia
North Claymont, Delaware
Port Chicago, California

Strang,  Texas
      49.9

      98.0
       68.0
Essex Chemical

Harshaw Chemical
  (Division of
   Kewanee Oil)

Kaiser

Pennwalt

Stauffer Chemical

  Total
Paulsboro, New Jersey

Cleveland, Ohio



Gramercy, Louisiana

Calvert City, Kentucky

Houston, Texas
      10.0

      16.3



      45.4

      22.7

      16.3

      326.6
    *Source:  Contractor's estimates.
                                      IV-20

-------
unit processes have been developed in recent years which provide economies




of scale over the smaller volume batch process.




     b.  Manufacturing Costs.  Estimated 1975 manufacturing costs for hydro-




fluoric acid are presented in Table  IV-11.  Capacity for this iiodel plant is




23,000 tons per year with a fixad investment requirement of $7.0 million.




Large-scale, continuous process1 plants are able to achieve economies of scale




which allow them to have substantially lower production costs.




     c.  Capacity Utilization.  Industry capacity has historically kept in




line with demand, resulting in high industry operating levels (Table IV-12).




In 1974, operating levels reached 96 percent of capacity.   The demand for




hydrofluoric acid is sensitive to the overall economy as reflected by the




decline in production in 1970 and 1975, two recession years.  In 1975, the




controversy over the use of fluorocarbons may also have influenced production,




although the degree to which this is the case is not ascertainable.




     Domestic production is expected to rebound from the depressed levels in




1975, but historical operating rates will not be achieved in the next several




years assuming static to low growth in demand.  Increased imports will supply




an increasing share of domestic consumption, and there will be overcapacity




for domestic production.  A ban on fluorocarbon propellants in aerosols will




create additional overcapacity.  As a result, with an imbalance in the supply/




demand, the smaller, high-cost hydrofluoric acid plants will be faced with




strong competitive pressures.




     3.  Demand Characteristics^




     a.  Market Size.  U.S. production of hydrofluoric acid has grown from




15,000 metric tons in 1940 to 345,800 metric tons in 1974, and production




declined to  284,300 metric tons in 1975.   Production of anhydrous hydro-




fluoric acid accounts for about 70 percent of total production and aqueous
                                  IV-21

-------
                                   TABLE IV-11
                         ESTIMATED  1975  COST  OF MANUFACTURING

                             HYDROFLUORIC ACID  (99.95%)
                                 (METRIC TONS)
                      Plant capacity
                      Annual production
                      Fixed investment (1975)
      63.5 T/SD
      20,860 T/yr
      $7,000,000
Variable-
Quantity
$/Unit
$/Ton
Fluorspar
Sulfuric acid (100% basis)
Oleum (100% basis)
Lime
Power
Fuel
Water

2.2 T
1.6 T
1.12 T
0.05 T
396.7 kwh
11.0 MMBTU
15.4 Mgal

106.9
55.10
57.3
33.1
0.02
0.70
0.02

235.17
88.16
64.18
1.65
7.93
7.71
0.31
405.11
Semi-variable costs

Operating labor
Supervision

Maintenance
Labor

Fixed costs

Plant overhead
Depreciation
Local taxes & insurance
12 men              12,000/yr
4 men               18,000/yr
1 superintendent    25,000/yr
6% of Investment/yr
35% of Labor & supervision
70% of Labor & supervision
9.1% of Investment/yr.
1.5% of Investment/yr.
             6.90
             3.45
             1.20
            20.12
             4.04
            35.71
              8.09
             30.53
              5.04
             43.66
Total  cost of manufacture
                                                                          484.48
     *Source:  Contractor's estimates.
                                         IV-2 2

-------
                                    TABLE  IV-12

                INDUSTRY OPERATING CAPACITY - HYDROFLUORIC ACID*
                         (THOUSANDS OF METRIC TONS)
Year
Capacity
Production
% capacity
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
_
-
259
-
-
319
-
-
361
361
327
205.2
242.5
247.6
274.1
297.1
294.8
303.2
319.7
331.8
345.8
284.3
_
-
96
-
-
92
-
-
92
96
87

     *Source:  U.S. Department of Commerce, Chemical Marketing Reporter,
Contractor's estimates.
                                        IV-23

-------
hydrofluoric acid accounts for about 5 percent of total production.  The




remaining 25 percent of hydrofluoric acid production is produced, but not




withdrawn from the manufacturing process (see Table IV-13 ).  Exports are




negligible and imports have become important in recent years,as shown in




Table IV-14. Imports are expected to become increasingly important as a




result of expanded capacity for hydrofluoric acid in Mexico.  Apparent




consumption is defined as production plus imports, l^ess exports, as summarized




in Table IV-15.




     b.  Growth.  U.S. production of hydrofluoric acid increased at an




average annual rate of 6.7 percent between 1960 and 1970 and apparent con-




sumption grew at a similar rate..  However, from 1970 to 1974 production




increased only 4.1 percent per year while consumption increased 6.2 percent




per year, in line with the historical growth rate.  The lower rate of growth




in recent years for production of hydrofluoric acid reflects the significant




level of imports of hydrofluoric acid which began in 1971.  The future of the




market for hydrofluoric acid is uncertain, particularly for the production of




fluorocarbons, because of the controversy over the possible impact of fluoro-




carbons on the ozone layer.  In addition, the increased use of fluosilicic




acid versus hydrofluoric acid arid the recovery of fluorine emissions because




of pollution controls are having an adverse impact on demand for hydrofluoric




acid in the aluminum market.
                                     IV-24

-------
                                TABLE IV-13
                 U.S. HYDROFLUORIC ACID  PRODUCTION  1960-19755"
                          (THOUSAND OF METRIC  TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Anhydrous
107.4 a
94.9
103.8
106.1
111.2
123.9
141.7
146.4
174.6
201.1
203.7
199.3
218.9
226.3
237.2
193. 4b
Aqueous
NA
11.9
11.8
10.5
11.0
12.4
17.5
20.2
17.1
15.6
14.3
13.8
16.2
18.1
18.4
14.6
Produced but
not withdrawn
from system
46.3
65.8
35.4
54.2
56.9
68.9
83.3
81.0
82.4
80.4
76.8
90.1
84.6
87.4
90.2
76.3
Total
153.7
172.6
151.0
170.8
179.1
205.2
242.5
247.6
274.1
297.1
294.8
303.2
319.7
331.8
345.8
284.3

     *Source:  U.S. Department of Commerce, Current Industrial Reports,
Series M28A.

     a.  Includes aqueous

     b.  1960-1963 production is estimated.
                                         IV-2 5

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                         TABLE  IV-14

             IMPORTS AND EXPORTS OF HYDROFLUORIC ACID
                    (THOUSANDS OF METRIC TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Imports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
1.0
19.4
12.9
28.7
NA
NA
Price per
metric ton (imports)
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
339
335
381
342
NA
NA
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA

* Source:  U.S. Department of Commerce, FT410, FT246.
                                  IV-2 6

-------
                               TABLE IV-15
               APPARENT CONSUMPTION OF  HYDROFLUORIC ACID *
                      (THOUSANDS  OF METRIC TONS)

Years
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Total
production
153.7
172.6
151.0
170.8
179.1
205.2
242.5
247.6
274.1
297.1
294.8
303.2
319.7
331.8
345.8
284.3
Imports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
1.0
19.4
12.9
28.7
NA
NA
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Apparent
consumption
153.7
172.6
151.0
170.8
179.1
205.2
242.5
247.6
274.1
297.1
295.8
322.6
332.6
360.5
375. Oe
300. Qe

'"Source:   U.S.  Department  of  Commerce.

 a.   Includes  changes  in inventory stock.

 e.   Estimated,
                                   IV-2 7

-------
     Future growth for domestic hydrofluoric acid production over the 1974 to




1980 period is likely to be limited to static to low growth resulting from the




impact of increased imports, static demand in the aluminum market, and the fluoro-




carbon controversy.  This assumes that there will be no restrictions on the use




of fluorocarbons which potentially could have a major impact on domestic produc-




tior for hydrofluoric acid.  Above average growth is expected in such markets as




petroleum alkylation, uranium processing and fluoride salts.




     c.  Uses.  The major end uses for hydrofluoric acid are as an intermediate




for the production of fluorocarbons and aluminum and synthetic cryolite which are




used in aluminum smelting.  The aluminum and fluorocarbon market each accounted




for an estimated 42 percent of the apparent consumption of hydrofluoric acid in




1974 (see Table IV-16).  The fluorocarbon market will experience continued growth,




assuming there are no restrictions on fluorocarbon uses.  Hydrofluoric acid con-




sumption for the aluminum market is expected to be static or decline over the




next several years because of the increased recovery of fluorine emissions as a




result of pollution requirements.  The remaining uses of hydrofluoric acid,which




account for 18 percent of consumption, include petroleum alkylation, fluoride salts,




stainless steel pickling, uranium processing and miscellaneous uses.




     d.  Substitute Products.  There are no substitutes for hydrofluoric acid in




the production of fluorocarbons.  However, there is limited competition at




secondary levels where fluorocarbons compete with other materials, particularly




in the aerosol propellant market.  Fluorocarbons dominate the market for pro-




pellants in aerosols in competition with hydrocarbons and carbon dioxide because




of cost/performance advantages.  There has been considerable effort to develop




alternatives to fluorocarbon propellants because of their high cost and because




of concern over the possible impact of fluorocarbons on the ozone levels in the




upper atmosphere; however, to date, suitable alternatives to fluorocarbon propel-




lants have not been developed.




                                        IV-2 8

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                                TABLE IV-16

                   U.S. HYDROFLUORIC ACID END USES, 1974*
                                       Percent
             Fluorocarbons                42
             Aluminum                     4 2
             Petroleum alkylation          4
             Fluoride salts                3
             Stainless steel pickling      3
             Uranium processing            2
             Miscellaneous                 4
*Source:   Chemical Marketing Reporter.
                                   IV-2 9

-------
     In the refrigeration/air conditioning market for fluorocarbons, there are




limited alternatives, and this market, tends to be relatively price inelastic




because the cost of fluorocarbons represents only a small portion of the total




cost of a refrigeration or air conditioning system.




     In the aluminum market, fluosilicic acid can be substituted for hydrofluoric




acid, and it has experienced increased use at the expense of hydrofluoric acid.




Fluosilicic acid is produced from the recovery of fluoride wastes in the production




of fertilizer grade phosphoric acid.  Currently, fluosilicic acid accounts for an




estimated 20 percent of the fluorine requirements of the aluminum industry.  At




present, there are no major plans in the chemical or aluminum industry to in-




crease the use of fluosilicic acid in place of hydrofluoric acid in the aluminum




market.  Increased production of fluosilicic acid has been considered, but because




of the declining demand for hydrofluoric acid in the aluminum market, there has




been a limited market for additional capacity.  With the recent increase in prices




for hydrofluoric acid and aluminum fluoride, the use of fluosilicic acid in the




aluminum market has become increasingly economically attractive; however, with the




demand outlook for the aluminum market,  it  is not  expected  that fluosilicic acid




will increase  its  share of  the  fluorine  requirements for  the aluminum  industry.




     e.  Prices.  Actual prices for hydrofluoric acid declined from 1960 to




1966 from $369 per metric ton to $293 per metric ton (see Table  IV-17).  Since




1966 actual prices have increased gradually at approximately 5 percent annual




rate with the major part of actual price increases occurring in 1973 and 1974.




Higher prices in these years reflected the higher operating rates and raw material




costs in the industry.  Actual prices historically are below list prices which




reflect the large portion of interplant  transfers in the reported shipments of




hydrofluoric acid.  Also, merchant sales  are generally made under long-term contracts.
                                          IV-30

-------
                              TABLE  IV-17

               ACTUAL VERSUS  LIST PRICES  OF  HYDROFLUORIC ACID*
                          (THOUSANDS  OF METRIC  TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipment quantity
(anhydrous)
(1,000 metric tons)
63.4
55.8
71.2
67.4
73.6
88.7
96.8
107.5
116.8
133.2
132.3
123.7
150.6
145.7
161.6
129.0
Value
($MM)
23.4
19.0
22.3
20.7
21.7
26.7
28.4
32.3
36.7
42.8
46.9
46.1
52.7
59.6
11 .5
58.0
Unit
value
($/metric ton)
369
341
313
307
295
301
293
300
314
321
355
373
350
409
442
450
List price
(anhydrous)
($/metric ton)
424
380
380
380
380
424
424
424
455
486
546
600
600
600
1003
744

     * Source:  U.S.  Department of Commerce, Current Industrial Reports,
Series M28A, and Chemical Marketing Reporter.

     Notes:   1.  Unit values reflect interplant transfers and understate
                 average value of commercial shipments.  In 1975, the
                 average commercial shipment value is estimated to be
                 $600/metric ton.
                                       IV--

-------
During periods of rapid price escalation as in recent years, the list price will




rise more rapidly than contract prices, and the spread between list and actual




shipment values will widen.




     Prices are determined by the major producers in the industry which act as price




leaders.  Prices are established based on manufacturing costs as well as a desired




rate of return.  However, with the current competitive environment in the industry,




full cost recovery through price increases is not likely for all producers.




     f.  Profitability.  The actual producer's profitability from the production




of hydrofluoric acid has not been determined.  Based on model plant manufacturing




costs, an approximate level of profitability has been estimated.  Table  IV-18




is an income statement for the model plant.  Corporate overhead, GS&A burden, and




other pollution control costs have not been included.  Assuming the model plant is




representative of the industry's cost structure, the after-tax profits are $57 per




metric ton and the cash flow is $87 per metric ton based on a $600 per ton average




selling price for 1975.




     g.  Foreign Competition.  Foreign competition in hydrofluoric acid was his-




torically insignificant up until 1971 when there were 19,400 metric tons imported.




The major portion of imports is from Canada; however, with new production capacity




for hydrofluoric acid on-stream in Mexico, installed  to serve the U.S. market,




imports  should continue  to increase.   It  is  expected  that imports will represent  an




increasing proportion  of  domestic consumption  of hydrofluoric acid over  the  next




several  years because  no  new domestic  capacity expansions are expected in  the




next  several years.
                                      IV-32

-------
                              TABLE IV-18
               MODEL PLANT INCOME STATEMENT AND CASH FLOW - 1975
                              HYDROFLUORIC ACID*
Plant capacity
Operating rate
Production

Average 1975 selling price
Manufacturing cost
23,180 metric tons per year
90%
20,860 metric tons per year

$600 per metric ton
 485
PBT
PAT (50% tax rate)
 115
  57
Plus:  Depreciation
Net cash flow
  30
 $87 per metric ton
      *Source:  Contractor's estimates.
                                      IV-3 3

-------
                        C.  Elemental Phosphorus (P,)




     1.  Industry Structure.




     a.  Producers.  Currently 10 producers have a capacity of 560,000 metric




tons, as shown in Table IV-19,  although TVA is planning on closing down their




manufacturing facility in 1976.  Three producers account for 81 percent of




industry capacity.  Electro-Phos Corporation is currently expanding capacity




to 20,000 metric tons, and therefore industry capacity will be 532,000 metric




tons in 1977.




     Producers of elemental phosphorus are primarily located in Tennessee,




Florida and the Northwest near sources of raw materials.  The major proportion




of capacity is located in Tennessee and the Northwest because of the historically




available low cost power.  Florida accounts for only 8 percent of industry




capacity.  Electric power costs represent a significant portion of total




manufacturing costs, and  therefore low-cost power is critical in the production




of cost-competitive products.




     b.  Captive Requirements.  Since the two major end-use areas for elemental




phosphorus are as  chemical intermediates, it is not surprising that more  than




80 percent of the  1974 production was used captively.  Captive use has been




above  90 percent in all but three of the last 10 years, as shown in Table IV-20.




With the high captive use, there are only seven producers, one of which plans




to shut down operations in 1976 and another is principally an exporter.




     c.  Other.  Competition  in the elemental phosphorus industry is on a price




basis  since most is consumed  as an intermediate in other chemical production.




For these uses quality is standard, although supply availability has been an




increasing problem in the last several  years because of shortages.
                                        IV-34

-------
                               TABLE  IV-19

                       ELEMENTAL PHOSPHORUS PRODUCERS*
                                                            Annual
Producer                     Location                      capacity
                                                        (1,000 metric tons)

FMC                    Pocatello, Idaho                       132
Electro-Phos Corp.     Pierce, Florida                        15
Hooker Chemical        Columbia, Tennessee                    52
Mobil Oil              Nichols, Florida                        4
Monsanto               Columbia, Tennessee                    122
Monsanto               Soda Springs, Idaho                    100
Stauffer               Mt. Pleasant, Tennessee                41
Stauffer               Silver Bow, Montana                    38
Stauffer               Tarpon Springs, Florida                23
TVA                    Muscle Shoals, Alabama                 33
  Total                                                       560
     *Source:  Chemical Profile, July 1, 1975.
                                     IV-3 5

-------
                           TABLE IV-20
    PRODUCTION, SALES AND CAPTIVE USE FOR ELEMENTAL PHOSPHORUS*
                      (THOUSAND METRIC TONS)

Year
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Production
457
504
514
533
557
566
542
495
491
477
476
408
Sales
30
41
40
59
52
40
35
38
26
80
77
50
Captive
usea
427
463
474
474
505
526
507
457
465
397
399
358
% captive
93
92
92
89
91
93
94
92
95
83
84
88

*Source:  U.S. Department of Commerce.

a.  Includes stock changes.
                                IV-3 6

-------
     Cost increases have been passed along through price increases in recent




years.  The recent shortages have allowed producers to obtain full recovery of




cost increases.  However, with static growth in demand and low capacity utiliza-




tion expected over the next several years, the market will be increasingly




competitive, and it will limit the producer's ability to obtain a full recovery




of future cost increases.




     2.  Supply Characteristics.




     a.  Manufacturing Routes.  The principal process for industrial production




of elemental phosphorus is the furnace process which accounts for 100 percent




of domestic production.  Phosphate rock is smelted with coke and silica in an




electric furnace to produce elemental phosphorus vapors.  The phosphorus-laden




vapors are collected in condensing towers where the phosphorus is separated and




stored.  The phosphate rock used by producers is generally captively produced,




and it is often less than a commercial grade of rock so that its market value is




limited.  There are considerable by-products from the production of elemental




phosphorus, including ferrophosphorus and slag.  Ferrophosphorus has a commercial




value, but slag does not have a commercial value and it is generally dumped.




     Alternative manufacturing routes for the production of industry phosphoric




acid are being carefully examined because of the increasing cost of producing




elemental phosphorus for the use in manufacture of industrial-grade phosphoric




acid.  Energy requirements are very high for the production of elemental phos-




phorus, and manufacturing plants have been located near low-cost power sources.




However, in recent years power costs have increased sharply resulting in higher




production costs for elemental phosphorus.  Since energy costs in areas where





phosphorus production is located are expected to continue to escalate, the costs




of production of elemental phosphorus will continue to increase.  As a result,
                                      IV-37

-------
there is growing research effort in examining the potential for alternative




manufacturing routes for industrial-grade phosphoric acid which would eliminate




the need for the intermediate step of producing elemental phosphorus.




     b.  Manufacturing Costs.  Estimated 1975 manufacturing costs for elemental




phosphorus are presented in Table IV-21.  The manufacturing costs are based on a




49,900 metric ton per year plant located in a western state where almost 50 percent




of industry capacity is located.  The total manufacturing costs may be higher for




plants located in other areas of the country because of higher power costs or because




of lower grades of phosphate rock available.  Energy costs are expected to rise




more rapidly over the next five years in Tennessee than in the western states.   With




significantly higher energy costs, manufacturers of elemental phosphorus located in




Tennessee will be in a high-cost manufacturing position.




     c.  Capacity Utilization.  During the  1960's industry operating levels were




high with a 96 percent average industry operating rate  in 1967.  Because of the




high fixed investment and the desirability  to operate at high levels from a manu-




facturing viewpoint, high operating rates were maintained to allow economic




production costs.  In 1970, the industry operating level declined to 87 percent




because of substantial overcapacity.  With  increasing government restrictions




on phosphate levels in detergents and the resulting decline in demand, over-




capacity developed which forced several producers to close down.  Since 1972,



operating rates  have been improving in  the  face of declining demand because of





continued reduction in capacity.




     As shown in Table IV-22, in 1974 the industry operating rate was 85 percent,



which was below  historical  levels.  However, because of power shortages and




other problems,  industry operating capacity was below reported capacity which




resulted in shortages of elemental phosphorus.  In 1975, the industry operating




rate declined to 73% of reported  capacity.




                                        IV-38

-------
                                   TABLE IV-21

                         ESTIMATED COST OF MANUFACTURING*

                           ELEMENTAL PHOSPHORUS (1975)
                                  (METRIC TONS)
                      Plant capacity            151.5 T/D
                      Annual production         49,900 T/Yr
                      Fixed investment (1975)   $41,000,000
                                       (1968)   $26,000,000
                      Location:  Western States
Variable costs
Quantity
$/Unit
$/Ton
Phosphate rock
Silica
Coke
Electrodes
Electricity
Fuel
Water

10.0 T
1.25 T
1.9 T
58.4 Lbs
14,330 Kwh
12.1 MMBtu


22.0
1.54
4.41
0.24
.008
0.80


220.00
1.93
83.75
14.02
114.61
9.70
2.20
446.21
Semi-variable costs

Direct operating labor
Direct supervisory wages
Maintenance labor
Maintenance supervision
Maintenance material
Labor
Operating supplies
5.15 man hours         6.00
15% of operating labor
3.0 man hours          6.50
15% of maintenance labor
3% of investment/yr.
30% of wages
             34.05
              5.11
             21.49
              3.23
             24.64
             19.16
              5.51
            113.19
Fixed Costs

Plant overhead
Depreciation
Local taxes and insurance
60% of wages
9% of investment/yr.
2.0% of investment/yr.
             38.33
             73.93
             18.07
                                                                          130.33
Total cost of manufacture

Byproduct credits

Ferrophosphorus
Slag

Total cost including byproduct credits
0.14 T
7.2 T
 51.8
  0.94
689.73


 (7.25)
 (6.74)

675.74
     *Source:   Contractor's estimates.'
                                         IV-3 9

-------
                             TABLE  IV--22
             INDUSTRY OPERATING CAPACITY - ELEMENTAL PHOSPHORUS*
                           (THOUSAND METRIC TONS)
Year               Capacity               Production               % capacity
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
_
-
-
552
-
-
622
-
535
-
558
558
457.4
504.2
513.5
532.9
556.8
565.6
541.6
494.8
490.9
477.1
475.9
407.7
_
-
-
96
-
-
87
-
83
-
85
73

     *Source:  U.S. Department of Commerce, Chemical Marketing Reporter.
                                        IV-40

-------
      3.  Demand Characteristics.




      a.  Market Size.  Since 1945, U.S. production of elemental phosphorus has




grown from 73,000 metric tons to over 500,000 metric tons  in 1969 when production




peaked.  Production has declined since 1969 and in 1975 was 415,800 metric tons,




as shown in Table IV-23.  Apparent consumption considers imports, exports, and




changes in inventory levels and as a result, apparent consumption was 375,100




metric tons in 1975.





     b.  Growth.   U.S.  production of elemental phosphorus increased at an average




annual rate of 3.8 percent between 1960 and 1970.; however, since 1970 it has




declined 3.2 percent per year through 1974.  The decline in demand in recent




years is because of limitations on the use of phosphate builders in laundry deter-




gents, the major end-use sector for phosphorus.   However, in 1974, phosphorus




was in limited availability because of power shortages and other problems which




limited the production capability of phosphorus producers.   The future of phos-




phate detergents plus the availability of adequate power will affect the future




growth of phosphorus most significantly and probably will limit it to static to




low growth.   Also, the TVA plans to discontinue production of P, and furnace acid




for fertilizer use, which will have a negative impact on production growth.




     c.  Uses.  The largest end-use area in 1974 was as an intermediate for the




production of phosphoric acid for industrial and fertilizer applications.  In-




dustrial uses for phosphoric acid include phosphate detergents, food and beverage




additives,  fire control,  and metal treating.  Phosphoric acid production accounted




for 75 percent of domestic production of phosphorus in 1974, as shown in Table IV-24.




Growth in phosphoric acid production in all probability will be static over the




next several years because of regulatory pressures on phosphate detergents, in-




creasing competition from non-ionic detergents, and because TVA plans to shut down
                                         IV-41

-------
                               TABLE IV-23

         U.S. PRODUCTION AND TRADE OF ELEMENTAL PHOSPHORUS (1960-1975)
                          (THOUSANDS OF METRIC TONS)*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Production
371.4
390.9
410.3
443.1
457.4
504.2
513.5
532.9
556.8
565.6
541.6
494.8
490.9
477.1
475.9
407.7
Imports
1.3
1.1
0.2
0.1
0.2
0.3
0.4
0.3
0.4
0.5
0.3
0.3
0.5
0.6
NA
NA
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
17.2
24.2
30.^
32.6
Stocks at
producing
plants
(Dec. 31)
13
10
14
8
7
5
8
10
9
7
9
8
6
8
7
7
Apparent
consumption
367.7
395.0
406.5
449.2
458.6
506.5
510.9
531.2
558.2
568.1
539.9
496.1
476.2
451.5
446.4
375.1

     *Source:  U.S. Department of Commerce, Current Industrial Reports,
M28A.  U.S. Department of Commerce, FT 110, 246, 410.

     a.  Equals production and imports - exports + Astocks.

     b.  11 months.
                                        IV-42

-------
                            TABLE IV-24
                 U.S. END USES OF PHOSPHORUS, 1974*
                                           Percent
       Phosphoric acid                        75
         (industrial and fertilizer
          use)
       Non-acid chemicals and other           21
       Exports                                 4
*Source:  Contractor's estimates.
                                  IV-4 3

-------
 their phosphorus  capacity utilized  for  the production of  fertilizers.   Non-acid




 chemicals and  exports account  for 21 percent and 4 percent  respectively of phos-




 phorus  end use.   Non-acid chemicals include phosphorus pentasulfide, phosphorus




 trichloride  and phosphorus pentoxide, which are used in insecticides,  lube oil




 additives, and flame retardants.  These areas  should achieve a level of growth




 higher  than  phosphoric acid over the next several years,  and as. a result, will




 represent an increasing share  of the market for phosphorus.




     d.   Substitute Products.   There are no direct  substitutes for elemental




phosphorus in the major end-use categories,  industrial phosphoric acid manu-




facture and other phosphorus chemicals.   In addition,  there are minimal sub-




stitute markets for these products because industrial phosphoric acid and other




phosphorus chemicals (P^S,.,  P?0r,  PCI.,)  are also principally chemical inter-




mediates.  However, there is competition from wet-process phosphoric acid parti-




cularly in fertilizer production where high-grade phosphoric acid is not required.




The TVA plans to shut down the only furnace acid facility for the production of




fertilizers and use wet-process-based phosphoric acid instead.




     Tertiary levels of competition exist such as for detergent builders and




water treatment chemicals which are the major markets for furnace-based phos-




phoric acid.   However,  there has been widespread research looking for costr-




effective and environmentally acceptable alternatives to phosphate-based builders




because of regulatory pressures to reduce phosphate content in detergents.  These




efforts have had limited success,  although the recent introduction of non-ionic




detergents may become increasingly competitive with phosphate-based detergents




and cleaners.  There are also possible substitutes for metal treating,  fire con-




trol, insecticides, lube oil additives, and flame retardant end uses for indus-




trial phosphoric acid and non-acid chemicals.  However, at this level of use,




the cost of  elemental phosphorus is a small portion of the total product cost and




the treatment cost impact will be minimized.




                                         IV-44

-------
      e.  Prices.  Prices historically have been relatively stable for




 elemental phosphorus.  As shown in Table TV—25, actual prices (defined




 by unit value) have been relatively stable and have ranged from




 $371 per metric ton to $398 per metric ton over the 1962 to 1970




 period.   Since 1972, actual prices have increased dramatically along




 with list prices because of increasing power and phosphate rock costs.  The




 producers of elemental phosphorus have had the pricing flexibility to pass on




 these higher manufacturing costs in the face of declining demand.  Although the




 capacity utilization in the industry has been below historic levels, the effective




 capacity utilization has been high because of power supply interruptions and other




 problems which reduced the actual industry capacity.  The high effective capacity




 utilization resulted in shortages in 1974, and also contributed to the producer's




 ability to recover higher manufacturing costs.  In the future, with static demand




 growth, the industry may have less pricing flexibility than in recent years.




     Import and export prices are summarized in Table IV-26.    in general, these




prices are higher than domestic prices^reflecting transportation cost differentials




as well as the premium value placed on elemental phosphorus in the import/export




market.




     f.  Profitability.  The actual producer's profitability from the production




of elemental phosphorus has not been determined.  Based on model plant manufacturing




costs, an approximate level of profitability has been estimated.   Table IV-27




is an income statement for the model plant.  Corporate overhead,  GS&A burden, and




other pollution control costs have not been included.  Assuming the model plant is




representative of the industry's cost structure, the after-tax profits are $188 per




metric ton and the cash flow is $249 per metric ton based on a $1,050 per ton




average selling price for 1975.




     g.  Foreign Competition.  Foreign competition in elemental phosphorus has




historically been insignificant and is likely to remain so,  at least for the next




several years.






                                         IV-45

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                             TABLE IV-25

            ACTUAL VERSUS LIST PRICES FOR  ELEMENTAL PHOSPHORUS


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipment
quantity
(1,000 metric tons)
374.2
333.2
346.6
387.6
410.6
465.2
465.3
486.8
515.2
515.6
499.2
455.9
464.9
443.5
451.7
384.8
Value
($MM)
120.5
130.0
135.1
146.0
152.8
172.6
173.1
184.1
191.2
203.2
198.5
191.4
190.2
206.3
273,4
379 ,,9
Unit
value
($/metric ton)
322
290
390
377
372
371
372
378
371
394
398
420
409
465
605
987
List price
($/metric ton)
419
419
419
419
419
419
419
419
419
419
419
419
419
419
485
617 - 1168

     *Source:   U.S. Department of Commerce, Current Industrial Reports,
Series M28A, and Chemical Marketing Reporter.
                                          IV- 4 6

-------
                      TABLE IV-26

      IMPORT AND EXPORT PRICES OF ELEMENTAL PHOSPHORUS *
                      ($ PER METRIC TON)
                    Import                     Export
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
337
335
701
NA
879
987
731
1070
916
979
1146
991
1072
1183
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
442
508
658
1124
*Source:  U.S. Department of Commerce, FT 110, 246, 410.
                                 IV-47

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                                TABLE  IV-27
              MODEL PLANT INCOME STATEMENT AND CASH FLOW - 1975
                            ELEMENTAL PHOSPHORUS*
Plant capacity
Operating rate
Production

Average 1975 price
Manufacturing costs
55,300 metric tons per year
90%
49,900 metric tons per year

$1,050 per metric ton
   674
PBT                                $  376
Profit after tax (50% tax rate)       188
Plus:  depreciation
Net cash flow
    61
$  249 per metric ton
    *Source:  Contractor's estimates.
                                        IV-48

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                          D.  Sodium Bichromate









     1.  Industry Structure.




     a.  Producers.  There are currently three producers of sodium dichromate




with a capacity of 154,000 metric tons per year,as shown in Table IV-28.




The Allied Chemical and Diamond Shamrock plants are approximately the same




size and together account for about 82 percent of total capacity.  Mallinckrodt,




Inc., produces small quantities of high grade sodium dichromate for laboratory




and pharmaceutical markets.




     b.  Captive Requirements.  There is significant forward and backward




integration by the three producers.  Over 50 percent of sodium dichromate




production is consumed in the manufacture of chrome colors (pigments) and




chromic acid.  All U.S. chromic acid production is from Allied and Diamond




Shamrock plants, as shownin Table IV-28.  Of their dichromate production,




32 percent and 25 percent respectively is dedicated to their chromic acid




production.  PPG has only small captive outlets for its dichromate.  None of




the sodium dichromate producers are chrome color producers.




     Soda ash and sulfuric acid are major raw materials for dichromate pro-




duction and are made by each of the dichromate producers.




     c.  Competition.  Sodium dichromate is sold primarily on the basis of




price as a standard specification product interchangeable among the producers.




There are few long-term contracts and the shorter-term contracts usually




contain provisions allowing the producer to change prices by giving a short




notice period.  Between January and December 1975, prices changed from $550




to $660 per metric ton or about 20 percent as a result of higher materials




costs.
                                     IV-49

-------
                                  TABLE  IV-28

                    SODIUM BICHROMATE AND CHROMIC ACID
                       PLANTS AND CAPACITIES-1975*
                                                           Capacity
    Company/plant                                  (1,000 metric tons/year)
                                           Sodium dichromate      Chromic acid


Allied Chemical Corp.
  Baltimore, Maryland                                59               19

Diamond Shamrock Corp.
  Castle Hayne, North Carolina                       68               17

Mallinckrodt, Inc.
  St. Louis, Missouri
  (high grade product for laboratory use)            small

PPG Industries, Inc.
  Corpus Christi, Texas                              27_               _0

                                    Total           154               36
     ^Source:   Contractor's  estimates.
                                       IV-50

-------
     Most major buyers will split their purchases with several producers in




order to maintain a relationship with alternative suppliers.  Because there




are only three suppliers, an incentive exists to be strongly influenced but




not dominated by price considerations in purchases over a year.




     There are some differences between the market profiles of the three




producers.  For example, PPG's sales are more heavily directed to chrome




colors.   Plant location gives a geographical price advantage to producers




in some areas.




     Since most of the dichromate production is consumed in secondary chemicals,




many of the competition characteristics for the secondary chemicals are largely




the same as for sodium dichromate.




     2.   Supply Characteristics.




     a.   Manufacturing Routes.  Sodium chromate and dichromate are made by




calcining chrome ore (chromite) with soda ash and lime.  More specifically,




sodium chromate is manufactured by calcining a mixture of chromite ore, lime




and soda ash.  The sodium chromate, if desired, can be recovered by leaching




and crystallization.  Sodium dichromate is produced by treating a sodium




chromate solution with sulfuric acid.  Sodium dichromate and the sodium sulfate




by-product produced are separated and recovered by crystallization.  Sodium




dichromate is the principal commercial product.  It is usually priced to cost




less per unit of CrO~ than sodium chromate.




     Chromium chemicals are produced from  chromite ore,  the  term chromite




being a general one used to designate chromium-bearing spinel.  The composition




of chromite varies widely, usually with inclusions of magnesia, alumina and




silica.   Although distinctions are not clearcut, there are three broad grades




of chromite:  high-chromium chromite, a metallurgical grade; high-iron




chromite, which is the chemical grade; and high-aluminum chromite,  the
                                     IV-51

-------
refractory grade.  Chromite has not been mined in the United States since




1961 when a small tonnage was produced under the government's Defense




Production Act.  With the exception of government stockpile releases, U.S.




producers of chromium chemicals are therefore dependent on foreign sources.




No commercially viable process for upgrading domestic chromite bearing




materials to compete with foreign ones has been developed.




     Most of the known world reserves are located in the Republic of South




Africa and Southern Rhodesia.  The embargo on chromite from Southern Rhodesia,




brought about by United Nations action in 1966 and an Executive Order in




1967, resulted in the U.S. turning to the U.S.S.R. for some of its chromite




requirements.  Most of the chemical grade chromite, however, comes from the




Republic of South Africa.




     b.  Manufacturing Costs.  Estimated manufacturing costs for sodium




dichromate are shown in Table IV-29.   The manufacturing costs are based on




a plant with 136 metric tons per day capacity and an investment (assuming




the plant was built in 1960) of $5.7 million.  The indicated manufacturing




cost in 1975 is $451.7 per metric tori.  Included in this total is the cost




of producing by-product sodium sulfcite, amounting to approximately $27 per




ton of dichromate.  Corporate overhead and G & A burdens are not included.




     c.  Capacity Utilization.   Table IV-30 lists the yearly value of




U.S. production, imports, exports, and apparent consumption of sodium di-




chromate.  Judging from the industry capacity values in Table IV-28, the




capacity utilization in the industry has varied considerably in. the last few




years. In 1975 about 75 percent of rated total capacity was used, while in 1974
                                        IV-5 2

-------
                                 TABLE  IV-2 9

                   ESTIMATED 1975 COST OF MANUFACTURING
                            SODIUM DICHROMATE*
                   l'l;mt. capacity           136 T/SD
                   Annual product ion        45,300 metric tons
                   Fixed investment (L97'S)  $1 0 , 400 ,000
Variable costs
                                    Quant i tv
                                                         $/Unit
$/Ton
Cliromiic Ore (48Z Cr 0 )
Soda ash
Lime
Sulfuric acid (66 P.-')
Power
Fuel
Water
Semi-variable costs
Operat ing labor
Supervision

Maintenance
Labor overhead

Fixed costs
Plant overhead
Deprec iat ion
Local taxes & insurance

1.09 T 176.00
0.77 T 66.00
0.73 T 33.00
0.45 T 51.3
500 kw!i O.t)2
40 MMlUu 0.70
1 '» M^aJ 0.02

124 men 1 2,000 /vr
12 foremen 18, 000 A r
1 superintendent 25,000/yr
6/c of 1 nvest men t /yr
357. of Labor & supervision


70% of labor & supervision
9 . 1% of investment /yr
1.5% of Investment /vr

212.00
56.00
26.00
25.00
11.00
31.00
0.31
362.00'

32.9
4.8
0.6
13.7
13.4
65.4

26.7
20.7
3.4
50.8
Total cost of manufacture

Byproduct credit - sodium sulfatc   0.73

Net cost
                                                            33.1
                                                                      478.20
                                                                      451.70
     *Source:  Contractor's estimates.
                                         IV-5 3

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                             TABLE  IV-30
U.S. PRODUCTION AND TRADE OF SODIUM DICHROMATE AND CHROMATE  1960-1975''
                       (THOUSANDS OF METRIC TONS)



1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975

Production
110.7
109.8
115.7
121.6
125.2
128.0
128.5
122.8
132.5
138.5
139.4
125.5
133.2
144.1
162.2
112.1

Imports
1.7
1.5
2.3
3.2
3.1
16.3
21.9
7.4
10.5
5.9
3.3
5.8
5.2
0.9
2.1
0.4

Exports
8.7
6.5
4.5
4.6
6.1
3.6
2.4
3.0
4.4
4.6
4.5
2.8
3.6
11.6
9.6
9.6
Apparent
consumption
103.7
104.8
113.5
120.2
122.2
140.7
148.0
127.2
138.6
139.8
138.2
128.5
134.8
133.4
154.7
102.9

*Source:
Series M28A.
U.S. Department
U.S. Department
of Commerce
of Commerce
, Current Industrial
FT 110, 135, 410.
Reports,

                                    IV-54

-------
production was in excess of rated capacity at 105 percent.  Capacity




utilization is expected to return to high values of at least 90 percent




in 1976 and 1977, with the improved general economic conditions and




particularly with improved automotive and appliance sales.




     3.  Demand Characteristics.




     a.  Market Size.   Table IV-30 lists the apparent U.S. consumption of




sodium chro'nate and dichromate for the period 1960 through 1975.  For most of




this period, U.S. production as reported by the Department of Commerce  has




varied between 120 and 150 thousand metric tons anually.  As indicated, these




data include both sodium chromate and sodium dichromate.  While some of the




sodium chromate produced in the initial phase of the manufacturing process




is marketed as such (an estimated 15 thousand tons of dichromate equivalent),




most of the sodium chromate filtrate is further processed to produce sodium




dichromate.




     On a long-range basis (in the post-World War II period), apparent con-




sumption of sodium chromate and dichromate has increased at an average annual




compound rate of 2.4 percent per year.  Both production and apparent consumption




declined in 1971, but increased 8.9 percent and 6.4 percent respectively




annually through 1974.  There was a sharp decline in 1975 to 112.1 thousand




metric tons of production and 102.9 tons of consumption.  This decline




reflected the generally poor economic conditions and the state of the auto-




mobile and appliance industries in particular which use chrome products.




Production in 1976 has recovered from 1975 levels as the economy has improved.




     The demand elasticity for sodium dichromate was estimated using




Department of Commerce production and unit values shown in Table  IV-32




through 1974.  The elasticity was -0.5, indicating that a 1 percent increase




in product price would result in a 0.5 percent decline in sales.
                                     IV-5 5

-------
     b.  Uses and Substitutes.  Fifty-six percent of sodium dichromate  pro-




duction in 1974 is estimated to have been consumed in the manufacture of




chrome colors (pigments) and chromic acid.  Table IV-31 is a market profile




reported in "Chemical Profiles".  The largest market segment is chrome colors




which accounted for 32 percent of production.  None of the dichromate producers




are chrome color producers.  Therefore,all of the sodium dichromate used




in chrome color production is sold on the commercial market.




     The production of chromic acid is the second largest use of sodium




 dichromate at 24 percent of 1974 production.  However, Allied Chemical and




Diamond Shamrock produce all U.S. chromic acid and use their own dichromate




as a raw material.




     Chromic acid is used primarily in chrome plating processes as well as




in copper stripping, aluminum anodizing and for general corrosion prevention.




The automotive industry represents the major user for chrome plating,




although other durable goods manufacturing such as appliances also have




requirements.




     The third most important outlet for sodium dichromate  is leather tanning.




With the exception of heavy cattle hides, where vegetable tanning is used,




chrome tanning is the most important treatment for all hides.  Chrome tannage




is used in shoe uppers, glove leathers, garment leathers, and bag leather.




In the tanning process, sodium dichromate is reduced with glucose to make the




solutions of chromium salts employed in chrome leather tanning.




     Five percent of sodium dichromate is used in various metal treating and




finishing processes.  For example, a solution of sodium dichromate and sulfuric




acid is used in the bright dipping of brass and copper to remove oxide scale.




Another important use in metal  finishing is in the formation of chemical




conversion coatings to provide  corrision protection and decorative effects,




as well as to provide a good base for painting metal surfaces.





                                       IV-5 6

-------
                                TABLE IV-31
     ESTIMATED 1974 USE PATTERN FOR SODIUM CHROMATE AND BICHROMATE*
    End Use                                                         _%
Pigments                                                            32
Chromic acid                                                        24
Leather tanning                                                     14
Corrosion control                                                    8
Metal treatment                                                      5
Petroleum                                                            4
Textiles & dyes                                                      4
Exports                                                              3
Miscellaneous                                                      	6
                                     Total                         100
   * Source:'themical Profiles" January 1, 1974, Schnell Publishing Co.
                                      IV-57

-------
     The textile industry consumes 4 percent of sodium dichromate in a




variety of ways.  Among its applications are mordanting of wool, dyeing




nylon and wool, dyeing with chromate colors, as an aftertreatment on cotton




to retard fading of dyes during washing and for stripdyed wool.




     Substitutes are represented by alternate materials (or processes) for




derivatives of sodium dichromate rather than for the dichromate.  As an




example, a high impact plastic can be substituted for chrome-plated trim




on motor vehicles.  Cadmium yellow can be used in place of chrome yellow




pigments.  Market growth for chrome leather is limited by lower cost sub-




stitutes, specifically, the poromeric materials.  Tin-free steel cans coated




with chromate compete with aluminum cans and seamless, deep-drawn steel cans




coated with tin.




     C.  Growth.  Sodium dichromate is a mature product whose immediate




future will depend on the sales of the secondary products in which it is




used.  There is no significant threat either from imports or substitutes to




sodium dichromate.  Sales of chromic acid used in chrome plating will move




generally with  the economy and slow growth can be anticipated on the average.




While some uses of chrome colors have fallen off because of environmental




concerns, other uses,such as in road signs,have been rising and slow growth




can be anticipated,,  The use of dichromate in leather tanning may continue




to decline slowly.  On the whole, sodium dichromate will experience a very




modest annual growth in the range of 2 percent per year.




     d.  Prices.  A comparison of list prices versus actual prices as




calculated from the Commerce Department data on reported value and quantity




of shipments is shown in Table IV-32.  From 1960 to 1969 list prices increased




very little, at an annual average rate of 0.9 percent.  From 1969 to 1974




the list prices have increased 8.7 percent per annum. Actual prices varied
                                    IV-58

-------
                                TABLE IV-32

          ACTUAL VERSUS LIST PRICES FOR SODIUM BICHROMATE 1960-1975*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipments3
(1,000 metric tons)
80.9
77.4
88.1
80.0
90.4
94.1
85.5
85.3
90.7
87.6
93.6
80.1
87.1
95.4
104.8
81.2
Value
($ MM)
22.7
20.5
24.8
21.2
22.9
24.2
23.9
23.0
23.9
23.1
24.8
21.9
24.5
28.6
40.9
41,2
Unit value
($/metric ton)
281
265
281
265
253
257
280
270
264
264
265
273
281
300
390
507
List price
($/metric ton)
287
287
287
287
287
287
309
309
309
309
331
353
353
380
469
550

     *Source:   U.S.  Department of Commerce,  Current  Industrial  Reports,
Series M28A, and Chemical Marketing Reporter.

     a.  Including interplant transfers.
                                     IV-5 9

-------
very little between 1960 and 1972 in the range of $250 and $280 per




metric ton.  In 1973 and 1974 the actual prices increased 17.8 percent




per year then increased 30 percent in 1975.




     The 1975 price rise was in spite of a sharp decline in production and




demonstrated the ability of producers to maintain price levels in spite of




falling demand.




     e.  Foreign Competition.  Imports and exports of sodium dichromate have




been a relatively insignficant part of the U.S. market.  In the past few




years exports have exceeded imports and accounted for about 5 percent of




production.  As discussed earlier all chrome ore.(chromite) used in U.S.




plants is imported principally from South Africa.
                                  IV-60

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                          E.  Titanium Dioxide




     1.  Industry Structure.




     a.  Producers.  In 1975 there were nine domestic TiO_ producers operating




15 plants, all but one of which are in the eastern half of the U.S.   Table IV-33




summarizes pertinent information regarding these facilities.   Since  1956,




chloride process facilities have accounted for all new TiO^ pigment  plant




construction.  However, two producers, PPG and NL Industries,  have recently




closed their chloride facilities, moves reportedly due to raw material




supply and economic problems.




     b.  Captive Requirements.   The major captive use of TiCL  pigment is




in the paint industry, where three of the top six TiO  consumers have their




own pigment plants.  Captive TiO  consumption as a percentage  of apparent




consumption rose from 8 percent in 1965 to 14 percent in 1971.  DuPont,




Glidden-Durkee, and NL Industries are the major captive users, and it is




believed that these companies account for virtually all of the captively




consumed TiO  pigment.




     c.  Other.  Nearly all TiO  plants are isolated manufacturing facilities,




although a few are part of larger, multi-product facilities.   Most plants




produce and sell titanate and other salts as by-products from  the process.




     Although Ti09 is sold in volumes comparable to those of  some commodities,




it is marketed more as a specialty chemical than as a commodity.  Producers'




marketing efforts in recent years have been centered around grade improvement,




quality control, and customer-oriented technical service.  Depending on




particular product characteristics, individual producers frequently  are




strong in one market segment,  such as paper, but weak in another, such as  paint.
                                    IV-61

-------
                                TABLE  IV-33

                TITANIUM DIOXIDE PLANTS AND CAPACITIES - 1975*
Company/plant
                                     Capacity
                             (1»000 Metric  tons/yr)
                     Process
American Cyanamid Co.
  Savannah,  Ga.
Combustion Engineering, Inc.
  Camden, N.J.
  Wilmington, Del.

E.I. duPont
  Antioch, Ca.
  Edge Moor, Del.
  New Johnsonville, Tenn.

Kerr-McGee Corp.
  Hamilton, Miss.

Lonza Inc.
  Mapleton, 111.
 65.3
 36.3
 n.a.
 n.a.
 27.2
 99.8
206.8
 45.4
 n.a.
                     Sulfate
                     Chloride
Chloride
Chloride
Chloride
                     Chloride
NL, industries, inc.
St. Louis, Mo.
Sayreville, N.J.
New Jersey Zinc. Co.
(Subs Gulf and Western)
Ashtabula, Ohio
Gloucester City, N.J.
SCM Corp.
Ashtabula, Ohio
Baltimore, Md.
Transelco Inc.
Pennyan, N.Y.
Total
98.0
112.5
26.3
39.9
24.5
26.3
48.1
n.a.
856.4
Sulfate
Sulfate
Chloride
Sulfate
Chloride
Chloride
Sulfate


     *Source: Contractor's estimates.
                                     IV-6 2

-------
     2.  Supply Characteristics.




     a.  Manufacturing Routes.  TiO,.,  is manufactured by either of two processes-




sulfate and chlorid.e.  Current domestic manufacturing capacity is about




856,000 tons, approximately 40 percent of which is sulfate.  The sulfate




process is older and employs sulfuric acid to separate and recover TiC*




from ilmenite, the principal raw material used in this manufacturing route.




The sulfate process has the disadvantage of producing a large amount of




potential pollutants in the form of spent sulfuric acid and ferrous sulfate




(copperas).  Depending on processing steps employed, the two chemical forms




of TiO , anatase and rutile, can be produced.




     The alternate method of production, and the one employed in every




TiO_ plant built since 1956, is the chloride process.  In this process,




chlorine is reacted at high temperature with the raw ore, generally rutile,




a high TiO -content material.  TiO  is recovered later in the process




through further chemical treatment, and approximately 90 percent of the




chlorine is recovered for reuse.  Due to higher quality ore and reactant




recycling, the chloride process produces far less pollutant by-product than




the sulfate process.  Although rutile pigment has been the sole product from




the chloride process in the past, DuPont began production of both anatase




and rutile grades upon conversion of its Edgemoor, Delaware  plant to




100 percent chloride production in 1974.  Chloride pigment has more uniformly




consistent particle size;  hence, it offers greater hiding power and is used




preferentially in certain critical applications such as automotive paint.
                                      IV-63

-------
     b.  Manufacturing Costs.  Table IV-34  summarizes estimated

manufacturing costs for a 22,680 ton per year chloride plant.  The costs

for raw materials, utilities, direct labor, and overhead  are based on

current estimates for these items.   Ore cost comprises over 50 percent

of the cost of manufacture, and this item has been most responsible for the

elimination of the chloride process's earlier cost advantage over the

sulfate process.   Chloride pigment  producers are anxious to lower this

cost through either more widespread use of ilmenite or through successful

commercialization of synthetic rutile production.  An important factor

in economical chloride production is recovery and recycle of chlorine gas
                         a
after the oxidation step.

     c.  Capacity Utilization.  Table IV-35  summarizes capacity and

production figures for recent years and shows that capacity utilization

has been in the 75 percent to 90 percent range.  Capacity has been taken

at announced, or nameplate, levels  and is higher than effective capacity

due to grade/product mix constraints.  The industry is now facing a potential

tight-supply situation in the next  several years as demand rebounds from

depressed 1975 levels.
     a.  The chloride process for the manufacture of Ti02 is the subject of
this analysis, despite its more favorable pollution characteristics, for
two reasons.  First, this is the dominant route to TiO^, and second, the
manufacturing costs for TiO_ for the chloride process nave been estimated
to be as much as 15 percent higher than for the sulfate process.  This
higher manufacturing cost, in combination with relative product price levels
and hazardous waste treatment costs, makes the chloride process more susceptible
to adverse economic impact from treatment and disposal of hazardous wastes.
                                       IV-64

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                                 TABLE IV-34

                       ESTIMATED COST OF MANUFACTURING
                TITANIUM DIOXIDE BY THE CHLORIDE PROCESS (1975)*
                           (THOUSAND METRIC  TONS)
Plant; c a pa c i 1 y
Annual production
Fixed Investment (1
Variable cost
RutiJe
Coke
Chlorine
Chemical additions
Water makeup
Power
Natural gas
Semi-variable costs
Operating labor
Supervision
Maintenance
Labor overhead
Fixed costs
Plant overhead
Deprecia tion
Local taxes & insurance
68 1 /SI)
22,680 Tons
975) $28,000,000
Qu.m t i ! v
I.I/ T
O.j'i T
0.21 1

2.53 Mga-1
898 kwh
11 MMBtu

68 men
1 2 foremen
1 supe r hit cndi'iiL
()70 of I n vest men t /yr
35'Z of Labor 6, Supe
70";' of labor & s>ipo
9 . 1 ,o o 1 ! lives 1 men t /
1 . V;' of 1 nvesl ineiH ,'



$/Ton S
303. C3
77.1
132.2

0.05
0.02
0.70

]2,000/vr
18,000/vr
2r. ,000/yr
rvi s ion
rv i s i on
yr
\ i'



/Ton pigment
354.51
26.99
27.77
8.82
0.13
17.96
7.71
443.89

35.97
9.52
1.10
74.05
10.31
136.95
32.62
112.32
18.51
163.45
Total cost ot" manufacture
                                                                      744.29
     *Source:  Contractor's estimates.

     a.  Estimated contract price, spot price is $510/T.
                                         IV-65

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                             TABLE IV-35

               INDUSTRY OPERATING RATE - TITANIUM DIOXIDE*
                       (THOUSANDS OF METRIC TONS)
                                                                  Capacity
Year             Capacity                     Production        utilization
	(percent)

1966                660                         540                  82
1967                695                         535                  77
1968                678                         567                  84
1969                705                         604                  86
1970                764                         595                  78
1971                740                         616                  83
1972                746                         653                  88
1973                792                         710                  90
1974                856                         712                  83
1975                856                         547                  64
     *Source:  U.S. Department of Commerce, Chemical Marketing Reporter.
                                           IV-6 6

-------
     3.  Demand Characteristics.




     a.  Market Size.   U.S. production of TiO? has grown from 414 thousand




metric tons in 1960 to about 550 thousand metric tons in 1975, valued at




about $428 million.  Table IV-36 shows the history of TiO  production and




foreign trade.




     b.  Growth.  From 1960 to 1974, overall market growth has been at an




annual rate of 3 percent to 4 percent although certain individual end-use




segments, such as plastics, have grown considerably faster.   Calculation




of the growth rate from 1960 to the depressed level of demand in 1975




distorts the long-term growth rate to an average of 2 percent per annum.




     c.  Uses.  Table IV-37  identified the major end uses for TiO~ pigments.




Paint and coatings applications, currently accounting for 52 percent of




total consumption, constitute the major use for TiO-.  Two other end uses,




paper and plastics, have grown rapidly in recent years, and  in 1973, accounted




for an additional 27 percent of TiO  consumption.




     The remaining applications are:  floor coverings, 3 percent; rubber,




3 percent; and miscellaneous, 15 percent.




     d.  Substitute Products.  TiO  use is presently threatened by substitute




products in only one market segment:  paper.  TiO_ is an effective opacifier,




but it is at a cost disadvantage to alumina and silica clays, some of which




offer nearly equivalent brightness.  In the paint industry,  TiO~ is by far




the most effective white pigment in terms of hiding power, a key to the trend




toward one-coat paint applications.  While pigment research  is extensive, no




equally effective substitute has been found.  In plastics and rubber, TiO




offers the best combination of white pigment cost, dispersion, and resistance to




discoloration.  In other product application areas, no substitute products




represent serious threats to TiO,, 's present position.
                                         IV-67

-------
                               TABLE IV-36

          U.S.  TITANIUM DIOXIDE PRODUCTION AND TRADE, 1960-1975
                        (THOUSANDS OF METRIC TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975


Production
413.6
456.5
475.0
471.6
507.0
523.5
539.7
535.1
566.2
584.9
594.9
615.3
629.4
712.6
714.1
547.2


Imports
NA
NA
NA
NA
40.6
45.0
43.6
42.5
48.4
48.3
54.7
38.9
78.4
54.8
32.0
23,9


Exports3
18.2
17.2
17.2
16.3
18.2
15.4
13.6
12.7
13.6
12.7
13.6
12.7
9.1
19.1
27.6
14.2

     *Source:   U.S.  Department of Commerce, Current Industrial Reports,
Series M28A.   U.S.  Department of Commerce FT 1.10,  135, 410.

     a.  Exports for 1960-1971 have been adjusted  to a 100%  Ti02 basis by SRI,
                                         IV-6 8

-------
                         TABLE IV-37

           U.S. END USE OF TITANIUM DIOXIDE, 1973
                                                  Percent
Paint, varnish and lacquer                          52
Paper                                               18
Plastics                                             9
Floor coverings                                      3
Rubber                                               3
Miscellaneous                                       15
      *Source:  Chemical Marketing Profiles.
                                    IV-6 9

-------
     e.   Prices.   Current list prices are 40.0cents  per  pound  for  rutile




grades,  and 34.5 cents per pound for anatase.   At these prices, TiO  frequently



is one of the most expensive raw materials in  its end-use applications.




List prices have historically been stable or slowly rising, with the




industry generally attempting to move as a whole to a given new price




level.  Due mostly to overcapacity problems, the industry has been plagued




with substantial price discounts which forced several major producers to




operate at a loss in the 1970-71 period.  Price history is shown in Table IV-38.




     f.   Foreign Competition.  As indicated in Table IV-39,  exports of




Ti07 have remained quite small at less than 2 percent to 3 percent of




domestic production.  Imports, on the other hand, have ranged in recent




years from 5 percent to 10 percent of total apparent consumption, although




1972 saw a large jump to 78,000 metric tons, or 11 percent of apparent




consumption.  Imports will probably continue at present percentage levels




for the foreseeable future.
                                         IV-70

-------
                            TABLE IV-38

                TITANIUM DIOXIDE COMMERCIAL SHIPMENT VALUES'
                        (THOUSANDS OF METRIC TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
19J5
Commercial
shipments
(000 M tons)
390.3
415.1
435.7
441.6
458.0
476.1
495.1
492.6
512.4
535.7
509.2
527.6
565.0
633.4
623.0
475,8
Total
value
($ MM)
236.0
244.4
242.8
257.5
266.2
274.7
279.7
277.2
288.8
301.1
277.8
262.4
291.2
353.8
458.9
370,3
Value per
metric ton
($/M ton)
596
589
557
583
581
577
565
563
564
562
546
497
515
556
737
778
List prices/metric ton
Anastase
($/M ton)
573
573
551
551
551
551
551
551
551
573
573
573
573
617
728
761
Rutile
($/M ton)
617
617
595
595
595
595
595
595
595
617
573
529
573
595
827
882

     *Source:   U.S. Department of Commerce, Current Industrial Reports,  Series M28A
and Chemical Marketing Reporter.
                                        IV-71

-------
                               TABLE IV-39
                                                              i
           TITANIUM DIOXIDE IMPORT AND EXPORT PRICES 1960-1975
                            ($ PER METRIC TON)
                            Imports
Exports
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
NA
NA
NA
NA
369
400
394
376
386
391
406
404
426
502
772
806
549
535
500
497
456
468
559
567
603
591
544
646
462
728
891
843

     *Source:   U.S.  Department of Commerce,  FT 110,  135, 410.
basis.
     a.  Exports for the years 1960-71 have been adjusted to a 100% Ti02
                                        IV-7 2

-------
              V.  CHARACTERIZATION OF SECONDARY AFFECTED CHEMICALS



                             A.  Aluminum Fluoride




    In 1975, U.S. production of aluminum fluoride totaled 108,900 metric tons,  a 20




percent decline from 1974 production of 136,000 tons. U.S. output of aluminum




fluoride, which is used almost entirely in the production of primary aluminum,




has increased at an average annual compound rate of approximately 3.3 percent




for the period 1963 through 1975, although production in recent years has been




relatively constant.  In its use as a fluxing agent for primary aluminum pro-




duction, aluminum fluoride is to a minor extent interchangeable with another




fluxing agent, cryolite.  In general, however, there are no direct substitutes




for aluminum fluoride in this major application.  A very substantial part of




aluminum fluoride consumption is captively supplied, viz. 70 percent in 1975.




    There are currently four U.S. producers of aluminum fluoride, two of which—





Aluminum Company of America (Alcoa) and Kaiser Aluminum & Chemical—are also major




aluminum producers.  The two remaining aluminum fluoride producers, not inte-




grated forward to aluminum production, are Allied Chemical and Stauffer Chemical.




Productive capacity for aluminum fluoride has been in excess of actual produc-




tion in recent years.  In 1975 the industry operating rate was approximately




68 percent.




    1.  Industry Structure.




    a.  Producers.  At the present time there are four manufacturers of aluminum




fluoride operating five plants.  Their plant locations and estimated capacities




are shown in Table V-l. Two of the three major primary aluminum producers are in-




cluded in the list.  These  two  producers account for  69  percent  of total industry




capacity.  Reynolds, the second largest aluminum producer (in terms of U.S.




aluminum ingot capacity),has shut down its aluminum fluoride facility.  In




addition, Olin also had an aluminum fluoride plant in Joliet, Illinois, which




has been shut down.

-------
                                  TABLE V-l

                         ALUMINUM FLUORIDE PRODUCERS*
                                    (1975)
      Company
   Location
       Capacity
                                                     (Thousand tons)   (% of total)
Allied Chemical Corp.
  Industrial Chemicals Div.
  Specialty  Chemicals Div.

Aluminum Corp. of America
Geisiaar, Louisiana
Fort Meade, Florida
Point Comfort, Texas
                          35.0
60.0
                21.9
37.5
Kaiser Aluminum & Chemical
  Corp.

Stauffer Chemical Co.

  Total
Gramercy, Louisiana


Greens Bayou, Texas
50.0
15.0
                         160.0
3L.2
 9.4
               100.0
     * Source:  Published estimates.
                                      V-2

-------
    b.  Captive Requirements.  Commerce Department data for the period 1968




through 1973 broken down by captive/merchant shipments are shown in Table V-2..




As indicated, in 1973 captive shipments of aluminum fluoride represented approxi-




mately 71 percent of total shipments.  We have estimated that in 1974 and 1975 cap-




tive shipments were 55-60 percent of total shipments.  Alcoa and Kaiser are the two





major factors in captive consumption of aluminum fluoride.  Reynolds has closed




its aluminum fluoride plant at Bauxite, Arkansas, and is believed to be supplied




primarily by Allied Chemical.




    Both Alcoa and Kaiser, in addition to supplying their own captive requirements




for aluminum fluoride, also supply the aluminum fluoride requirements of some of




the smaller, non-integrated aluminum producers, such as Intalco, Ormet, Anaconda,




and Harvey.  Allied and Stauffer are primarily merchant suppliers of aluminum




fluoride.




    c.  Producer Integration.  All of the aluminum fluoride producers are sub-




stantially integrated to raw materials, and, in the case of Alcoa and Kaiser,




to downstream products, i.e., primary aluminum.  More specifically, Alcoa, Kaiser,




and Allied produce both hydrofluoric acid and alumina hydrate in addition to




aluminum fluoride.  Stauffer produces hydrofluoric acid and aluminum fluoride,




but not alumina hydrate.




    2.  Supply Characteristics.




    a.  Manufacturing Routes.  Aluminum fluoride is manufactured from hydro-




fluoric acid and alumina hydrate.  The alumina hydrate used is an intermediate




product obtained in the processing of bauxite to alumina.   It is necessary to




use the hydrate for reaction because the alumina prepared for electrolysis and




calcined at high temperatures is not reactive.  Newer facilities use a fluid




bed system for the reaction between hydrofluoric acid and the alumina hydrate.
                                       V-3

-------
                           TABLE  V-2
         CAPTIVE/MERCHANT SHIPMENTS FOR ALUMINUM FLUORIDE*
                     (THOUSANDS OF METRIC  TONS)


Year

1968
1969
1970
1971
1972
1973
1974
1975
Total
shipments

125.5
129.8
122.2
141.3
123.9
127.1
156.0
114.9
Merchant
shipments

55.9
48.8
47.5
59.1
45.2
37.2
63.4
51.7
Approximate captive
shipments
(% of total)
54.5
62.4
61.1
58.2
63.6
70.6
59.4
55.0

*Source:  U.S.  Department of Commerce.
                                   V-4

-------
    Alcoa has been operating a plant in Fort Mead, Florida, since late 1971 to
produce aluminum fluoride from fluosilicic acid, a by-product of phosphoric acid
manufacture.  It is anticipated, however, that for the foreseeable future the
fluosilicic acid route to aluminum fluoride will constitute a relatively constant
part of total production, with most of the output continuing to be derived from
hydrofluoric acid and hydrated alumina.
    b.  Manufacturing Economics.  Estimated manufacturing costs for aluminum
fluoride are shown in Table V-3. The cost estimates are based on a plant with an
annual capacity of 29,940 metric tons and a 1975 fixed investment of $3.0 million.
    The raw material costs account for an estimated 95 percent of the total manufac-
turing costs. We have assumed a cost for hydrofluoric acid of $485 per ton based on
hydrofluoric acid manufacturing costs.  If an aluminum fluoride producer were to
purchase hydrofluoric acid on the open market, it would result in manufacturing
costs for aluminum fluoride higher than the current market price because of the
low profit margins for aluminum fluoride.  The implication is that a producer of
aluminum fluoride must be integrated to hydrofluoric acid to be profitable.
     c.  Supply/Demand Balance.  U.S. alumina fluoride capacity is in excess
of actual production and has been for the past several years, even with the closing
of aluminum  fluoride facilities by Reynolds and Olin.  Presumably, Reynolds,
because they were not integrated backward to the production of HF, found it more
economic to purchase aluminum fluoride while low profitability and the small
merchant market may have prompted Olin's decision to close its plant.  For 1974
and 1975, production represented 84 percent and 69 percent of current capacity of
160,000 tons.
                                        V-5

-------
                                TABLE V-3
                   ESTIMATED COST OF MANUFACTURING  (1975)
                             ALUMINUM FLUORIDE*
                         (THOUSANDS  OF METRIC TONS)
                    Plant capacity               29,940 tons/year
                    fixed investment            $3,000,000


Raw materials         Units           $/Unit           Unit/Ton           $/Ton
HF (cost)
Metric ton
Metric ton
485
163
.67
.61
325.0
99.4
Utilities               Kwh                            143.0
Fuel                    MMBtu                          2.25

Direct labor
 Supervisors                                                               5.73
 Operators

Overhead (100% of DL)                                                      5.73
Maintenance (50% of DL)                                                    2.87
Maintenance supplies (5% investment/year)                                  5.57
Depreciation (2% investment/year)                                          2.23
Taxes and insurance (1 1/2% investment/year)                               1.68

Total                                                                    448.21
    *Source:   Contractor's Estimates.
                                        V-6

-------
    3.  Demand Characteristics.




    a.  Market Size and Growth.  Aluminum fluoride production for the period




1963 to 1975 is shown in Table V-4. During this time span, U.S. production of




aluminum fluoride has increased at an average annual compound rate of approxi-




mately 3.3 percent.  Aluminum fluoride imports are small, and exports are an




estimated 10-15 percent of total production.  The apparent U.S. market for the




material in 1975 was less than 117,900 metric tons.  (The exact quantity of aluminum




fluoride imporcs and exports cannot be determined because the material is grouped




with a number of other aluminum compounds in U.S. Tariff Commission import data.)




    b.  Uses.  Aside from minor applications in secondary aluminum production




and use as a metallurgical and ceramic flux, aluminum fluoride is used entirely




by producers of primary aluminum.  In primary aluminum production, aluminum




fluoride functions as a major make-up ingredient in the fused electrolyte of the




aluminum reduction cell.  Although there is no actual consumption of the aluminum




fluoride in the electrolysis reaction, there are mechanical losses, pyrohydrolysis




and some carbon tetrafluoride formation.  Consumption varies between companies




and smelters but averages between 30 to 35 kilograms of aluminum fluoride per




metric ton of aluminum produced.   In addition to operating requirements (pot




make-up), additional quantities of aluminum fluoride are needed for pot line




startup .   A 59,000 metric ton pot line, for example,  would require approximately




544 metric tons of aluminum fluoride as an initial charge.




    The consumption of aluminum fluoride per ton of primary aluminum produced has




declined in recent years as a result of the industry's efforts to realize more




efficient recovery of fluorine values from pot linings and flue gases.  Table V-5




presents estimated consumption of aluminum fluoride in the United States.
                                        V-7

-------
                            TABLE V-4
         PRODUCTION,  FOREIGN TRADE,  AND APPARENT CONSUMPTION
                       OF ALUMINUM FLUORIDE*
                      (THOUSANDS OF  METRIC  TONS)

Year
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Production
78.9
84.1
101.6
113.3
119.5
126.2
129.9
123.2
143.3
126.1
127.3
153.5
117.9
Imports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Apparent
consumption
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA

*Source:  U.S. Department of Commerce.
                                    V-8

-------
                            TABLE V-5
               U.S.  CONSUMPTION OF ALUMINUM FLUORIDE*
                     (THOUSANDS OF METRIC TONS)

Aluminum fluoride



1963
1965
1970
1972
1973
1974
1975
Primary
aluminum
production
2,098
2,499
3,607
3,739
4,109
4,443p
3,519p
Aluminum fluoride consumption
Primary
aluminum
70
97
117
118
121
128
101
b
Other
4
4
5
6
6
6
5
a
Total
74
101
122
124
127
134
106
consumption (Kg)
per ton of
primary
33
39
32
32
30
29
29
aluminum








 *Source:   Contractor's  estimates  and  Bureau  of Mines, Minerals  Industry  surveys.
a.  Based on total shipments less other uses.

b.  Estimate.
                                  V-9

-------
    As previously mentioned, aluminum fluoride is also used in the refining of




secondary aluminum.  The two accepted techniques for producing secondary




aluminum are referred to as "wet fluxing" and "hot fluxing".  Aluminum fluoride




is used in both wet and hot fluxing; techniques to remove magnesium from the




molten scrap, the actual quantity depending on the magnesium content of the scrap.




Aluminum fluoride is also used in brazing fluxes (for aluminum fabrication),




fluxes for ceramic glazes and enamels, and for welding rod coatings.




    c.  Substitute Products.  In addition to aluminum fluoride, cryolite is also




used as the molten electrolyte in the electrolytic reduction of aluminum to




aluminum metal.  The two fluxes are to some degree interchangeable, depending




upon operating practices and the sodium oxide content of the alumina used in the




reduction plant.  For start-up of a new pot line, considerably more cryolite is




required (approximately 1,800 metric tons for a 59,000 metric ton pot line) than




aluminum fluoride.  During pot line operation, loss of fluorine values is greater than




loss of sodium values.  Consequently, during normal operation of a pot line,




more aluminum fluoride than cryolite is used to maintain a constant composition




of the melt.  The effect of the industry's efforts to recover fluorine values




from flue gases and pot linings will in general be more pronounced for cryolite




than for aluminum fluoride.




    d.  Prices.  In Table V-6, list versus actual prices (unit value) are shown for




aluminum fluoride for the period 1963 through 1975.  The "actual" prices are




as calculated from Commerce Department data for total shipments and represent




industry average plant prices.  In 1972 plant prices returned very nearly to




levels which prevailed during the early 1960's.  Throughout the period illus-




trated, however, plant prices were considerably below list prices.  Current merchant





prices are   $400   per metric ton, which are above current list prices.
                                         V-10

-------
                                 TABLE V-6

          ACTUAL VERSUS LIST PRICES FOR ALUMINUM FLUORIDE 1960-1975 *
                         (THOUSANDS OF METRIC TONS)

Shipments Value Unit value
(1,000 metric tons) ($MM) ($/metric ton)
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
60.4
53.7
65.5
73.6
85.0
100.7
113.9
119.4
125.5
129.8
122.2
141.3
123.9
127.1
156.0
114.9
17.9
14.9
19.2
22.2
25.3
27.0
29.7
30.9
26.8
28.2
27.0
36.7
36.1
37.0
45.7
46.0
296.4
277.5
293.1
301.6
297.6
268.1
260.8
258.8
213'. 5
217.3
220.9
259.7
291.4
291.1
292.9
400.3
List price
($/metric ton)
358
358
358
358
358
309
298
298
298
287
287
369
386
386
386
386

     *Source:   U.S.  Department of Commerce,  Current Industrial Reports,
Series M28A,  and Chemical Marketing Reporter.
                                      V-ll

-------
                            B.  Chrome Pigments





     Total U.S. production in 1974 for the five chrome pigments (chrome green,




chrome oxide green, chrome yellow and orange, molybdate chrome orange and zinc




yellow) plus iron blue was an estimated 64,630 metric tons, more than half of




which was represented by chrome yellow and orange.  Imports have been increasing




and in 1973 represented 17 percent of total U.S. output.  Exports have declined




since first reported in 1966 and are negligible.  Apparent U.S. consumption in




1973 was 72,980 metric tons.  The U.S. market for chrome pigments and iron blue




has been expanding slowly with the largest growth shown in molybdate chrome




orange, chrome yellow, and chrome oxide green.




     The major uses for these inorganic pigments are in paint, printing ink,




floor products and paper.  Specialty applications are in ceramics, cement, and




asphalt roofing.  Captive requirements by the U.S. producers are minimal.




     There are four major U.S. producers (with production of three or more of




the individual products) and seven minor producers.  In general, the producers




are neither integrated back to raw materials (e.g., sodium bichromate) nor forward




to end products.




     Plant prices in 1974 varied between $900 and $1,700 per metric ton depending




upon the specific product.  The weighted average price in 1974 was an estimated




$1,400 per metric ton.
                                      V-12

-------
      1.  Product Characteristics.




      a.  Market Size and Growth.  U.S. production data for chrome pigments for




 the period 1960 through 1974 are shiwn in Table V-7.  As indicated by these data,




 U.S. production has been increasing  for chrome oxide green, chrome yellow and




 orange, and molybdate chrome orange.  The most rapid growth, 6.1 percent per year




 on a compound basis, has been demonstrated by molybdate chrome orange followed




 by chrome yellow and orange at 4.2 percent per annum compounded and chrome oxide




 green with an average annual compound growth of 2.8 percent in the 15-year period.




 Production of iron blue has been essentially static at 4,000-5,000 metric tons




 per year.  Production of chrome green and zinc yellow has shown a slight declining




 trend, although production figures for chrome green have been available since 1971.





      b.  Prices.  In Table V-8, actual prices for the five chrome nigments plus




 iron blue as calculated using U.S. Department of Commerce data are compared with




 list prices taken from the Chemical Marketing Reporter.   Actual prices remained




 slightly below list prices from 1960 to 1973.  In 1974 a range of list prices is




 given due to the variation in price during the year.




      Total 1974 shipments, including interplant transfers for the five reported




chrome pigments, was 58,740 metric tons,as shown in Table V-Q.   (Chrome




green has not been reported by the U.S. Department of Commerce since 1971.)  The




value of these shipments was $82.016 million.   Thus,  the  average unit value in 1974




for the five products was $1,396 per metric ton.   In 1973 the average unit value




was $1,017 per metric ton.   There was thus a 37 percent price increase in 1974.
                                         V-13

-------
                              TABLE V-7

              U.S.  PRODUCTION  OF CHROME PIGMENTS,  1960-1975*
                       (THOUSANDS OF METRIC  TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Chrome
green
2.83
2.93
2.96
2.61
2.82
2.78
2.69
2.49
2.57
2.38
2.31
2.46
NA
NA
NA
NA
Chrome oxide Chrome
green yellow
4.71
4.78
5.33
4.74
5.09
5.81
6.22
4.71
5.66
5.32
6.13
5.97
5.59
6.50
6.97
5.09
19.40
20.62
22.20
22.47
24.07
26.55
28.51
27.86
29.77
29.05
29.46
26.35
30.66
33.70
34.44
23.51
Molybdate
chrome
orange
5.75
6.34
6.78
7.66
8.48
8.58
9.86
9.40
10.33
10.32
10.00
10.33
11.27
12.76
13.24
8.67
Zinc
yellow
5.49
5.17
6.01
6.23
7.05
7.22
7.41
7.09
6.73
6.62
5.22
5.06
5.14
4.82
5.23
NA
Iron
blues
4.36
4.25
4.48
4.57
4.58
4.97
5.06
5.24
5.49
5.30
4.73
4.89
4.71
4.58
4.75
3.32
Total
42.54
44.09
47.76
48.28
52.09
55.91
59.85
56.79
60.55
58.99
57.85
55.06
57.37a
62.36a
64.63a
40.59b

     *Source:   U.S.  Department of Commerce, Current Industrial Reports,
Series M28A.

     a.  Excludes chrome green.

     b.  Excludes chrome green and zinc yellow.
                                    V-14

-------
                                TABLE V-8
               U.S.  SHIPMENTS OF CHROME PIGMENTS, 1960-1973''
                        (THOUSANDS OF METRIC TONS)


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Chrome
green
2.93
2.93
2.92
2.61
2.71
2.64
2.63
2.41
2.50
2.45
2.29
2.47
NA
NA
NA
NA
Chrome Molybdate
Chrome oxide yellow & chrome
green orange orange
4.49
4.65
5.49
4.78
4.97
5.47
6.11
4.93
5.67
4.98
5.51
5.27
5.32
6.66
6.69
4.74
18.73
19.87
21.61
22.28
23.94
25.04
28.21
27.03
29.07
29.12
28.79
25.72
29.04
32.84
30.81
23.18
5.53
6.03
6.76
7.28
8.10
7.78
9.53
9.20
9.97
10.04
10.34
9.75
11.13
11.74
11.78
9.00
Zinc
yellow
5.04
5.07
5.71
6.07
6.91
6.60
7.55
6.90
6.84
6.59
5.34
5.36
5.40
5.06
4.57
NA
Iron
blues
4.12
3.75
4.00
4.13
4.51
4.72
4.76
4.96
5.11
5.06
4.96
4.58
4.25
4.66
4.89
3.44
Total
40.84
42.30
46.49
47.15
51.14
52.25
58.79
55.43
59.16
58.24
57.23
53.15
55.14a
60.963
58.74a
40.36b

     *Source:  U.S. Department of Commerce, Current Industrial Reports,
Series M28A.

     a.  Excludes chrome green.

     b.  Excludes chrome green and zinc yellow.
                                     V-15

-------




































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                                V-16

-------
     c.  Foreign Trade.  The data for the years 1963 through 1973 is shown in




Table V-10. For the period covered, imports of chrome pigments have generally




been increasing, with chrome yellow and orange and molybdate chrome orange




representing the largest volume imports.  Total imports have ranged from 16 per-




cent to 17 percent of total production for the 11-year period.  Japan has been




a leading supplier of chrome yellow.




     Exports of chrome pigments are negligible and have been declining since




first reported in 1966»as shown in Table V-10.




     d.  Uses and Substitutes.




     Chrome Green.  The chrome  greens find wide application in many kinds of




paints such as house paints, sash and trim paints, enamels, both air-drying and




baking, flat paints, and also in printing inks, lacquer, calcimines, oilcloth,




paper, etc.




     Chrome Oxide Green.  Chromium oxide green comprises two different pigments.




The principal product is the anhydrous oxide, Cr_0 , but a certain amount of




hydrated chromic oxide, or Guinet's green, is also manufactured.  Chrome oxide




green's resistance to alkalies, acids and high temperatures, and its superlative




fastness to light make it valuable for use as a colorant in Portland cement,




ceramic-tile glazes, rubber, alkali-proof printing inks, limeproof paints,




concrete and stucco paints, and bridge paints.  It finds special use in coloring




cement and in green granules for asphalt roofing.  An interesting application is




in camouflage paints, since the reflectance spectrum of chromic oxide resembles




that of green foliage.  Hydrated chromium oxide finds considerable use in auto-




motive finishes.
                                        V-17

-------
                         TABLE V-10
             IMPORTS AND EXPORTS  OF CHROME PIGMENTS*


1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
Imports
Quantity
(1,000 metric tons)
0.79
1.11
1.33
2.68
3.79
5.153
5.39a
7.44a
9.73a
10.58
10.853
6.55

Value
($ MM)
0.4
0.6
0.7
NA
NA
NA
2.6
3.9
4.5
6.3
5.6
8.2
Exports
Quantity
(1,000 metric tons)
NA
NA
NA
0.79
0.71
0.14
0.15
0.16
0.18
NA
0.23
NA

Value
($ MM)
NA
NA
NA
0.482
0.392
0.153
0.189
0.227
0.227
NA
0.461
NA

*Source:  U.S. Bureau of Mines - Minerals Yearbook.
a.  Includes hydrated chromium oxide green.
                                   V-18

-------
     Chrome Yellow and.Orange.  The chrome yellows are bright, clean colors with




good hiding power and good resistance to fading in either mass colors or tints.




They are soft, grind easily, and are not reactive with most paint vehicles.




Their durability for exterior use is generally good, although they do darken on




exposure and are susceptible to blackening in the presence of hydrogen sulfide.




They have poor resistance to alkali and discolor when subjected to high temperature,




as in baking.  Their many good qualities and relatively low cost make them very




useful pigments in many kinds of paints and lacquers, traffic line paints,




printing inks, papers, linoleum, leather finishes, etc.  They are also used in




calcimines and water paints which are not alkaline.  Large quantities of chrome




yellows are used with iron blues in the manufacture of the chrome green pigments.




     Chrome oranges are generally employed in the same manner as the chrome




yellows.  In addition, the darker shades are used in rust-inhibitive primers and




paints for use on ferrous metals.  A specific bright red ^orange shade of basic




lead chromate, known as International Airway Orange, is a standard color for




airport markings.




     Molybdate Chrome Orange.  The molybdenum oranges are characterized by their




strong and brilliant color, very high hiding power, and high tinting strength.




Despite costing more than the chrome oranges, they are economical to use because




of their high strength.  They have poor resistance to alkali and, on exposure to




light, darken more than do the basic chrome oranges.   They are used in many




kinds of paints, enamels, and lacquers, and are especially useful in mixtures




with organic red toners to produce economical light-red colors of good brilliance.




Use is made of them in floor coverings and printing inks.
                                          V-19

-------
     Zinc Yellow.  Due to its limited water solubility, zinc yellow is important




as an inhibitive pigment for prime-coating metals.   It is also used in decorative




finishes but almost always in combination with other color pigments such as




hydrated chromium oxide.  In addition, it is employed to make zinc green pigment,




a precipitated mixture with iron blue.




     Iron Blues.  The iron blues are very strong pigments which may appear almost




black in the full color.  They are used in all kinds of paints and enamels, such




as sash and trim paints, automotive enamels, lacquers, and "metallic" finishes.




They are also used extensively in inks and printing inks, carbon paper inks,




crayons, linoleum, composition flooring, paper, laundry blues, etc.  For use in




making chrome greens, the green shades of the iron blues are preferred.




     2.  Production Characteristics.




     a.  Production Processes.




     Chrome Green.  To make chrome green, chrome yellow and iron blue are physi-




cally mixed prior to grinding or coprecipitated from solution and then dried,




ground, and packaged.




     Chrome Oxide Green.  The currently favored method of preparing chromic oxide




is by the calcining of sodium dichromate with sulfur or carbon in a reverbatory




furnace.




                       Na2Cr207 + S = C^O^ + Na2S04





                       Na2Cr207 + C = Cr^-J- + Na2C03 + COi




     Sodium sulfate from the first reaction above or soda ash from the second is




removed by washing, and the chromic oxide is filtered, dried and packaged.




Chromic oxide for pigments is made with sulfur; that for aluminothermic chromium




is made with charcoal or some other low-sulfur carbonaceous material.
                                           V-20

-------
     Guignet's green (hydrated chromic oxide) results from the firing of a




mixture of potassium dichromate and boric acid at about 550 C.  The product is




leached, filtered, washed, and dried.  The pigment product is about 81 percent




chromic oxide, 17 percent water, and about 2 percent boric acid (formerly con-




sidered necessary but now regarded as an impurity).




     Chrome Yellow and Orange.  Chrome yellow pigment is basically a mixture of




lead chromate, lead sulfate, and zinc sulfate, whereas chrome orange pigment con-




tains basic lead chromate and lead sulfate.   The primary ingredient of chrome




yellow pigment is lead chromate, which is produced by the reaction of sodium




chromate or dichromate with lead nitrate or acetate.  The lead nitrate is often




obtained in-plant by reacting lead oxide (litharge)  or pig lead with nitric acid.




If zinc sulfate is to be in the pigment mixture, it  is prepared by reacting zinc




oxide with sulfuric acid.  If lead sulfate is to be  in the pigment mixture, it




is formed by the addition of sodium sulfate to the reaction vessel in which lead




chromate is formed.  The precipitated and mixed pigment material is subsequently




filtered out, treated for development of the specific pigment properties desired,




and packaged.




     The basic lead chromate (chrome orange), which  may be described as a co-




precipitate of lead hydroxide and lead chromate, is  produced by the addition of




lead hydroxide to the reaction vessel in which lead  chromate is formed.




     Molybdate Chrome Orange.  The pigment known as  molybdate chrome orange (or




molybdenum orange) is a mixed crystal of lead sulfate, lead chromate, and lead




molybdate.  In the production process a mixture of sodium chromate and sodium




molybdate is added to a solution of lead nitrate or  acetate to produce the




precipitate.
                                          V-21

-------
     Zinc Yellow.  Zinc yellow pigment is a complex mixture whose composition




includes zinc, potassium, and chromium.   Of the two types of zinc yellow,  the




low chloride-sulfate type is prepared by first reacting zinc oxide with potassium




hydroxide, then adding the chromate as a solution of potassium tetrachromate.




High chloride zinc yellow is made by reacting zinc oxide with hydrochloric acid




and sodium dichromate to produce a zinc yellow slurry.   The solids are removed




by filtration, dried, milled, and packaged for sale.




     Iron Blues.  Iron blues include Prussian blue, Chinese blue, bronze blue,




etc.  The generalized production process, which varies  somewhat from plant-to-




plant, involves the precipitation of ferrous sulfate-ammonium sulfate solutions




with sodium ferrocyanide to produce ferrous ferrocyanide, followed by oxidation




of this product to ferric ferrocyanide by sodium chlorate.  The precipitated pig-




ment is filtered, washed, dried, sxirface-treated to enhance pigment properties,




and packed.





     t>.  Process Hazardous Waste.  Treatment of wastewaters from the production




of chrome yellows and oranges and molybdate chrome orange generates a hazardous waste




containing lead salts and chromium hydroxide.  The amounts and types of reactants




and wastes will differ depending on the color produced.




     Treatment of the waterborne wastes from the production of zinc yellow gener-




ates insoluble zinc salts, chromium hydroxide, and unrecovered zinc yellow, all




of which require careful disposal.
                                          V-22

-------
     The wash waters from chrome oxide green production require treatment which




generates sludges of chromium compounds requiring careful disposal.




     The waterborne wastes from iron blue production contain a considerable amount




of suspended product which is settled out prior to discharge.  This material is




then recovered as a hazardous waste which should have special handling due to its




cyanide content.  Chrome green is produced by mixing a slurry of chrome yellow




and iron blue and thus the waste problems are similar to those of the two con-




stituent pigments.
                                     V-23

-------
                             C.  Nickel Sulfate




     1.  Product Characteristics.




     a.  Market Size and Growth.  Department of Commerce data for nickel




sulfate production for the period 1960 through 1974 are shown in Table V-ll .  Pro-




duction volume increased at an average compound rate of 7.4 percent  per annum for




the period 1960 through 1970.  According to these data, production has decreased




11 percent per year on an average compounded basis  from 1970 to 1974.  The




Commerce Department, without disclosing the company name,  explained that a




nickel sulfate plant representing significant capacity ceased production in




early 1974.  Domestic production of nickel sulfate  in 1974 was 9,100 metric tons.




     b.  Prices.  In  Table  V-12 list, prices versus actual prices for nickel




sulfate are  shown for the years 1960  through 1974.  The "actual" prices are




calculated from Commerce Department, data for total  shipments and represent




industry average plant prices.  "Actual" prices have been  increasing since




1960 at an annual average of 5 percent.  List prices peaked in 1970 when nickel




sulfate was  in short supply, dropped, and rose in 1973  to the 1970 level.




The year 1974 was unusual and thus a  range of prices is given.  List prices




are greater  than "actual" prices by about 25 percent.



     c.  Foreign Trade.  Foreign trade of nickel sulfate has .never  been reported




and is estimated  to  be very small.
                                      V-24

-------
                                    TABLE V-ll

                         U.S.  PRODUCTION OF NICKEL SULFATE *
                            (THOUSANDS OF METRIC TONS)
            Year                               Amount
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
9.5
9.6
9.7
9.3
10.3
14.2
16.0
13.4
17.8
18.5
19.0
15.3
9.4
9.9
9.1
NA

     •^Source:   U.S.  Department of Commerce,  Current Industrial Reports,
Series M28A.
                                       V-25

-------
                             TABLE V-12

           ACTUAL VERSUS LIST PRICES FOR NICKEL SULFATE 1960- 1975*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipment
quantity
(1,000 metric ton)
7.5
9.0
7.3
7.8
9.4
11.3
14.9
13.6
17.7
17.3
16.6
14.0
8.5
9.4
8.4
5.8
Value
($MM)
3.9
4.8
4.0
4.3
5.0
5.2
6.9
7.2
9.9
11.4
12.0
10.5
6.9
9.0
9.0
7.8
Unit value
($ /metric ton)
520
533
548
551
532
460
463
529
559
659
723
750
821
957
1071
1345
List price
($/metric ton)
617
617
662
662
662
662
662
706
750
827
1114
992
1014
1114
1180-1433
1566

     *Source:   U.S.  Department of Commerce,  Current  Industrial  Reports,
Series M28A,  and Chemical Marketing Reporter.
                                        V-26

-------
     d.  Uses and Substitutes.  It is estimated that 90 percent of total




consumption is represented by metal plating and the remainder as a hydrogenation




catalyst.  Consumption of nickel sulfate by the plating industry has plateaued




and is now expected to decline.  As a result of disposal restrictions and the




high price of nickel salts, the plating industry is beginning to recycle nickel




sulfate.  The extent of the expected decline in consumption is not yet clear.




Some producers believe that after platers install closed loop systems to




avoid wastewater disposal, the total demand for nickel sulfate will be reduced




by 50 percent.  Other producers believe that the impact on demand will not be




so dramatic.  Some platers may find it economically feasible to sell the spent




solution and purchase "fresh" nickel sulfate.  Processors may then recover




nickel from the solution according to market demand.  In this event, demand




for nickel sulfate might not be drastically reduced.  In any event, sales are




expected to decline within the next five to ten year period, although the degree




of the decline and its impact on the industry are not yet clear.




     Nickel sulfate has no chemical substitutes in the plating industry.  However,




auto manufacturers have been replacing metal plated parts by stainless steel




and plastic parts.




     2.   Production Characteristics.




     a.   Production Processes.   Nickel sulfate  is  produced  from two types  of raw



materials: (1) pure nickel or nickel oxide; or (2) impure nickel.




     In che first case, the metal or oxide is digested in sulfuric acid and




the solution is then filtered and either packaged for sale or further processed




to recover a solid material, the hexahydrate.  The sludges recovered by filtration




can be sent to the second process to produce more nickel sulfate.
                                       V-27

-------
     b.  Concentration and Location of Markets.   Approximately 90 percent of




nickel sulfate production goes into metal plating.   The metal plating industry




is diversified, with a large number of small establishments.  A large part




of the metal plating industry is found in the Northeast and North Central regions.




     c.  Process Hazardous Wastes.  The manufacture of nickel sulfates




generates relatively small amounts of nickel-containing hazardous wastes for




land disposal.  They result from the treatment of wastewaters by raising the




pH to precipitate metallic salts.




     d.  Capacity and Capacity Utilization.  Capacity data are not publicly




available.  There is currently a balance between supply and demand and the




industry is producing at capacity.  Capacity expansions are not anticipated




since overall demand is expected to decline as metal platers recycle the nickel




sulfate to comply with water pollution regulations that require the reduction




of nickel salts in waste water effluent.




     3.  Industry Structure.




     a.  Number of Firms and Degree of Concentration/Integration.  The four most



important nickel sulfate producers and their plant locations are shown in




Table V-13.     It is estimated that Harshaw Chemical Company is the largest




manufacturer with close to 50 percent of total capacity.  Chemetron may be




the second largest manufacturer, followed by CP Chemicals and M&T Chemicals, Inc.




The first three produce both liquid and dry product, while M&T Chemicals




manufacturers liquid and resells dry material.  In addition to these companies,




Federated Metal/ASARCO produces crystal nickel sulfate from copper refining and





a number of other companies produce small volumes at different times.  Nickel




sulfate is produced in diversified plants where the operation is a relatively




small part of the total.
                                         V-28

-------
                            TABLE V-13

                     NICKEL SULFATE PRODUCERS*
                               (1975)
     Company                                      Location

Harshaw Chemical Co.                         Cleveland, Ohio

Chemetron Corporation                        Cleveland, Ohio

C.P. Chemicals                               Sewaren, New Jersey

M&T Chemicals, Inc.                          Matawan, New Jersey
     *Source:  Contractor's  estimates.
                                     V-29

-------
     In the second case, the raw materials are also digested in sulfuric acid.




However, the resulting solutions have to be treated in series with oxidizers,




lime and sulfides to precipitate impurities.   These solutions are filtered




and marketed as such or further processed to recover a solid product.  The




recovered sludges from filtration are treated as hazardous waste.




     To recover solid product, the nickel sulfate solutions are first




concentrated, then filtered and fed to a crystallizer.   The resultant suspensions




are fed to a clarifier where solid product is recovered.   This material is




then dried, cooled, screened and packaged for sale.  The recovered solids from




the filtration step and other liquor from the classifiers are recycled to an




earlier part of the process.




     b.  Production Costs.  The manufacturing cost of nickel sulfate is




heavily dependent on the price of nickel metal.  For example, in 1972 when




the producer's price for nickel was $1.33 per pound, the list price for nickel




sulfate was $0.46 per pound.  In 1974, the producer's price for nickel was $1.85




per pound and the list price for nickel sulfate was $0.65 per pound.  That is,




a 39 percent increase in the price of nickel resulted in a 41 percent increase




in the list price of nickel sulfate.




    Although detailed manufacturing costs for nickel sulfate are not shown»




industry sources estimated that the replacement cost for a 5,000 ton-per-day




plant in 1972 was $2.5 to $3.0 million.  On the basis of the industry average




1972 plate price of $744 per ton, after-tax profits were estimated at $37.20




per ton.
                                         V-30

-------
                     D.  Phosphorus Pentasulfide




     1.  Industry Structure




     a.  Producers.  Currently there are only three producers with a capacity




of 79,900 metric tons, as shown in Table V-14. These capacities may be some-




what overstated in that they include debottlenecking and expansion plans




which will not be completed until 1976 or 1977.  Monsanto is the largest




producer with 48 percent of total capacity.  Stauffer is the second largest




producer with 27 percent of total capacity, and Hooker has the remaining 25




percent of industry capacity.   Monsanto and Stauffer both have important




captive requirements while Hooker is primarily a merchant supplier of phos-




phorus pentasulfide.




     b.  Captive Requirements.  Commercial shipments of phosphorus penta-




sulf ide are not reported by the Department of Commerce; however, captive use




is estimated to be only 25 percent of total production.  Both Monsanto and




Stauffer, the major producers  of phosphorus pentasulfide, are forward inte-




grated into the production of  organophosphorus pesticides.  There is little




captive use of phosphorus pentasulfide for the production of lube oil additives,




the major end-use market.




     2.  Supply Characteristics




     a.  Manufacturing Routes.  The phosphorus sulfides are manufactured




commercially by direct union of elemental phosphorus and sulfur.  Usually




molten white phosphorus is run into molten sulfur in a reaction vessel.




The sulfur is stirred continuously and the rate of addition of the phosphorus




is controlled to maintain reaction temperature.  Phosphorus pentasulfide is




purified by washing it with carbon disulfide, which removes small percentages




of the sesquisulfide and free  sulfur.
                                   V-31

-------
                             TABLE V-14


              PHOSPHORUS PENTASULFIDE PRODUCERS - 1975*
   Producer
Location
Annual capacity
  (metric tons)
Hooker Chemical
Hooker Chemical
Monsanto
Monsanto
Stauf fer
Stauffer
Stauf fer
Total
Columbus, Mississippi
Niagara Falls, New York
Anniston, Alabama
Sauget, Illinois
Morrisville, Pennsylvania
Mt. Pleasant, Tennessee
Nashville, Tennessee

6,400
13,600
10,900
27,200
8,200
9,100
4,500
79,900

* Source:   Chemical Marketing Reporter.
                               V-32

-------
     Direct production of organophosphorus insecticides is under evaluation




without going through the intermediate, phosphorus pentasulfide.   If  an  alter-




native manufacturing route  is employed, it would have a major  impact  on  the




demand for phosphorus pentasulfide.




     b.  Supply/Demand Balance.  As shown in Table V-15,  industry  capacity has




historically kept ahead of  demand.  As a result, operating levels  in  the indus-




try reflect the overcapacity which has occurred.  In 1973, operating  levels




increased as production increased significantly and resulted in shortages of




phosphorus pentasulfide.  Because of raw material shortages rather  than  reduced




demand, the industry operating level declined in 1974.  The industry  is  currently




undergoing additional expansion of capacity in order to meet the increased




forecasted demand over the  next several years.




     3.  Demand Characteristics,




     a.  Market Size.  U.S. production of phosphorus pentasulfide has grown




from 31,050 metric tons in  1960 to 61,460 metric tons in 1974.  Production




declined 14 percent in 1975 to 53,200 metric tons versus 49,600 metric tons In




1974.  Data for imports and exports are not reported separately; however,




imports are believed to be  negligible and exports were an estimated 2,000-4,000




metric tons in 1974 (see Table V-16).




     b.  Growth.  U.S. production of phosphorus pentasulfide increased at an




average annual rate of 5.0 percent between 1960 and  1974;  however,  in recent years




production has grown more rapidly with a 5.6  percent  annual average growth from




1970 to 1974.  The higher growth reflects the increased demand for organo-




phosphorus pesticides and the increased use of phosphorus-based lube  oil




additives.  Future growth should be at least at historical levels because of




expected continued growth in the major end-use sectors.   The availability of




elemental phosphorus should not have a limiting impact on production  growth.
                                     V-33

-------
                         TABLE V-15
                                                            *
       INDUSTRY OPERATING CAPACITY - PHOSPHORUS PENTASULFIDE
                    (THOUSANDS OF METRIC TONS)
   Year          Capacity          Production          % capacity
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
54
-
-
-
63
-
-
69
-
-
80
44.8
48.8
44.2
43.0
56.0
49.5
53.4
55.6
68.9
61.5
55.7
83
-
-
-
89
-
-
81
-
-
70
* Source:  Chemical Marketing Reporter, Contractor's estimate.
                                 V-34

-------
                                 TABLE V-16

            U.S. PRODUCTION OF PHOSPHORUS PENTASULFIDE, 1960-1975*
                         (THOUSANDS OF METRIC TONS)

Year
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Production
31.05
32.05
30.87
30.87
37.76
44.75
48.84
44.21
43.03
56.01
49.48
53.38
55.56
68.90
61.46
55.70
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
2
NA
Apparent
consumption
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
59
NA
     * Source:
Series M28A.
U.S. Department of Commerce, Current Industrial Reports,
                                  V-35

-------
     c.  Uses.  The largest  and potentially fastest growing end-use area is as




a precursor for lube oil additives, principally zinc dithiophosphate.  The




trend to fewer lube oil changes, and hotter operating engines for pollution




control will result in increased demand for phosphorus-based additives which




are antiwear and corrosion inhibitors.  Industry forecasts range between 5 and




15 percent per year growth through 1980 for this end-use sector.  Oil additives




accounted for an estimated 50 percent of consumption of phosphorus pentasulfide




in 1975>as shown in Table V-17.




     The other major end-use area is for organophosphorus insecticides, in-




cluding the parathions and malathion, which accounted for an estimated 40 per-




cent of phosphorus pentasulfide consumption in 1975.  This end-use sector has




grown rapidly in recent years as organophosphorus insecticides have been a




replacement for DDT and .because of: increased crop acreage.  Future growth




will be more limited, and demand will more closely follow crop trends and




severity of pest control problems.  The remaining 10 percent of consumption




includes flotation agents, exports and miscellaneous uses.




     d.  Prices.  Prices historically have been depressed for phosphorus




pentasulfide.  As shown in Table V-18,  actual prices declined from $261 per




metric ton in 1961 to $224 per metric ton in 1969.  In the past several years




prices have increased significantly due to increasing raw material costs as




well as increased demand and tight supply for phosphorus pentasulfide.  List




prices were historically above actual prices, and to some extent, reflect




the lower transfer price of the captive producer.  Also, since competition in




the industry is generally based on price, the historical overcapacity in the




industry has resulted in depressed prices.
                                     V-36

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                              TABLE V-17
                                                             A
        PHOSPHORUS PENTASULFIDE CONSUMPTION BY END USE - 1974
             End use                    % of total
  Oil additives                            50
  Organophosphorus pesticides              40
  Flotation agents                          6
  Exports                                   3
  Miscellaneous                             1

                                          100
* Source:   Chemical Marketing Reporter,   Contractor's estimates
                              V-37

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                                     TABLE V-18

            ACTUAL VERSUS LIST PRICES FOR PHOSPHORUS PENTASULFIDE  1960-1975*

(1
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipments
,000 metric tons)
NA
29.5
28.5
27.3
34.2
36.5
38.9
25.5
30.2
42.9
40.3
45.5
44.9
59.5
49.3
42.8
Value Unit value
($MM) ($ /metric ton)
NA
7.7
7.5
7.1
8.3
8.2
8.9
6.1
7.3
9.6
9.5
10.3
10.9
12.8
18.0
28.6
NA
261
263
260
243
225
229
239
242
224
236
226
243
215
365
668
List pricea
($/metric ton)
254
254
303
303
303
254
259
303
314
322
322
322
322
313
313 - 661
661

     *Source:   U.S.  Department  of  Commerce,  Current  Industrial Reports,
Series M28A,  and Chemical Marketing  Reporter.

     a.   Powder,  drums,  carlot, works.
                                      V-38

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     e.  Foreign Competition.  Foreign competition in phosphorus pentasulfide




has historically been insignificant and is likely to remain so for the next




several years.




     f.  Substitute Products.  There are. no substitutes for phosphorus penta-




sulfide as intermediates in the production of pesticides or lube oil additives.




There are secondary levels of competition particularly with organophosphorus




insecticides which compete with a number of alternative pesticide products.




Also, phosphorus pentasulfide-based lube oil additives compete with alternative




additives to a limited degree.
                               V-39

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                         E.  Phosphorus Trichloride




     1.  Industry Structure.




     a.  Producers.  Currently there are only five producers of phosphorus




trichloride (see Table   V-19) with a total capacity of 88,000 metric tons.




Monsanto and Stauffer have 57 percent of total capacity with the remaining




three producers sharing 43 percent of the total capacity.  Several producers




are expanding or planning to expand capacity in the next several years.




     b.  Captive Requirements.  Captive consumption of phosphorus trichloride




is believed to be significant^ although commercial shipments are not reported




by the Department of Commerce.  The four producers of phosphorus oxychloride




are also producers of phosphorus trichloride, which implies that at least 43




percent of production is used captively.  Captive consumption is likely to be




greater than 50 percent since the producers of phosphorus trichloride are




also producers of pesticides, phosphite esters, and other important end-use




markets.




     2.  Supply Characteristics.




     a.  Manufacturing Routes.  Phosphorus trichloride is produced by the




reaction of phosphorus and chlorine.  The raw materials are combined with phos-




phorus trichloride which moderates the heat of reaction.  Liquid phosphorus and




chlorine gas are continuously fed to a reaction vessel, and phosphorus trichloride




is refluxed to remove the heat of reaction.  The phosphorus trichloride is dis-




tilled and treated with additional chlorine to remove traces of unreacted phos-




phorus.  The product is further distilled to remove organic chloride compounds




and phosphorus oxychloride.




     b.  Supply/Demand Balance.  As shown in Table  V-20,  in 1966 and 1968 the




industry operated at a high level of capacity utilization.  The reported




capacities may be understated since phosphorus oxychloride is often produced
                                      V-40

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                              TABLE V-19
               PHOSPHORUS TRICHLORIDE CAPACITIES - 1975*
    Producer                  Location                Annual capacity
                                                       (metric tons)
    FMC                 Nitro, West Virginia               18,100
    Hooker              Niagara Falls, New York             9,100
    Mobil               Charleston, South Carolina         10,900
    Monsanto            Sauget, Illinois                   27,200
    Stauffer            Cold Creek, Alabama                10,900
    Stauffer            Morrisville, Pennsylvania          11,800

      Total                                                88,000

* Source:  Chemical Marketing Reporter.
                                 V-41

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                                TABLE V-20

               INDUSTRY OPERATING RATE - PHOSPHORUS TRICHLORIDE*
                         (THOUSANDS OF METRIC TONS)
Year               Capacity               Production               % capacity
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
^
-
36
-
48
48
-
-
76
-
88
88
27.2
34.8
40.0
46.4
49.4
52.0
46.8
50.1
57.7
72.8
67.7
74.6
.
-
Ill
-
103
108
-
-
76
-
77
85

    * Source:  U.S. Department of Commerce, Chemical Marketing Reporter.
                                       V-42

-------
in the same plant.  If PCI., capacity used to produce POC1  is not reported,




it would explain the estimated operating levels greater than 100 percent. A




high level of capacity utilization was also achieved in 1973 because of signi-




ficantly increased production.  In 1974, the operating rate declined, but




this was more likely due to raw material shortages as opposed to reduced




demand.  The higher prices which producers received reflect the continued




market demand in the face of a lower operating level for the industry.




     3.  Demand Characteristics.




     a.  Market Size.   Large-scale U.S. production of phosphorus trichloride




began after World War II principally for use as plasticizers.  Since 1951,




production has grown from 10,900 metric tons to oyer 74,000 metric tons in




1975 (Table V-21).  Since imports and exports are negligible, apparent con-




sumption, including inventory changes, is taken equal to production.




     b.  Growth.  U.S. production of phosphorus trichloride increased at an




average annual rate of 7.4 percent between 1960 and 1975.   However, since




1970 growth has averaged 9.8 percent per year.  The future growth for phos-




phorus trichloride will be affected by the regulatory status of leaded




gasolines which utilize phosphorus-based additives.  This potential impact




on demand will be offset by increased growth for flame retardants, pesticides,




and other markets, and as a result, future growth should be moderate.
                                  V-43

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                                  TABLE V-21

               U.S.  PRODUCTION OF PHOSPHORUS TRICHLORIDE,"1960-1975*
                          (THOUSANDS OF METRIC TONS)
            Year
                               Volume
            1960
            1961
            1962
            1963
            1964
            1965
            1966
            1967
            1968
            1969
            1970
            1971
            1972
            1973
            1974
            1975
                                20.88
                                21.51
                                22.97
                                24.33
                                27.23
                                34.77
                                40.03
                                46.39
                                49.40
                                52.02
                                46.75^
                                50.11
                                57.74
                                72.81
                                67.72
                                74.56
     *Source:
Series M28A.
U.S. Department of Commerce, Current Industrial Reports,
                                          V-44

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     c.  Uses.  The largest end-use area for phosphorus trichloride was as an




intermediate for the production of phosphorus oxychloride.  This area accounted




for an estimated 43 percent of domestic consumption in 1975, as shown in




Table v-22.    Phosphorus oxychloride is an intermediate for phosphate esters,




which are used as gasoline additives, plasticizers and fire retardants.  Use




of phosphorus trichloride as a pesticide intermediate has been growing in recent




years, and the end-use area'has become the second largest market with an




estimated 27 percent of domestic consumption.




     Other end uses include phosphate esters, surfactants and stabilizers,




and miscellaneous uses which account for the remaining 20 percent of consumption.




     d.  Prices.  Prices for phosphorus trichloride declined from $275 per metric




ton in 1960 to $188 per metric ton in 1970.  Actual prices in the 1960's were




close to list prices and reflected the high capacity utilization.  In the




early 1970's, actual prices were depressed, and the spread between list and




actual prices widened reflecting reduced demand and overcapacity.  In 1974,




list prices more than doubled and actual prices increased more than 70 percent.




The higher prices reflected higher raw material costs for phosphorus and chlorine




as well as increased demand for phosphorus trichloride.




     Actual versus list prices for phosphorus trichloride are shown in Table V-23.




     e.  Foreign Competition.  Foreign competition in phosphorus trichloride has




historically been insignificant and is likely to remain so at least for the




next several years.




     f.  Substitute Products.  There are limited substitutes for phosphorus




trichloride because of its principal use as a chemical intermediate.  There




are secondary levels of competition such as other plasticizers, flame retardants,




and pesticide products but direct competition is minimal.  Also, alternative
                                     V-45

-------
                           TABLE V-22

          CONSUMPTION OF PHOSPHORUS TRICHLORIDE BY END-USE*
              End use                  % of 1975 total
Phosphorus oxychloride intermediate          43
Pesticide intermediates                      27
Phosphite esters                             15
Surfactants and stabilizers                   5
Miscellaneous                                10

  Total                                     100
* Source:  Chemical Marketing Reporter

-------
                                TABLE V-23

           ACTUAL  VERSUS LIST  PRICES FOR PHOSPHORUS TRICHLORIDE 1960-1975*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipments
(1,000 metric tons)
8.0
7.4
9.1
8.7
9.3
11.7
15.8
15.3
17.5
19.1
18.6
22.6
29.6
36.7
40.4
38. 9 _
Value
($MM)
2.2
2.0
2.2
2.1
2.2
2.5
3.3
3.4
3.8
4.3
3.5
4.6
6.1
8.1
15.3
23.1 _____
Unit value
($/M ton)
275
270
242
241
237
214
209
222
217
225
188
204
206
221
379
594
a
List price
($/metric ton)
276
276
276
276
221
221
221
232
243
243
243
292
292
292
292^772
     *Source:   U.S.  Department of Commerce,  Current  Industrial  Reports,
Series M28A,  and Chemical Marketing Reporter.

     a.  Drums, carlot,  works.
                                         V-47

-------
processes for producing phosphorus trichloride end products are under evaluation.




If such processes were utilized on a large scale,  they could have a major impact on




phosphorus trichloride demand.
                                         V-48

-------
                           F.  Sodium Silicofluoride





     1.  Product Characteristics.




     a.  Market Size and Growth.  U.S. production of sodium silicofluoride has




increased 3.5 percent per annum during the 15-year period from 1960 to 1974.




Production, as shown in Table V-24,reached a high of 54,800 metric tons in 1971




and has declined 5 percent per annum in the three years since then.  Imports were




not reported separately in 1974 and have been declining since 1969.  Imported




sodium silicofluoride appears to have little impact on the overall U.S. market




except to make up shortages when U.S. production is low.  Exports have never




been reported.  There appear to be three U.S. producers at three plants.




     b.  Prices.  Price data,as shown in Table V-25,show a gradual decrease of




1.1 percent per annum from 1960 to 1974 for "actual" prices.   "Actual" prices




are calculated from Department of Commerce data for total shipments and represent




industry average plant prices.  However, 1972-4 prices show a decline from prices




in the 1965-71 period.  List prices were taken directly from the weekly data




compiled by the Chemical Marketing Reporter and represent open market prices.




List prices are substantially higher than plant unit values.




     c.  Uses and Substitutes.  Water fluoridation and the production of synthetic




cryolite are the two largest single uses for sodium silicofluoride.  Other market




areas provide a substantially smaller annual demand for this material. (Table V-26.)
                                        V-49

-------
                              TABLE V-24
                              DE OF SODIU
                        (THOUSANDS  OF METRIC  TONS)
U.S. PRODUCTION AND TRADE OF SODIUM SILICOFLUORIDE 1960-1975


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Production
28.8
30.5
35.0
36.4
36.0
42.2
43.6
47.5
42.0
44.5
53.4
54.8
52.1
49.0
46.8
44.2
Imports
2.5
2.8
3.1
1.8
3.3
4.3
3.5
7.1
11.0
16.0
6.6
5.6
6.0
4.3
NA
NA
Exports
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA

     *Source:   U.S.  Department of Commerce, Current Industrial Reports,
Series M28A.  U.S. Department of Commerce, FT 110, 246, 410.
                                      V-50

-------
                                  TABLE V-25

         ACTUAL VERSUS LIST PRICES OF SODIUM SILICOFLUORIDE 1960-1975*


1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipments
(1,000 metric tons)
26.0
29.0
30.8
32.0
34.2
37.2
41.4
44.3
40.8
42.7
50.9
52.1
49.2
50.5
45.4
42.2
Value
($ MM)
3.0
3.2
3.5
4.0
4.6
5.4
6.1
6.8
6.2
6.3
7.4
7.9
6.3
6.2
6.1
5.9
Unit value
($/tnetric ton)
115
110
114
125
135
145
147
154
152
148
145
152
128
123
134
140
List price
($/metric ton)
143
143
165
154
165
165
165
176
176
176
176
198
198
198
198
198
     *Source:  U.S.  Department of Commerce, Current Industrial Reports,
Series M28A, and Chemical Marketing Reoorter.
                                           V-51

-------
                            TABLE V-26
                 SODIUM SILICOFLUORIDE END USE
                                              1966              1972
Water fluoridation
Synthetic cryolite
Glass
Metallurgy of beryllium
Vitreous enamel frits
Other :
24
NA
5
4
3
NA
27
47
4
4
2
16
 preservative
 glue
 laundry sour
 insecticide
 latex
 intermediate chemical
 (production of sodium fluoride)
* Source: Contractor's estimates.
                               V-52

-------
     Although the number of public water systems fluoridating supplies is con-




tinually increasing, sodium silicofluoride is enjoying less popularity in this




application.  Difficulty in handling, poor applicator reliability and lifetime,




and often poor relative economics have prompted the use of substitute fluoride




compounds, especially in the largest and the smallest water systems.  Fluoridation




equipment manufacturers have confirmed such a trend toward more easily metered




liquids  (fluosilicic acid) and solids with a more constant solubility (sodium




fluoride, which has essentially a uniform 4 percent solubility and can therefore




be metered on a volumetric basis rather than on a dry weight basis).




     In primary aluminum production, cryolite (Na,.AlF,) is used with aluminum




fluoride as a molten electrolyte in the electrolytic reduction of alumina to




aluminum metal.  A large proportion of cryolite is now synthetic due to an acute




shortage of the natural material.  Kaiser Aluminum and Chemical Corporation is




the only producer of synthetic cryolite using sodium silicofluoride as a starting




material.  The silicofluoride is manufactured from fluosilicic acid at Kaiser's




plant in Mulberry, Florida, and shipped to Kaiser's plant in Chalmette, Louisiana,




for processing to cryolite.  Other synthetic cryolite routes do not involve the




manufacture of sodium silicofluoride.  Kaiser's current cryolite capacity is




30,000 tons per year, which requires a minimum silicofluoride input of 26,800




tons per year.




     This demand for cryolite, and therefore for sodium silicofluoride,is intimately




tied in with primary aluminum production.  The industry-wide operating factor




for aluminum dropped from 95 percent of capacity in 1970 to 85 percent in 1971.




Although this is expected to increase throughout the decade, no great increase




in sodium silicofluoride usage is anticipated.
                                     V-53

-------
     Other minor uses for sodium silicofluoride include:




          1.  leather and wood preservatives;




          2.  glue;




          3.  opacification of vitreous enamel frits;




          4.  opalescent glass;




          5.  laundry sours;




          6.  insecticides and rodenticides;




          7.  coagulating agent for latex;




          8.  extraction of beryllium from its ores; and




          9.  manufacture of sodium fluoride.




     Water fluoridation may be accomplished by other fluoride-containing substances




in place of sodium silicofluoride.  Although sodium silicofluoride is the least




costly (f.o.b. point of manufacture) on a per pound of available fluorine basis




when compared to sodium fluoride and fluosilicic acid (agents most commonly used),




shipping expenses and fluoridation equipment cost and operating expenses ultimately




bring all three to nearly a competitive position.  Fluosilicic acid, an acid in




liquid form, provides a readily shipped, easily metered' and controlled (on a




volumetric basis) fluoridating agent.  Larger communities have shown preference




for the acid over other choices.  Smaller communities have favored sodium fluoride




due to its higher and constant 4 percent solubility level over most application




temperatures.  This allows controlled dissolution of the granular solid and sub-




sequent volumetric metering.  Sodium silicofluoride is typically metered into




water systems as a dry powder or as a temperature-controlled solution.
                                      V-54

-------
     In addition to cryolite, aluminum fluoride is used as a molten electrolyte




in the electrolytic reduction of alumina to aluminum metal.  The two fluxes are




to some degree interchangeable, depending upon operating practices and the




sodium oxide content of the alumina used in the reduction plant.  Moreover,




synthetic cryolite may be manufactured directly from hydrofluoric acid without




an intermediate production of sodium silicofluoride.  Kaiser is the only cryolite




producer following the sodium silicofluoride route.




     Potassium silicofluoride is a viable substitute for sodium silicofluoride




in production of vitreous enamels.  The current laundry sour market has become




oriented toward materials more voluble than sodium silicofluoride.




     2.  Production Characteristics.




     a.  Production Processes.  Sodium silicofluoride is a by-product of the




fertilizer industry's wet process phosphoric acid production.  Fluosilicic acid,




the primary raw material for silicofluorides, is present as an impurity in the




product phosphoric acid.  Two primary schemes are in current use for producing




silicofluorides.  In the first, the recovered fluosilicic acid is reacted with




sodium chloride in water.  Sodium silicofluoride is collected as a precipitate,




washed, dried and packaged.  In the second, fluosilicic acid is not recovered as




a separate stream but rather  remains mixed in an impure phosphoric acid stream.




Soda ash is mixed with the acid to form and precipitate the sodium silicofluoride.




Again, the salt is separated, washed, and dried for packaging.  These two process




routes account for all of the annual domestic production of sodium silicofluoride.
                                        V-55

-------
     b.   Process Hazardous Wastes.  In the process where the recovered fluo-




silicic acid is reacted in solution with sodium chloride, all of the wastes are




waterborne.  Treatment of this effluent does generate a small amount of some




calcium fluoride-containing wastes.  This treatment consists, in general, of




precipitation with lime and settling or filtering of solids.  In the second process




where soda ash is mixed in the impure phosphoric acid stream, all wastes are water-




borne.  Their treatment generates a hazardous waste containing calcium fluoride as




above.  This second process is used in only one facility and the amount of waste




material is small.




     c.  Capacity and Capacity Utilization.  U.S. sodium silicofluoride capacity




appears to be in excess of actual production.  The 1972 data indicate that only 91




percent of the estimated 57,135.netric ton capacity was utilized.




     Indications are that demand for sodium silicofluoride will not change sub-




stantially in the near future.  Kaiser has stated that demand for synthetic




cryolite is slipping; the popularity once enjoyed by silicofluoride in water




fluoridation is also waning.
                                       V-56

-------
            VI.  PROPOSED REGULATIONS AND MANAGEMENT COSTS







                       A.  Proposed Regulations




     At this time (August 1976) EPA does not have a Congressional mandate to




promulgate regulations for the control of hazardous wastes in the inorganic




chemicals industry.   In anticipation of such a mandate, a report was prepared




for the EPA entitled "Assessment of Industrial Hazardous Waste Practices,




Inorganic Chemicals Industry" by Versar, Inc. under contract #68-01-2246. The




Assessment Report was prepared for information purposes and was not concerned




with the modification of production processes or treatment technology, but




only with the secure transfer of hazardous wastes to approved storage, treat-




ment or disposal facilities.  Three levels of technology were identified and




considered for each chemical:







     Level I:   Technology currently employed by typical facilities;




                i.e., broad average present treatment and disposal




                practice.  For most large volume wastes, two or three




                options are required to cover the different technologies




                utilized.




     Level II:  Best technology currently employed.  The technology




                identified at this level must represent an acceptable




                process from an environmental and health standpoint




                currently in use in at least one location.   Installations
                                 VI-1

-------
              must be on a commercial scale.  For the inorganic




              chemicals land-destined hazardous wastes this level




              may be similar to Level I in a number of instances.




   Level III: Technology necessary to provide adequate health and




              environmental protection.  Level III may be more or




              less sophisticated or may be identical with Level I




              or II technology.  At this level, identified technology




              may include pilot or bench scale processes providing




              the exact stage of development is identified.  One




              pertinent difference between Level III technology




              and Levels I and II is that it is not necessary that




              at least one location be using this technology.




              Technology transfers from other industries are




              also included.




     The incremental cost of complying with a potential regulation that




all producers must achieve at least Level III waste management practices




was used in an economic impact analysis for each chemical.   In some cases




the incremental cost of compliance would be the difference between Level I




and Level III and in other cases the total Level III costs represent the




incremental costs.
                                    VI-2

-------
                 B.  Hazardous Waste Management Costs




     The hazardous waste management costs contained in the Assessment Report




have been used in two different ways in the economic impact analysis.  In order




to approximate the average cost impact likely to be experienced by firms pro-




ducing a primary chemical, the incremental costs of moving from Level I to




Level III were calculated for each chemical.  These incremental costs were then




used to estimate average product price changes and losses in total product




demand for the industry.




     The Assessment Report costs were also used in the plant closure analysis




and the sensitivity analysis.  The average incremental cost of compliance is




probably not a good approximation of the compliance costs faced by an individual




plant in danger of closing.   Either because of unique locational factors or an




absence of even the Level I practices, the plant will probably be facing




higher compliance costs than indicated by the average incremental costs.  The




Assessment Report did not estimate the costs to be used for a closure analysis.




The assumption has been made in this economic impact analysis that the total




Level III costs can be used in the worst case closure analysis.  While it is




not known what the actual costs are, this level of costs is believed to be




correct within an order of magnitude, and should serve to at least identify




situations needing closer examination.




     The Assessment Report developed treatment and disposal costs for 1973 for




the identified "potentially hazardous" wastes.  For the impact analysis, these




costs were updated to the base year, 1975, in order to be consistent with other




cost data presented in the study.  Except for this update, the cost figures used
                                 VI-3

-------
in the impact analysis which follows are precisely those developed for 1973.




The updated total Level III treatment costs for the primary chemicals are




shown in Table VI-1.  The costs represent the treatment technology which most




producers will be able to employ, in the opinion of the Assessment Report




contractor.  The following is a description of each option shown in the table.




     Chlorine - Diaphragm Cell:  secured landfill (off-site) for asbestos,




                lead sludges and chlorinated hydrocarbons.




     Chlorine - Mercurcy Cell:  off-site secured landfill (50 miles).




     Titanium Dioxide:  on-site approved land storage.




     Phosphorus:  recovery of phosphorus wastes by distillation.  Precipitator




                  dust recycled.  Calciner and ftfrnace fume scrubber wastes




                  put in approved landfill.




     Hydrofluoric Acid:  secured landfill, rainwater diversion and leachate




                         monitoring.,




     Sodium Dichromate:  chemical treatment plus filtration and approved




                         contract landfill.




     The treatment and disposal costs were updated using the inflation factors




shown on Table VI-2.  The actual treatment costs can vary substantially.




     The plant shutdown impact analysis is a worst case analysis based on the




highest treatment costs for each model plant.  The plants most likely to be




impacted by the solid waste treatment requirements are those plants for which




(1) there is no current control, (2) present controls are not appropriate for




achieving Level III technology, or  (3) locational factors make control techniques




appropriate to other plants inappropriate to the impacted plant.  A significant




percentage of plants have some level of waste treatment control.  As indicated




in Table VI-3, the percent of plants with Level I control technology range  from
                                 VI-4

-------
                             TABLE VI-1

                         1975 TREATMENT COSTS*
Chlorine-Diaphragm Cell

Level II & III -Option 3

Investment costs:
  land              0
  other             0
  total             0
Annual costs:
  capital           0
  operating         0
  energy/power      0
  contractor     60,000
  total          60,000

Cost/m ton chlorine
  (excl. capital cost)      0.37
Cost/m ton chlorine         0.37
Cost/m ton haz.waste  (wet) 28.84
Chlorine-Mercury Cell
Level II & III - Option 5

Investment costs:
  land               0
  other              0
  total              0

Annual costs:
  capital            0
  operating          0
  energy/power       0
  contractor     367,200
  total          367,200

Cost/m ton chlorine
  (excl. capital cost)       4.08
Cost/m ton chlorine          4.08
Cost/m ton haz.waste (wet)  83.84
Titanium Dioxide
Level III - Option 5
Investment costs:
land 0
other 0
total 0
Annual Costs:
capital 0
operating 0
energy/power 0
contractor 157,200
total 157,200
Cost/m ton TiO,.,
(excl. capital cost) $4.32
Cost/m ton Ti02 4.32
Cost/m ton haz. waste (wet) 3.96
Phosphorus
Level II & III -Option 3
Investment costs :
land (annualized)
other 1,012,690
total 1,012,690
Annual costs:
capital 264,180
operating 78,000
energy /power 5,400
contractor 0
total 347,580
Cost/m ton phosphorus
(excl. capital cost)
Cost/m ton phosphorus
Cost/m ton haz. waste (wet)




1.67
7.00
9.52

                                     VI-5

-------
                               TABLE VI-1  (Con't)

                           1975 TREATMENT COSTS (continued)

Hydrofluoric Acid
Level III - Option 4
Investment costs:
land (10,000/yr.)
other 1,037,850
total 1,037,850
Annual costs:
capital 274,200
operating 127,200
energy /power 40,500
contractor 0
total 441,900
Sodium Bichromate
Level II & III -
Investment costs
land
other
total
Annual costs :
capital
operating
energy /power
contractor
total
Option 5

0
629,000
629,000

101,898
189,600
1,350
300,000
592,848
Cost/m ton HF
  (excl. capital cost)       7.29
Cost/m ton HF               18.90
Cost/m ton haz.waste  (wet)  4.03
Cost/m ton chrornate
  (excl. capital cost)      7.55
Cost/m ton chromate         8.92
Cost/m ton haz.waste  (wet)  8.12
   *Source:  "Assessment of Industrial Hazardous Waste Practices,  Inorganic
Chemicals  Industry", Versar, Inc., updated to 1975.
                                      VI-6

-------
                                TABLE VI-2

       METHOD USED FOR UPDATING THE VERSAR TREATMENT COSTS TO 1975 COSTS



Investment

     Other - update to 1975 using the CE  Plant Index.

                  CE Plant Index (June 1975)  =  181.8  _  ,  ?c-fi
                  CE Plant Index (June 1973)     144.5  ~

                  1.258 x June 1973 cost  *  June 1975 cost.

     I,and - assume constant land costs

Annual Costs

     Capital - Use the same percentage as that used by previous contractor

               in each individual example.   This is necessary because it

               appears that various combinations of factors have been used.

     Operating - Operating costs are labor  and supplies.   An approximation

                 of the updated cost can be made by using approximately a

                 20 percent increase.  This 20 percent was developed using

                 labor cost data published  in Chemical Week.

     Energy and Power - The previous contractor suggests that each of their

                        examples used specific energy costs.   A factor of

                        1.35 is reasonable  to update the energy and power

                        costs.



     *Source:  "Chemical Engineering" (CE),  and Contractor's estimates.
                                       VI-7

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-------
33 percent for sodium dichromate to 100 percent for phosphorus.  Although some




plants have treatment technology at Level II or III, a number of plants have




limited or no controls, and therefore, an examination of the impact of total




Level III treatment costs is necessary to reflect the potential plant shutdown




impact.   Also, if present control technology is not suitable for upgrading to




Level III technology, total Level III treatment costs wil] be incurred by a




producer who could not utilize existing controls.  For example, Table VI-3




points out that 100 percent of the phosphorus plants have Level I control




technology which potentially could reduce the cost impact of achieving Level III




technology.  However, the geographic location of a plant or some other site-




specific problem may prevent a producer from utilizing a lower cost Level III




approach.  If, as a result, an alternative technology were required, the pro-




ducer would not benefit from existing controls, and would be impacted by higher




total Level III technology treatment cost.  Therefore, in order to more




realistically assess potential plant shutdowns, the total treatment costs




required to achieve Level III technology have been considered.




     The incremental cost impacts of achieving Level III for the average plants




are shown on Table VI-4.   Tables VI-3 and VI-4 were developed in cooperation




with the Assessment Report contractor and represent a best judgement as to the




current  status of plants  producing the primary chemicals and their ability to




move to  the specified Level III technology.   The status of current control for




the primary chemicals and the projected treatment/disposal options for the




model plant are summarized in Table VI-3.   Since the treatment  and disposal




costs presented in the "Assessment Report" represent the total  costs required.




to achieve the various technology levels,  these costs have been adjusted to
                                 VI-9

-------
















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reflect the incremental costs of compliance for those plants at Level I moving




to Level III.  Table VI-4 summarizes the incremental treatment costs for the




model plant for each primary chemical.  These incremental costs are based on




the difference in the baseline and projected treatment/disposal options.  For




example, for a chlorine producer with a diaphragm cell plant, the baseline




technology is off-site landfill (Option 2).  The projected Level III technology




for the model plant is secured, off-site landfill (Option 3) and the incremental




costs reflect the incremental disposal costs for the model plant switching from




Option 2 to Option 3 control technology.




     The incremental compliance costs for the model plant are the treatment




costs utilized for determining short-run economic impacts on price and demand.




The incremental costs of treatment/disposal in Table VI-4 are said to be the




costs that producers on the average will attempt to pass along through price




increases.  This analysis assumes the incremental costs for the model plant




are representative of the principal industry producers.  The industry price




leaders are assumed to be impacted by the incremental treatment costs, and they




will, therefore, attempt to pass along these compliance costs through price




increases.  For a variety of reasons, it is possible that the actual costs to




be experienced by the price leaders will be higher or lower than those assumed




in this analysis.  No new attempt has been made to verify the applicability of




the Assessment Report costs to the product price leaders.
                                 VI-11

-------
                   VII.  ECONOMIC IMPACT METHODOLOGY




                  A.  Analytic Framework and Overview




     The methodology applied in this report has sought to analyze the




following short- and long-run economic impacts of proposed Federal hazardous




waste control regulations:




     1.  Short-Run Impacts (1977-78).  Short-run impacts include consideration




of marginal plant closures, increases in price due to:  (1) potential shortages




from plant closures in the next two to three years; (2) shifts in industry




cost curves because of compliance with regulation; (3) decreases in quantity




demanded as a result of any price increases.  Short-run secondary impacts con-




sidered include employment, wages, foreign trade and community effects.




     2.  Long-Run Impacts (1980 and beyond).  Long-run impacts include




consideration of price increases of a different magnitude than those which




occur in the short run.  Long-range impacts are discussed in greater detail




in Section C. 6. of this chapter.




     3.  Impacts Not Considered.  The following economic impacts are beyond




the scope of this analysis:  (1) secondary effects on consumers and suppliers




of affected products; (2) long-run changes in demand,  industry structure, and




aggregate capital requirements.




     4.  Analytical Disciplines.  Four disciplines were used in the assessment




of the impact upon the inorganic chemical industry of proposed hazardous waste




regulations.




     a.  Microeconomics.  Microeconomic theory offers a conceptual framework




upon which to build the logic of the impact analysis.   With econometric




techniques, a demand function can be specified and estimated.
                                   VI I-1

-------
     b.  Engineering Process Economics.   Engineering process economics offer




an ability to estimate the supply-cost characteristics of the affected products.




These characteristics may then be employed in an assessment of model plant




profitability.




     c.  Business and Industry Analysis.   Business and industry analysis provides




a conceptual apparatus through which to view the effects of the proposed regula-




tions by considering aspects of industry structure, conduct, and performance.




Also, such methods are necessary for the development of the numerous judgmental




and interview-based inputs that are required to complete the overall economic




impact analysis.




     d.  Financial Analysis.  Financial analysis is used to evaluate the cash




flows and capital structure of typical plants subject to hazardous waste regula-




tions.  This quantitative input is a useful measure of financial considerations,




but it must be rounded out by careful consideration of the qualitative issues




discussed in the industry analysis.




                        B.  Segmentation of  Industry




      In order to focus analytical efforts on those chemicals for which




greatest impacts on  the inorganic chemical industry would be expected, the




chemicals were segmented  into two categories.  These two categories are:




primary affected chemicals and secondary affected chemicals.  The first




category contains five of the thirteen chemicals/processes  studied and it




was for these five chemicals that a detailed economic impact assessment




was performed.  For  the remaining eight chemicals, it appears that no




severe economic impact would occur because of the small level of hazardous




waste  treatment costs developed as a basis for this analysis.
                                    VI I-2

-------
     The segmentation of chemicals was done on the basis of market




importance of the chemical (on the basis of production volume) and on a




comparison of treatment/disposal costs with product selling price.  This




segmentation approach is illustrated in Figure   VII-1 .   A more  detailed




segmentation of  all  of the  chemicals is presented in Table VII-1.




                        C.  Detailed Methodology




     1.  MicTQeconomic Theory of Hazardous Waste Control.  Demand and




supply curves are the fundamental conceptual tools of economic analysis in




that they depict the quantities of a particular good that customers are




willing to buy and sell, at certain prices of the good.   In the long run,




producers have complete flexibility to adjust their supply decisions to




changing demand conditions.  However, in the short run,  producers have




certain fixed commitments which act as constraints and offer only partial




freedom to adjust to given changes in demand.  For this reason,  the firm's




short-run supply curve will generally be steeper than the long-run supply curve.




     Microeconomic theory states that the perfectly competitive firm will




employ the most efficient mix of inputs in order to achieve the least-cost




level of output.  Given a set of production plans, a firm's supply curve




can be discussed in terms of its total, average, and marginal cost curves.




Total cost (TC), in the short run, is the sum of variable cost and any fixed




costs that must be incurred—regardless of the level of output.   Average




cost (AC) is the cost per unit of output and is defined as total cost divided




by the given level of output.  Marginal cost (MC) is the change in total cost




associated with a unit change in output and is defined as the slope of the




total cost curve.
                                     VII-3

-------
   1975
Market Size
(Production)
Large
(Over 1 Million Short
Tons)
Medium
(Over 100,000 Short
Tons)
Small
(Under 100,000 Short
Tons)
  Diaphragm Cell
     Chlorine
   Downs Co'l
   Chlorine
                             Aluminum Fluoi idc
(LOWEST PRIORITY)
Sodium Silicofluorids

   Phosphorus
   Pentasulficle

   Phosphorus
   Trichloride
                                  Small
                           (Under 0.5 Percent)
 Titanium Dioxide
(Chloride Process)
  Chrome Colois

  Nickel Sulfate
                                                                                (HIGHEST PRIORITY)
                            Mercury Cell
                              Chlorine
  Phosphorus

Sodium Uichromate'

Hydrofluoric Acid  '•
                                 Medium
                           (0.5 to 1.0 Prrceni)
                Trcatmc'iit Costs As Percent of Selling Price
                                 Lnrgo
                            (Over 1.0 Percent)
                   Source:  Contractor's Estimates,

                   FIGURE VII-1   ECONOMIC IMPACT PRIORITIES OF  INORGANIC CHEMICALS
                                                     VII-4

-------
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                                                                VII-5

-------
     Two final important short-run concepts are average fixed cost (AFC)



and average variable cost (AVC).   These are total fixed and total variable



cost divided by the relevant level of output.  These relationships can be



expressed somewhat more formally as follows:



     TC(q) = VC(q) + FC                                 (1)



     AC = TC/q                                          (2)



     MC - ATC = TC(q+l) - TC(q) = VC (q+1) - VC(q)      (3)



     AFC = FC/q                                         (4)



     AVC = VC/Q                                         (5)



where



     TC(q) = total cost of producing q units of output,



     VC(q) = variable cost of producing q units of output,



     FC = fixed cost of production required at all levels of output.



     These relationships are shown graphically in the figures which follow.



In Figure VII-2, TC is the short-run total cost curve.  Fixed costs are the



amount which must be incurred no  matter what the level of production.   Variable



costs depend on the level of output and are equal to FT at an output  of Q units.



Thus, at the point Q, total costs can be measured on the vertical axis as OT.



     Associated with any total cost curve is a set of average cost curves



and a marginal cost curve.  Figure VII-3 shows short-run average cost,



AC , average variable cost, AVC,  and average fixed cost, AFC.  Also,  short-run
  s


marginal cost is depicted as MC , which is the extra total cost per unit of
                               S


extra output.  It should be clear from equation 3 above, and from the verbal



definitions, that MC  is totally independent of any fixed cost, depending
                    S


only on variable cost.  It should also he noted that MC  intersects both
                                                       S


AVC and AC  atl their minimum points.  In the short-run, the firm's supply
          S





                                       VII-6

-------
Cost
                                        Fixed Costs
        0                         Q





        Source:  Contractor's Estimates.
Quantity
                    FIGURE VII-2    TOTAL COST CURVE
                               VII-7

-------
Cost Per Unit
                                           -  AFC
                                                                Quantity
             Source:  Contractor's Estimates.
           FIGURE VII-3    AVERAGE AND MARGINAL COST CURVES
                                VII-8

-------
curve is defined as that portion of MC  which lies on or above AVC, i.e.,
                                      s


the segment AB in Figure VII-3.  Although not explicitly shown in the figure,



in the long-run, when all costs are variable, the firm's supply curve is that



portion of MC  which coincides with or lies above AC .  To obtain a supply curve.
             i-t                                      L>


for an industry requires a summation of all the supply curves of the relevant,



individual firms.



     In a very real sense,  a discussion of supply is only half of the equation



because it is the interaction between demand and supply which determines



the industry's and firm's equilibrium output and price.  Generally, rational



consumers of normal goods will demand more of a product as its price declines,



i.e., the demand curve is negatively sloped.  Profit is defined as the



difference between total revenue and total cost.  It can be proven that



maximum revenue is achieved at the point where marginal revenue equals marginal



cost.



     In Figure VII-4, AR is a  downward demand curve and MR is



the associated marginal revenue curve.  MR intersects MC at Q , thereby



defining the industry's equilibrium output.  Optimal price, P , is determined



as the point on AR which is vertically above the point  of equilibrium output.



     An important aspect of microeconomic analysis is price elasticity.  This is



the degree to which consumers or producers will change  their  consumption or



production decisions in response to a given change in price.   If the demand for



a particular product is of  the form
     Q.=f(P., P , Y)
                 r

where



     Q. = demand for product i,



     P. = price per unit of product i,



     P. = price per unit of product j, a substitute for product i,



     Y  = economic activity index,




                                    VII-9

-------
Price Per Unit
                                                             AC
                                -    \
                                                               AR = D
Quantity
                                           MR
              Source: Contractor's Estimates.
         FIGURE VII-4    DETERMINATION OF EQUILIBRIUM PRICE AND QUANTITY
                                 VII-10

-------
then the price elasticity of demand is defined as
     e =
            APi
If |e| < 1 (=1, > 1), demand is said to be price inelastic (unitary elastic,




elastic).  Most chemical producers feel that demand for their products is




relatively price inelastic.  If this is so, then it has direct implications




for the effect that pollution control regulations will have on both producers




and consumers.  Because e denotes the change in quantity demanded as a result




of a given change in price, one would expect, ceteris paribus, that chemical firms




with inelastic demand would be fairly successful in passing through to end users




increases in cost due to pollution regulations that fall equally on all producers.




     Conversely, in the elastic demand case, consumers will not be as willing




to accept the price increases on the affected products, and the economic




impacts upon the producers will be larger.  Thus, all other things equal,




profits and employment will fall and marginally profitable firms may be




pushed into loss positions.




     In the short run, the firm's decision to shut down or not will depend




on whether it can cover its variable cost, i.e., AR > AVC.  If the




firm can't escape its fixed costs by shutting down, then it must try to




maximize the excess of revenue over variable cost.   In the long run, when all




costs are variable, any firm that cannot cover its costs will go out of




business rather than produce at a long-run loss.
                                  VII-11

-------
     In analyzing the effect of pollution control regulations on industry,



one useful approach is to consider increased costs due to regulation as a



tax.  Increased costs have two components, one fixed (FT) and the other



variable (VT).   These pollution taxes alter the firm's cost functions in



the following manner:



     Recall  ;hat prior to any tax, the firm's total cost is defined as



          TC(q) = VC(q) + FC



     Now, if the two-part tax is imposed, total cost is



          TC (q) = [1 + VT] VC(q) + [FC + FT]



     Thus, the average and marginal costs inclusive of tax are


            *     * ,
          AC  = TC /q



          MC* = ATC* = TC (q + 1) - TC*  (q)



              = [1 + VT] VC (q +1) - [1 + VT] VC (q)



              = [1 + VT] [VC(q +1) - VC  (q)]



where



     FT = fixed portion of pollution control requirement,



     VT = variable portion of pollution control requirement,



     and all asterisks denote costs inclusive of tax.



According to this framework, marginal cost would shift upward by the amount



VT.



     These effects can be demonstrated graphically, as well.  In Figure VII-5,



a situation similar to that shown in the previous figure is illustrated.  Just



as before, equilibrium output is determined by the intersection of MR and MC.



Therefore, output would be OQ  and price per unit, OP .  In this case, the



industry incurs costs per unit of OC.. and profits per unit of C.P .  Thus, total



profits are the rectangle C,A B-P...
                                         VII-12

-------
Price Per Unit
    C1
                                                                                  R = D
                                                                                    Quantity
                                                                MR
             *Denotes Cost Inclusive of Tax.

            Source: Contractor's Estimates
           FIGURE VII-5    EFFECT OF POLLUTION CONTROL-INDUCED COST CHANGES ON
                           EQUILIBRIUM PRICE AND QUANTITY
                                      VII-13

-------
     Now suppose that the industry's costs are increased as a result of


the imposition of pollution control regulations.  Upward shifts in average

                                                     *       *
and marginal costs are shown by the dotted curves, AC  and MC , respectively.


A new equilibrium is established at (Q_ P0) with lower output and higher price.
                                      ^> *•

This shift in costs also has the effect of raising unit costs to OC  and


reducing unit profits to ?,,£„.  Therefore, total profits are reduced to the


rectangle C«A B P .  It should be noted that the extent to which profits are



reduced depends critically on the shape or slope of the relevant supply and


demand functions.
                                     VII-14

-------
     2.  Econometric Analysis.   The demand was econometrically modelled
for five chemicals — chlorine, titanium dioxide, hydrofluoric acid, sodium
dichromate, and elemental phosphorus.  These products were chosen because they
were expected to have the largest impacts and because there are fairly large
markets for each of them.
     In theory, the following demand function is to be estimated:
          QP   =  a  + b   POD  .  + b   GNPD  + b.,  PSD _.
where
     QP      =  quantity produced of given product in period t,
     POD _.  =  deflated price of given product in some period prior to period t,
     GNPD    =  gross national product in constant dollars in period t,
     PSD _.  =  deflated price of a substitute for the given product in some
                period prior to period t,
     and a ,  b ,  b~, and b- are coefficients to be estimated.

     Production data were used in this function because there is a large amount
of captive consumption for some of the chemicals.   Thus, commercial shipments
data would not indicate the extent to which production was responding to the
demand for the chemical within the firm — either as a feedstock to other pro-
cesses or for other internal uses.  GNP was included in the equation to capture
shifts in demand  or changes in the purchasing power of consumers.
     Deflated price, POD, is expected to have a negative coefficient because
the demand curve  for any normal good is negatively sloped by definition.  POD
is lagged one or  two periods because it is assumed that consumers respond to
changes in price  with a lag.   The precise dimensions of this lagged response are
not known, so several functional forms were experimented with.  Generally, a lag
of one or two years provided the most reasonable results.
                                  VII-15

-------
     The need to capture substitution effects calls for the inclusion of sub-




stitute price, PSD, in the demand function.  However, there are a large variety




of end uses for all the chemicals in this study.  To complicate the matter, in




each end use there is generally an entirely different product which could be




substituted for the given chemical.  In some cases, due to the unique




structural properties of the chemical, there are virtually no direct substitutes




for the product, although there may be indirect substitutes.  For these reasons,




data for PSD were not collected and not included in the demand estimation.




Clearly, this omission leads to biased and inconsistent parameter estimates, with




the extent of the bias related to the correlation between POD and PSD.  This




problem has not been analyzed in detail, but it*should be noted that the demand




relationships that have been econometrically estimated will be  least reliable




for those products which are subject to the strongest substitution possibilities




from competing products.




     Data for production and price on each of the five chemicals were collected




for the period 1950-74.  Macroeconomic data for GNP and a price deflator were




also assembled.  Using the contractor's version of an econometric software




package (Time Series Processor or TSP), the demand equations were estimated by




regression analysis, with the Cochrane-Orcutt correction for first order serially




correlated errors.  The results are shown in Table  VII-2 .  All of the estimated




coefficients have the theoretically correct sign and are statistically significant




from zero at the  .05 confidence level or better.  GNPD does not appear in many




of the final equations because it was highly collinear with POD.  Multicollinearity




was determined to be a problem, because when GNPD was omitted from many of the




equations, the standard errors for POD were observed to decline.




     The Durbin-Watson  (D.W.) statistic for the hydrofluoric acid and elemental




phosphorus equations are below the cutoff value at the 5 percent level of  signif-




icance, thereby indicating positive serial correlation.  Attempts to correct this




                                     V1I-16

-------
                            TABLE VII-2

                  RESULTS OF REGRESSION ANALYSIS*
Chlorine
              log (QPt) =  10.55  -   .36  log
                          (17.09)    (-2.01)

              Period:   1962-74

              R2  =  .98

              F(l,  11)   =  642.9

              D.W.   =   1.69
               e
=  .84
  (5.63)
        *The regression results include:
         1.  t-statistics which appear in parentheses below the estimated
             coefficients;

         2.  The period of fit is indicated and since estimation is with annual
             data the number of observations is implied;
              o
         3.  R , R-squared, which refers to the raw or unadjusted coefficient
             of multiple determination;

         4.  F which is the F-statistic with k-1 and T-k degrees of freedom,
             where k=the number of right-hand side variables and T=the number
             of observations.

         5.  D.W. which is the Durbin-Watson statistic.

         6.  P is rho or the first-order serial correlation coefficient.
                                          VII-17

-------
                         TABLE VII-2     (Continued)
                 a
Hydrofluoric Acid
              log (QPt)  =  23.5  -  1.91  log  (PODfc_2)
                           (17.6)  (-8.81)
              Period:  1952-73
              R2  =  .80
              F(l, 20)  =  77.65
              D.W.  =  .28

Sodium Chromate and Bichromate
              log  (QPt)  =  14.37  -   .50  log  (POD(._1)
                            (11.71)    (-1.97)
              Period:  1972-74
              R2  -  .59
              F(l, 11)  =   15.90
              D.W.  =  1.28
                    =  .45
                       (1.81)
    a. Estimated by ordinary least squares with no correction  for  autocorrelation.
                                        VII-18

-------
                            TABLE VII-2  (Continued)
                    b
Elemental Phosphorus
              log  (QPt)  =   26.37   -  2.18   log (PODt_1)
                            (14.27)   (-7.27)
              Period:  1950-74
              R2   =   .71
              F(l, 22)  =   53.28
              D.W.  =  .24
Titanium Dioxide
              log (QPfc)  =  6.03  -   .42  log  (PODt_2) +   .46 log  (GNPD  )
                           (4.41)    (-4.18)             (3.85)
              Period:  1963-74
              R2  =  .98
              F(2, 10)   =  180.7
              D.W.  =  1.79
                    =  -15
                      (.54)
     b.  Estimated by ordinary least squares with no correction  for autocorrelation.

     Source:  Contractor's estimates.
                                         VII-19

-------
problem with appropriate techniques did not meat with success.   Therefore,




the reported results are probably "less significant" than their t-statistics




indicate, because the estimated standard errors are biased downward.




     As stated earlier, the concept of elasticity is an extremely important




one.  The concept is particularly useful because it is dimensionless,  being




stated in terms of the percentage change in one variable with respect  to




the percentage change in another variable.  As defined here,  e is the  price




elasticity of demand evaluated at the means of price and quantity.  It is meant




to measure how quantity demanded changes in response to a percentage change




in price.  Usually e is described differently if it is greater than,  equal to,




or less than -1.  When e is greater than -1, demand is said to be inelastic.




Similarly, when e equals -1, demand is unit elastic, and when e is less than




-1, demand is elastic.  Thus, with an inelastic demand curve, a given price




increase will be met by a less than proportionate decrease in quantity demand.




     The demand price elasticities implied by the regression results are shown




in Table  VII-3 .  (Because all of the equations are estimated in log-log form




under the assumption of constant elasticity, the estimated coefficient for POD




is the actual price elasticity.)  It is important to note that each value is




only a statistical estimate of the mean and is therefore subject to some




error.  Accordingly, the .05, or two standard error, confidence interval is




also reported.  In only 5 percent of the cases would the true value of e lie




outside of this error band.  Based on the estimates in Table  VII-3,   it would




appear that demand is relatively price inelastic for chlorine, titanium dioxide,




and sodium dichromate.  On the other hand, demand is relatively elastic for




hydrofluoric acid and elemental phosphorus.  Depending on the extent of the




product price increase caused by the imposition of hazardous waste management




•Regulations, one would expect that the demand for inelastic groups of chemicals




                                     VII-20

-------
                         TABLE VII-3





        DEMAND ELASTICITIES OF PRIMARY AFFECTED CHEMICALS

Chemical
Chlorine
Titanium dioxide
Hydrofluoric acid
Sodium chromate & dichromate
Elemental phosphorus
Price elasticity
of demand
-.36
-.42
-1.91
-.50
-2.18
Confidence
interval
-.01, -.71
-.22, -.62
-1.47, -2.34
0.0, -1.00
-1.58, -2.78

*
 Source:  Contractor s estimates.
                               VII-

-------
would decrease less than proportionately.   Conversely,  product price changes




will have a larger impact on the producers of the two price elastic chemicals.




     The following data sources were used  for the estimation of the demand




equations.







     QP  - Total annual production.  Census of Manufactures,  U.S. Department




           of Commerce.




     PO  - Price per unit.  Census of Manufactures, U.S. Department of Commerce.




     GNP - Gross national product  (current dollars).  Survey of Current




           Business, U.S. Department of Commerce.




     DEF - Implicit price deflator for GNP (1958 = 1.0).   Survey of Current




           Business, U.S. Department of Commerce.




     Also, the following data adjustments were made to deflate the independent




variables:




     POD  - PO/DEF




     GNPD - GNP/DEF
                                   VII- 22

-------
     3.  Process Economics.  An important element of any quantitative assessment




or economic impact is the determination of elements of, and total, production




costs for a given chemical.  Variable cost elements are used in an analysis of




^hurt-run economic consequences of regulations, while fixed and total production




cost elements are used in a plant shutdown analysis.




     The production cost estimates presented in this report are engineering




estimates based on 1975 cost elements consistent with the process or technology




believed to be in common use.  The cost data which are developed are hypothetical




in that they represent costs for a "model" or "representative" plant.  It must




be clearly understood that the particular circumstances surrounding the opera-




tion of each individual plant may significantly affect the accuracy of these cost




estimates.




     4.  Short-Run Economic Impact Analysis.  For the short-run analysis one




would like to know the degree of price increase and associated quantity decrease




that could be brought about by the imposition of hazardous waste control regulations




The required inputs to this analysis are:  (1) incremental costs of compliance




with potential hazardous waste guidelines; (2) costs of manufacture for affected




products and processes; (3) elasticity of demand for affected products; (4) pricing




strategy of producers in response to regulated cost increases.




     The costs of compliance are provided by the Waste Practice Assessment Report.




These costs have been adjusted to 1975 cost conditions so that they are in a




comparable time frame with the manufacturing cost estimates.  Aside from these




effects, no additional changes were made in the Assessment Report cost data.
                                      VII-23

-------
     Under ideal conditions an econometric estimate of the Industry supply




function for each chemical would be an appropriate vehicle for analyzing




the effect of changing manufacturing costs.   However, due to a major problem




with the data available for such an analysis, it was not possible to construct




an econometric model of the supply side of the markets for the affected products.




Tbe essence of the data problem is that the only widely available time series




of cost data is the Commerce Department's Current Industrial. Reports.





     In the case of chlorine, data on both "cost of taat.etials, fuels, etc."




and "production worker rnanhours and wages" are reported for the &-• digit SIC




code, which is 2812, "Alkalies and Chlorine."  SIC 2812 includes the following




categories:  compressed or liquified chlorine, sodium carbonate (soda ash),




sodium hydroxide (caustic sods), potassium hydroxide  (caustic potash), and




other alkalies.  Also, the cost data reported for SIC 2812 only apply to




approximately two-thirds of total production.  For a number of reasons, it




was found that it would be extremely difficult to cull out of the total




cost data that proportion which was attributable to the production of chlorine.




Several approaches were tried but none lad to reasonable estimates of unit




cost when they were compared to independently derived, static estimates of




production cost.  The SIC 2812 data is primarily unusable because of this




aggregation problem, which offers no objective basis for identifying the




costs associated with an individual, product.  Other complicating factors




are: (1) chlorine is a joint product with caustic soda, ihus further muddying




the cost allocation process; (2) chlorine is produced by at least three




major production processes, arid the1 pollution impact upon each process is
                                     VT1-24

-------
fundamentally different.  Even if one were able to isolate the costs of




producing chlorine from the SIC 2812 data, there would be further aggregation




problems with the varying mixes of production processes.   Although the data




problems were not quite as severe with titanium dioxide,  there was still no




reliable means for separating out the individual costs.




     The alternative methodology employed for estimating the supply relation-




ships for these different chemical products was the engineering cost




estimation that is described in Section VII. C. 3.  (These cost estimates were




made for model plants.)  A major problem associated with the use of these cost




estimates is that they do not reflect the entire spectrum of plant cost conditions




as they now exist within the industry; rather these estimates are for state-of-




the-art technology.  Any amount of economic impact detected here will have to be




adjusted by the extent to which current industry manufacturing costs diverge




from these estimates for a model plant.  The engineering cost estimates were used




in conjunction with the treatment and disposal cost data to provide a basis for




estimating the degree to which the industry supply curve would shift upward in




response to the waste regulations.  In effect this type of analysis indicates




the change in the level of average variable cost.




     Another element required for the short-run impact analysis is the price




elasticity of demand for each affected product.  As stated in Section VII.  C. 2.  ,




the price elasticity is a quantification of the expected change in quantity




demanded that would result from a change in price.
                                    VII-25

-------
     In order to analyze what the price and quantity etfects will be, it




is necessary to understand how producers set their prices given certain cost




conditions.  In actuality a producer has a number of pricing alternatives




available to him in determining the price response to a given change in




costs due to increased expenditures or pollution control equipment.   Due




to his particular supply and market characteristics a producer may do




nothing in terms of price and simply absorb the cost increases as reduction




in profitability.  In the loag run this  strategy would result in a




continuing operation only if discounted revenues exceeded total costs.




Microeconomic theory supports the view that the producer's short-run




pricing policy would be dictated by the shape of the marginal cost curve,




the average variable cost curve and the demand curve for the product.  If




the firm can't escape its  fixed costs by shutting down in the short run,




then it must be content with maximizing the difference between total revenue




and total variable cost.  Thus, the relevent economic concept for




considering short-run pricing decisions is the firm's short-run marginal




cost curve which is dependent only upon variable cost.  So long as average




variable costs are covered ir. the short run, the firm will stay in business




even if it finds it must produce at a short-run loss.




     Most firms are not so constrained by competition that they are only




attempting to recover variable cost.  Rather, they employ what is known




as the full cost pricing method.  This involves a constant percentage




markup over total unit cost, i.e..average variable plus average fixed cost.




Clearly if the demand for a firm's product is such that it could recover




the full change in its average total costs in the short run, then it would
                                    VII-26

-------
find this to be the most effective pricing strategy.   Yet depending on the




firm's competitive environment, it may not be possible to achieve a total




cost passthrough quickly and the firm will only cover average variable cost.




It is difficult to specify precisely how a firm will change its prices in the




face of increasing production costs.  One can parameterize the range of price




changes by assuming different pricing strategies and calculating the




percentage price changes based on percentage changes in both average variable




cost and average total cost.




     In order to make clear this point on pricing policy, it must be underscored




that the economic impacts discussed in the final chapter depend critically on the




assumed price strategy, whether it be based on changes in variable cost, on




changes in total cost, or on some variant thereof.   In the case of some




chemicals, it is more likely that a given industry structure would yield a




pricing policy closer to one of the extremes of pricing to cover variable




cost or total cost.  Nonetheless, the full range of possible outcomes is tabulated




by showing both total and variable cost changes, associated price changes, and




the resulting impacts on demand.




     These results are generally discussed for the  industry as a whole and




as if they were "once and for all" changes.  In fact, individual producers




may have quite different responses to pollution control induced expenditures.




Some producers may elect to recover their increased costs by a gradual set




of price increases which test customer reaction.  Conversely, other producers




may choose to recover cost changes in one, complete price change.
                                  VI1-27

-------
      This approach is supported more by the standard microeconomic theory and




  provides  for a more  conservative estimate  of future plant profitability.




  It  should be clear,  however, that the  short-run price effect and  the total




  cost recovery price  effect provide a range of possible price effects due




  to  near-term waste standards.  What the actual price impact will  be




  depends upon the pricing behavior of the industry.  In other words, different




  models may apply to  different  chemicals.





     The short-run effect on price of compliance with proposed regulations




is based upon the assumption that the firms are profit maximizers and the




supply function would shift upward by the change in marginal cost.   The new




equilibrium price would then be determined by the intersection of supply




and demand.  As an alternative to the standard competitive model, a price




could also be calculated which reflected the total change in cost  (fixed




and variable) by including annual capital cost along with operating cost changes.




The present example of the short-run  analysis assumes that the degree of price




change is dictated by the change in variable cost.
                                     VII-28

-------
     Having discussed the four different inputs to the short-run impact



analysis, the entire procedure can be described with an example in terms



of product X.  The following notation is used:



     AD   =  change in demand for product x due to a change in price,
       X


     e    =  price elasticity of demand for product x,
      X


    AVC   =  change in variable cost due to compliance with hazardous waste
       X


             control regulations.  (This example could also have been done



             in terms of ATC  =  .)
                            x




     The change in quantity demanded is the product of the econometric



estimate of e ,  and AVC  which can be computed from a comparison of the cost
             X         X


of compliance data with engineering estimates of total variable cost,



          AD  = e  ( AVC )
            x    x      x


This calculation can be clarified by a numerical example.  Suppose that the



incremental total annual variable cost associated with treating and disposing



of hazardous waste for product "x" in order to achieve Level III technology



is $500,000 for a model plant in 1975.  The total annual variable cost



(exclusive of hazardous waste treatment and disposal costs) of producing "x"



is $15,000,000 at a model plant in 1975.  Dividing each of these cost estimates



by the assumed level of annual production puts them on a unit variable cost basis.



If the quantity produced is assumed to be 100,000 units, then AVC  would be
                                                                 X
          AVr  = (500,000)7100,000
                 (15,000,000)7100,000     150



               =  3.3%



Then, if the price elasticity of demand for product "x" were estimated to be



0.9,  the percent change in demand would be



          AD   =  .9(3.3%)
            X


               =  3.0%
                                      VII-29

-------
A knowledge of the industry and its business practices would then be required




to interpret whether this 3 percent reduction in quantity demanded would




be a severe and immediate impact, and whether it would fall more heavily




on a certain segment of the industry..




     It should be noted that, other things being equal, products with relatively




more elastic demands will experience greater demand reduction for a given change




in price than will those products with less elastic demands.  This is so




because in response to a given change in  price, demand declines by more




than a proportionate amount.




     This type of short-run anal/sis implies the following assumptions:




     •  producers apply the same percentage mark-up to costs whether




        they be normal production, costs of production or increased




        operating costs due to pollution control.  Therefore, the




        percentage change in prices will be the same as the percentage




        change in costs ;




     »  producers operate on a full-year basis at, or near, capacity;




     •  the typical plant is an accurate depiction of the industry; and




     •  there is no significant scale difference in unit cost estimates




        between treatment cost data and variable manufacturing cost data,




        although such estimates are sometimes based on different plant




        capacities.




Tliese assumptions can be relaxed and different values of AVC and e can be




used in order to test the sensitivity of  the results.  Chapter VIII includes




a discussion of some of these sensitivity analyses.
                                     VII-30

-------
     The following section outlines how a firm's decision to close a




plant can be analyzed.   By using discounted cash flow analysis,  it is possible




to identify the effect that probable shifts in demand will have  on marginal




plants.   These plants would be expected to be most severely impacted by




the cost of hazardous waste regulations.
                                     VII-31

-------
     5.  _P,1^3JL Shutdown Analysis Methodology.




     fi.   Introduction,  The plant shutdown decision on the part of the




;-• v.-r-cer j s complex, Involving boLh economic and  nun-economic




considerations.   If treatment costs cannot be passed on as price increases,




a producer absorbs these costs or shuts down his plant.,  Considerations




which will affect the shutdown decision are:




          Profitability:  The after-tax cost of waste treatment per ton




     of  product produced compared with the unit after-tax net income




     measures the producer's; ability to absorb the added cost.




          Cash Flow:  Plants probably will continue operating tem-




     porarily at zero profitability (if necessary) if the plant is




     producing a positive cash flow, particularly if it is in a stable




     or growing market.




          Ratio of Investment in Treatment Facilities and Net Fixed




     _Investment_:  If the nev investment in hazardous waste management is




     large in comparison with existing plant investment (and other




     factors are marginal), there will be a greater inclination  for




     the producer to shut down plant facilities rather than make the




     investment in effluent treatment.  In some instances the availability




     of capital to the producer may influence the shutdown decision.




          Integration:  The degree of backward or forward integration




     is a factor in the shutdown decision.  The producer with a significant




     raw material position or one using the product for downstream




     manufacture is less likely to curtail production than the non-




     integrated producer.
                                    VII-32

-------
          Chemif.il Co-•' •':>'„"   '''•.>-' c* '• c' ••.•< '* r>f p":<-h>s  If  <. >'. multi-industry  company has




     other (and better)  invest merit opunrtvin ties than the  single-product




     company, parti cu Lar ', v &  pr i va t v ! /- held fan'ilv business.




     In reaching decisions concern trig probable fu'.ure plant  closures,




qualitative judgment  must take  into account the factors  specified




above.  In many cases} one or two  factois may assume overwhelming




importance and this can  change from  situation to situation.
                                       Vi r  33

-------
     b.  Financial Analysis.  A quantitative investment analysis was




performed in addition to an evaluation of the qualitative factors which




affect the plant shutdown  decision.  The investment analysis was based




on model plant manufacturing and treatment costs which are representative




of typical plants for the primary affected chemicals.  They should not be




viewed as being representative of an individual plant situation.  Utilizing




these model plants, a discounted cash flow analysis  (DCF) was performed in order




to assess the investment implications of hazardous waste treatment investment




requirements as a factor in determining the potential for plant shutdown.




     A ten-year scenario from the date hazardous waste treatment would be




required was tested via DCF analysis for the model plants.  If the Net Present




Value  (NPV) of expected cash flows  under this scenario is negative, it is reasonable



to assume that plant shutdown  from the effects of hazardous waste treatment




investment can be expected.




     Estimates of economic parameters for plant models (e.g.,operating




costs, waste treatment and disposal costs, salvage value, working capital) are based




on process economic  analysis of the model plant.  The model plant's cost





estimates  are included in Chapter IV, Characterization of Primary Affected




Chemicals.  Prices are based on current average market prices (1975) for the




primary affected chemicals.









     The financial ratios were based on the model plant manufacturing




arid total treatment costs, although these factors, in particular, vary from





plant  to plant.  Based on  industry  interviews,  an attempt was made to




determine the variability of these  costs.  A sensitivity analysis was




performed where  it was felt that the variability from the model plant




costs  would have a different economic  impact.
                                      V1I-34

-------
     Future prices will depend on manufacturing cost changes as well as




pollution control costs.   Since manufacturing cost changes have not been




forecasted, a constant profit margin has been assumed over the period of




the investment analysis.    The profit margin will vary from year to yeart




although over the long-term the profit margin should, on average, approximate




a producer's desired profit margin.   The impact of waste treatment costs




on future prices depends on the producer's ability to pass on treatment and dis-




posal costs through price increases  (see Section C.  4.).  The plant shutdown




impact analysis considers the marginal producer who may be unable to




recover waste treatment costs and in the DCF analysis, profit margins have




been reduced based on estimated waste treatment costs.  The investment




analysis is done in 1975 constant dollars.




     c.  Discounted Cash Flow.   A discounted cash flow (DCF)  analysis




was used to determine if  producers would close their plants rather than




invest in the required hazardous waste management facilities.   The DCF




analysis determined whether the net  present value of the future cash




flows of the model plant  was greater than the required capital investment




in waste treatment facilities.
                                      VII-35

-------
The basic equation underlying the DCF analysis is:



          NPV  -
     where:  NPV = net present value



             CF  = net cash flow in period t



             r   = discounted rate



The cash flow in the DCF analysis is summarized as follows:



     CF  = P R C - COE  - INV  - TAX  - SALV  + SALV
       ttt       t      t      t       o       t



where:



          P        = product price in period t



          R        = operating rate in period t



          C        = plant capacity in physical units in period t



          SALV     = salvage value of project in last year of analysis



          COE      = cash operating costs in period t, exclusive of interest



                     and federal taxes



          INV      = investment cash outlay in period t (including working capital)



          TAX      = federal income tax paid in period t



The recovery value (SALV ) of the plant in year 0 is included in the analysis



because this is an opportunity cost as a result of not closing the plant.



     A shortcoming to the approach is that it is based on a model plant



economics and major uncertainties about future market prices, volume, costs



etc.  As a result, in certain instances, sensitivity to these factors were



considered.  Based on the DCF analysis as well as qualitative judgements



about the primary affected chemicals, the liklihood of plant shutdowns was



assessed.
                                       VII-36

-------
     6.  Long-Run Economic Impact Analysis.  In the long run,  capital




expansion takes place based upon the prevailing conditions of  supply and demand




in the industry.  To make a complete determination of the long-run effects




of pollution control expenditures it would be necessary to know the industry




cost of capital, other aspects of industry cost, and the rate  of demand




growth.  The critical element to such an analysis would be an  estimate of




the cost of capital or required rate of return that would apply to the




industry, both with and without pollution controls.  This cost of capital




would then be used to calculate the long-run price that would  be required to




attract and maintain capital in the industry.




     For a number of reasons it was not possible to develop econometric




estimates of the long-run industry supply curve.  This makes it more difficult




to quantify a precise long-run economic impact.  However, the  short-run




analysis provides a sound analytic basis from which to judge what the




most likely long-run effects might be.   Also it is clear that  in the long-




run all producers must fully recover any changes in their average total




costs which are due to compliance with hazardous waste management regulations.




Given the short-run impacts and several data and time constraints, estimates of




the long-run changes in price that will most likely result from full




compliance with the proposed regulations have been developed.   These estimates




are of necessity less precise than the short-run impacts.
                                   VII-37

-------
                         D.  Limitations of Analysis

     The methodology adopted and developed In this report has the following

general drawbacks:

     1.  Segmentation of Industry.  Early in the study, it was determined that

five chemical products (chlorine, titanium dioxide, elemental phosphorus,

hydrofluoric acid, and sodium dichromate) would be the primary focus of

attention.  This decision was based on the size of the markets for these

chemicals and the magnitude of the ratio of estimated treatment costs to pro-

duct list price.  The remaining chemicals have by no means been excluded from

the analysis, but simply were looked at in less depth.  This partitioning pro-

cess has, in effect, been the result: of an assumption that any economic impacts

in the second category of chemicals will be of such a minimal nature as to have

little bearing on the broad level of domestic economic activity.

     2.  Sources of Error.  By necessity, all of the estimates made as part of

the study are subject to varying degrees of error.  Sources of error can be" from

the lack of required data, the statistical properties of estimation based on

sampling from a population, or simple human fallibility.  Places where error

will occur are, first, in the cost estimates contained in the  Assessment

Report.   The Assessment Report Contractor estimated the following percent error in

their hazardous waste treatment and disposal cost estimates:
SIC Code

 2812
 2816
 2819
Classification
Major Products
% Error
Chlor-Alkalis

Inorganic Pigments
Industrial Inorganic
Chemicals, n.e.c.
Chlorine

Titanium Dioxide
Chrome Pigments
Iron Blues
- 20%
- 40-50%
Hydrofluoric Acid    - 40-50%
Phosphorus
                                     VII-38

-------
     A second area which is subject to measurable error is the econometric




model.  Each estimated coefficient has a standard error associated with it.




These errors are reflected in the price elasticities of demand.




     Finally, engineering estimates of manufacturing costs are subject to




some identifiable error which is indicated by those making the actual estimates.




Taken together, it will be necessary to qualify any final judgments on economic




impact by noting that all of the inputs to this estimate were less than per-




fectly precise.




     3.  Other Regulations and Costs.  The analysis deals only with the impacts




of compliance with probable hazardous waste management control guidelines.




Possible effects of effluent, air, or OSHA regulations are not considered.




     4.  Microeconomic Model.  The conceptual microeconomic model used in this




study is primarily one of pure competition.  In this case, it is assumed that




there are many sellers of a homogeneous product, with no barriers to entering




the market and with perfect information on the part of all sellers.  Thus, no




seller has any control over price (i.e., all market participants are price




takers).  For many of the chemical products in this study, the assumptions




of numerous sellers and no barriers to entry may be violated.  Whether or not




the performance of the industry is different from what would obtain under pure




competition is quite a different matter.  There is not enough evidence to refute




an hypothesis that the industry is workably competitive.  For this reason, the




purely competitive model has been retained for the most part even though




some of its assumptions have been violated.  It may be that in some cases





profit levels are resulting in rates of return greater than the cost of capital



earned within the industry.  If this is true, then the price rises (or quantity




reductions) may be greater (or less) than we have estimated.
                                   VII-39

-------
     5.  Single Industry.  This study is in the tradition of a partial




equilibrium analysis in that it considers only the economic impacts of




pollution abatement regulations within a single industry.  The necessary




resources were not available for a full general equilibrium analysis which




would trace through the inter-industry effects of compliance.




     6.  Forecasting.  As with any study which attempts to forecast future




events, these estimates are subject to increasing inaccuracy as they extend




forward in time.
                                   VII-40

-------
                 VIII.  ASSESSMENT OF ECONOMIC IMPACT




                    A.  Primary Affected Chemicals




     1.  Chlorine.




     a.  Treatment and Disposal C>sts.  The total cost for Level III control




of hazardous waste from mercury c^ll chlorine is $4.08 per metric ton of product




in 1975 dollars, according to the Assessment Report.  These model plant costs




are for off-site secured landfill within a 50-mile radius.  Actual treatment




costs to be experienced by specific plants can be highly site specific.  For




this reason, the model plant costs are used as generally indicative of actual




costs and may not be applicable to any particular plant.  For example, industry




contacts have indicated that the Assessment Report treatment costs substantially




understate treatment costs because adequate landfill sites may be several




hundred miles from the plant site.




     b.  Short-Term Impact.




     (1)  Prices.  Producers of mercury cell chlorine will have limited ability




to recover full waste treatment costs through price increases.   Mercury cell




treatment costs are more than ten times greater than for diaphragm cell plants,




w;)ich are also lower-cost producers in the absence of the hazardous waste costs.




In view of the competitive nature of the industry, with more than 35 producers,




the producers with higher treatment costs will be prevented from full recovery




of treatment costs.  The industry has experienced relatively high capacity




ut1JNation, moderate demand growth, and low foreign trade.  The high level of




captive usage of chlorine and the limited number of substitute products are.




factors, v/hich mitigate the price increase constraints and should allow full cost




recovery by the diaphragm producers (see Table VIII-1).   Some producers may be
                                VIII-1

-------
              TABLE VIII-1
PRICE INCREASE CONSTRAINT FACTORS - CHLORINE

\ll Processes:
L975 Production (Thousand Metric Tons)
1975 Unit Value ($/ Metric Ton Chlorine)
1975 Production Value ($MM)
lumber of Plants (Current.)
PRICE INCREASE CONS'ITATIJTS
Factor
Ratio of Incremental
Before- Tax Treatment Cos
to Selling Price per
ET'TT t 
-------
able to recover part of the treatment costs because of location or contract




provisions, but full recovery of solid waste treatment costs by mercury cell




producers is unlikely.




     (2)  Demand.  Chlorine has had an historically low price elasticity of




demand of -0.36 (AD/AP).  Price increases because of hazardous waste treatment




costs therefore have a limited impact on the demand for chlorine.  Table VTII--2




lists the potential demand changes resulting from a range of price changes under




two pricing strategies.  The demand values are for the entire industry, not an




individual plant, and the prices are industry-wide values.




     The producer can either be pursuing a full cost recovery pricing strategy




or in some highly competitive situations he may be pricing so as to only recover




his variable costs.  Faced with the treatment costs, the producer represented by




the model plant could either attempt to recover the incremental total manufac-




turing costs of the plant, 2.8 percent, or the incremental variable costs, 3.5




percent, depending on which pricing strategy his current prices represent.  On a




longer-term basis the operator will always attempt to recover the incremental




total treatment costs.  Independent of what the operator's cost recovery objec-




tives are, competitive demand may only allow a partial recovery in the short term.




Table VIII-2 lists the demand changes, assuming different levels of passthrough




of treatment costs under the two pricing strategies.




     If the model plant producer were to attempt to recover the total hazardous




waste treatment costs of 2.8 percent of total manufacturing costs and is allowed




100 percent passthrough, demand would drop one percent to 8=12 million tons.  A




50 percent cost passthrough would result in 0.5 percent demand reduction to




8.16 million tons.  As mentioned above, the cost advantage of diaphragm producers
                                VIII-3

-------
                                   TABLE VIII-2

                IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND
                                (CHLORINE MERCURY  CELL)*
 Cost change        Percent        Percent
($/metric ton)    cost change    passthrough
               Price
           ($/metric ton)
                    Demand
              (1,000's metric ton)
Change in total
cost

 3.56/126.33         2.8%
Change in variable
cost

 3.56/102.81         3.5%
100
 50
  0
100
 50
  0
107.94
106.47
105.00
108.68
106.84
105.00
8120
8160
8200
8100
8150
8200
     *Source:  Contractor's estimates.

     •Notes:  1.  The total manufacturing plant costs of the Arthur D. Little model
                 are $126.33 per metric ton of product; variable costs are $102.81
                 per ton.

             2.  A percentage change in cost (total or variable) is assumed to be
                 reflected in an equal percentage change in price at 100 percent
                 cost passthrough.

             3.  The demand is for all chlorine, not just mercury cell production.

             4.  The manufacturing and control costs are for chlorine and caustic
                 together.  The percent allocation of manufacturing costs to each
                 product is assumed to apply for the hazardous waste costs.

             5.  The $105 price is for chlorine.  The commercial price per ECU of
                 chlorine and caustic soda together (which corresponds to the total
                 manufacturing cost) was $178 in 1975.
                                         VIII-4

-------
suggests the mercury cell producers will be able to change prices only to the




limit of changes at diaphragm plants.  If demand cannot be met by diaphragm




plants, the mercury cell producers will have more price flexibility.   As a con-




servative estimate, one can say that chlorine from mercury cells is being priced




at full cost recovery but that competitive constraints will not allow price




increases in the short run to recover the hazardous waste management costs.




     (3)  Profitability.  The after-tax total treatment cost for the model




plant is 7.8 percent of the estimated plant level net income (see Table VTII-3).




The profitability levels have been determined from current market prices and




estimated model plant manufacturing costs.  The impact on profitability of




treatment costs will vary for individual producers depending on their actual




manufacturing costs and revenues.   If producers of mercury cell chlorine are




unable to recover treatment costs, the impact on profitability for the model




plant would be moderate and not enough to result in a negative cash flow posi-




tion for the plant.




     c.  Plant Shutdown Impact.  No plant shutdowns are expected as a result of




hazardous waste management costs.   Even if the model plant were required to absorb




the total hazardous waste treatment costs of $4.08/ton,  the net present value




of the investment in waste treatment is $25 million, based on a 15 percent cost




of capital (see Table VIII-4).  The investment in waste treatment would provide




a positive    return for the model plant, and, therefore, most producers are




expected to take the necessary steps to meet hazardous waste requirements.  Even




under Case II assumptions, a  positive  return is obtained.  It would require a




combination of adverse circumstances, including a lower operating rate, higher




manufacturing costs, and higher treatment costs because of an excessive




to a secured  landfill, for a plant shutdown to occur.
                                    VIII-5

-------
             TABLE VIII-3
PLANT SHUTDOWN DECISION FACTORS - CHLORINE

PLANT SHUTDOWN DECISION
Factor
Ratio of AT Total Treatment
Cost to AT Net Income
GO
Cash Flow (Including
Treatment Costs)
Ratio of Investment in
Treatment Facilities to
Net Fixed Investment (%)
Integration
Chemical Complex
Other Environmental
Problems (Including OSHA)
Emotional Commitment
Ownership
Condition for
Shutdown
High
Negative
High
Low
Isolated Plant
Multiple
Indifference
Multi-Industry
Companies
Treatment
Level
III
£>: •••.,• :-'':-- • :'
III
V;--J= ' • V.'::.' ' •' -
V..' •-••"."'./ .-'•''



Chlorine Mercury Cell
7.8%
Positive
0
High
Complex
Nominal
Low to High
Multi-Industry
                    VIII-6

-------
                             TABLE VIII-4

               SUMMARY OF SOLID WASTE TREATMENT INVESTMENT
              ANALYSIS FOR MERCURY CELL CHLORINE MANUFACTURE*
                                  (1975)
                                    Case I
                                  (model plant)
                         Case  II
Commercial price per ECU (1975)

Manufacturing costs

Total  treatment  costs
  (level III technology)

Average annual operating rate

Average annual production

After-tax cash flow
                  a
Net present value       ^
  (15% cost of capital)
$178 /metric  ton

$126/metric  ton
$178 /metric  ton

 $135/metric ton
 $4.08/metric ton         $15/metric ton
 (no capital investment)  (no capital investment)
  90%

  163,300 metric  tons

  $40.5/ton

  $24.9 MM
   80%

  145,200 metric tons

  $35/ton

  $17.4  MM
     *Source: Contractor's estimates.

     a.  Based on 10-year investment.

     b.  Weighted average cost of  capital  projected  at  14.6%  over  the
1976-1980 period for the chemical  industry, unpublished paper, "Cost of
Capital Study", Professor Gerald A. Pogue, June 1975.

     c.  The $178 price of chlorine and caustic (1 to 1.1  tonnage  ratio)
is the composite of 1975 chlorine  and caustic soda commercial shipment prices
of $105 and $66 per ton respectively.
                                   VIII-7

-------
     2.  Hydrofluoric Acid.




     a.  Treatment and Disposal Costs.  Assuming the solid waste from hydro-




fluoric acid manufacture is determined to be hazardous and must be treated




accordingly, the total treatment costs in 1975 to achieve Level III technology




for the model plant are $18.90 per metric ton for Option 4.  The total required




capital investment would be 19.6 percent of gross fixed investment.




     The hazardous waste treatment costs are highly site-specific, and, there-




fore, the application of the model plant treatment costs to the entire industry




would not be appropriate in all cases.  For example, plants on the Gulf Coast,




where there is a high water table, may find it impossible to find a suitable site




where a secured landfill can be established at the costs developed for the model




plant.  Treatment costs could be 100-200 percent higher than the estimated




Level III costs for the model plant.




     b.  Short-Term Impact.




      (1)  Prices.  Smaller domestic producers of hydrofluoric acid will have




difficulty fully recovering waste treatment costs through price increases. The




treatment costs are expected to be higher for small plants,, and in view of the




competitive situation in the industry, they will be prevented from full recovery




of treatment costs.  Price increases will be based on the treatment costs at




the larger plants which determine industry pricing.  The industry is faced with




low capacity utilization in relation to historical levels, limited demand growth,




and high foreign imports (see Table VIII-5).  Assuming a model plant producer




could recover his full incremental treatment costs and was pricing at full cost




recovery, price increases would be 1.7 percent (see Table VIII-6).
                                VIII-8

-------
                                  TABLE VII1-5

               PRICE INCREASE CONSTRAINT  FACTORS  - HYDEOFLUORIC ACID
All Processes:
1975 Production (Metric Tons)
1975 Unit Value ($/Metric Ton)
1975 Production Value  ($MM)
Number of Plants (Current)
Factor
  Ratio of 'Incremental
  Solid Waste Disposal Cos
  to Selling Price  (%)
  Substitute Products
  Capacity Utilization
  Captive Usage
  Demand Growth
  Foreign Competition
  Abatement Cost
  Differences
   Price  Elasticity
   of  Demand
   Basis  for  Competition
   Market  Share
   Ois tribution
   Number  of  Producers
   Substitute  Process
                               .         NFS _
                               Condition  for
                                Constraint
     High
High Occurrence
     Low
     Low
     Low
     High


   Unequal
     High
    Price
  Fraf.nn.'ntfil
     Manv
     Many
                  Treatmont
                 Level III
                                                           Hydrofluoric  acid
                                  284,000
                                      600
                                      170
                                       12
                                                       1.4%
                                                   Direct - Moderate
                                                   Secondary - Moderate
                                                   96% - 1974 (high)
                                                   80% - 1975 (low)
                                About 60%
                                                   (0-2%) - low
                                                   (1974-1980)
                                                    High
                                                    Unequal


                                                    High (-1.91)
                                                               Price
                                 Cone:  4 with 80%
                                None
                                      VIII-9

-------
                                 TABLE  VIII-6

                IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND
                                  (HYDROFLUORIC ACID)*
  Cost change
($/metric ton)
   Percent
 cost change
  Percent
passthrough
    Price
($/metric ton)
      Demand
(1,000's metric ton)
Change in total
cost

 8.28/484.48         1.7%
Change in variable
cost

 0.78/440.82         0.2%
                    100
                     50
                      0
                   610.20
                   605.10
                   600.00
                    100
                     50
                      0
                   601.20
                   600.60
                   600.00
                         290.2
                         295.1
                         300.0
                         298.8
                         299.6
                         300.0
     *Source:  Contractor's estimates.
     Notes:  1.
             2.
The total manufacturing plant costs of the Arthur D. Little model
are $484.48 per metric ton of product.  The model plant variable
costs are $440.82 per ton.

A percentage change in cost (total or variable) is assumed to be
reflected in an equal percentage change in price at 100 percent
cost passthrough.
                                           VIII-10

-------
     The high level of captive usage of hydrofluoric acid and the limited number




of substitute products are factors which mitigate the price increase constraints.




Some producers may be able to recover a part of the treatment costs through




other end products.




     (2)  Demand.  Hydrofluoric acid has had an historically high price elas-




ticity of demand of -1.91 (AD/A.P).  Price increases because of hazardous




waste treatment costs, therefore, have a significant impact on the demand for




hydrofluoric acid.  Table VIII-6 lists the potential demand changes resulting




from a range of price changes.  The demand values are for the entire industry,




not an individual plant, and the prices are industry-wide values.  Table VIII-6




lists the demand changes assuming different levels of passthrough of treatment




costs and different pricing strategies, as discussed for chlorine.




     The incremental variable cost from hazardous waste treatment (Option 1 to




Option 4) is estimated at 0.2 percent for the model plant. With 100 percent pass-




through, demand would drop 0.38 percent while with only a 50 percent passthrough,




demand would drop 0.19 percent.  Depending on the producers' ability to raise




prices to recover variable cost increases, it will have a varying impact on




demand.




     If a producer attempts to recover total treatment costs (fixed and variable)




associated with hazardous waste treatment, the impact on demand will be higher.




The incremental total treatment cost is estimated at 1.7 percent for the model




plant.   With a 100 percent passthrough, demand would be reduced 3.2 percent




and with only 50 percent passthrough, demand would be reduced 1.6 percent.




Producers historically appear to have been pricing at full cost recovery during




a period of high demand growth and high capacity utilization.  In the short run,




the price leaders will probably not be able to raise prices to fully recover








                                 VIII- 11

-------
incremental costs.  Price increases covering 0 to 50 percent of the hazardous




waste costs would probably be seen..




     (3)  Profitability.  The after-tax total treatment costs for the model




plant are 16.4 percent of the estimated net income at the plant level (see




Table VIII-7).  The profitability levels have been determined from current




market prices and estimated model plant manufacturing costs.  The impact on




profitability of treatment costs will vary for individual producers depending




on their actual manufacturing costs and revenues.  For producers with higher than




expected treatment costs, the impact on profitability could be severe because




of their inability to fully recover higher treatment costs.  The treatment




costs for certain producers could result in a reduction of after-tax profits




of 100 percent based on having to bear full treatment costs at triple the




level estimated in the Assessment Report and lower operating rates (see




Table VIII-8).




     c.  Plant Shutdown Impact.  The anticipated closing of at least one to




two hydrofluoric acid plants over the next five years is expected to be




accelerated by hazardous waste management costs.  With the low growth outlook




and increasing foreign competition., the domestic industry is faced with over-




capacity through 1980.  Although industry cash flow is expected to remain




positive, integration is high and the impact on profitability or investment




is not excessive for the model plant, the market uncertainty and the competi-




tive environment, combined with the hazardous waste costs, may result in the




closure of a few small plants earlier than otherwise anticipated.  Some smaller




producers may be able to meet Level III treatment requirements at a small




incremental cost.  However, if a small plant with high manufacturing costs is




also faced with total waste treatment costs, the plant shutdown potential is




Increased.






                                 VIII- 12

-------
                   TABLE VIII-7




PLANT SHUTDOWN DECISION FACTORS - HYDROFLUORIC ACID

PLANT SHUTDOWN DECISION
Factor
Ratio of AT Total Treatment
Cost to AT Net Income (%)
Cash Flow (Including
Treatment Costs)
Ratio of Investment in
Treatment Facilities to
Net Fixed Investment (%)
Integration
Chemical Complex
Other Environmental
Problems (Including OSHA)
Emotional Commitment
Ownership
Condition for
Shutdown
High
Negative
High
Low
Isolated Plant
Multiple
Indifference
Multi-Industry
Companies
Treatment
Level HI


Option 3
Option 4
_ — .___
A-


Hydrofluoric acid
16.4%
Positive
9.0%
14.8%
High
Isolated and complex
Water pollution
None
Multi- industry
                               VIII-13

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                                 TABLE VIII-8

                 SUMMARY OF SOLID WASTE TREATMENT INVESTMENT
                 ANALYSIS FOR HYDROFLUORIC ACID MANUFACTURE-1975*
. .- . . - - - - - ...... - - - .
Case I
(model plant)
Case II
Commercial price (1975)

Manufacturing costs
                      a
Total treatment costs
  (level III technology)
   (capital investment)
Average annual operating rate

Average annual production
$600/metric ton

$485/metric ton

$18.90/metric ton

($1.04 MM)
90%

20,860 metric  tons
$600/metric ton

$530/metric ton

$57.2/metric ton

($3.11 MM)
80%

18,500 metric  tons
After-tax cash flow

Net present value
   (15% cost of capital)
 $81.2/ton

 $6.4 MM
$49.8/ton

$0.10 MM
     *Source:   Contractor's estimates.

     a.   Treatment costs are stated as  per ton of capacity.

     h.   Based on 10-year investment.
                                      VIII-14

-------
     The net present value of the hazardous waste treatment investment for a




model plant faced with total treatment costs is $6.4 MM, based on a 15 percent




cost of capital (see Table VXII-8).  Based on this analysis, the producer with




a model plant would obtain a reasonable return on the required investment for




hazardous waste treatment.  Case II examines the situation where a producer is




faced with high manufacture costs, high or total treatment costs and an




operating rate comparable to current industry operating levels.  The NPV of the




waste treatment investment for this plant based on a 15 percent cost of capital




is marginally positive at $0.1 MM.  The return is marginal because under other




less favorable operating and economic conditions the net present value is poten-




tially negative.   Faced with a marginal return on investment, and considering




(1) the competitive environment in the industry, and (2) the producer's own




captive requirements, a producer may consider a plant shutdown.




     3.  Elemental Phosphorus.




     a.  Treatment Costs.  Assuming the solid waste from elemental phosphorus




manufacture is determined to be hazardous and must be treated accordingly,




the 1975 treatment costs for a model phosphorus plant are $6.9/metric ton of




phosphorus to achieve Level III technology, according to the Assessment Report.




These treatment costs are 0.7 percent of 1975 estimated selling price.  Incre-




mental treatment costs are 0.4 percent of the selling price.  In addition, the




investment requirements are 2.5 percent of gross plant investment for the model




plant.




     The treatment costs for hazardous waste disposal are site-specific so that




the model plant treatment costs cannot be assumed to represent the actual cost




for each producer.  The treatment costs depend on plant size, land availability




and cost, local soil conditions, and waste loads.   The last two factors have










                                 VIII-15

-------
particular importance in elemental phosphorus manufacture.  The plants located




in western states have a lower waste load to treat because of higher grade ore




which is processed.  In addition, soil conditions are such that the installation




of a secured landfill necessary for Level III technology could be achieved in




line with the model plant treatment costs.  Elemental phosphorus plants located




in other areas of the country, because of higher waste loads and permeable soil




conditions, could require significantly higher treatment costs in order to




achieve Level III technology.  Industry contacts have indicated that the Level




III hazardous waste treatment costs may be 100-200 percent higher than the




model plant treatment costs in some cases.




     b.  Short-Term Impact.




     (1)  Prices.  Producers of elemental phosphorus have had pricing flexi-




bility in recent years to pass on increased costs through price increases.




The producer's ability to pass on cost increases in the future will be more




limited.  The low capacity utilization in the industry (see Table VIII-90> low




demani. growth, and high price elasticity of demand are factors which will limit




elemental phosphorus producers' pricing flexibility in the future.  The concen-




tration and high captive usage in the industry offset these, factors and will




probably allow some recovery of treatment costs.




     However, with ,the unequal treatment costs expected between plants located




in different areas of the country, price increases will probably be limited to




treatment costs incurred by western plants.  The reduced pricing flexibility




in the future will prevent producers with higher treatment costs from fully




recovering increased costs through price increases.
                                  VIII-16

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                                   TABLE VII1-9
                     PRICE INCREASE CONSTRAINT FACTORS  -  PHOSPHORUS
A 11 Processes:
1975 Production  (metric tons)
1975 Unit Value ($/metric tons)
1975 Production Value  ($MM)
Number of Plants (Currrnt)
Factor
                       . I_NCREASK_CONSTR A IN IS__
                               Condition tor
                                Constraint
  Ratio of total incremen-
  tal solid waste disposal
  cost to selling price
  Substitute Products
  Capacity Utilization
  Captive Usage
  Demand Growth
  Foreign Competition
  Abatement Cost
  Differences
  Price Elasticity
  of Demand
   Basis  for Competition
  Market  Share
  Dis tribution
   Number  of Producers
   Substitute  Process
                  Irr.itment
                 Level  III
     Hiph
11 Lph Occui rence
     Low
     Low
     Low
     High


   Unequal
     High
    Price
  Fragmented
     Many
     Many
                                                             Phosphorus
                                 408,000
                                     987
                                     408
                                      10
                                                  0.4%
                                                   Direct - Low
                                                   Secondary - Low
                                                   Tertiary - High
                                                              Low (75%)
                                                   High
                                                   Low (0-2%)
                                                   Low
                                                   Unequal
                                                   High (-2.18)
                                                   price;
(commodity
    product)
                                                   Concentrated
                                                   (3 producers with 81%)
                                                               10
                                                              None
                                        VIII-17

-------
     Assuming the model plant treatment costs would be applicable to a western




plant, the price increases resulting from full recovery of model plant incre-




mental treatment costs would be 0.4 percent of the 1975 estimated selling price.




      (2)  Demand.  Elemental phosphorus has historically had a high price elas-




ticity of demand.  This is significant in view of the fact that phosphorus is




primarily an intermediate, for other end products.  Environmental restrictions




on the use of phosphate-based detergents in recent years bias the price elas-




ticity analysis, but with an adjustment for the impact of regulatory restrictions,




the price elasticity of demand for phosphorus is still high at -2.18.




     Depending on his current pricing strategy, the producer represented by




the model plant will either change prices in proportion to the percentage




change in total manufacturing costs of the plant, or the variable costs as a




result of the hazardous waste management costs.  Independent of what the




operator's cost recovery objectives are, competitive demand may only allow a




partial recovery in the short term.  Table VIII-10 lists the demand changes,




assuming different levels of passthrough of treatment costs, as well as the




different pricing strategies,




     The treatment costs for the model plant are modest, and the change in




total costs resulting from hazardous waste treatment costs  (Option 1 to Option  3)




are only 0.7 percent.  The short-term  Impact on demand will vary depending on the




producers' ability to fully recover costs through price increases. With 100 percent




passthrough, demand would decline 1.5 percent, while a 50 percent passthrough




would result in a 0,# percent decline in demand.




      Since price increases are expected to be limited to the cost impact on the




model plant because of the competitive situation in the industry, the impact on




demand will be minimized.  If all producers were able to pass on their total




treatment cost increases, the reduction in demand based on the price elasticity







                                  VIII-18

-------
                                  TABLE VIII-10

                IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND
                                (ELEMENTAL PHOSPHORUS) *
  Cost change.       Percent        Percent          Price               Demand
($/metric ton)    cost change    passthrough    ($/metric ton)    (1,000's metric ton)


Change in total
cost

 4.33/675.74         0.7%            100            983.07               403.7
                                      50            986.54               406.9
                                       0            990.00               410.0

Change in variable
cost

 0.13/545.41         0.02%           100            984.80               409.8
                                      50            984.90               409.9
                                       0            990.00               410.0
     *Source:  Contractor's estimates.

     Notes:  1.   The total manufacturing plant costs of the Arthur D.  Little model
                 are $675.74 per metric ton of product.  The model plant variable
                 costs are $545.41 per  ton.

             2.   A percentage change in cost (total or variable) is assumed to be
                 reflected in an equal  percentage change in price at 100 percent
                 cost passthrough.
                                        VIII-19

-------
of demand could be more significant because of the expected higher treatment




costs faced by certain plants.




     At present, producers appear to be pricing at full cost recovery.   If




the compliance costs are as small as the model plant incremental costs (0.4




percent of price), the price leaders would be able to increase prices to




recover most of the costs.





     (3)  Profitability.  The after-tax treatment costs for the model plant




are 2.2 percent of estimated after-tax net income at plant level.  If elemental




phosphorus producers are unable to recover treatment cost increases, the impact




on profitability for the model plant will be small.  For producers with higher




expected treatment costs, the impact on profitability will be more significant




because of their inability to raise prices to fully recover their costs.  The




treatment costs for certain producers could result in a reduction of after-tax




plant profits of 4-6 percent based on total treatment costs 100-200 percent




higher than the estimated model plant costs.




     c.  Plant Shutdown Impact.  No plant shutdowns are expected because of




hazardous waste treatment costs.  Although not all producers will be able to




fully recover treatment costs, the level of profitability in the industry will




allow the producers to absorb these cost increases in their profit margins.  In




addition, cash flow is expected to continue to be positive, the investment re-




quirements are a modest percent of gross fixed investment, and with the level of




integration in the industry (see Table VIII-11), these factors will mitigate any




plant shutdown decisions.  Producers with higher treatment costs than the model




plant treatment costs are not expected to shut down, although their level of




profitability will be more adversely impacted.
                                 VIII-20

-------
              TABLE VIII-11
PLANT SHUTDOWN DECISION FACTORS - PHOSPHORUS

PLANT SHUTDOWN DECISION
Factor
Ratio of Total AT Treat-
ment Cost to AT Net Income
C/\
\n)
Cash Flow (Including
Treatment Costs)
Ratio of Investment in
Treatment Facilities to
Net Fixed Investment (%)
Integration
Chemical Complex
Other Environmental
Problems (Including OSHA)
Emotional Commitment
Ownership
Condition for
Shutdown
High
Negative
High
Low
Isolated Plant
Multiple
Indifference
Multi-Industry
Companies
Treatment
Level III



:~ '•••'. > •




Phosphorus
1.9%
Positive
2.5%
High
Isolated
Air and water pollu-
tion, OSHA
Low
Mult i- industry
                   VIII-21

-------
     Elemental phosphorus producers also have other environmental requirements,




particularly water pollution regulations.  Hazardous waste limitations will not




result in a plant shutdown, although, depending on the level of other environ-




mental requirements, the combination of all environmental regulations may have




an impact on the industry which is beyond the scope of this study.




     The net present value of the investment in treatment facilities for the




model plant faced with total treatment costs is $44.6 million based on a




15 percent cost of capital (see Table VIII-12).  Based on this analysis, the




producer with a model plant would obtain a reasonable return on the required




total investment for hazardous waste treatment.  Case II examines the  situation




where a producer is faced with high manufacturing costs, high treatment costs,




and an operating rate comparable to current industry operating levels.  The




NPV of the waste treatment investment for this plant is still high at $26.1




million.  Even under the Case II assumptions, there is a reasonable level of




return for the hazardous waste treatment investment.




     The plant shutdown impact could change over the next several years if the




market scenario is different from the basic assumptions.  The industry is faced




with rapidly escalating power costs which, because of the competitive environ-




ment in the future, producers may not be able to fully recover.  Also, further




environmental restrictions on the use of phosphate detergents or a more rapid




substitution of phosphate builders by the detergent industry could result in




a decline in demand for elemental phosphorus.  If faced with deteriorating




profit margins and a decline in demand, the impact of hazardous waste treatment




costs could have a more adverse impact on the industry.
                                  VIII-22

-------
                                TABLE VIII-12

                 SUMMARY OF HAZARDOUS WASTE  TREATMENT  INVESTMENT


                 ANALYSIS  FOR  ELEMENTAL  PHOSPHORUS MANUFACTURE-(1975)*
                                       Case  I
                         Case  II
Commercial price  (1975)

Manufacturing costs

Total treatment costs3
   (Level III technology)
   (capital investment)
Average annual operating  rate

Average annual production


After- tax cash flow

Net present value
   (15% cost of capital)
$990/met.ric ton

$675/metrlc ton

$7.00/metrie ton

($1.15 MM)
90%
$990/metric ton

$775/metric ton

 $19.20/metric ton

 ($3.04 MM)
80%
49,900 metric  tons    44,350 metric  tons
 $217/metric ton

 $44.6 MM
 $171/metric ton

 $26.1 MM
     *Source:   Contractor's estimates.

     a.   Treatment costs are stated as  per ton of capacity.

     b.   Based on 10-year investment.
                                        VIII- 23

-------
     4.  Sodium Bichromate.




     a.  Treatment Costs.  The generalized hazardous waste management costs




presented in the Assessment Report are particularly difficult to use in the



case of sodium dichromate because there are only three plants.  Each of the




plants has a unique set of process and locational factors which influence the




actual disposal costs.  In addition, the argument is made that chromium hy-



           +3
droxide  (Cr  )  is not toxic and as such should not be covered by the hazardous




waste regulations.  The model plant treatment costs should be viewed as indi-




cative rather than definitive for the dichromate plants.




     The model plant in the Assessment Report and the contractor model plant




were somewhat different in size.  The costs have therefore been converted to




costs per metric ton of product.  The incremental costs of compliance for the




sodium dichromate producers is represented by moving from the Report Option 3




to Option 5.  Plants coming into compliance would require a capital investment




of approximately $9.68 per ton of annual production, or about 3 percent of net



fixed assets.  The total incremental treatment and disposal costs are $3.60



per metric ton of product, which was 0.6 percent of 1975 average selling



price.



     b.  Short-Term Impact.




     (1)  Prices.  As a whole, producers have shown considerable flexibility




to increase prices to cover higher costs.  Table VIII-13 was constructed to




display the factors bearing on the ability of the producers to change prices



and recover higher costs.  Their ability to individually recover the costs




of hazardous waste management will depend on how different the per unit costs



are among the three producers.  If their costs are approximately equal, they may
                                VIII-24

-------
                                  TABLE VIII-13
               PRICE INCREASE CONSTRAINT FACTORS  -  SODIUM BICHROMATE
All Processes:
                                                            Sodium Dichromate
L975 Production (Thousand Metric Tons)
L975 Unit Value ($/Metric Ton)
-975 Production Value ($MM)
Jumber of Plants (Current)
PRICE INCREASE CONSTI'AINTS
Factor
Ratio of Incre-
mental Before-Tax
Treatment cost to Sell-
ing Price (%)
Substitute Products
Capacity Utilization
Captive Usage
Demand Growth
Foreign Competition
Abatement Cost
Differences
Price Elasticity
of Demand
Basis for Competition
Market Share
Distribution
Number of Producers
Substitute Process
1
Condition for
Cons traint
High
High Occurrence
Low
Lov;
Low
High
Unequal
High
Price
Fragmented
Miny
Many
Treatment
Level III












112.1
606.0
44.2
3
0.6%
i
1
Few (for derivatives)
90% - High
25% - Moderate
Low
Negligible
Unequal
-0.5 - Low
Price & Service
Concentrated
3
none
                                          VIII-25

-------
be able to recover the costs uniformly.   If one producer has much lower costs




than the other producers, they may be able to restrain price increases by their




competitors.  In a low capacity utilization year,  such as 1975,  this would be




particularly true.




     Current prospects are that over the next few years sodium dichromate pro-




ducers will experience little change from historic patterns of low growth but




fairly high capacity utilization.   Price rises in 1975, in spite of sharp pro-




duction declines, suggest an ability to hold prices at necessary levels.  It




is not possible given currently available information to say what the cost  of




compliance differential will be among the producers.   As an approximation, one




can say that the costs estimated by the Assessment Report could be matched by




price changes if they are generally applicable to the three producers.  Since




none of the plants are currently at Level III (Option 5) and significant incre-




mental expenditures would have to be made by each plant, price changes adequate




to cover most of, if not all of, the hazardous waste costs can be expected.




     (2)  Demand.  Through 1974, sodium dichromate has had a low to moderate




elasticity of demand.  The elasticity was estimated earlier at -0.5.  Table




VIII-14 lists the potential demand changes resulting from price changes under




a range of pricing strategies.  The competitive environment in the industry




will determine whether firms are setting prices so as to cover variable costs




or total costs.  This price objective is assumed to remain unchanged.  There-




fore, the percent price change would equal either the percent change in variable




costs or total costs.  The demand values are for the entire industry, not an




individual plant, and the prices are industry-wide values.











                                VIII-26

-------
                               TABLE VIII-14

               IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND  DEMAND
                              (SODIUM DICHROMATE ) *
  Cost change          Percent          Percent             Price            Demand
($/metric  ton)        cost  change      passthrough     ($/metric  ton)  (1,000's metric  ton)


  Incremental tctal cost
  3.60/451.70             0.8            100           604.8                144.4
                                          50           602.4                144.7
                                           0            600.0                145.0

  Incremental variable
  cost
  2.04/400.90              0.5            100           603.0                144,6
                                          50           601.5                144.8
                                           0            600.0                145.0
        *Source;   Contractor's  estimates.

        Notes:   1.   The  total manufacturing plant  costs of the Contractor's model
                    are  $451.70 per metric ton of  product.  The model plant variable
                    costs are $400.90 per ton (including by-product credit).

                2.   A percentage change in cost  (total or variable) is assumed to be
                    reflected in an equal percentage change in price at 100 percent
                    cost passthrough.

                3.   Total yearly demand at $600 per ton is assumed to be 145,000 metric
                    tons, reflecting historic levels rather than the actual 1975 level.
                                          VIII-27

-------
     If the producer represented by the contractor model plant is attempting




to recover the total manufacturing costs of the plant, his objective in




increasing prices would be 0.8 percent.  If the current price strategy is to




recover variable costs, his objective would be to raise prices 0.5 percent.




     Table VIII-14 lists 1975 prices as $600 per ton of sodium dichromate and




total plant manufacturing costs (excluding corporate overhead) as $452 per ton.




The price level suggests that the producer is probably pricing so as to recover




his total costs plus a return on investment.  The 0.8 percent price increase




objective is probably closer to actual operator behavior.   Independent of what




the operator's cost recovery objectives are, competitive demands may allow a




partial recovery.  Table VIII-14 lists the demand changes assuming different




levels of passthrough as well as different pricing objectives.




     Demand was assumed to be 145 thousand metric tons at $600 per ton.  In




1975, demand was actually lower.  The 145 thousand tons is more representative




of future levels.  If the producer attempts to recover the change in total




costs of 0.8 percent and is allowed a 100 percent cost passthrough, demand




would drop by 0.4 percent to 144.4 thousand tons.  A 50 percent cost pass-




through would result in a 0.2 percent demand reduction to 144.7 thousand tons.




     The actual price change achievable will depend on the hazardous waste




management costs per ton of product for the three producers.   If their incre-




mental costs of compliance are similar, they will be able to raise prices to




recover most of the costs without competitive price constraints from another




producer.  It appears that each of the sodium dichromate producers will have




to make substantial incremental hazardous waste expenditures, and the actual




price changes would be in the range of 50 percent to 100 percent passthrough




of hazardous waste treatment costs.









                                VIII-28

-------
     (3)  Profitability.  The actual profitability of sodium dichromate sales




has not been determined.  The contractor model plant has been used to indicate




an approximate profitability at the plant level.  Table VIII-15 is an income




statement for the model plant.  Corporate overhead and G&A burdens have not been




included.  Assuming the model approximately represents the current plant's




cost structure, the after-tax profits are $74.15 per metric ton on sales of




$600 per ton.  The cash flow is $97.95 per ton.




     A producer will attempt to increase price so there is no profit reduction




as a result of the hazardous waste management costs.  If prices cannot be




increased,  the producer would have to absorb the new costs.  Table VIII-16




lists the effect on profitability of the producer's having to absorb the total




Level II and III costs of $8.92 per ton.   A sensitivity analysis using a cost




level of $15 per ton was also examined.  These costs are intended to represent




a worst case analysis.  In the first case, after-tax profits would be reduced




to $69.7 per ton (a 6 percent reduction).  In the higher cost case, the reduc-




tion would be to $66.67 per ton (a 10.1 percent reduction).




     c.  Plant Shutdown Impact.  The plant shutdown decision in the short run




is based on whether the net present value of the required capital investment




in hazardous waste management facilities is positive.  Table VIII-16 lists




such a computation.  The Assessment Report estimates the capital




costs at, for Level II and III (Option 5), $630,000.  In the worst case  when




prices cannot be increased, the net present value of the investment is $17.2 MM,




assuming the $8.92 per ton cost and $16.3 MM, assuming the $15 per ton cost.




     Based on these values, none of the three sodium dichromate plants are




expected to close as a result of the hazardous waste management costs.  Table




VIII-17 displays the factors contributing to the plant closure decision.










                                VIII-29

-------
                              TABLE VIII-15

                     MODEL PLANT INCOME STATEMENT - 1973
                          SODIUM DICHROMATE*
Production                    39,735 metric tons

Revenue                       $600/ton

Manufacturing cost             451.70

Gross profit                   148.30

Profit after tax                74.15

Depreciation                    23.80

Atter-tax cash flow             97.95
     *Source:  Contractor's estimates.
                                 VIII-30

-------
                             TABLE VIII-16

                 SUMMARY OF HAZARDOUS WASTE TREATMENT
           INVESTMENT ANALYSIS FOR SODIUM DICHROMATE (1975)*
                                           Case I              Case  II
                                        (model plant)	
Commercial price ($/metric ton)             $600                $600

Manufacturing cost ($/metric ton)            451.7               451.7

Total treatment costsa($/ton)               $8.92                $15.00
(capital investment)                         ($0.63 MM)           ($1.0 MM)
Average annual operating rate                80%                  80%
Average annual production (metric tons)     39,735               39,735

Net present value                           $17.2 MM             $16.3 *
  (15% cost of capital)
  /

    *Source:  Contractor's estimates.

    a.  Treatment costs are stated as per ton of capacity.


    b.  Based on 10-year investment.
                                VIII- 31

-------
                  TABLE VIII-17
PLANT SHUTDOWN DECISION FACTORS - SODIUM DICHROMATE

PLANT SHUTDOWN DECISION
Factor
Ratio of AT Treatment
Cost to AT Net Income
(%)
Cash Flow (Including
Treatment Costs)
Ratio of Investment in
Treatment Facilities to
Net Fixed Investment (%)
Integration
Chemical Complex
Other Environmental
Problems (Including OSHA)
Emotional Commitment '
Ownership
Condition for
Shutdown
High
Negative
High
Low
Isolated Plant
Multiple
Indifference
Multi-Industry
Companies
Treatment
Level
III
SyU;-;;V-;M-;v:-

;':•? Ori:'i'ivp' :\ V'vs-
..•'.'• : * '.''•'•
•• •• •:•••: v ;.;-. ..




:KM,
Sodium dichromate
6.0% (low)
Positive
3.0% (low)
Moderate
Isolated
Multiple
High
Multi- Industry
                          VIII- 32

-------
     5.  Titanium Dioxide (chloride process).




     a.  Treatment Costs.  The  Assessment Report estimated the




costs associated with the treatment of hazardous waste from the manufacture of




titanium dioxide.  The total 1975 treatment costs for the model plant are $4.3




per metric ton.  These treatment . :osts are 0.6 percent of 1975 estimated selling




price.  Incremental treatment coses are $3.2 per metric ton, or 0.4 percent of




1975 estimated selling price.  There are no investment requirements in order to




achieve Level  III control of hazardous waste treatment.  Compliance costs for the




sulfate process are higher, but the mar.ufacturing costs are correspondingly lower.




     The treatment costs for hazardous waste disposal are site-specific so




that the model plant treatment costs cannot be assumed to represent the impact




on each producer.  The treatment costs depend on plant size, land availability




and cost, local soil conditions, and waste loads.




     b.  Short-Term Impact.




     (1)  Prices.  Producers of titanium dioxide should be able to recover a




large part of waste treatment costs through price increases.  With the compe-




titive environment in the industry, generally high capacity utilization, and




moderate demand growth, producers will be able to recover a significant portion




of treatment costs (see Table VIII-18, which summarizes price increase con-




straints) .




     (2)  Demand.  Titanium dioxide has a low price elasticity of demand of




-0.42 (AD/AP).  Price increases because of hazardous waste treatment costs




will therefore have a limited impact on the demand for titanium dioxide.  The




incremental total costs from hazardous waste treatment (Option 1 to 5) is esti-




mated at 0.4 percent for the model plant.  Depending on the producer's ability
                                 VIII-33

-------
                 TABLE VIII-18
PRICE INCREASE CONSTRAINT FACTORS - TITANIUM DIOXIDE

\ 1 1 Processes:
.975 Production (Thousand Metric Tons)
.975 Unit Value ($/Metric Ton)
.975 Production Value ($MM)
lumber of Plants (Current)
PRICE INCREASE CONS'ITAINTS
Factor
Ratio
of Total Before-Tax
Treatment cost to Sell-
ing Price (%)
Substitute Products
Capacity Utilization
Captive Usage
Demand Growth
Foreign Competition
Abatement Cost
Differences
Price Elasticity
of Demand
Basis for Competition
Market Share
Distribution
Number of Producers
Substitute Process
Condition for
Constraint
High
High Occurrence
Low
Low
Low
High
Unequal
High
Price
Fragmented
Many
Many
Treatment
Level III











Ti02 , Chloride Proc.
549 all Ti02
330 chloride process
778
427
15 all Ti02
8 chloride process
0.6
Low
85%
14%
I
4-5% yr.
Low
Unequal
Low
Technology & Service
Concentrated
9
Few
                          VIII-34

-------
to raise prices over the short term to recover total cost increases, it will




have a varying impact of demand.   Based on a 100 percent cost passthrough,




demand will decline 0.17 percent while a 50 percent cost passthrough will




result in a 0.08 percent decline in demand.  Titanium dioxide producers appear




to price on a total cost basis, but from a short-term perspective, the operators




should be able to recover most or all of the compliance cost if they are of




the magnitude shown for the model plant.  Table VIII-19 lists the demand cnanges




assuming different levels of passthrough of treatment costs as well as different




cost change assumptions.




     If the model plant producer were to attempt to recover incremental




variable treatment costs of 0.5 pereent, and 100 percent passthrough is feasible,




demand would drop 0.2 percent, while a 50 percent cost passthrough would result




in a 0.1 percent demand reduction (see Table VIII-19).




     (3)  Profitability.  The total after-tax treatment cost for the model




plant is 12  percent of the estimated after-tax income at the plant level for




Option 5 (see Table VIII-20).  The profitability levels have been determined




from current market prices and estimated model plant manufacturing costs.  The




impact on profitability of treatment costs will vary for individual producers




depending on their actual manufacturing costs and revenues.




     c.  Plant Shutdown Impact.  No plant shutdowns are expected because of




hazardous waste treatment costs.   Although not all producers will be able to




fully recover treatment costs, the level of profitability in the industry will




allow the producers to absorb these cost, increases in their profit margins.




In addition, cash flow is expected to continue to be positive, the investment




requirement for treatment facilities is zero, and the level, of




integration in the industry is low to moderate.   These factors will
                                VII1-35

-------
                                   TABLE VIII- 19

                IMPACT OF HAZARDOUS WASTE COSTS ON PRICE AND DEMAND
                       (TITANIUM DIOXIDE CHLORIDE PROCESS)*
  Cost change       Percent        Percent         Price                Demand
($/metric ton)    cost change    passthrough    ($/metric ton)    (1,000's metric ton)


Change _n total
cost

 3.16/744.29         0.4%            100           776.88                549.Q
                                      50           778.44                549.5
                                       0           780.00                550.0

Change in variable
cost

 3.16/580.84         0.5%            100           776.10                548.7
                                      50           778.05                549.4
                                       0           780.00                550.0
     *3ource:  Contractor's estimates.

     Notes:  1.  The total manufacturing plant costs of the Arthur D. Little model
                 are $744.29 per metric ton of product.  The model plant variable
                 costs are $580.84 per ton.

             2.  A percentage change in cost (total or variable) is assumed to be
                 reflected in an equal percentage change in price at 100 percent
                 cost passthrough.
                                        VIII- 36

-------
TABLE VII1-20

PLANT SHUTDOWN DECISION
Factor
Ratio of Total AT Treatment
Cost to AT Net Income
(%)
Cash Flow (Including
Treatment Costs)
Ratio of Investment in
Treatment Facilities to
Net Fixed Investment (%)
Integration
Chemical Complex
Other Environmental
Problems (Including OSHA)
Emotional Commitment
Ownership
Condition for
Shutdown
High
Negative
High
Low
Isolated Plant
Multiple
Indifference
Multi-Industry
Companies
Treatment
Level
III
::.:.A:-,, .•'..-•-..• '
III

'"&j'r"' .:( -••'>'-.:'•" '•



'/''•' '' •
Ti02 , Chloride Proc.
12%
Positive
0
Low to Moderate Forward
Low to Moderate Backward
Isolated
Solid Waste
Air (Chloride)
High
Multi-Industry
              VIII-37

-------
raitigate any plant shutdown decisions.  Producers with higher treatment costs




than the model plant treatment costs are not expected to shut down, although




their level of profitability will be more adversely impacted.  The net present




value of the investment in treatment facilities for high cost producers is




estimated to be positive,based on a 15 percent cost of capital (see Table VIII-21).
                                 VIII-38

-------
                             TABLE VIII-21

            SUMMARY OF HAZARDOUS WASTE TREATMENT INVESTMENT
           ANALYSIS FOR TITANIUM DIOXIDE MANUFACTURE*  (1975)
                          (CHLORIDE PROCESS)
                                      Case I
                                    (model plant)
                         Case II
Commercial price (1975)

Manufacturing costs

After-tax treatment costs
  (Level III technology)

Average annual operating rate

Average annual production

After-tax cash flow

Net present value
  (15% cost of capital)
$780/metric ton

$744/ruetric ton

$4.3/metric ton3


    90%

22,680 metric tons

$128.0/ton

$9.7 MM
$780/metric ton

$744/metric ton

$8.6/metric ton


      90%

22,680 metric tons

$125.8/ton

$8.2 MM
     *Source:  Contractor's estimates.

     a.   Based on average annual production of 22,680 metric tons.

     b.   Based on 10-year investment.
                                VIII-39

-------
                      B.  Secondary Affected Chemicals
    1.  Aluminum Fluoride.
    a.  Treatment Costs.  There are limited hazardous waste problems associated with
the production of aluminum fluoride.  Therefore,the estimated hazardous waste treat-
ment costs developed by the Assessment Report for 1975 are only $0.7 per metric  ton
for Level III technology.   The investment costs for Level III hazardous waste
treatment technology are also low at $0.15 million, or 5.0 percent of gross fixed
investment for the nodel plant.
    Several producers of aluminum fluoride do not  isolate hydrofluoric acid, a
principal raw material, in the manufacturing process.  Since the production of
hydrofluoric acid does generate significant hazardous waste, the waste loads for
these producers of aluminum fluoride would result  in higher hazardous waste  treatment
costs.  Assuming the waste treatment costs for hydrofluoric acid and aluminum
fluoride are additive, the total hazardous waste treatment  costs  for the model plant
are $13.1 and $16.1 per metric ton of aluminum fluoride based on Options
 3  and 4  for  hazardous waste  control from the production of  hydrofluoric
acid.
      The hazardous  waste  treatment  costs are site-specific,  and as  a result, the
applicability of the model plant treatment costs to all producers would not be
appropriate.   Some firms have said that their estimated costs are more than
twice the levels of the model plant costs,or $25 to $30 per metric  ton of  aluminum
fluoride, including costs  for the treatment of hazardous waste from the production
of  hydrofluoric acid.
                                       VIII-40

-------
     b.  Short-Term Impact.  Domestic producers of aluminum fluoride should be




able to recover waste treatment costs through price increases.  Since




there is high captive usage, no substitute products, limited foreign competition,




and a limited number of producers, the industry should be able to raise prices




to recover treatment costs.  With the possibility of unequal treatment cost differ-




ences, full treatment cost recovery may be limited for some producers because of




the competitive situation.  The fact that there are only two merchant suppliers of




aluminum fluoride, the aluminum producers without captive production of aluminum




fluoride, in spite of the competitive situation in the industry, should allow




aluminum fluoride producers to raise prices to recover treatment costs.  If




the merchant producers of aluminum fluoride were to shut down, certain aluminum




producers would be dependent on their competitors for an important raw material.




    Another factor which should allow hazardous waste treatment cost  passthrough is




the limited number of plants in the industry.  If one large producer were to




close down, the supply/demand balance would change dramatically and could create




short-term shortages of aluminum fluoride.  With a better supply/demand balance




and possible shortages, price increases may occur which would be greater than




price increases resulting from the passthrough.  of hazardous waste treatment costs.




    The after-tax treatment costs>including HF treatment costs for the model plant,




are 23 percent and 29 percent of after-tax profits for Options 3 and 4 res-




pectively.   If producers of aluminum fluoride are unable to recover treatment




costs, the impact on the profitability of the model plant would be high.  For




producers with treatment costs higher than model plant costs, the impact on
                                    VIII-41

-------
profitability would be a reduction in after-tax profits of 54 percent and




66 percent for Options 3 and 4.respectively based on treatment costs double the




model plant costs.




    c.  Plant Shutdown Impact,   it is not expected that any producers of aluminum




fluoride will shut down because of hazardous waste treatment costs.   If cost pass-




through were to occur, there would also be no impact on profitability.




    The high level of integration in the industry will also mitigate the plant




shutdown impact.  The captive users of aluminum fluoride, even if unable to




recover treatment costs, will be forced to absorb the treatment costs in order




to maintain supplies of an important raw material.  Also, if a captive user were




to close down, the available market price of aluminum fluoride would be higher than




the production costs including hazardous waste treatment costs.  The problem of the




captive users making the necessary investment for hazardous waste treatment is




impacted by capital availability for aluminum producers and the competitive.




position of aluminum.  These issues are beyond the scope of this study but can




have important implications on the captive user's decision to absorb, if necessary,



hazardous waste treatment costs.




     If cost passthrough is not allowed, or waste treatment costs are higher




than estimated by industry, a plant shutdown could occur.  Since there are only




five domestic plants for the production of aluminum fluoride, one plant shutdown




would improve the supply/demand balance in the industry.  Therefore, under worst




case assumptions, only one plant is susceptible to shutdown.
                                      VIII-42

-------
     2.  Chrome Pigments.




     a.  Treatment Costs.  There are significant hazardous waste problems




associated with the production of pigments in the chrome colors group.




Treatment of process wastewater generates a solid waste containing various




lead and chromium salts.  The estimated hazardous waste treatment and disposal




cost presented in the Assessment Report is $7.50 per metric ton for Level III




technology.  Level III control involves contractor chemical fixation and land




disposal and- therefore, no additional investment is required.




     b.  Short-Term Impact.  The short-term impact of hazardous waste treatment




and disposal costs for chrome pigments is expected to be minimal, although some




producers could have difficulty in recovering full treatment costs through price




increases.  The Level III treatment costs represent about 0.5% of product




selling price.  This is a relatively small incremental cost compared to increasing




energy and raw material costs.  On the other hand, the industry is facing




increasing pressure from imports as well as relatively low domestic market




growth.  A much more significant issue facing the industry is the possible




carcinogenic nature of chromates.




     c.  Plant Shutdown Impact.  Although the chrome pigments industry may




experience plant shutdowns during the next five years, no shutdowns are expected




as a direct result of hazardous waste treatment and disposal costs.  These costs




are expected to be of relatively less significance in this regard than the other




factors discussed above.  In the current buyer's market situation, and in viev




of the abatement cost differences facing the industry, it is unlikely that there




will be complete passthrough of hazardous waste treatment costs to consumers.




Therefore, a potential exists for a small impact on industry profitability.
                                  VIII-43

-------
     3.  Nickel Sulfate.




     a.  Treatment Costs.  Production of nickel sulfate results in the




formation of nickel-containing hazardous wastes for land disposal.  The




Assessment Report estimated Level III hazardous waste treatment and disposal




costs at $8.30 per metric ton for off-site secured landfill in lined drums,




and $3.80 per metric ton for contractor chemical fixation.   These costs




were estimated for a plant producing 9 metric tons of nickel sulfate per day.




     b.  Snort-Term Impact.  The Level III treatment costs represent




approximately 0.5 percent of the product selling price.  Despite this




relatively small size, some producers of nickel sulfate could experience




difficulty in passing this cost on to consumers.  Production of nickel




sulfate has dropped in recent years and the demand outlook is limited by




the fact that pollution control regulations are forcing consumers to more




efficiently recycle product which was formerly discarded.  In addition,




the industry is threatened by various indirect substitutes.  At present,




industry capacity is in excess of demand.  In the current buyer's market,




price increases will be difficult to sustain.




     c.  Plant Shutdown Impact.  In the last several years at least one




plant has been closed as the result of slackening demand for nickel sulfate.




Additional plant shutdowns may occur over the next five years, however, it




is unlikely that any shutdowns will occur as a direct result of hazardous




waste treatment and disposal costs.  Other adverse factors, outlined above,




would play a more significant role.  On the other hand, to the extent that




hazardous waste management costs cannot be passed on to consumers, the industry




will be forced to absorb these additional costs and industry profitability




will be reduced accordingly.
                                  VIII-44

-------
     4.  Phosphorus Pentasulfide*




     a.  Treatment Costs.  The hazardous waste treatment costs for the model




plant are $.07 per metric ton.  Industry contacts have indicated that




these costs substantially understate their actual costs.  In fact, the




model plant disposal costs for phosphorus trichloride are substantially




higher although similar waste disposal techniques are employed.  Assuming




disposal techniques for phosphorus pentasulfide are equivalent to phosphorus




trichloride, disposal costs would be $0.4 per metric ton of phosphorus




pentasulfide.




     b.  Short-Term Impact.  Producers of phosphorus pentasulfide should be




able to pass along treatment costs through price increases.  The industry is




experiencing high demand growth,  high capacity utilization, and low foreign




competition.  Also, the limited number of substitute products, high captive




usage, equal abatement costs, and the limited number of producers are




conditions which should allow the producers to recover disposal costs. .Since




the treatment costs ($0.4 per ton) are only 0.1 percent of the 1974 selling




price, the impact on prices will be limited.  The impact on demand for phos-




phorus pentasulfide because of higher prices will be small.  With the small




price increase and an assumed moderate price elasticity of demand, the




reduction in demand because of hazardous waste treatment costs will be limited.




Also, there will be no impact on the profitability of phosphorus pentasulfide




because the producers will be able to raise prices to recover treatment costs.




     c.  Plant Shutdown Impact.  There should be no plant shutdown because of




hazardous waste  treatment costs.  With full treatment cost recovery., phosphorus




pentasulfide producers will not be faced with a plant shutdown decision.
                                     VIII-45

-------
     5.  Phosphorus Trichloride.




     a.  Treatment costs.  The costs to achieve Level III technology for the




disposal for hazardous waste from the production of phosphorus trichloride is




$0.4 per metric ton.  These costs are based on a model plant of 58,000 metric




tons, although the largest plant in the industry is 27,200 metric tons.




However, the treatment costs would be similar for smaller plants.




     b.  Short-Term Impact.  Producers of phosphorus trichloride should be able




to pass along treatment costs through price increases.  The conditions in the




industry including moderate demand growth, high captive usage, low foreign




competition, limited substitutes, and a high level of industry concentration




suggest that price increase constraints in order to recover treatment costs




will be limited.  Since the model plant treatment costs are only 0.1 percent




of the 1974 selling price, the impact on prices will be small.




     The impact on the demand for phosphorus trichloride will also be limited.




With the small price impact expected and an assumed moderate, price elasticity,




the reduction in demand because of  hazardous waste treatment costs  will be small.




Also, there will be no impact on the profitability of phosphorus trichloride




because the producers will be able to raise prices to recover treatment costs.




     c.  Plant Shutdown Impact.  There should be no plant shutdown because




of hazardous waste treatment costs.   With full treatment cost recovery, phosphorus




trichloride producers will not be faced with a plant shutdown decision.
                                        VIII-46

-------
     6.  Sodium Silicofluoride.




     a.  Treatment Costs.  In either of the two processes by which sodium




silicofluoride is manufactured, treatment of waterborne wastes generates a




small amount of hazardous waste material containing calcium fluoride.  According




to the Assessment Report, the concentration of calcium fluoride in the solid




waste is such that some protection of ground and surface waters is required.




A more complete discussion of the potentially hazardous nature of these




wastes is presented in the Assessment Report.  Hazardous waste management




costs for a 45 metric ton per day plant have been estimated in the Assessment




Report at $0.80 per metric ton for Level III technology.  This compares to




a cost of $8.50 per metric ton for deep welling of hazardous wastes which




is now being done by at least one plant.




     b.  Short-Term Impact.  At $0.80 per metric ton, hazardous waste




management costs for Level III amount to less than 0.5 percent of product




selling price.  Some producers of sodium silicofluoride could experience




difficulty in recovering the full waste management costs through price




increases.  This is because of the generally low level of demand growth




in the industry and because of significant abatement cost differences.  Each




of the three U.S. sodium silicofluoride plants uses a different hazardous




waste treatment/disposal process and hazardous waste management costs and




water treatment costs are often difficult to separate.  To the extent that




full cost passthrough is not achieved, industry profitability will suffer.




     c.  Plant Shutdown Impact.  No plant shutdowns are expected for sodium




silicofluoride producers as a direct result of hazardous waste treatment and




disposal costs.  Other factors in the industry are likely to be more




significant in arriving at a shutdown decision.  On the other hand, the




additional cost of hazardous waste management, to the extent that this cost




must be absorbed, can only serve to decrease the attractiveness of an




investment in the production of this chemical.





                                 VIII-47

-------
                C.  Inorganic Chemical Industry Impact




     As is apparent from the discussion of expected economic impacts on the




primary and secondary affected chemicals presented above, hazardous waste




management costs are not, in themselves, likely to lead to severe economic




consequences for most producers of these chemicals.  In particular, the effect




of these costs on producers of the secondary affected chemicals is judged to




be small in every case.




     This section summarizes the expected impact of hazardous waste management




costs on the producers of the five primary affected chemicals from the overall




perspective of the inorganic chemicals industry.




     1.  Size and Growth.  The primary affected chemicals accounted for about




32 percent of the $8 billion of inorganic chemicals shipped in 1975, though




only 16 percent were made by processes with high hazardous waste costs




(Table VTII-22).  Chlorine/caustic accounted for 79 percent of.the production




tonnage and 29 percent of the production value of primary product/processes.




     Table VIII-23  summarizes the estimated impacts on product demand of pro-




ducer price increases in the face of hazardous waste management costs.  The




estimated value of shipments which would have been lost as a result of 100




percent passthrough of hazardous waste management costs to consumers (due to




price elasticity effects) is $21.6 million, or about 0.27 percent of total




industry shipments.  This is equivalent to about 1 percent of the 1975 primary




affected chemical shipment value.  Actual demand losses are expected to be lower




at $8 to $11 million due to competitive constraints on price increases in some




cases.




     This study indicates that only one of the studied chemicals, hydrofluoric




acid, could experience plant shutdowns as a result of imposing the estimated




hazardous waste treatment costs for Level III control of these wastes.  As








                                  VII1-48

-------
                             TABLE VIII-22
           PRODUCTION AND VALUE OF PRIMARY CHEMICALS - 1975

Chemical
Chlorine
• mercury cell
• non-mercury cell
Caustic soda
• mercury cell
• non-mercury cell
Hydrofluoric acid
Phosphorus
Sodium dichromate
Titanium dioxide
• chloride process
ui -A b
• non-chloride process
Total
Production
(1'000's
metric tons)

2 ,060
6,200

2,270
6,830
284
408
112

330
220
5,464 13,250
Price3
$/ton

105
105

67
67
600
987
600

778
778
Value
($MM)

216

152
170
403
67

257
1,265 1


651

458




171
,280

*Source: Current Industrial Reports, Inorganic
(M28A(75)),
Contractor's estimates.
Chemicals

- 1975


     a.  Prices are the unit commercial shipment values, except for HF,
which is a contractor estimate.

     b.  Production of primary chemicals by processes with lower hazardous
waste treatment costs and not evaluated durine the orimarv economic impact
analysis.
                                  VIII-49

-------
                           TABU: vni-23

                  DEMAND IMPACTS ON PRIMARY CHEMICALS*

1975 demand
Chemical ($MM)
Chlorine 'e &^
Hydrotluoric acid [70
Phosphorus 4Q3
Sodium dichromate 87
Titanium dioxide 426
Total 1,947
Demand loss with
100% cost passthrough
($MM)
a. 4 (i%)
5.8 (3.47.)
6.2 (l.'i%)
0.4 (0.4%)
0.8 (0.2%)
21.6 (1%)
Expected demand
($MM)
none
0 - 2.9
6.2 (1.
0.4 (0.
0-8 (o.
7.6 - 10
(0.4% - 0.

(1.7%)
5%)
4%)
2%)
.5
.5%)

     ^Source:  Contractor's estimates.

     a.  Assumes full cost recovery pricing strategy and lost demand valued
at 1975 prices.

     b.  Total chlorine production is included because a price change for
mercury cell chlorine would have to be matched by increases in other chlorine
orices in order for the change to stick.

     c.  The value of sodium dichromate product ion • In l')75 was actually
about $68 MM (112,000 metric tons).  The demand impact calculation assumed
144,000 tons as more representative than the actual 1975 value.

     d.  The total titanium dioxide production is included rather than only
  t;V,p c^lori^1"  orocess production for  th" sa™~ reason all chlorine is included.
  About 60%  is  chloride process production.

     e.  Price increases for caustic soda would result .in a demand reduction,
  however its magnitude has not been estimated.
                                  VIII-50

-------
 indicated  in  Table VIII-24,  one  to  two  small hydrofluoric acid plants may  close




 earlier as a  result of  th«se added  costs.  These plants  represent  2  to  3 percent




 of  the plants producing the  primary affected chemicals.




     The ratio of incremental hazardous waste treatment costs to model plant net




income is shown in Table VIII-25.  Although these costs are on a model plant




basis, the percentage of net income is roughly the same as would be calculated




for the entire industry sector.  Assuming a producer is unable to recover treat-




ment costs, these ratios reflect the potential impact on the net income from a




model plant.   For example, hydrofluoric acid producers would experience a 7.2




percent loss in net income which is an important contribution to the plant




shutdown scenario indicated by the analysis for this sector.




     The incremental capital investment required for producers of the primary




chemicals to move from Level I to Level III controls is estimated to be $20.1




million,  Table VIII-26-   The estimate is based on extrapolating the model plant




capital investment to the total production capacity of the three chemicals




requiring new capital investments to come into compliance with a Level III




requirement.




     An expenditure of $20.1 million is small relative to total chemical industry




capital spending of $6.3 billion in 1975, of which $684 was spent on pollution




control facilities.   However, the required investment is large relative to




current investment related to the primary chemicals.  Table VIII-27 was con-




structed to give a rough estimate of current capital expenditures relating  to




the primary chemicals.  Total capital expenditures for the production of all




the primary chemicals were $120 million in 1975, of which $13 million was for




pollution control.  Less than $1 million of the $13 million was for solid waste




control,  of which hazardous waste is part.  Chlorine/caustic and titanium




dioxide require no new investment.   When they are excluded from the primary




chemicals,  the total 1975 pollution control capital expenditures were about





                                  VIII-51

-------
                             TABLE VIII-24
            POSSIBLE PLANT CLOSURES RESULTING FROM HAZARDOUS
                         WASTE TREATMENT COSTS*
                            Number of existing  Number of possible
Chemicals	plants	plant closures	Percent
Chlorine-mercury                   27                    -               -
Titanium dioxide -
  chloride process                  8                    -               -
Elemental phosphorus               10                                    -
Sodium dichromate                   3                    -               -
Hydrofluoric acid                  12                  1-2           8-16
   Total                           60                  1-2           2-3

     *Source:  Contractor's estimates.
                                VIII-52

-------
                                  TABLE VIII-25

             RATIO OF  INCREMENTAL HAZARDOUS WASTE TREATMENT  COSTS
                         TO MODEL PLANT PRE-TAX  INCOME*


Chemicals
Chlorine and caustic -
mercury cell
Titanium dioxide -
chloride process
Elemental phosphorus
Sodium dichromate
Hydrofluoric acid
Pre-tax plant
level income
per ton a
52
36
315
148
115
Increment
treatment
cost per ton
3.56
3.16
4.43
3.60
8.28
Percent of
pre-tax income
6.8
8.8
1.4
2.4
7.2
         *Source:  Contractor's estimates.

         a.  These values are at the plant level and do not include corporate
    overhead costs.
                                TABLE VIII- 26
                                                                        •i
     INCREMENTAL INDUSTRY INVESTMENT REQUIRED FOR HAZARDOUS WASTE CONTROL
Chemicals
   Incremental
capital investment
required to achieve
Level III treatment
($/ton of capacity)
      Total
    industry
    capacity
(000 metric tons)
   Incremental
capital investment
   required for
  total industry
     ($ 000)
Chlorine-mercury cell
Titanium dioxide
Elemental phosphorus
Sodium dichromate
Hydrofluoric acid
Total
a
a
16.48
9.68
28.72

2,800
514
560
154
327


-
9,200
1,500
9,400
20,100
     *Source:   Contractor's estimates.

     a.   Level III hazardous waste disposal is specified as contract disposal.
                                   VIII
                                       _ 53

-------













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VIII-54

-------
   $6.4  million.   In  this  context,  the new  $20.1 million  required  for hazardous




   waste control becomes much more  important, even though  the expenditure would




   be made  over several years.




        The discounted cash  flow analysis has  shown  that  in almost all  cases  the




   producers would make the  necessary investment to  come  into compliance with the




   Level III requirements.   The $20.1 million would  appear to impose a  severe




   distortion on current capital expenditure patterns for these chemicals.




   However, one must  realize that these chemicals  have the most severe  of the




   hazardous waste problems  and the typical large  diversified producer  is also




   making other inorganic  products which will not  face the high hazardous waste




   capital  costs.





     The growth of the inorganic  chemicals  industry is  not  likely to be




significantly affected by the  cost  of  hazardous waste management.   Some




small reduction in demand growth  is likely  to occur as  real  prices rise;




however, hazardous waste  management costs are relatively small  when compared




to other elements  of  increasing cost.   As is  the case throughout  much of




this analysis,  the additional  costs resulting from hazardous waste management




are relatively small  in themselves; however,  this is not to  say that these




costs do not work  incrementally to  increase overall production  costs and




contribute to a variety of economic phenomena.
                                 VIII-55

-------
     2.  Employment and Wages.  The impact of hazardous waste management costs




on employment in the inorganic chemicals industry is shown in Table VIII-28.




As a result of the potential shutdown of one to two hydrofluoric acid plants,




45 to 90 related jobs could be lost.  The production at these plants would be




made up by increased production and employment at the remaining plants.  About




60 jobs could be affected by demand reduction due to price increases.  All of




these jobs may not actually be lost because the demand changes are so small in




most cases.  The lost jobs may be subtracted from new ones which would other-




wise be created by growth.  The related effect on wages is shown in Table VIII-29.




An estimated $0.6 to $1.2 million in wages would be lost if the HF plants are




closed.  The wage losses resulting from demand losses are $0.6 to $0.7 million.




     3.  Community Effects.  Community effects may be expected in those




instances where plant shutdown leads to a significant net decrease in the number




of jobs available in a given community.  In this study, hydrofluoric acid was




identified as the one chemical, among eleven studied, where plant shutdowns




may occur as a result of hazardous waste management costs.  It was beyond the




scope of this study to review prospects for individual chemical plants.  None-




theless, the majority of hydrofluoric acid plants are located in small communities




and, therefore, hydrofluoric acid plant shutdowns are likely to cause significant




community effects in terms of employment and wages.




     4.  Foreign Trade Effects.  As indicated in Table VIII-30, foreign trade




effects for the five primary affected chemicals range from small to negligible.




This is because foreign trade represents such a small part of U.S. production




and consumption in most cases.  An exception is hydrofluoric acid,where imports




represented about 16% of production in 1975.  Hydrofluoric acid imports are
                               VIII-56

-------
                             TABLE VIII- 28
  POTENTIAL IMPACT OF HAZARDOUS WASTE TREATMENT COSTS ON EMPLOYMENT*
Chemicals
Chlorine-mercury
Titanium dioxide
Elemental phosphorus
Sodium dichromate
Hydrofluoric acid
Total
Number of Plant
employees closure
2165
6165
2890
850
540 45 - 90
12,610 45 - 90
Demand
loss
_
10
40
3
0-10
55 - 65

*Source:  Contractor's estimates.
                         TABLE VIII-29
    POTENTIAL IMPACT OF HAZARDOUS WASTE TREATMENT COSTS ON WAGES*


Chemicals
Chlorine-mercury
Titanium dioxide
Elemental phosphorus
Sodium dichromate
Hydrofluoric acid
Total
Estimated
wages
($MM)
29
82
38
11
7
167
Wages affected ($MM)
Plant closure Demand loss
.
0.1
0-.5
—
0.6 - 1.2 0 - 0.1
0.6 - 1.2 0.6 - 0.7

 * Source:
Contractor's estimates.
                                 VIII-57

-------
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        VIII- 58

-------
expected to represent an increasing portion of U.S. production based on previous




capacity commitments.  In the long term, if demand for hydrofluoric acid




increases, environmental considerations may limit capacity expansion in the




U.S., and the U.S. balance of payments would be adversely impacted.
                                VIII-59

-------
                            IX.  ACKNOWLEDGEMENTS




     Mr.  Michael Shannon, EPA Project Officer,  provided valuable guidance in




the preparation of this report.  Sincere appreciation is also extended to the




representatives of the following companies who  were kind enough to provide




information useful in the preparation of this report.




     Allied Chemical                              Harshaw Chemical




     Alcoa                                        Monsanto




     Diamond Shamrock                             Olin




     Dow                                          PPG Industries




     DuPont                                       Stauffer
                                     IX-1

-------
                              APPENDIX A




      DETAILS OF SHORT-RUN ECONOMIC IMPACT ANALYSIS CALCULATIONS




                    FOR PRIMARY AFFECTED CHEMICALS









     Appendix A summarizes the detailed calculations for determining




short-run economic impacts on demand and price for the primary affected




chemicals.  The analyses are based on the model plant production and




treatment costs and demand elasticities discussed in Chapter VII.   The




demand impact has been estimated for several levels of cost passthrough,




ranging from 0 to 100 percent.
                                 A-l

-------
                                 TABLE A-l

                          SHORT-RUN IMPACT ANALYSIS
Chemical:  Chlorine - Diaphragm Cell
Increment Treatment/Disposal Costs (1975)

  (option 2 to option 3)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs - Model Plant

Annual Fixed Costs

Variable Unit Costs

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):


Change in Variable Costs:


Change in Total Costs:
-0.36
 0.31
84.62
 0.31 _
             $51.000

             $51,000

             $51,000

             162,000

             $  0.31/ton

             $  0.31/ton



             $ 22.68/metric tons

               84.62

             $107.30
                                             107.30
0.37%


0.29%
     *Source:  Contractor's estimates.
                                       A-2

-------
                                 TABLE A-2
                          SHORT-RUN IMPACT ANALYSIS*
Chemical:   Chlorine - Mercury Cell
Increment Treatment/Disposal Costs (1975)

  (option 2 to option 5)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs

Annual Fixed Costs

Variable Unit Costs

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):


Change in Variable Costs


Change in Total Costs:
                                              -  0.36

                                                 3.56
                                               102.81

                                                 3.56
                                               126.33
                                                          ($ 46,800)
                                                          (     175)
                                                            367.200

                                                           $320,230

                                                           $320,230

                                                             90,000

                                                           $   3.56/metric ton

                                                           $   3.56/metric ton



                                                           $  23.52/metric ton

                                                             102.81

                                                           $126.33
3.46%
     *Source:   Contractor's estimates.
                                        A-3

-------
                                 TABLE A-3
                          SHORT-RUN IMPACT ANALYSIS*
Chemical:  Hydrofluoric Acid
Increment Treatment/Disposal Costs (1975)

  (option 1 to option 4)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs - Model Plant

Annual Fixed -Costs

Variable Unit Costs

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):


Change in Variable Costs:


Change in Total Costs:
- 1.91

  0.78
440.82

  8.28
484.48
             $172,340



             $ 18,000



             $ 18,000

             $190,340

               23,000

             $   0.78/metric ton

             $   8.28/metric ton



             $  43.66/metric ton

               440.82

             $ 484.48
0.18%
1.7%
     *Source:  Contractor's estimates.
                                    A-4

-------
                                 TABLE A-4

                          SHORT-RUN IMPACT ANALYSIS*
Chemical:  Elemental Phosphorus
Increment Treatment/Disposal Costs (1975)

  (option 1 to option 3)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs

Annual Fixed ^Costs

Variable Unit Costs (including by-product credit)

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):               - 2.18
Change in Variable Costs;
Change in Total Costs:
                                                0.13 _
                                              545.41
  4.43
675.74
             $215,000
             $  3,600
                2,700
             $  6,300

             $221,300

               50,000

             $   0.13/metric ton

             $   4.43/metric ton



             $ 130.33/metric ton

               545.41

             $ 675.74
                                                           0.02%
0.66%
     *Source:   Contractor's  estimates.
                                        A-5

-------
                                  TABLE A-5
                          SHORT-RUN IMPACT ANALYSIS*
Chemical:  Sodium Bichromate
Increment Treatment/Disposal Costs (1975)

  (option 3 to option 5)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs - Model Plant

Annual Fixed Costs

Variable Unit Costs (incl. Na2SO^ credit)

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):


Change in Variable Costs:


Change in Total Costs:
  1.99
400.90

  3.53
451.80
 $101,900



 $ 80,400
(   8,100)
   60.000

 $132,300

 $234,200

   66,430

 $   1.99/ton

 $   3.53/ton



 $  50.80/metric ton

   400.90

 $ 451.70



 -0.50


  0.51%


  0.78%
      *Source:   Contractor's  estimates.
                                       A-6

-------
                                  TABLE  A-6
                          SHORT-RUN IMPACT ANALYSIS
Chemical:  Titanium Dioxide - Chloride Process
Increment Treatment/Disposal Costs  (1975)

   (option 1 to option 5)

Annual Capital Costs

Variable Costs

  Operating
  Energy & Power
  Contractor

Total Variable Costs

Total Annual Costs

Assumed Annual Production (metric tons)

Variable Unit Cost of Disposal

Total Unit Cost of Disposal

Annual Production Costs

Annual Fixed Costs

Variable Unit Costs

Total Unit Annual Cost

Short Run Demand Change

Price Elasticity of Demand (e):


Change in Variable Costs:


Change in Total Costs:
- 0.42

  3.18
580.84

  3.18
744.29
             ($ 38,400)

              157,200

             $114,300

             $114,300

               36,000

             $   3.18/metric ton

             $   3.18/metric ton



             $ 163.45/metrJc ton

               580.84

             $ 744.29
0.55%
0.43%
     *Source:   Contractor's estimates.
                                      A-7

-------
                              APPENDIX B




                 DETAILS OF PLANT SHUTDOWN INVESTMENT




                ANALYSIS FOR PRIMARY AFFECTED CHEMICALS









     Appendix B summarizes the detailed plant shutdown analysis for the




primary affected chemicals.  The analysis is based on a discounted cash




flow approach over a ten-year period.  The cash flow determined is an




average for the ten-year period.  Two cases have been examined.  The first




case assumes the model plant will be faced with the total treatment costs




for hazardous waste control.  The second case is a sensitivity analysis




which examines the impact of alternative, but possible, operating and




treatment cost assumptions.
                                    B-l

-------
                              TABLE B-l

                 NET PRESENT VALUE OF HAZARDOUS WASTE    ^
             CAPITAL INVESTMENT FOR CHLORINE/MERCURY CELL
                                Case I
                                      Case II
Production

Revenue (per ECU)

Manufacturing costs

Treatment costs


PAT (50% tax rate)

Plus depreciation:

  Plant

  Treatment invest-
    ment

Cash flow

Case I

Investment

Working capital

  Operating

  Treatment
Salvage value  (10%
  plus mercury
  inventory)
Cash flow
 163,300 metric tons/year

 $178/metric ton

$126.4

$  4.1
$ 47.5

$ 23.8



 $16.7


     0
 $40.5/metric ton

 Year 0         Year 1-10

   0



($4.48 MM)

($0.17 MM)
($6.32 MM)


 	           $6.61 MM
                       ($10.97 MM)
 145,200 metric tons/year

 $178/metric ton

$126.4

$ 15.0
$ 36.6

$ 18.3



 $16.7


   	0

 $35.0/metric ton

     Year 10
     $4.48 MM

     $0.17 MM

     $6.32 MM
                  $6.61 MM/year   $10.97 MM
NPV  (@ 15%) = $24.9 MM
                                     B-2

-------
                              TABLE B-l  (Continued)
                 NET PRESENT VALUE OF HAZARDOUS WASTE
             CAPITAL INVESTMENT FOR CHLORINE/MERCURY CELL

Case II
Investment
Working capital
Operating
Treatment
Salvage value (10%
Year 0 Year 1-10
0

( $3.98MM)
( $0.54MM)
($6.32 MM)
Year 10


$3.98 MM
$0.54 MM
$6.32 MM
  plus mercury
  inventory)
Cash flow
$5.08 MM
                     ($ 10.84MM)
$5.08 MM/year  ($10.84 MM)
NPV (@15%) = $17.4 MM
     *Source:  Contractor's estimates.
                                      B-3

-------
                                    TABLE  B-2

                  NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL

                        INVESTMENT FOR HYDROFLUORIC ACID*
                                       Case I
                                       Case II
Production



Revenue

Manufacturing  costs

Treatment costs
  (Option 4)

PAT (50% tax rate)

Plus depreciation:

   Plant

   Treatment investment

 Cash flow


Case I

Investment

Working capital

   Operating

   Treatment

Salvage value  (10%)

Cash flow



NPV (@ 15%) = $6. 6 MM
          20,860 metric tons/
          year (90% operating
          rate)

          $600/metric ton

         $ 484.5

          $ 21.1
          $ 94.4

          $ 47.2
          $ 30.5

          $  5.Q

           $82. 7/ metric ton
 Year 0

($1.04 MM)



($2.37 MM)

($0.04 MM)

($0.7 MM)



($4.15 MM)
Year 1-10
             18,500 metric tons/
             year (80% operating
             rate)

             $600/metric ton

             $530

             $ 71.5
             $ -1.50

             $  -.75
$ 34.3

$ 16.8

 $50.4/metric ton


     Year 10
$1.73 MM

$1.69 MM/year
    $2.37 MM

    $ .04 MM

   $ 0.7   MM



    $3.11 MM
                                          B-4

-------
                                     TABLE B-2 (Continued)

                 NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL
                                                         *
                        INVESTMENT FOR HYDROFLUORIC ACID
Case II
Investment
Working capital
Operating
Treatment
Salvage value (10%)
Cash flow
Year 0
($3.11 MM)

($2.3 MM)
($0.12 MM)
($0.7 MM)

Year 1-10 Year 10


$2.3 MM
$.12 MM
$ 0.7 MM
$0.93MM
                    ($6.23 MM)


NPV (@ 15%) = $-0.09 MM
$0.92 MM/year      $3.12  MM
      *Source:   Contractor's estimates.

      a.  Based on treatment costs of $441,900/year and $1.3MM/year for  Cases  I
  and II respectively.


      b.  Working capital = (manufacturing costs - depreciation x annual production
                                                                        4
                                        B-5

-------
                                TABLE B-3
               NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL
                    INVESTMENT FOR ELEMENTAL PHOSPHORUS*
                                   Case I
                                Case II
Production


Revenue
Manufacturing costs
Treatment costs*1

PAT  (50% tax rate)
      49,900  metric  tons/
      year  (90%  operating
      rate)
       $990/metric ton
      $674
      $  7.0
      $  309.0
      $154-5
        44,350 metric tons/
        year (80% operating
        rate)
         $990/metric ton
         $ 774
         $  24
        $ 192
         $  96
Plus depreciation:
   Plant
   Treatment investment
Cash flow

Case I
Investment
Working capital
  Operating
  Treatment
Salvage value  (10%)
Cash flow

NPV  (@ 15%) =  $44.6 MM
       $60.9
       $  2.0
       $217.4/metric  ton
          $68.5
          $ 6.8
         $171.3/metric ton
   Year  0
 ($1.0 MM)

 ($7.65  MM)
 ($ .02  MM)
 ($4.1 MM)

($12.77  MM)
Year 1-10
 $10.85 MM
 $10.85 MM/year
Year 10
  $7.65 MM
  $  .02 MM
  $4.1  MM

 $11.77 MM
                                       B-6

-------
                         TABLE B-3 (Continued)

             NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL
                 INVESTMENT FOR ELEMENTAL PHOSPHORUS*
Case II

Investment

Working capital

  Operating

  Treatment

Salvage value (10%)

Cash flow



NPV (@ 15%) = $26.1 MM
  Year 0

 ($3.04 MM)



 ($7.82 MM)

 ($ .06 MM)

 ($4.1  MM)



($15.02 MM)
Year 1-10
$7.60 MM
Year 10
                  $7.82 MM

                  $ .06 MM

                  $4.1  MM
$7.60 MM/year    $11.98 MM
     *Source:  Contractor's estimates.

     a.  Based on treatment costs of $1.01 MM and $3.03 MM for Cases I and
II respectively.

     b.  Based on electricity costs of $0.15 per KWH.
                                  B-7

-------
                                    TABLE B-4
             NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL INVESTMENT
                             FOR SODIUM DICHROMATE*
                                          Case I
                                         Case II
Production (80% operating rate)  39,735 metric tons/year
Revenue
Manufa :turing costs
Treatment costs (Option 5)

PAT (50% tax rate)
Plus depreciation:
  Plant
  Treatment investment
Cash flow
               $600/metric  ton
               $451.8
               $8.92
               $139.28
               $69.64


               $23.82
               $ 1.58
               $95.04/metric ton
               39,735 metric tons/year
                 $600/metric ton
                 $451.8
                 $15.00
                 $133.20
                 $66.60
                 $23.82
                 $ 2.60
                 $93.02/metric ton
Case I
Investment
Working capital
  Operating costs
  Treatment costs
Salvage value  (10%)
Cash flow

NPV (@15%) = $17.1 MM
 Year 0
($0.63 MM)
($4.25 MM)
($0.09 MM)
($1.04 MM)
($6.01 MM)
Year 1-10
Year 10
 $3.78 MM
 $3.78 MM/year
                     $4.25 MM
                     $0.09 MM
                     $1.04 MM
$5.38 MM
                                        B-8

-------
                              TABLE B-4 (Continued)
                NET PRESENT VALUE OF HAZARDOUS WASTE CAPITAL  INVESTMENT
                                FOR SODIUM DICHROMATE*
Case II
Investment
Working capital
  Operating costs
  Treatment (est.)
Salvage value (10%)
Cash flow

NPV (@ 15%) = $16.6 MM
 Year 0
($0.63 MM)


($4.25 MM)
($0.15 MM)
($1.04 MM)

($6.07 MM)
Year 1-10
 Year 10
$3.70 MM
$3.70 MM/year
                   $4.25 MM
                   $0.15 MM
                   $1.04 MM
$5.44 MM
     *Source:  Contractor's estimates.
                                      B-9

-------
                               TABLE B-5

                 NET PRESENT VALUE OF HAZARDOUS WASTE  ,
                CAPITAL INVESTMENT FOR TITANIUM DIOXIDE
                                         Case I
                                    (chloride process)
                                        Case II
                                   (chloride process)
Production (90% operating rate) 22,680 metric tons/year   22,680 metric  tons/year
Reve nue

Manufacturing costs
               Q
Treatment costs


PAT (50% tax rate)

Plus depreciation:

  Plant

  Treatment investment

Cash flow


Case I

Investment

Working capital

  Operating

  Treatment

Salvage value (10%)

Cash flow



NPV Ǥ 15%) = $9.7 MM
Year 0
($3.58 MM)

($ .02 MM)

($2.8  MM)
($6.4  MM)
               $780/metric ton

               $744.6

               $  4.3
               $ 31.1

               $ 15.5
              $ 112.4
                  0
                  $780/metric ton

                  $744.6

                  $  8.6
                  $ 26.8

                  $ 13.4
                  $ 112.4
                     0
               $128.0/metric ton    $125.8/metric ton
Year 1-10
  $2.90 MM

  $2.90 MM/year
 Year 10
                    $3.58 MM

                    $ .02 MM

                    $2.8  MM
$6.40  MM
                                  B-10

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                         TABLE B-5 (Continued)
                 NET PRESENT VALUE OF HAZARDOUS WASTE
                CAPITAL INVESTMENT FOR TITANIUM DIOXIDE*
Case II                      Year 0           Year 1-10         Year 10
Investment                      0
Working capital
  Operating                  ($3.58 MM)                         $3.58 MM
  Treatment                  ($ .04 MM)                         $ .04 MM
Salvage value (10%)          ($2.8  MM)                         $2.8  MM
Cash flow                    	        $2.85 MM         	
                             ($6.42 MM)        $2.85 MM/year    $6.42 MM
NPV (@ 15%) = $8.2 MM

     *Source:  Contractor's estimates.
     a.  Treatment costs based on $4.3/ton x 22,680 tons/year = $97,520/year,
         and $8.6/ton x 22,680 tons/year = $195,048/year.
                                    •ftU.S. GOVERNMENT PRINTING OFMCt: 1977-240-648/51
   ya  1457
                                  B-ll

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