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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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)
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
X
CO
hJ
^J
u
M
s
[V]
33
CJ
o- rt
I ^-s
H a
M r-j
Prf
W CM
sf §
H
o
M
H
*^
CNl
M
»J
w
H
u
Si
>
Q & >5
>4H
O
CO
V-l 4-1
oi c
43 n)
B H
3 ft
4-1
moo
r- 3 o o
cy> TJ o -H
rH O »-l
U rH 4-1
ft 01
8
i-H
Cfl
O
H
O
m ""> r^ co o in m
00 f^ 00 f-~ CT\ vO v£>
43 CU
U S 60 S C & S
O O -H O O O O
rH rH 43 rH C3 rH rH
CU
4J
Cfl
M *~|
0) 60 & 35
3 3 T3 -H O O O
O O O 43 rH rH rH
rH rH g
CM CM co mm
vO v£> 1 1 1 II
o o rH < rH rH
O O -J oo CM r~ O
v£> v£) 00 O rH -3" CO
CM O CM -l
0) O cfl T3 ft
O Cfl B -rl
>> O r4 O 13
IJ -H 45 tH iH
rH3 M Cfl O'QrHM
cfl O O 3 -H cfl O
CU4JM 3 &T3 B4JrH
COOlrHO 3OJ3
H 4-1 B ^H r* Q (_) 4J CJ
M 0 ft 3 C
O M CO -H cfl
rH -a OT) 4J»»
U 33' CM CO H
co
01
2
, , J
4J
co
cu
CO
o
4-1
o
cfl
^4
4J
a
o
^
= co
1-1
CU
0
3
a
o
}_|
FM
rH
Cfl
O
H
B
0)
o
MH
O
O
4J
o
cu
M
Q
*~*
m
r>.
~^s
^
oo
CM
g
CO
M
O
ft
CU
Qq
rH
Cfl
H
M
4J
CO
3
£3
M
4-1
(3
OI
)-i
S-i
3
U
»
0)
o
3
O
CO
*
n-io
-------
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
-------
CO
% 0
4J -H
rl 4-1
U crj
Cd N 6^
0.-H
0) rH
U -rl
4J
T) JG H
C 4-1 ed
cd s cu
BOS*
CU t-l ^
Q oo e^s
UH
o co
4-1
i_i rl
W M
cu cd
J3 rH
§ *
r3
<4H CO
O !-i
cu
M U
CU 3
43 T3
§ 0
3 1-J
a txi
e
O CO
H CO C
4-1 - O
m o o 4J
r- 3 o
ON T3 O CJ
rH O > iH
)-( H M
CX 4J
3
rH
cd
a
H
g
cu
CJ
cu
4-1
cd
M
CU J3
s TJ s s s oo
o Q o o o -H
rH S rH rH rH .C
o m o o m o
00 oo vO r^ oo f^
cu
CU C
C -rH
H rH
CN rH ON O
,
u ^
CJ
^ a
C -H
cd N
" *>
ca cu
M 60
cu c
0 §
3 M
-a o
o
A^ "^
CM c
crt
rH W
cd s
0 0
H rH
a rH
cu cu
e ^
it i pi
O O
>s £
M 0
o
4-1 .»
a c
cu cu
>-i cu
H p
. Q 60
* n)
/ N
/^s
m
r-.
v-x
a u
60 3
H *O
CX O
H
cu ex
0
5 *
cu M r^
CJ J- ON
t-t CJ r1
o
C/l
* cd 42
11-12
-------
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
-------
W
EH
CO
is
CO
a
o
§
*^
M
[T^
x"~s
M m
M r-.
H a\
W
u O
rJ O
1
"f 00
""* rH §
M > U
W W
W M EH
rH JTj
PQ U H
H **§
P^ Sj
O H
pi) <^
CO ptf
H EH
CO
O
U
t
S3
w
(*^d
W
(yj
u
3
M
CU
4-1
d Cfl
3 6
r5 O
rtH Lj
T) "
o *-
co _cJ
13
cn
3
v^
o
J2
a.
CO
o
j3
Oi
CJ
1 -H TJ
0 M -H
rJ O U
-o 3 <:
>, H
»T-« i[ I
cn
cn
a)
CJ
o
0 01 H
3 id a.
H T-l
a x (u
cfl O 13
4J -H -H
H 13 >-i
H 0
rH
CJ
CJ
H rH
<1J 4J rH
C en oi --^
H 3 a cn
M co cn
O O r^ 0)
rH rJCJ
£ 13 3 O
u a o M
co M a,
0)
S
rH
O i 1
H CU
0) 4J U
C cn ^-N
H 3 S cn
r-i co &o cn
O O rd 01
rH MO
XI 13 A O
U C D- M
cfl cfl CX
H
a
00 0 0 O 0
o o o o o o
O O O C^ -d- rH O
CT> C7> rH O OO O
CN CN O 00 " ' VD
o o o o o
o o o o o o
o o o vo r~- i
» * * * *
a" st m n CN
CN CN i-H
oo oo CN'
^
^ ° ° 9 S
§ *. -^ s §
o 0 0 i i
" VO ^D CN CO
^ ^ so r-. rH
X* N
III § 0 I 0
* *.
in °° >-
V^X 1
o m o
III 1 O t~^ O
00 rH CN
vo r^
III 1 1 1 0
o
0
II
in
CO
4-1
(0 rJ
O Cl)
0 MS
4.J O
ij 00 Pu t-l
C O 00 O
nj 0 C 08 4-1
6 rH rH -H O
>cJn[2 & txcu a) c
MI-JO <;uowu
c c
O O 4J °.
0 0 ^ ^
CNJ O O ^^*
<0-
_i ci
o o
O O 4J -1-1
o o ^ 7^
ro O n °°
*l ». *"'
§ s
0 0 4J 0
CN 00 _^
H '« si
d S
0 °
O 4J W
§ § 2 s
CO ^° CN
1 ^ ^^"
1-1
c ,.,
O O 4-J O
ro O --^ ^~
CN O VD ^J
o o "*-
csi cTi m '
ro -
c S
0 °
O O 4J >
o o ;>
0 O rH °
H CN *
in v£> o "^
1-1 S>
c _,
rH O 5
CO 4-1 ^
3 ^
c o .. "Zi1
C3 "H H 01
Cfl rJ P 3
C 4-> 4-1 rj s_x
c -° a 3 ^
cfl 4-i 13 S S
rH U rJ O ,, ~
^ CU 3 CU M £ jg
tfl ,_, "S a a CX 3
flj Ll 4J 'i I
Q ~r rr ^r ^r 4J 'i i
S U rj
o
M
^
r-l
cn
01
£>
_
* **
£>>
r-l
4J
cn
3
13
c
rH
CO
rH
cfl
o
H
B
0)
u
o
H
0
cfl
00
n
o
c
M
cn
0)
o
H
4J
o
CO
D-i
CU
4-1
cn
cfl
cn
3
o
T)
M
cfl
N
cfl
W
rH
cfl
H
M
4-1
cn
3
-o
c
M
U-J
o
4J
c
0)
E
cn
cn
Q)
M
cn
^
"
0)
o
3
o
CO
*
11-14
-------
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
-------
x-s
rH
00
CN
u
M
to
* '
C/)
rJ *
^ w
M rf
' 1 (~~(
S b.
M ^
EC §
" S
CO U j
1 H 3
M 3 §
M S ^
W 0 I
rf 2 M
^ M ^
H ^
^H
M
pi
H
CO
J^)
o
S3
H
in
^o
ON
rH
vo
VO
ON
rH
r^
\o
ON
rH
00
vO
ON
J
^^
O
^o
ON
rH
O
1^-.
ON
rH
i 1
r^
ON
rH
CN
t^-
ON
rH
CO
1-^
ON
rH
ca
-o-
r^
ON
rH
M
f« .
1 0)
0 >
rH
fi B en
0) O 0)
TJ a x
H C cd
> -H 4-1
H
o
.
c
o
H
in
CO
H
cu
"O
cd
t-i
H
rH
cd
J-l
0)
'O
0)
PM
"co
M
o
rl
4-J
cd
t.
H
o
Cu
M
o
o
60
C
H
J-l
4-1
O
cd
M-(
3
3
a
>-i
o
4H
4J
J-l
O
p.
0)
Pi
rH
cd
rl
O
c
rl
Pn
>-,
rH
J-l
01
4-1
M
cd
3
o-
0)
O
rl
3
O
CO
K
CO
J-l
«
01
r>>
CO
3
O
H
Si
JH
O.
O
4-1
0)
^
r^
,0
Rl
IU
M
n)
P.
e
o
o
>,
rH
4-1
O
0)
M
H
U
4-1
0
a
0)
J-l
cd
o
C
fTt
"J
CO
cu
J-l
3
T3
CU
O
O
J-i
P.
60
C
H
4J
C
3
O
O
o
cd
C
H
0)
60
C
cd
£1
O
4-1
O
cu
rH
14-1
01
J-l
cn
01
j-i
3
60
rl
<4H
JT
r~-
ON
rH
cd
III-ll
-------
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
-------
NO *sj"
^^v
i-H
00
CM
U
1 1
CO
^-^
CO
< w
M fj
r^ pL|
pr") * .
C
-H
^"i
j_i
J-l
W
j3
r^
C
M
ON vO
rH "^
r\ *%
i i in
rH
CO 00
\£> m
., ^
CM m
rH
^O ^^
ON ON
\O CO
r. M
CO vD
rH
r^. in
CM rH
r^- co
rt n
CO ^O
rH
*\
m vo
rH
CO B^S 00
ON ON r--
ON
f, CO rH
r-H CM
CN
rH ON
CM ON
CO CN
NO r~N
rH
o o-
r~. O
0 00
rH
O B«S O
CM 00 00
vQ
« a. co c
cd c cd ai -^
T3 O vH ,-s O rH CO
a) S aj a) co
X 60rHg 60CO rH4J
H c cd f, cd a)
14-1 -H 4-1 ' -H 4-1 CO CO
^ O £6 0) CO
4-1 V-l E-H M C 4-i Cd
aj o o a)
z rs s 2;
c
o
H
CO
CO
H
O
U
0)
a
CO
M
(U
T3
QJ
c
O
H
4J
cd
M
O
P-.
O
u
60
C
H
S-i
O
cd
S-i
o
o
cx
V
pi
cd
H
O
C
cd
c
H
PK
cd
5-
QJ
O
^
O
C/)
o
4J
0)
!-t
cd
a.
o
u
4J
O
OJ
VJ
H
T)
o
0)
cd
fi
cd
co
OJ
cu
a
o
ex
60
C
H
4J
3
O
O
O
cti
C
H
a)
60
C
cd
u
a)
CO
0)
!-i
3
00
H
ON aj
CO
3
cfl O
*rH
OJ
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
-------
T 1
00
Oxl
u
1 1
CO
CO
i-!*
< w
« rJ
tl M
LO K g
I U P-. ^x
M 0 HJ 1
H ti <
(H H ~
3 1 »
M ^ <
r~~
ON
00
»-
rH
-^
LO
XO
r.
rH
rH
Oxl
xO
rH
CO-
LO
xD
oo
rH
00
XD
-o-
N
rH
-
ON
0
00
«t
rH
0X1
-*
LO
r>
oo
rH OO
Oxl xD
xD -H
r--
Oxl OO
Oxl LO
OO OO
Oxl OO
«. *%
oxi ^r
Oxl
H
P
rH
CO
4-1
H
ft
0)
o
cn
0)
»-i
3
H
T3
C
CU
ft
X
0)
IS
o
1
r 1
M-l
4-J
3
O
jr
cn
CO
O
/ v
r^* oo
'"*
vOl
oo
0
^^^
r-l
0
LO
vj.|
ON
oo
o
1
^ s
LO
xO
oo
rH
M
0
rH ?>-.
M-l 4-J
H
-C 3
cn cr
cfl 0)
CJ ~-~-
4-)
4-1 ,0
QJ QJ
2 P
1
^
C
O
H
CO
cn
H
g
3
O
O
CU
-a
co
!-i
H
rH
cfl
M
0)
13
0)
fn
n
"en
C
O
H
4-1
CO
S_i
O
ft
t-i
O
U
60
C
iH
}-i
3
4-1
CJ
cfl
MH
3
fi
cfl
g
Vi
O
>4H
4J
VJ
O
ft
01
erf
!-H
cfl
H
u
C
cfl
a
H
fn
>-,
rH
(-1
0)
4J
P
cfl
3
o-
. .
Ol
O
M
3
O
en
K
,
^^
fi
Vi
cfl
0)
>N
x^
C
o
H
4-1
cO
H
CJ
Ol
M
ft
CU
id
+
^x
rH
I
V-i
cfl
01
>.
1
C
M
cO
0)
>^
x^
4J
Cl
O)
6
4J
cn
Ol
>
C
H
t3
0)
x
H
MH
4-1
0)
C
II
^^
c
(-1
CO
Ol
>^
x^ '
en
QJ
)-l
3
4J
H
13
C
Ol
ft
X
01
rH
CO
4J
H
ft
cO
o
,
cO
cn
3
O
H
>
01
5-1
ft
0
4-1
01
rH
43
Cfl
S-i
cfl
ft
6
O
U
>,
4-1
o
Ol
t-l
H
T3
4-1
O
C
01
JH
Cfl
T3
G
cfl
cn
01
S-l
3
T3
01
O
O
M
ft
60
C
H
4J
G
O
O
O
cfl
G
H
01
60
C
CO
-C
U
4-1
U
01
rH
MH
01
S-l
en
0)
M
3
60
rH
MH
.
60
C
H
G
H
e
!-i
eu
4-J
Ol
T3
G
H
QJ
en
3
CO
U
01
43
S
0
rH
MH
X
cn
co
a
cu
C
H
B
L-l
01
4-J
01
T3
CU
0 B
4-> O
o
cn c
QJ -H
X
cfl 60
4-J C
H
M 4-J
01 Cfl
4J J-i
M-l 01
Cfl ft
0
Q)
S 0
0 4J
O
C Q)
H 60
^
4J Cfl
QJ 43
C cj
o 4=:
4J cn
cfl
*a o
0) 1
a c
-a o
CO C
Ol cfl
43
en
4J CO
cn S
a
E C
0
C -H
0 4-1
H CO
4-1 -H
Cfl U
H QJ
O J-l
CU ft
J-l Ol
ft TJ
01
Q QJ
CJ
o C
H
4-J
QJ
C
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
-------
,-v
rH
00
CN!
£_}
M
CO
S^ x
CO
1 1
5*
u
S3 w
PJ rl
_ [Tj uj
I 0 fe
M 0
M ^ Dd
[Z] *^ n
^
W 0 w
pq Pi O
<; o cj>
^~* M
,_J
*^
M
p^
H
CO
£=>
Q
la
M
in
ON
H
vO
ON
I 1
1-^
^o
ON
rH
oo
ON
i 1
ON
ON
r-l
0
ON
rH
p^
ON
rH
CNI
CT
i 1
co
ON
rH
cd
^j-
p^.
rH
B-S B<; x-s. B^ &-S fr*S
O O LO
O C^ VD
O r-
u-| CM
-d" O
i 1 ^-^
CO O CO
-* VO OO
B-S
0
CM
rH
rH
O-. CM
CO O
r-l -*^
t-- VO ^, ON
co m oo|| o
i-H -^
B^S B^' y^"s B*11? 6*^9 S"*?
O rH 00
O CN] \O
O 00
i 1
r-l CM
..
r-l 0
1 1 ^"^
ON
rH
B-S
oo
CO
x^-
B-S B-J; /-v B-S B-S B-S
O CM VD
O CM ^D
O 00
rH
CNI -i"
r-l CD
, ^ \^/
oo oo o
O -^" vO
i 1
B-«
-*
^
^-»-
B-S &-^ /*"- &-S B-S B-S
O ON ON
O CO vD
O OO
rH
CNI r^
CT. O
^^
m in o
oo co m
B-S
CM
rH
B-S 6-!! ^-s B-S B-S B-S
O 00 00
O CO ^O
O 00
rH
^}- OO
*
CT. O
NO vO C*
oo co m
B-S
ON
»
1 1
rH
1 i *^s
B-S B-S B-S
CO ON -3"
ON co in
B^
ON
rH
&-S B-i1 / \
O rH 00
o CM in
O 00
rH
r-l 00
CNI O
, ] ^s
B-S B-S B-S
co oo m
, | ^ ^
rH
B-S
P^
,
O
B-S B-S' B-S B-S B-S
o *n ON
f"N CM -si"
O CO
rH
o-y CM
i.
CN rH
1-1
m co CM
co m oo
rH
B-S
CO
ON
CO
CO
» cu cu co
pj rj k^ ClJ
O Q (0 rS
r" CJ 4_1 Cd
CO Ct -H CU
CO Hi oO CO O
H -U (i .Q Cd
00 4-* E1 CO CU
C It) C (-1 (i c o cd co
4-1CDO C.2 4JH4-I l><
cu c cu cu cd
3 I- 53 S5 H
CO
o
H
p| CU
O r-l
H CX.
CO
CO O
H 4J
6
§ ai
O rH
O rO
CO
01 }-t
d co
CO &,
M 3
H O
O
^
CO >s
M i~H
CU 4J
a o
cu ai
H
^ > T3
~CO 4J
CS O
0 C
H
4-1 CU
CO )-l
t-i cd
o
& !i
o cd
O
CO
00 CU
Cj ^j
H 3
M Tj
3 cu
4-1 0
0 O
cd M
u-i a,
3
pi 60
^ **"*
4-1
M C
O 3
14-1 O
O
4-J 0
M cd
O
rX d
CU -H
pd
cu
rH 60
cd C
H co
O 43
Cl CJ
cd
Cl *-*
H 0
fn 0)
p>^ H )
I-H m
(-1 1-1
0)
4J CO
rJ CU
CO VJ
cy oo
14H
1
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
-------
!=
CO
I
w
H
n
r*
I
I
S
s
1
z
s
1
i
1
i
t
i
i
1
a.
I
<5
S
I
C
i
I
!
1
I
X
O
1
E
|
IB
i
2
g
a
t
o
s
e .
";!
**->*
9 = «
* 1 =
tit
13
*!
-f
i
' §«
i * "
all
H
i!
jsi
**
,il
111
5S.5
iS
lls
= 3*
"M
w
iJi
III
as.?
||.
3 -H 2
* JS
S
^^
o § S
22!2
J]J
a 1;
:1
11:
u "
8-1
b
?|I
all
fto<^r4r^ao**1*^«'"^^'*«'>**t'*
*-( r-4r* *H n « -
s s ~ ds a
S 3 S "S E
f^tfl x«rj^m MM NMO! gSiS o ir-««o3s S.j*«fc.is«»-*«i..ea ^ «« 3 u
i> - » to & « « ^u S u, 0-41- c j * c j n H So it jt m ^
j-^H<-*5a B-, 4jy.-4 . o
I!
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
-------
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 sodaoften 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 1974a 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
-------
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
-------
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 TV25, 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 $1,050 per ton
average selling price for 1975.
g. Foreign Competition. Foreign competition in elemental phosphorus has
historically been insignificant and is likely to remain so, at least for the next
several years.
IV-45
-------
TABLE IV-25
ACTUAL VERSUS LIST PRICES FOR ELEMENTAL PHOSPHORUS
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipment
quantity
(1,000 metric tons)
374.2
333.2
346.6
387.6
410.6
465.2
465.3
486.8
515.2
515.6
499.2
455.9
464.9
443.5
451.7
384.8
Value
($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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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 & Chemicalare 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
-------
ON
|
>
W
T
5
H
*
ON
rH
Q
v*0
ON
rH
CO
H
£5
W
O
1 1
(X,
W
g
0
pc
pq
o
erf
o
tt
CO
W
erf
P-I
j
<^
a
H
U
CO
p
CO
erf
w
>
H
CO
M
^
^
53
0
H
U
M
erf
H
g
Prf
PM
CO
. t-i
( r^
^< r*-*
o o
g
T3
C
CU CO
B
o S
t-i O
A rH
CJ rH
CU
01
-a
H
^
o
cu
o
M
XI
CJ
cu
3
XI
9
o
tH
1
01
rH
cO
3
^J
o
<^
CO
H
r-t
CO
3
O
CO
H
cu
60
C
CO
O
rH
CO
) t
O
4J
CO
H
1-1
cu
C
cfl
O
rH
CO
3
4-J
O
ON ON ON ON ON ON ON
I
cu
o
cu
CJ
M
O >-i
co cu
X 4J
o
(X
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 $224 per metric ton in 1969. In the past several years
prices have increased significantly due to increasing raw material costs as
well as increased demand and tight supply for phosphorus pentasulfide. List
prices were historically above actual prices, and to some extent, reflect
the lower transfer price of the captive producer. Also, since competition in
the industry is generally based on price, the historical overcapacity in the
industry has resulted in depressed prices.
V-36
-------
TABLE V-17
A
PHOSPHORUS PENTASULFIDE CONSUMPTION BY END USE - 1974
End use % of total
Oil additives 50
Organophosphorus pesticides 40
Flotation agents 6
Exports 3
Miscellaneous 1
100
* Source: Chemical Marketing Reporter, Contractor's estimates
V-37
-------
TABLE V-18
ACTUAL VERSUS LIST PRICES FOR PHOSPHORUS PENTASULFIDE 1960-1975*
(1
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Shipments
,000 metric tons)
NA
29.5
28.5
27.3
34.2
36.5
38.9
25.5
30.2
42.9
40.3
45.5
44.9
59.5
49.3
42.8
Value Unit value
($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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
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
-------
m
1
H
W
rJ
pQ
^
H
-X
c/>
w
H
O
O
rJ
0
z
EC
W
H
,_J
5*
C/3
O
p-l
t/1
H
Q
^-i
p?^
[V|
PJ
S3
Cd
H
Q
W
H
U
W
O
P-i
Q
£2
^
Cd
Z
rH
rJ
W
CO
^
PQ
en M
4J M
C
CO H
H CU
CX >
CU
O
4-J
H
cfl
CO
0
cx
CO
,_J
n
TJ
4J
c
cu
g
4-1
cfl
cu
l-l
H
4-1 CO
Cfl 4J
C
4-1 Cfl
C H
cu cx
e
W l-l
cd cu
CU 43
l-l 4-1
H 0
CO
4-J IH
C
Cfl H
H CU
cx £>
CU
4-4 r-J
O
1 1
S^S cfl
H
cfl
CO
0
ex
CO
H
»rj
^^
4-1
C!
CU
£3
4-1
Cfl
CU
H
en
en
cu
a
o
i-i
CX
H
cfl
o
H
0
cu
43
U
CU
C
o
(3
cu
4-1
H
CO
00 |
'M
C u-i
0 O
'rH
4-1 « H
CX TJ H
O CU -H
I i (_j_^
3 ^
0 (3
CU cfl
c/2 H
H
rH
rH
H
cu
^
CU
t-J
0
m
00
t3
H
1 (3 1
T) M O
C 3 U
H r*">
U 43
CU O
60 4-> TJ
T) CJ CU
CM 3 Cfl 4-1
H M cfl
C CO U p)
O C -H
H CU O r-l
4J 4-J cJ O en
CX -H H C
O CO - 43 O
1 H U 43
U-l H r-l
U-l -H U-l cfl
O 4-1 O O
P
H
CU
O
g
60
CU cfl
H 43
l-l CX
O cfl
H -H
43 TJ
U s-'
TJ
CU
(-1
m 3
o
C
o
4-1 CU H
O. 4-1 H
O -H -H
en u-i
4-1 Ci
4-1 CO
O H
H
H
-a
cu
cu
cu
60
cfl
o
4-1
en
CS TJ
C O
o cx
H
cu
a,
o
CO
c
O
CU
CJ
cu >i
(3 M
rl 3
M CJ
O r-l
H CU
43 0
U ^
CM
H
m
C
o
H
4-1
CX
O
1 J
CO
o
o
V-I
cu
43
60
H
EC
O
m
H
(3
0
H
4-1
CX
O
s~\
en
cu en
TJ CU
rl CJ
x o
0 V4
H ex
TJ
cu
0 TJ
3 -H
H M
o o
23
H 0
H ^
|
H
ex
H
a
CU -CJ
M a)
ex >
o
« M
c ex
o cx
H cd
4-J
CO TJ
N (3
H cd
H
cfl ti
I-i O
4J -H
3 4J
CU ctf
Z 4J
H
1 j
<-3
H
H
cu
>
cu
H
CU
60
I cd
H M
CX O
H 4->
U CO
CU
v-i cu
CX 4J
H
« CO
a i
0 Ci
H 0
4-1
Cfl TJ
N Ci
H cfl
H
Cfl Pi
I-i 0
4-1 -rl
3 4->
CU Cfl
Z 4->
/ s
cu
M
O
cu
H
H
4-1
£
cu
60
cd
o
4-J
CO
cu
4-J
H
en
1
4-1
UH
O
cu
c
o
c
*«3*
G
O
H
4-1
CX
O
M
H
H
CU
0)
rJ
m
r^
tH
Pi
O
H
4-1
CX
0
*rt
H
U
cfl
O
H
M
O
3
H
U-l
o
r-l
T3
EC
H
H
H
4-1
T3
C
cfl
H
CU
4J
H
en
I
a
o
T3
cu
r4
3
CJ
cu
C/J
H
H
H
U-l
''CJ
£j
cd
H
CU
4-1
H
en
1
Pi
O
m
Ci
0
H
4-J
CX
0
^
&
O
o
H
|-~|
CJ
o
H
4-1
CX
0
en
3
O
43
ex
en
O
PH
cu
a
o
PI
T)
cu
^
o
V-i
cx
cx
cd
a
a
cO
q
o
H
4-1
cfl
H
H
H
4-1
CO
H
Q
H
H
H
U-l
rrj
c^
Cfl
H
CU
4-1
H
en
I
C
o
H
H
H
U-l
""CJ
Ci
cfl
H
CU
4-1
H
en
I
e
o
cu
c
o
c
m
C
o
H
4-1
cx
O
1 1
CO
o
CJ
V-i
cu
43
60
H
EC
fO
fO
CO
a
o
H
4-1
CX
o
cu
4-)
CO
g
O
M
43
O
H
13
e
3
H
TJ
O
CO
*
4-1
C
CU
e
4-1
CO
cu
r4
4-1
H
cfl
o
H
43
U
H
i |
c^J
H
H
CU
>
CU
H
*
cu
60
cfl
M
O
4-J
en
rrj
c
o
cx
TJ
cu
fi
H
H
C
T3
cu
^
O
r-l
CX
CX H
cfl H
H
a u-4
C T3
cfl (3
cfl
C H
O
H 4J
4J a
cfl cfl
l-l r-l
4-1 4-J
H ei
H O
u-i o
H
H
U-l
T"J
Pi
Cfl
H
cu
4-1
H
Cfl
1
PI
0
^
CJ
C
1 1
r
l-l
cfl
CO
V-i
cu
^
r*\
J_J
4-J
en
3
T3
h- 1
CO
H
cfl
CJ
H
e
CU
43
U
O
H
C
cfl
60
r-l
O
c
1 1
en
cu
o
4-1
0
CO
P-,
CU
4-1
CO
CO
CO
3
o
T)
V-i
CO
N
cfl
EC
rH
CO
H
}-l
4-J
en
3
d
IH
U-l
o
4-1
n
cu
e
CO
en
cu
CO
CO
0)
a
V4
3
o
c/3
*
VI- 3
-------
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
-------
w
C/D
o
2
> u
w w
W M H
rf W
M OH
<3 <1 %*
H @
O H
pL) ^
PM
c/D p^
H H
CO
O
u
3
H
ts
pj
§
H
prf
o
^
M
CU
H |
O &
H
TJ
co
M
J2
P<
CO
o
43
Pi
O
1 -rl T3
O M -H
MOO
T) 3 CO
PB «4H ^
CO
CO
iH vH
O
O
H rH
CD 4J rH
B CO CU x-s
H 3 O W
MO) CO
O O K*-> CU
rH M CJ
43 T3 3 O
U B O K
CO M Q<
CU
^^
i-H
O i-H
rt CU
QJ 4-1 O
B CO ^
H 3 S CO
M CO 00 CO
O O CO CU
rH MO
43 T3 43 0
O C P, M
cd rfl n.
H
'O
o o o o o o
o o o o o o
o o o o> «a- I-H o
ON CTl rH O 00 O
CN CN O CO ' vD
V0 \D rH
O O O O O
O O O O O O
O O O v£> r~- I
AM A *v M
s^ ^ in co CN
CN CN rH
00 00 CN
| § § 58
°» g g S 5 ' '
i3 vo \o JH ^
^^^
0 0 0
III § 0 1 0
o -^ ^
(/-) oo r^
s^/ co in
to m o
III 1 O r-» O
00 rH CN
^ f^
^f vO
^ CO
III 1 1 1 0
0
o
rH
in
CO
4-1
CO M
o m 9
4J 0
4j w a M
C O M O
m 0 B 4) 4J
S r-H r-H «H O
g "3 rH o) 4J >, CO
> C 43 £ C O. CU CU C
ci cO 4-* B cd Cu B O
MtJco ^
CN O O 7^-
-a- m . ^
CO vD CO _:
CN ^^"
B c
0 0 4J °
co o oo ^r
O CO ^
C7> CN 00 "
^ W
C ^
o °
f~"t C3 4J
§§^5
^^ ** nH ^^
** '
3 n s s
(3 fi
O O 4J O
CO O ---. "
CN CD **O ^^
> *s in ^^
o o ^
CN C?\ CO _!
CO -CO- ij
l^»
co-
B g
5 2
O O 4J >*
o o -*. 7^
O O rH 0
% ^ co
H CM '
m vo o JQ
1-1 'c/>
rH § g
B O u "^
B "rl .^ CU
B 4J 4J £ v3
« ° §3 S
co 4J -o e 2
0, 3 OJ 2 ^J »
o !g S w« Wlw
t-1 o o g °
S o o
o
M
*t
03
CO
cu
"" «
M
4-1
CO
3
TJ
B
1 1
smicals :
IK
43
o
o
H
B
CO
00
M
o
B
M
CO
cu
o
H
4J
0
M
P-l
CU
4J
CO
cO
CO
3
o
13
M
cfl
N
&
r-l
CO
H
V-i
4-1
CO
3
nO
B
M
O
4-1
B
6
CO
CO
CO
?
CU
o
M
O
crt
*
VI-10
-------
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 incurredregardless 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
-------
w
M
<3
H
!*
Prf
H
tn
P
I"]
55
M
r4
O
S3
g
U
o
r-l
J3
CU 4-1
AS &
l-l O
£ &
4-1
cu cu
AS N
l-i -H
CO CO
4.J
C
CU
g 4-1
4-1 CO
Cfl O
cu o
r4
H
Tj
cu
4->
O CO
CU rH
U-l Cfl
<4H O
CO -H
e
>> CU
r4 .*i
cfl U
g
H
l-l
P-.
cu cu cu
4-1 4-1 4-1
cfl cfl cfl
)-i M M
X CU 01 CU
60 13 13 TJ IS
r( 0 O O O
PS S3 S3 s; r4
cu
4-1
cfl
x cu ,e ,c x
60 TJ t>0 60 60
H O -H -H -H
PS S3 IB 33 33
g
H
X -H
60 & S S T3
H O O O CU
g g B B g B
CU3333 3CU3rHrHrHrHrH
60 -rt -H -H -H -H 60 -H rH rH rH rH rH
cflcucucucu cucflcuggggg
r42SS3S S3rJS3cnwcflwc/3
g B B
CUCUCUCU3 rHrHrH33rHrHrH
cflcflcococu gggcucugBg
! 1 jj |j jj ^rj w cjo cio S3 S3 cio cio to
/^s
o
o
l-l
ex
cu
H rH
x-v l-l rH CU
rH O CU 13 CU
rH rH U <-v -H 13 CU
CU JH rH i*-i vH 13
O O S rH rH M -H
v-x 13 60 (U 3 O l-i
>M3 CU CU CUCflo COrHO
1-lt-l 4JCU 4-1 131J CflX3
3O CO'O CJ -HXCOCO 4JOrH
ocfl S -H cuco t-iCxp4-iaj(ii-Hi-H
l-l OX 4HrH OCfl?C4-lCUl-lO
CUU l-iO >4-icfl 3-HOCUcflP,4->O
g-H X-H COO rHTSQB1*-! 'rl
^^J-lCOOI-l -H MH<^^^60rHCOCOrH
0 3 -H >. g -H 3 3 3 -H
Q) l3 V^ *^3 3 fa ^ S ^ ^ p^ 0} ^t ^ co
CrHO 3 cfl,C 3CC OO
iH4Hj3g-H 130 C'H'HCUrH^IJsg
M O Qi 3 C* C3 *iH 1^ M B CU O' f* - 3
Or^CO'HCfl O goOOASCOCO»H
r 1 'U O 13 4-1 O 3rHrHl-lOOOrO
Xr^rCO*H CU i lrCj2rG-HrCj2O
C_5 »3C P-i C/2 tH CO ^ O C_3 O 2^ P^ P-i CjO
cu
60
c
cfl
rH
Cfl CU
cu g oc
60 J-i CJ
com
CO C r4
^t
M-l rH
rH O CO
6 13 M
l-i l-i O
o -H e
C X
4-1 'i i
4-1 O
o cu
13 13 rJ
M 13 -H
H -H J3
4-J
C M
fX -rl QJ
O $
4J II O
i
r-1
C CU
H 4J C
cO -H
II M
CU II
JS 13
60 O rH
H B rH
r4 M
l-l O CO
O
B r4
CU 3 O
60 -H
l-i 13 >
cfl CU O
rH g rH
^
CU
^
CO
cu
CO
cu
a
cO
M
o
o
CU
U
l-l
3
O
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
-------
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
-------
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
-------
*
m
r^»
CTi
rH
1
O
FH
25
o
u
JJ5
o
M
H
^
r«~ O
CN PXi x-s
1 (3
^*H [25 O
H O -H
M rH
> CO rH
W & &
M H
-x
H Q
W
fe
W
J
^
H
M
P-i
^3
U
Q
W
H
Jg
Pi
H
CO
w
CO
cu
3
4J
H
TJ
C
cu
^
cu
H
cd
4-1
H
p
cd
u
T3 CU
H 4J
rH Cfl
O Cd
CO 3
1 rH
3 O
rH M
rH 4-1
0 C
P. O
o
rH
cd £
4J O
0 -H
El i j
rH
cd
4-1
O
H
co
4-1
G
B
p
H
r!
co
P
o
M
00
4-1
CJ
3
O
M
PLI
cu cu cu
r*^ r*** *^r
*
o *
O O CN vO
S M «l
m 00 rH
oo
^
CU
H CN
X3 O l-l O
Q) -H /~, O -H
H C rH rH H
rH s-\ Cfl 00 CO 43 0)
rHOO OOCN rHCJT) 4-1
cd CN M cd fi cd
O U cj 60 cd 0
-a u CM -H c -ri
CH -HCO B'HCJ 4J
cd co ^^ cu TJ -H co
'-' rH J3 3 4J 0)
co cd ca o iH to
rH CO -H rH O 3 II
cd 4J i-i cd ^ X cd
a o 4.) o MCUU cu
H 3 co -H cd
B T) 38 B
CU o TJ CU -H
43 M C J3 M
cjp. MO Pi
co cu
M m cd cu
o r^ 4-i 4J
4-1 o> co o ed B
CJ rH M 4-1 BO
cd cu o M
M J3 T) CU r( 4H
4-1 iH C 4-1 43
£3 3 cfl CJ M
O 00 {3 -H M
U CN t*> Q T3 M
cd iH
U B 4J a -H
r*^.
ON
?H
*
s^
o
o
rH
4-1
S
t 4
cd
H
M
4-1
CO
3
"O
c
M
,
CO
J~i
H K 3 CU
CO O O <-* >
H P, T3 CU
43 4-1 O O i-J
4-1 Cfl l-l CO
H M P* 43
U t3 4-1
CU Q) C -H
O 43 43 cfl &
H H
4-1 O CU
Cfl 4-1 CO U
M 3 C
x^. T3 M cfl
CU vO CU O 'H
B OO 4-1 43 rH
Cd rH Cd Pi P*
cfl ro .' a co a
-^ CO -H O O
G en rH 4-1 43 CJ
H r~ cfl co p,
CO O 4J
43 8 O & Cfl CU
rH B
-a o co a o
CU f3 -H rH -HO
« 4J -H e cd M
vjo cd cd cj o o
r>» B co oo H 34-1
ON -H CU M B rH
rH 4-1 (J O -0) MH CO
CO 3 (3 43 O 4-1
>. CU 4J M CJ M (3
H -H T3 CU
3 CU T3 M t^ !>% S
-J M (3 O M 43 4-1
0) CU MH cfl co
CO
CO
CU
13
H
(0
3
CP
+J
c
cu
M
3
U
14-4
0
rH CU CU V-i MH G
00 l-l PM -H
CN rH 3 . CO
cd 4J CU iH 4J rH
U 4-1 -H 43 OO G cd
H -H T3 4J CN Cd 4J
CO P, G rH -H
rd cu I-i U p. p.
M-l CJ P, O M cd
O X IH CO rH O
rH CU CU
CO Cfl CO 4H T3 U
CU 4-1 CU CU O O CU
M O 4-1 M B 13
3 4-i ca 3 cfl
4-1 Cfl 4-1 4-1 CU T3
CO -HCUIZ -HG 43CUM
CU T3 l-l T3 CU 4-11-1
4-1 GCUT3 CB "HrH
cfl CU&-H CUPi >, 3
H XCOO X43 GCUtt)
4J pqcflco W w OMhJ
co
0)
rH CN CO
cu
u
h co
3 cu
O 4-1
co o
* z
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
-------
4-1
*
LO
P^-
O
rH
CO
H
U
W
fV,
HH
o fr
r% W
' CO
LH H
s 1
W |
pq *
3 P*
H 0
W
0
CO
4-1 O
M -H
0 M
ft 4-1
0 CU
t-H 0
O
O
O
s '
^*\
a ca
o e
H 0
i_l j_J
*J 4-J
y
3 0
TJ -H
0 VJ
M 4J
ft CU
e
CO O
0
1=> 0
*~s
rH
cfl
o
H
J3
U
iH rH rH
CU r-l rH CU iH
o 3 S o 3
C CO Cfl (3 ffi
CM LO ">O CM
cfl
U~| CM CTv -*
H C ro r-l
cu
1
r~1
f*
^LJ
H
00
O -H ~d" CT>
rH
r-» CM M O ro
^D <3- CU CM
C
O CU
O cfl TJ
TJ Cfl 0 -H
CU OX
4-1 U MO
CJ -H X -H
CU M CO O TJ
m o 3 -H
M-i 0) 3 M TJ g
tfl C rH O 3
H 14-1 ,C S -H
>, M O ft 3 C
J-i O (-1 CO -H cfl
CO i ( TJ O TJ 4J
S ,fl ^ J3 O -H
r( CJ> 5C (X CO H
V-i
PH
ft
cu
Q
C/3
1=1
CO
4J
M
O
I
tfl
M
a)
Cfl
4J
(-1
o
w
CO
0)
o
I-I
o
CO
K
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
-------
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
------- |