Appendix — EI Du Pont De Nemours & Co. v. Train

Supreme Court brief1977

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APPENDIX

EXHIBIT VOLUME

-

Supreme Cour? U. &

FILED

JUL 16 1976

' MICHAEL RODAK, JR. CLERK

in the Supreme Court of the United States

OCTOBER TERM, 1976

No. 75-978

E. I. pu Pont pE NEMOURS AND

ComPANY, et al., Petitioners,

Vv.

RusseE_i E. TRAIN, as Administrator,

Environmental Protection Agency,

et al., Respondents

On Writ Of Certiorari To The United States Court

Of Appeals For The Fourth Circuit

Petition for Certiorari Filed January 12, 1976

Certiorari Granted April 19, 1976

A

_——

in the Supreme Court of the United States

OCTOBER TERM, 1976

No. 75-978

E. I. pu Pont pE NEMOURS AND

ComMPANY, et al., Petitioners,

Russe E. Train, as Administrator,

Environmental Protection Agency,

et al., Respondents

On Writ Of Certiorari To The United States Court

Of Appeals For The Fourth Circuit

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ADMINISTRATIVE RECORD IN THE {

ENVIRONMENTAL PROTECTION AGENCY |

Economic Analysis of Effluent Guidelines for the te tee Herts we ose: OF

Inorganic Chemicals Industry [5419A-5570] _.... saaaiiteniniasiiiasieitabiita hosel . 5419A* { ) to ate AoA MS + be-

Development Document for Effluent Limitations | : AGES ody ahs pl wat po Peas ;

Guidelines and New Source Performance Se ae: ae = Stee Se s , p= MP ssn sre oe

Standards for the Major Inorganic Products se tT Sa pete OR - te el EEA Ere, eS “A

Segment of the Inorganic Chemicals Manufacturing 3

Point Source Category [5571-5936] aasibdaiaimalaiaaanal .. 5571*

* The pagination of the Administrative Record by EPA is adopted for the Exhibit Volume. | . or SS gt a et st =

: J

“wy. s. ‘ENVIRONMENTAL. PROTECTION AGENCY .

, S Office of Planning and Evaluation

\ Red F | Washington, D.C. 20460

: : 7 | BYIKA

PREFACE

The attached document is a contractor's study prepared with the

EPA-230/2-74-015 supervision and review of the Office of Planning and Evaluation of the

U.S. Environmental Protection Agency (EPA). Its purpose is to provide

a basis for evaluating the potential economic impact of effluent

limitations guidelines and standards of performance established

by EPA pursuant to sections 304(b) and 306 of the Federal Water Pollu-

tion Control Act.

ECONOMIC ANALYSIS OF EFFLUENT GUIDELINES

FOR The study supplements an EPA technical "Development Document"

THE INORGANIC CHEMICALS INDUSTRY issued in conjunction with the promulgation of guidelines and standards

for point sources within this industry category. The Development

Document surveys existing and potential waste treatment and control

methods and technologies within this category and presents the invest-

ment and operating costs associated with various control technologies.

| This study supplements that analysis by estimating the broader economic

effects (including product price increases, continued viability of

affected plants, industry growth and foreign trade) of the required

application of certain of these control technologies.

This study has been submitted in fulfillment of Contract No.

April 1974 68-01-1541, Task No. 30 by Arthur D. Little, Inc. Work was completed

as of April 1974. The study is based primarily upon an earlier study,

"

Contract No. 68-01-1541 also prepared by Arthur D. Little, Inc., entitled "Economic Analysis

of Proposed Effluent Guidelines for Inorganic Chemicals, Alkali and

Chlorine Industries." The earlier report was circulated in conjunction

with the publication in the Federal Register of a notice of proposed

rulemaking under sections 304(b) and 306 for the subject point source

"fama Gene ee category. The analysis contained in the original study has been revised

Washington, D.C. 20460 based upon information received during the period of time between

publication of the notice of proposed rulemaking and the promulgation of

the final regulation. Because of the constraints of time, the control

and treatment costs analyzed in this study may not in all instances be

identical to those associated with the requirements of the promulgated

regulation. However, those differences, when they exist, are minor

insofar as the final conclusions of the study are concerned.

This report represents the conclusions of the contractors. It

has been reviewed by the Office of Planning and Evaluation and approved

for publication. Approval does not signify that the contents necessarily

reflect the views of the Environmental Protection Agency. The study has

been considered, together with the Development Document, information

received in the form of public comments on the proposed regulation,

and other materials in the establishment of final effluent limitations

guidelines and standards of performance.

iii

— = ee

TABLE OF CONTENTS

List of Tables

List of Figures

I. SUMMARY

A. INTRODUCTION

B. IMPACT ANALYSIS METHODOLOGY

C. INITIAL AND MAJOR STUDY PRODUCTS

D. ADDITIONAL STUDY PRODUCTS

II. INDUSTRY CHARACTERIZATION--MAJOR STUDY PRODUCTS

A. CA)CLUM CARBIDE

B. SODIUM SULFATE

C. TITANIUM DIOXIDE

D. SODIUM CHROMATE AND BICHROMATE

E. POTASSIUM CHROMATE AND BICHROMATE

III. IMPACT ANALYSIS--INITIAL STUDY PRODUCTS

A. ALUMINUM CHLORIDE

B. ALUMINUM SULFATE

C. CHLORINE AND CAUSTIC SODA

D. HYDROCHLORIC ACID

E. HYDROFLUORIC ACID

F. HYDROGEN PEROXIDE

G. LIME

H. NITRIC ACID

I. SULFURIC ACID

100

101

102

103

104

IV.

a |

~~

TABLE OF CONTENTS (Continued)

IMPACT ANALYSIS--MAJOR STUDY PRODUCTS

CALCIUM CARBIDE

SODIUM SULFATE

TITANIUM DIOXIDE

SODIUM CHROMATE AND BICHROMATE

IMPACT ANALYSIS--ADDITIONAL PRODUCTS

SODIUM BICARBONATE

SOLAR SALT

EVAPORATED SALT

SODIUM SILICATE

SODIUM METAL

SODIUM SULFITE

CALCIUM CHLORIDE

SYNTHETIC SODA ASH

POTASSIUM SULFATE

vii

135

138

r. hg

LIST OF TABLES

WATER TREATMENT COSTS BY LEVELS OF CONTROL

MANUFACTURING COSTS AND PLANT ECONOMICS

IMPACT ANALYSIS MATRIX

CALCIUM CARBIDE PRODUCTION, IMPORT/EXPORT, AND APPARENT

CONSUMPTION

TOTAL MARKET VALUE OF CALCIUM CARBIDE PRODUCTION

USE PATTERN OF CALCIUM CARBIDE BY APPLICATION

CAPTIVE VS. COMMERCIAL CONSUMPTION OF CALCIUM CARBIDE

CALCIUM CAREIDE PRODUCERS--LOCATION AND LAPACITY

ESTIMATED COST OF MANUFACTURING CALCIUM CARBIDE

CALCIUM CARSIDE PRICES--PUBLISHED VS. ACTUAL

SODIUM SULFATE PRODUCTION, IMPORT/EXPORT, AND

APPARENT CONSUMPTION

USE PATTERN OF SODIUM SULFATE BY APPLICATION

GEOGRAPHIC USE PATTERN OF SODIUM SULFATE

CAPTIVE VS. COMMERCIAL CONSUMPTION OF SODIUM SULFATE

PRODUCTION OF SODIUM SULFATE BY PROCESS

SODIUM SULFATE PRODUCTS--LOCATION AND CAPACITY

SODIUM SULFATE PRICES--PUBLISHED VS. ACTUAL

TiO. APPARENT CONSUMPTION AND INDUSTRY SHIPMENTS

2

TiO, MARKET CONSUMPTION

TiO, CAPTIVE CONSUMPTION

60

63

Table

No.

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

LIST OF TABLES (Continued)

T10, MANUFACTURING LOCATIONS AND CAPACITIES

TiO, MANUFACTURING ECONOMICS--SULFATE PROCESS

T1i0., PIGMENT PROFITABILITY--SULFATE PROCESS

TiO, MANUFACTURING ECONOMICS--CHLORIDE PROCESS

TiO, PIGMENT PROFITABILITY--CHLORIDE PROCESS

TiO, INDUSTRY PLANT CAPACITY UTILIZATION

Ti0,, COMMERCIAL SHIPMENT VALUES

APPARENT U.S. CONSUMPTION OF SODIUM CHROMATE AND

BICHROMATE

ESTIMATED 1971 USE PATTERN FOR SODIUM CHROMATE

AND BICHROMATE

PRODUCTION OF CHROMIUM PIGMENTS AND CONSUMPTION OF SODIUM

BICHROMATE EQUIVALENT, 1971

SHIPMENTS OF SODIUM CHROMATE AND BICHROMATE

ESTIMATED MANUFACTURING COST, SODIUM BICHROMATE

PRODUCERS OF SODIUM BICHROMATE

ACTUAL VS. LIST PRICES FOR SODIUM BICHROMATE

ESTIMATED MANUFACTURING COST, POTASSIUM BICHROMATE

92

94

I. SUMMARY

LIST OF FIGURES

Figure oie A. INTRODUCTION

No. =288

LE 8 The following report is submitted in compliance with Task Order

1 INCREMENTAL WATER TREATMENT COSTS FOR BEST nn No. 30 to BOA No. 68-01-1541, "Economic Impact of 1972 Federal Water

TECHNOLOGY VERSUS SELLING PRICE AND PROFIT MAR Pollution Control Amendments on the Inorganic Chemical Industry." As

10 outlined in our proposals, this report deals with 24 inorganic chemicals,

‘2 ‘INCREMENTAL en Le aa including the nine discussed in the initial study;1

TECHNOLOGY VERS

Aluminum Chloride

3 SCHEMATIC FLOW DIAGRAM--PRODUCTION OF CALCIUM CARBIDE 33 Aluminum Sulfate

; Chlorine and Caustic Soda

4 RECOVERY OF SODIUM SULFATE FROM NATURAL BRINES 49 Hydrochloric Acid

Hydrofluoric Acid

5 PRODUCTION OF SODIUM SULFATE IN VISCOSE RAYON PROCESS 50 Hydrogen Peroxide

Lime

6 PRODUCTION OF SODIUM SULFATE IN THE MANNHEIM PROCESS Nitric Acid

Sulfuric Acid

7 TiO, PIGMENT MANUFACTURING PROCESSES 65

as well as the six inorganic chemicals studied in depth;

Calcium Carbide

; Sodium Sulfate

Titanium Dioxide (Chloride)

Titanium Dioxide (Sulfate)

Sodium Chromate and Bichromate

Potassium Bichromate

and the nine additional products briefly reviewed in a subsequent

analysis;

Sodium Bicarbonate

Solar Salt

Evaporated Salt

Sodium Silicate

Sodium Metal

Sodium Sulfite

Calcium Chloride

Synthetic Soda Ash and

Potassium Sulfate.

BI i) ei» iy ois LAS aim Ll lea

| lwinitial Analysis of the Economic Impact of Water Pollution Control

° Costs Upon Ten Inorganic Chemicals," report to Environmental Protection

Agency by Booz, Allen Public Administration Services, Inc.,

January 5, 1973.

xiii 1°

The objective of this study was to analyze the economic impact

of the costs of water pollution abatement requirements for the specified

products, using the data for the nine initial study products contained

in the initial impact study, new water treatment cost data provided by

EPA and the industry information developed for the major study products

and the additional study products by the contractor.

B. IMPACT ANALYSIS METHODOLOGY

In order to assess the impact of water treatment costs on the

inorganic chemicals covered in this report, we have developed an analytical

framework to arrive at the impact judgment. In addition to providing

us with a systematic method to weigh each of the factors affecting the

impact judgment, the methodology also provides a tormat by which the

basis for our conclusions are clearly presented.

The basic premise behind the methodology is that a producer faced

with new investment in water treatment facilities could (1) continue to

operate by (a) passing on the additional costs through price increases,

or (b) absorbing the costs (thereby reducing profits); or (2) shut his

plant down. This premise, of course, reduces the impact of increased

costs due to water treatment to the simplest terms. In the real world,

the result of higher costs most probably would be some combination of

these alternatives, e.g., a price hike by the most efficient producer

sufficient to recover part of his costs (but not enough to cover

most of the costs of the marginal producer), reduced profit margins

for the most efficient producer partially offset by an increased market

share resulting from plant shutdowns by the marginal producer(s).

The approach we have taken in assessing the impact on each of

the inorganic chemicals is to first examine the likelihood that the

higher costs imposed on the industry by virtue of new water effluent

guidelines will be defrayed, wholly or in part, by higher product

prices. If the conclusion is that treatment costs cannot be passed

on through price increases, the second part of the impact analysis is

to examine the likelihood that some plants in the industry would be

forced to shut down, taking into account both economic and noneconomic

factors.

l. Price Increase Constraints

The treatment costs per ton before taxes indicate the magnitude

of the unit price increase necessary to fully recover all treatment costs

(i.e., repay the investment and cover operating costs). The larger the

ratio of before-tax unit treatment cost to actual unit selling price,

the more difficult it will be to fully recover treatment costs, all things

being equal. As indicated, the first question we have addressed is whether

conditions in the specific competitive situation would permit price in-

creases. In general, the products’ price history and the nature of those

prices--whether firm or widely dispersed and discounted--provide a clue

428

as to the possibility of price increases. More specifically, however,

the following factors are those that we have used in arriving at the

judgment as to whether price increases are feasible. Except in unusual

circumstances, no one factor would be overriding. Rather, the judgment

is based on a combination of factors.

Substitute Products (or Processes)--If substitute products exist,

price increases to cover the (full) costs of water treatment would be

difficult.

Capacity Utilization--If capacity utilization for the industry

is low, price increases to cover the (full) costs of treatment would

be difficult.

Captive Usage--If there is negligible captive use, price increases

to cover the (full) costs of water treatment would be difficult.

Demand Growth--Price increases are more difficult to achieve in

a static or declining market than in a growing market.

Foreign Competition--If the market can be served by foreign

competitors (particularly if the foreign producers are not faced with

added water pollution abatement costs), price increases are less likely.

Abatement Cost Differences--If some plants in the industry will

incur substantially higher water pollution abatement expenditures than

other plants, they will be less able to pass on the added costs as price

increases.

Price Elasticity of Demand--For some products, substantial water

pollution abatement costs, if passed on as price increases, could result

in reduced demand for the product.

Basis for Competition--If the basis for competition in the in-

dustry is primarily price as opposed to service or technology, cost in-

creases will be more difficult to pass on, particularly if there is a

significant difference between unit treatment costs between large

producers and small producers.

Market Share Distribution--If the market share distribution is

fragmented (rather than concentrated, in which case there often is a

dominant price leader), price increases are less likely, particularly

if treatment costs do not affect all producers fairly equally.

Number of Producers--If the market is served by many producers

(increasing the likelihood of manufacturing cost differences, abatement

cost differences, etc.), a condition exists constraining price increases.

Although not explicitly listed in the generic model, we have been

alert to other factors which might prevail for individual products.

For example, the economic importance of a product in the manufacturing

costs of derivative products might act as a constraint on price increases.

3

%129

In assessing the possibiliy of water treatment costs being passed on

as titanium dioxide price increases, for instance, we took into account

the impact on titanium dioxide demand of the resultant increase in

the cost of paint.

2. Plant Shutdown Factors

If treatment costs cannot be passed on as price increases, the

simplistic model says that the producer either absorbs them or shuts down

his plant. The shutdown decision will involve both economic and

strategic (i.e., noneconomic) considerations as follows.

Profitability--The after-tax cost per ton of water treatment

compared with unit after-tax net income measures the producer's ability

or willingness to absorb the added cost.

Cash Flow--Plants will continue to operate temporarily at

essentially zero profitability (if necessary) if the plant is producing

a positive cash flow (and has a competitive process and is in a stable

or growing market).

Ratio of Investment in Treatment Facilities to Net Fixed

Investment--If the new investment in water treatment facilities bulks

large in comparison with existing plant investment (and other factors

are marginal), a shutdown decision may be in order. In some instances,

the availability (and cost) 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. A producer (or industry) with a sig-

nificant raw material position or one using the product for downstream

manufacture is less likely to curtail production than a non-integrated

producer (or industry).

Chemical Cowplex--An isolsted plant would be unable to take

advantage of common treatment facilities.

Other Environmental Problems--If a plant has already commited

funds for air pollution, it will be more likely to commit the additional

funds necessary for water pollution. Alternately, if a company faces

both water and air pollution abatement (and/or unusual OSHA) costs, the

magnitude of the environmental costs taken together may prompt plant

closing whereas any one taken alone would not.

Emotional Commitment--The emotional commitment of the company to

that particular product (taking into account protection of competitive

position, prestige, the importance of the product in the company’s long-

range strategy, etc.) may be a factor in the shutdown decision.

Ownership--Other things being equal (and negative), multi-

industry companies are more likely to shut down marginal plants than less-

diversified producers. The premise is that the multi-industry producer

has other (and better) investment opportunities than the single product

company (particularly a privately-held, family business).

430 4

C. INITIAL AND MAJOR STUDY PRODUCTS

l. Water Treatment Costs

All of the water treatment costs for the various levels of

effluent control shown in this report were taken from the Development

Document for Proposed Effluent Limitations Guidelines and New Source

Performance Standards for the Major Inorganic Products prepared for

the EPA under contract number 68-01-1513 dated June 1973. The water

treatment costs (on a before-tax basis) by product are summarized in

Table 1. Base-level practice (B.L.P.) represents water treatment practices

which, in the judgment of the Development Document, are followed by most

of the industry and exceeded by exemplary plants. Similarly, exemplary

plant practice (E.P.P.) reflects the unit cost of water treatment and

control practices at the exemplary plant. Proposed best practicable

technology (B.P.T.) reflects the Development Document's estimate of the

unit water treatment cost for the product in question based upon the

best technically and economically feasible treatment and control

technology. Finally, proposed best available technology (B.A.T.) reflects

the degree of effluent reduction which must be achieved by July 1, 1983.

The unit treatment costs used for any particular level of control in

the impact analysis is the incremental cost over B.L.P.

2. Manufacturing Costs and Profitability

In the following report the manufacturing costs and profitability

data shown in Table 2 for the "Initial Study Products" were taken

from the initial study project. Comparable data for the six "Major

Study Products" were developed by the Contractor.

3. Conclusions

In Figure 1 we have compared the incremental (over B.L.P.) water

treatment costs estimated in the Development Document to achieve B.A.T.

effluent standards as a function of product selling price versus treat-

ment costs as a function of unit profit margin for the inorganic

chemicals discussed in this study. Three initial study products do

not appear on the figure because data for industry profitability were

not developed. For the three products (hydrochloric acid, nitric acid,

and hydrogen peroxide), however, unit treatment costs are small so that

these products would appear in the lower left-hand corner of the figure.

One of the major study products, viz. calcium carbide, has also been

left off the figure. With a treatment cost of $1.94 per ton versus a

selling price of $90 per ton, the cost/price ratio is a nominal 2.2%.

However, since industry profit margins are minimal, the treatment cost

as a function of unit margins is very high and falls off the scale of

the figure.

Titanium dioxide stand out in this figure as the product where

the estimated treatment costs represent the highest proportion of both

selling price and profit margin. (For both the chloride and sulfate

' 5434

TABLE 1

WATER TREATMENT COSTS BY LEVELS OF CONTROL

(Dollars Per Ton of Product)

Base- Exemplary Best Best

Level Plant Practicable Available

Practice Practice Technology Technology

Initial Study Products

Aluminum Chloride 0.00 3.77 3.77 3.77

Aluminum Sulfate 0.79 1.72 1.72 1.72

Chlorine

(Mercury) 2.14 2.14 - 2.74 3.00

(Diaphragm) 0.04 0.29 0.29 0.56

Hydrochloric Acid 0.25 0.25 0.30 0.30

Hydrofluoric Acid 3.57 4.04 4.89 12.95

Hydrogen Peroxide

(Organic) 0.20 0.33 1.06 1.06

(Electrolytic) 0.00 0.75 1.14 1.14

Lime

(Bag) 0.00 0.00 0.00 0.00

(H20 Scrubber) 0.00 1.28 1.28 1.28

Nitric Acid 0.00 0.22 0.22 0.22

Sulfuric Acid

(Burning) 0.05 0.10 0.17 0.17

(Regen) 0.25 0.75 0.75 0.75

Major Study Products

Calcium Carbide 0.00 1.94 1.94 1.94

Sodium Sulfate 0.00 0.00 0.00 0.00

Titanium Dioxide

(Sulfate)

[Neutralization] 1.90 10.05 83.57 98.09

[Acid Recovery] 1.69 10.05 35.71 50.48

(Chloride) 2.12 38.61 38.61 66.79

Sodium Chromate and 0.26 11.66 16.45 16.45

Bichromate

Potassium Bichromate 0.57 3.52 5.24 5.24

Additional Products

Sodium Bicarbonate 0.03 0.04 0.04 0.04

Solar Salt 2.34 2.34 2.34 2.34

Evaporated Salt 0.00 0.23 0.44 0.44

Sodium Silicate 0.19 0.60 1.14 1.14

Sodium Metal 0.19 3.07 5.53 5.53

Sodium Sulfite 0.00 3.09 2.98 (1.56)*

Calcium Chloride 0.00 0.19 0.19 0.19

Soda Ash--Synthetic 0.44 (1.17)* 0.44 1.10

Potassium Sulfate 0.10 2.47 2.47 2.47]

*Before-tax profit.

Source: Development Document on inorganic chemicals, alkali and chlorine

industries prepared for United States Environmental Protection

1132 Agency under Contract Number 68-01-1513, June 1973.

. - : 6

TABLE 2

MANUFACTURING COSTS AND PLANT ECONOMICS

Sample

Selling Manufacturing After Tax Depreciable Plant

Price Costl Net Income Investment Capacity

. = ($/Ton) > SMM M Tons/Year

Initial Study Products

Aluminum Chloride 292 226 21 1.2 10

Aluminum Sulfate 42 32 3 1.0 33

Chlorine and Caustic

Soda

Mercury 1017 NLA. 4.12 13 66

Diaphragm 101 81 4.33 20 115

Hydrofluoric Acid 370 N.A. 18 5 21

Lime 16 12 1.00 4 165

H.SO

2nutning 20 14 1.20 6 330

Regeneration 22 16 1.20 9 330

Major Study Products

Calcium Carbide 90 86 0 4 45

Titanium Dioxide-- .

Sulfate 540 416 26 15 25

Chloride 570 471 21 21 25

Sodium Bichromate 245 212 18 5 49

Potassium Bichromate 475 403 24 2 5

bexcluding GS&A and federal income taxes.

2sales revenue per ECU.

Source: Initial Study Products: “Initial Analysis of the Economic Impact

of Water Pollution Control Costs Upon Ten Inorganic Chemicals,"

final report to Environmental Protection Agency for Booz, Allen

Public Administration Services, Inc., January 5, 1973.

Major Study Products: The Contractor.

7

1B

Treatment Cost as Percent Profit Margin

@ Titanium Dioxide - Chioride

@ Titanium

Dioxide -

Sulfate

(Neutralization)

200 }

150 }

@ Titanium Dioxide - Sulfate (Recovery)

100 } 20

© Lime

10 LL @ Chlorine/Caustic - Mercury

Aluminum Chioride @

50 } @ Potassium Bichromate

Sulfuric @@ydrofluoric Acid Sodium Sulfate

ation 0 — L

Aluminum Sulfate 0 1 2

o* +——— For Key to Product Identity See Expanded Scale — , , .

j i 1 i

0

0 2 4 6 8 10 12 14 16 18

Treatment Cost as Percent Selling Price

FIGURE 1 INCREMENTAL WATER TREATMENT COSTS FOR BEST AVAILABLE TECHNOLOGY VERSUS

SELLING PRICE AND PROFIT MARGIN

175.1

process, the estimated treatment costs on a unit basis are very nearly

2.5 times current estimated industry profit levels.) Lime and sodium

bichromate are at an intermediate level where treatment costs represent

7-8% of selling price and 50-80% of estimated profit margins. A third

group of products--hydrofluoric acid, sludge sulfuric acid, and aluminum

sulfate--are faced with treatment costs representing 2-3% of selling

price and 15-25% of estimated profit margins. A final group of products

including aluminum chloride, potassium bichromate, chlorine and caustic

soda, and direct burning sulfuric acid, have estimated treatment costs

at about 1% of selling price and 5-10% of profits. No water treatment

costs were ascribed to sodium sulfate (as chromate by-product).

The same comparison is made in Figure 2 using incremental water

treatment costs for B.P.T. In general, the spatial relationships between

the identified products is much the same as in Figure 1, with the ex-

ception that sulfate process titanium dioxide is at a greater disadvantage

with respect to chloride process titanium dioxide.

Although Figures 1 and 2 provide a first approximation of the

impact severity on each of the products from additional water treatment

costs, we have used the methodology described above to assess the

economic impact. The results of this assessment are summarized in

Table 3. From this table and based on the treatment costs given in the

Development Document we conclude that plant shutdowns as a direct

result of increased water treatment costs using B.A.T. are likely for

chlorine/caustic soda, lime, sludge sulfuric acid, sulfate process

titanium dioxide and sodium bichromate. Although the B.A.T. costs for

potassium bichromate could be passed on through a price increase the

one significant manufacturing facility could not continue operating

if the sodium bichromate plant upon which it depends were shut down.

For the other products included in the study the increased water

treatment costs will either be passed on as price increases or absorbed

by the producers.

The final effluent guidelines, published in the March .2, 1974,

Federal Register contain some changes from the originally proposed

guidelines. Among others, the B.A.T. standards for mercury cell chlorine/

caustic and sulfate process titanium dioxide have been modified to

allow higher suspended solids. The aforementioned plant shutdown con-

clusions are based on the guidelines and estimated treatment costs

contained in the original Development Document dated June 1973.

The same shutdown conclusions pertain as well for B.P.T. For

three of the five shutdown candidates--viz. lime, sludge sulfuric acid,

and sodium bichromate--B.P.T. costs are identical to B.A.T. costs. It

should be noted that the regulation as promulgated for B.P.T. standards

for sodium bichromate has been relaxed somewhat from the originally

proposed regulation. For the remaining two--viz. mercury cell chlorine/

caustic and sulfate process titanium dioxide--the costs resulting from

B.P.T. were not judged to be significantly different (i.e., lower) than

B.A.T. costs to impact the industries less severely.

Treatment Cost as Percent of Profit Margin

180

160

140

120

100

Titanium Dioxide - Sulfate (Neutralization) ]

@ Titanium Dioxide - Chioride

@ Titanium Dioxide - Sulfate (Recovery)

@ Potassium

Lime @ Bichromete

Aluminum Chioride @

8}

®@ Chiorine/Caustic -

Mercury

6 @Suituric Acid - Burning

Sodium Bichromate @e

4

@ Sulfuric Acid - Regeneration

0 1 2

@ Aluminum Sulfate /

®

@

3

@—For Key to Product identity See Expanded Scale Diagram

D. ADDITIONAL STUDY PRODUCTS

L L l l l

2 4 6 8 10 12 14

Treatment Cost as Percent Selling Price

FIGURE 2. INCREMENTAL WATER TREATMENT COSTS FOR BEST PRACTICABLE TECHNOLOGY VERSUS

SELLING PRICE AND PROFIT MARGIN

10

1. Water Treatment Costs

All of the water treatment costs for the various levels of

effluent control shown in this report were taken from the Development

Document prepared for the EPA under contract number 68-01-1513 ded

June 1973.

The water treatment costs provided by the Development Document

and summarized in Table 1 were specific to a particular manufacturing

process for each of the products under consideration. In general,

this manufacturing process is not the only method for producing

the products being considered, or in some cases not even the major

method of production. Our judgment of economic imapct, however, is

necessarily predicated on these costs and we have, therefore, confined

our judgment to the economic impact on the producers utilizing the

particular process defined by the Development Document. The

processes are specified in the individual product studies.

2. Conclusions

The impact analysis matrix (Table 3) also summarizes the

relevant price increase and plant shutdown impact considerations for

the additions’ products. For none of the nine additional products do

we see plant shutdowns as a direct result of increased water treatment

costs. For one of the nine--sodium metal--there may be plant shutdowns

as a result of possible reduced demand for alkyl leads in gasoline.

The Development Document indicates that for solar salt there

would be no incremental cost for B.P.T. or B.A.T. over E.P.P. and con-

sequently no economic impact. For sodium bicarbonate, evaporated salt,

sodium silicate, and calcium shloride, the conclusion is that water

treatment costs can be passed on as price increases. For sodium metal,

sodium sulfite, and potassium sulfate, the water treatment costs will

either be absorbed by the producer or passed on as price increases.

Finally, for sodium carbonate the nominal incremental cost for B.A.T.

over E.P.P. will be absorbed by the producer. (The original Development

Document indicates that there is no incremental cost over E.P.P. for

B.P.T. for synthetic soda ash.)

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91450

TABLE 4

Il. INDUSTRY CHARACTERIZATION--MAJOR STUDY PRODUCTS

CALCIUM CARBIDE PRODUCTION, IMPORT/EXPORT, AND APPARENT CONSUMPTION

a. cect IDE (Thousands of Tons)

1 Apparent

l. Summary Year Production Imports Exports Consumption

Calcium carbide is produced in the United States almost exclusively 1950 671 6 6 671

for conversion to acetylene gas. Acetylene is used primarily in the

synthesis of various organic chemicals and plastics, although a sig- _ 41955 875 2 4 873

nificant amount is used as a fuel for welding and other metalwork.

1960 1,093 5 5 1,093

Production of calcium carbide declined more than 502% by 1972

from a peak reached in the mid-1960's. The main reason for this decline 1961 1,042 5 6 1,041

has been the substitution of acetylene derived from hydrocarbons for that

produced from calcium carbide for the manufacture of organic chemicals. 1962 1,083 6 6 1,083

Acetylene for chemical uses has also been largely replaced by other,

less expensive, raw materials. 1963 1,109 7 6 1,110

While the lower cost of shipping calcium carbide to industrial 1964 1,132 12 6 1,138

centers for conversion to fuel acetylene has favored this source over ;

tanked, hydrocarbon-derived acetylene, more convenient and economical 1965 1,098 ll « 1,109

fuels (e.g., propane) have made significant inroads into the amount

of acetylene used for metalworking. 1966 1,063 20 o 1,083

The general trend of a declining market for calcium carbide is 1967 912 8 o 920

likely to continue as hydrocarbon-derived acetylene replaces carbide-

derived acetylene for chemical use, and as other raw materials replace 1968 942 7 s 949

acetylene in both chemical and metalworking applications.

1969 856 18 - 874

2. Market Characterization 1970 791 19 - 810

a. Size 1971 625 20 - 645

U.S. production of calcium carbide reached a maximum of approxi- 1972 493 ll - 504

mately 1.1 million tons per year in the period 1960 to 1965. Since U.S.

foreign trade in this commodity has always been small in comparison

to production, apparent annual consumption of calcium carbide was also

at a level of about 1.1 million tons during this period, as is shown in l exports not reported separately after 1964.

Table 4. By 1972, production had fallen to less than half a million °

tons per year. Table 4 also indicates the low level of imports, Apparent consumption: production and imports minus exports.

which have ranged between 1% and 3% of consumption in recent years,

and have come exclusively from Canada.

Source: U.S. Department of Commerce.

b. Growth

Calcium carbide producers have experienced a steady drop in

demand for almost a decade. Annual market value data for calcium carbide

production since 1950 are given in Table 5. While 1972 production, at

26 27 9

Year

1950

1955

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969 |

1970

1971

1972

Sources:

945!

1

TABLE 5

Production

(Thousands of

671

875

1,093

1,042

1,083

1,109

1,132

1,098

1,063

912

942

856

791

625

493

Tons)

28

TOTAL MARKET VALUE OF CALCIUM CARBIDE PRODUCTION

Market

Value

($/Ton)

78

94

100

99

93

95

91

89

87

94

94

78

81

90

90 (est.)

44.4

U.S. Department of Commerce, and Contractor's estimates.

4°3,000 tons represented a 55% drop from 1960 production levels, price

erosion has caused the total market value of calcium carbide production

to drop 60% over the same period (from $109 million to $44 million).

c. Uses

Although a small quantity of calcium carbide is consumed in such

direct applications as the carburization of steel, desulfurization, and

other foundry work, by far the largest use is in the production of

acetylene. In the preferred "dry" process, water is added to calcium

carbide to form acetylene and calcium hydroxide at the-rate of 640 pounds

of acetylene per ton of carbide. The "wet" process uses excess water,

and produces by-product calcium hydroxide in a slurry which is 90% water.

Approximately 80% of the acetylene produced from calcium carbide

is used as a raw material in the synthesis of organic chemicals and

plastics by the chemical industry. The balance is used as a fuel in

metalworking for welding, cutting, and scarfing. A summary of calcium

carbide use, showing representative products produced by the chemical

industry, is given in Table 6.

d. Substitute Products

Until 1951, all of the acetylene produced in the United States

was derived from calcium carbide. Since that time, acetylene has also

been manufactured through the pyrolysis, or cracking, of hydrocarbons.

This process produces several other important industrial chemicals as

by-products, and has become increasingly competitive with the calcium

carbide route to acetylene.

The advantage of calcium carbide as a source of acetylene is that

the carbide can be shipped more economically than the heavy cylinders of

compressed acetylene gas. Thus, for uses which are geographically

removed from the production of hydrocarbon-derived acetylene, calcium

carbide as a source of acetylene is less-susceptible to substitution.

Even here, however, carbide acetylene faces competition from other fuels,

such as propane or natural gas, and also from electric-arc welding.

In such direct applications as the carburization of steel, de-

sulfurization, and use as a drying agent, calcium carbide also faces

competition from a variety of products. In foundry work, various com-

binations of lime, coke, and magnesium can replace calcium carbide.

Calcium sulfate is only one example among a variety of alternative drying

agents which are available as substitutes for calcium carbide. These

direct applications currently account for only apout 3% of U.S. con-

sumption.

e. Geographic Consumption

Except for the relatively small amount of calcium carbide used

to generate acetylene for metalworking, virtually all calcium carbide

29

5455

TABLE 6

USE PATTERN OF CALCIUM CARBIDE BY APPLICATION!

Calcium Carbide Converted to Acetylene

97%

Chemical Acetylene 80%

Used in synthesis of organic chemicals

(e.g., butadiene, allyl alcohol, vinyl

ethers) and derived products such

as neoprene, other plastics, and resins.

Fuel Acetylene

17%

Used for welding, cutting and scarfing

in metalwork, and for production of

acetylene black.

Calcium Carbide for Direct Use

3%

Includes use as a dehydrating agent and a

reducing and desulfurizing agent in certain

metallurgical processes.

100%

This use pattern is typical of consumption in 1972. Chemical use

of calcium carbide acetylene is rapidl

significant. pidly becoming much less

Sources: Kirk-Othmer, Encyclopedia of Chemical Technology;

Shreve, Chemical Process Industries; and

Contractor's estimates.

5456

30

is consumed in the region in which it is produced. In fact, most

carbide acetylene is generated either in the same plant as the carbide,

or in an adjacent one. In 1972, nearly 85% of U.S. calcium carbide

production capacity was located in Kentucky and Ohio, and with it, the

bulk of calcium carbide consumption. Most of the remaining 15% of

consumption occurs in major industrial metalworking cities such as

Cleveland, Detroit, and Pittsburgh.

f. Captive Requirements

As indicated above, calcium carbide is most often used as a ready

source of acetylene. Furthermore, the greatest portion of calcium car-

bide is consumed either in the same plant as it is produced, or at

another plant owned by the same company. Although the most recent

information on merchant shipments was given in 1965, it is apparent from

these data that captive consumption was typically at a level of 75%.

Data illustrating th‘s relationship for the years 1962 through 1965 are

given in Table 7. Although the trend in recent years has been away

from captive use, as acetylene for chemical synthesis has been replaced

by ethylene, propylene, and other less expensive raw materials, the

bulk of calcium carbide production will be consumed captively through-

out the 1970's.

3. Supply Characterization

a. Manufacturing Route

Calcium carbide is prepared from quicklime (calcium oxide) and

coke (carbon) which are mixed together at approximately 2000° C. This

temperature is achieved in an electric furnace using large amounts of

electric power. In a typical run, 1900 pounds of quicklime, 1300

pounds of coke, and 3,000 kilowatt hours of electricity are required

to produce one ton of calcium carbide. The product, tapped from the

furnace as a liquid, is allowed to solidify and is then crushed to a

convenient size for packing and handling. Calcium carbide for chemical

acetylene often goes directly to an acetylene generator in the same

plant.

An example of the overall process is shown in Figure 3 as a

simplified schematic diagram. The source of quicklime is a high-grade

limestone containing nearly 100% calcium carbonate. The limestone is

heated in a kiln to produce quicklime, which is combined with coke,

or another source of carbon such as anthracite, in the electric furnace.

The large power requirements and high raw material shipping costs are

important factors in determining plant location.

b. Producers

In 1972, calcium carbide was produced in seven plants by four

different companies. As indicated in Table 8, three of these plants

31

AS?

FIGURE 3

SCHEMATIC FLOW DIAGRAM--PRODUCTION OF CALCIUM CARBIDE

TABLE 7 a es

+ oe —w}| Crusher > Kiln — oa

CAPTIVE VS. COMMERCIAL CONSUMPTION OF CALCIUM CARBIDE 3 ‘

(Thousands of Tons) i i

)

Consumption

Year Production Captive Merchant! Percent Captive

Coal ——| Pulverizer

1962 1,083 815 268 75

1963 1,109 824 285 74

1964 1,132 891 241 79 Coke —~ Crusher ! Drier

1965 1,098 819 279 75

Carbon Mono e

co

Electric-arc |

, Calcium Carbide ~<«— Vurasce

Last reported separately in 1965. Cac,

Source: U.S. Department of ( merce.

Cooling Commer cial-Grade

mn Crusher

Calcium Carbide

33

5158 32

/

TABLE 8

CALCIUM CARBIDE PRODUCERS--LOCATION AND CAPACITY

(Thousands of Tons)

Annual

Producer Location Capacity

Airco, Inc. , Calvert City, Ky. 325

Airco Carbide Div. Louisville, Ky. 150

Midwest Carbide Corp. Keokuk, Lowa 30

Pryor, Okla. 50

Pacific Carbide & Alloys Co. Portland, Ore. 20

Union Carbide Corp.”

Chemicals & Plastics Div. Ashtabula, Ohio 228

Portland, Ore. 35

Total 838

1

Manufacturing operations in Calvert City were discontinued early in

1973; the Louisville plant is to be phased out over the next

several years.

~operations at Portland were discontinued in mid-1973.

Sources: Trade journals, industry contacts.

51460 34

were responsible for most (84%) of the 1972 annual production capacity

of 838,000 tons. These were the Airco plants at Calvert City and

Louisville, Kentucky, and the Union Carbide plant at Ashtabula, Ohio.

A decade ago, in 1960, there were twelve plants, with a combined

capacity of 1,225,000 tons. The move to reduce capacity, which began

in the early 1960's, has continued into 1973 with the announcement by

Airco that operations would be discontinued at the Calvert City plant,

and that the Louisville plant would be phased out by about 1980. The

closing of Calvert City has reduced 1973 U.S. capacity by 39% to

approximately 513,000 tons per year.

, Existing calcium carbide plants may be classified as either large

(annual capacity 150,000 tons or more), or small (annual capacity 50,000

tons or less), with four of the six plants operating in early 1973 classi-

fied as small. All of these plants are at least ten years old and some

are much older. Airco's Calvert City plant had been operating about 20

years when it closed this year.

As stated earlier, approximately 75% of all calcium carbide

produced is captively consumed. This gives some indication of the large

degree of intra- and inter-company integration in the sale and use of

this chemical commodity. As an example, the Airco plant at Calvert City,

which was the largest calcium carbide plant in the world, shipped a

small part of its output to the Airco plant in Louisville, and con-

verted the rest to acetylene for local use. This local use included

chemical synthesis at an adjacent Airco plant, and shipment of acetylene

and derived products by pipeline to the plants of several other firms in

the large Calvert City chemical complex.

c. Manufacturing Economics

A summary of estimated manufacturing costs for calcium carbide

is given in Table 9. The data in this table are for a plant of

45,000 ton-per-year annual capacity, operating at 100% capacity. A

plant of double this capacity would benefit from relatively small economics

of scale, reducing manufacturing costs by about 5%, to $81 per ton.

On the other hand, a plant producing calcium carbide for fuel acetylene,

as opposed to chemical acetylene, experiences manufacturing costs which

may be from 5% to 6% higher than that shown in Table 9 due to quality

requirements relating both to raw materials and to the manufacturing

process itself. General, celling, and administrative expenses are

estimated to be 5% of manufacturing costs. This brings total costs to

about $90 per ton for a 45,000 ton-per-year plant producing calcium

carbide for conversion to chemical acetylene. Depending on plant size

and intended end use of the product, total manufacturers’ costs may

vary from approximately $85 to $95 per ton.

35

S161

TABLE 9 4. Supply/Demand Balance

Industry capacity for calcium carbide has gradually been reduced

since the early 1960's. As of 1972, capacity had been reduced by 302,

ESTIMATED COST OF MANUFACTURING CALCIUM ,

SEATED COST OF MANUFACTURING CALCIUM CARBIDE

while production had fallen by more than 50%. In the early 1960's,

Plant Capacity: 45,000 Tons/Yr (1-15,000 KVA furnace) operating rates were typically close to 90% of capacity; in the early

Fixed Investment: $3,740,000 1970's operating rates have generally been below 80%, and it is only

the shut down of the largest plant in the industry (Calvert City) which

has brought current capacity down to a level consistent with current

Quantity/Ton $/Unit Ton demand.

Variable Costs In view of the continued replacement of carbide acetylene by

: hydrocarbon-derived acetylene, and replacement of acetylene for chemical

Quicklime 0.95 ton 18.75 17.81 use by less expensive raw materials, this trend towards reduction of

Coke 0.65 . excess capacity is likely to continue as demand is further reduced.

. ton 24.00 15.60 Total production in the first two months of 1973, for example, was 20%

Carbon Electrodes 30 1b. 0.15 4.50 below that of the same period in 1972.

Operating Supplies 0.30

reas 2780 kwh 0.007 19.46 5. Prices

Water ,

32 M gal 0.02 0.64 Published prices for packaged and delivered calcium carbide have

58.31 increased steadily from $121 per ton in the early 1950's, to a level of

. $171 per ton since 1963. A more realistic price for 1972 is the $100

Semi-Variable & Fixed Costs per ton, f.o.b. plant, quoted by industry sources. Some discounting

occurs, and the average actual price received for calcium carbide shipments

Operating Labor 9 men/shift 4.25/hr 7.45 has been somewhat lower than this in recent years, as is shown in Table 10.

Supervision 4€ ‘ In addition to discounting, and as indicated in the footnote for Table 10,

: ocenes 12,000/yr 1.07 the difference between actual and published prices also reflects packaging

superintendent 17,000/yr 0.38 and freight charges. Packaging charges range from $35 to $45 per ton,

Maintenance “5% of investment/yr 3.73 and freight charges add approximately $10 per ton locally and up to $20 .

' wi °

Labor Overhead 30% of operating labor oa per ton for more distant shipments within a given region

Information on 1972 actual prices is not yet available, but it

and supervision

appears that the declining trend was at least temporarily halted in

Plant Overhead 70% of o

perating labor .

1 and supervision —e 1971 when actual price increased approximately 10%, from $81.00 to

Depreciation $90.00 per ton. In any case, a comparison of manufacturer's total costs

6-2/3% of investment/yr 5.53 with actual prices received per ton of calcium carbide, indicates that

Local Taxes & Insurance si of investment/yr 1.25 ee cot ey ia

a’: the break-even level.

die 28.31

ost o nufacture (Bulk)

Off Gas Credit” rages

edit 3.14 MM Btu 0.35 1.10

Net Cost of 3

st of Manufacture” (Bulk) 85.52

l

For older plants depreciation may onl

20% of this amount. y y cover items replaced and be about

2

Credit valid only if carbon monoxide can be utilized as fuel at plant.

3

Quality requirements make manufacturin

g costs about $5/ton higher f

manufacturers of calcium carbide for use in generation of rom —

acetylene.

37 "163

91462 36

TABLE 10

CALCIUM CARBIDE PRICES--PUBLISHED VS. ACTUAL

(Dollars per Ton)

B. SODIUM SULFATE

Published Price! Actual Price’

121 78

134 94

149 100

171 89

171 81

171 90

171 N.A,

Published prices include packaging and freight charges of

ca. $50/ton. Quoted 1972 price for bulk

was $100 per ton, f.o.b. plant. CoD GENER

2

Actual Price: Total Value of Shipments/Tons Shipped.

Sources: Chemical Marketing Reporter, U.S. Department of

Commerce, and Contractor's estimates.

38

1. Summary

Sodium sulfate is produced in the United States largely as a

joint product with some other material, rather than for its own value.

This joint-product characteristic, combined with a low price, has oft m

led to a situation where the potential supply of sodium sulfate has ex-

ceeded demand. Uses have been developed to take advantage of the large,

inexpensive supplies. As a result sodium sulfate has become an important

material to several industries, and its low cost ultimately translates

to lower product costs in those industries where it is used.

Sodium sulfate is used in the paper industry, by detergent

manufacturers, and in the manufacture of glass and textiles. U.S.

consumption has averaged 1.6 million tons over the last decade, and this

level of use is likely to be characteristic of the foreseeable future.

2. Market Characterization

a. Size

U.S. production of sodium sulfate was approximately 1.36 million

tons in 1972, down 8% from a record level of nearly 1.5 million tons

in 1968. Total value of 1971 shipments was $28 million.

Net imports of about 0.27 million tons in 1972 (equa). to 20%

of U.S. production) brought total 1972 U.S. apparent consumption to

approximately 1.63 million tons. Belgium accounted for 48% of import

dollar value, Canada 38%, and in descending order of importance, The

Netherlands, East Germany, Sweden, West Germany, and Japan accounted

for the remaining 142%.

Historical data for production, foreign trade, and apparent

consumption are given in Table 11. In this table, and in Table 17.

(giving price information) the data are presented for both high purity

(anhydrous sodium sulfate), and lower purity (saltcake) grades of

sodium sulfate. Most of this analysis will be in terms of aggregate

data for both grades.

b. Growth

As Table 1l illustrates, both U.S. production and apparent

consumption of sodium sulfate reached record levels in 1968. Between

1968 and 1972, production decreased 8% and apparent consumption

39 5465

TABLE 11 ‘decreased 6%. Data for 1972 indicate that the downward trend has at

— least temporarily stopped. Production volume was up slightly (less

— - — coms _ than 1%) from 1971, and apparent consumption increased 5%.

SODIUM S , IMPORT/EXPORT, AND APPARENT CONSUMPTION

While net imports were at a record level in 1972, and accounted

(Thousands of Tons-- 100% Na,SO,) for most of the 5% increase in apparent consumption between 1971 and

1972, it is difficult to discern a trend in imports over the past

1 2 decade. From a low of 9% to a high of 20%, net imports have

Production, by Type Foreign Trade . vo averaged 16% of U.S. production since 1962.

Year Saltcake Anhydrous Na,SOQ, Imports Exports Apparent Consumption - ;

c. Uses

1960 810 303 167 31 1249 Se

1335 ; An estimated use pattern for sodium sulfate is given in

1961 . 844 327 196 32 Table 12. By far the largest use (ca. 70%) is in the kraft, or sulfate,

1331 pulping process of the paper industry. Sodium sulfate is converted to

1962 826 368 188 51 sodium sulfide, and with sodium hydroxide and water, forms a digesting

1348 solution for wood chips. Techniques for recovering impure sodium sulfate

1963 837 396 160 45 (saltcake) from the digesting liquor are constantly being improved, but

62 present losses average about 100 pounds of saltcake per ton of pulp.

1964 926 390 290 44 15 Purchased saltcake is used to replace that which is not currently re-

1665 covered. Use in kraft pulping has remained relatively constant at

1965 976 428 274 13 about 1.1 million tons for the last ten years. Increasing requirements

1654 due to growing pulp demand have been offset by improved sodium sulfate

1966 1,009 436 237 28 recovery techniques.

1967 696 668 290 28 1626 The second largest use of sodium sulfate (ca. 18%) is in deter-

1732 gent formulations. A small amount is added to all detergents as part

1968 758 125 305 56 of the manufacturing process, but increasingly, manufacturers have

1669 been adding additional purchased sodium sulfate to their formulations.

1969 730 744 286 91 This additional sodium sulfate partly compensates for the loss of bulk

1587 and detergency brought about by decreased phosphate content. Sodium

1970 561 812 269 55 sulfate use in detergent formulation has doubled from about 150,000 tons

_ 67 1559 in the early 1960's to about 300,000 tons in 1972.

1971 514 843

1634 Use in the manufacture of glass, in textile finishing, and other

1972 681 683 299 29 uses constitute the remainder (ca. 12%) of U.S. consumption of sodium

sulfate. In glass manufacture, sodium sulfate speeds the melting of the

raw material charge, improves the working properties of high-silica glass,

and, when carbon is added, forms sulfur dioxide gas. The sulfur dioxide

bubbles have a “fining” effect, removing other gas bubbles as they move

toward the surface of the molten glass.

Use of sodium sulfate in glass manufacture has decreased slightly

over the past decade due to restrictions on the sulfur dioxide content

1 The large difference between pre-1967 and post-1965 production figures is of stack gases. Manufacturers are being forced to cut down on the amount

h . of sodium sulfate in each batch of glass and to install scrubbing units

due to a product classification change

which will allow recycling of sodium sulfate. Current consumption is

about 140,000 t ar.

2 Total for crude and refined sodium sulfate. - , — oe ewe

In textile manufacture, sodium sulfate finds use in the finish-

3 Apparent Consumption: production plus imports minus exports. ing operation. The primary use is dye standardization; that is,

Source: U.S. Department of Commerce. Data for 1972 are preliminary.

41

9-166 40

SAG7

TABLE 12 dilution of the dye to a standard potency. Sodium sulfate is also

USE PATTERN OF SODIUM SULFATE BY APPLICATION added to the dye bath to level, or control, the color. Consumption of

————eeerereerereeerrrerrerreeeeeee sodium sulfate for textile applications has remained fairly constant at

an estimated 50,000 tons annually over the past several years.

Finally, several thousand tons per year of sodium sulfate find

application in such uses as cellulose sponge manufacture, mineral feed

Kraft (Sulfate) Paper Process 70% supplements, cleansing agents, photography, and as a chemical catalyst.

Used with sodium sulfide and sodium

hydroxide in the pulping-bleaching operation. d. Substitute Products

In applications which account for the bulk of U.S. sodium sulfate

consumption, other products could be substituted with relative ease.

The major consequence of such substitution would probably be increased

Detergents manufacturing and product costs.

Sodium sulfate is used in detergents to 18%

improve detergency and contribute bulk In kraft pulping operations, sodium sulfate is employed as the

density to the formulation. most economical source of make-up sodium and sulfur values. Other, more-

expensive sources (e.g., sodium carbonate or caustic soda) could be sub-

stituted for the purchased saltcake, or "synthetic saltcake”" may be

manufactured by oxidizing a mixture of soda ash (sodium carbonate) and

sulfur. Furthermore, the newer pulp mills will generate most, or all,

Glass, Textile, and Other of their saltcake requirements internally as a by-product of on-site

In approximate order of importance, sodium 12% chlorine dioxide bleach production. The only problem here is that

sulfate is used in "fining" glass, standard- sodium values must still be purchased outside, and high prices for

izing textile dyes, manufacturing cellulose sodium hydroxide or sodium carbonate can make this source of saltcake

sponges, as a cleaning and metal pickling agent, less attractive than purchased saltcake.

and in photography.

os SESS SEES . — Increasing use of sodium sulfate in detergent formulation is,

itself, the result of a substitution. Sodium sulfate, as an inexpensive

electrolite, serves to replace some of the lost detergency and bulk to

100% detergents with reduced phosphate content.

e. Geographic Consumption

An estimated geographic use pattern for sodium sulfate is given

in Table 13. More than 60% of sodium sulfate demand is in the U.S.

south, and approximately 90% of this demand is attributable to the kraft

pulping industry.

Approximately 16% of U.S. sodium sulfate demand is in the north-

Sources: Kirk-Othmer, Encyclopecia of Chemical Technology; Shreve, central--Great Lakes region. The primary use in this region (ca. 60%)

alec Chemical Process Industries; and Contractor's estimates. is in detergent formulation, with kraft pulping operations accounting

for most of the remaining consumption.

The U.S. west and northwest require an estimated 14% of annual

U.S. sodium sulfate supply. Kraft mills account for most (cay 75%) of

this regional demand; detergent formulation and other uses make up the

rest.

In the U.S. northeast, it is estimated that half of the 72%

regional consumption is for detergent formulations; most of the remaining

half is split between kraft pulping and glass manufacture.

SAG 43

»168 as 5469

TABLE 13

GEOGRAPHIC USE PATTERN OF SODIUM SULFATE

South

Approximately 90% - kraft pulping,

10% other.

North Central - Great Lakes

Approximately 60% - detergent formula-

tion, 25% kraft pulping, 15% other.

West and Northwest

Approximately 75% - kraft pulping,

15% detergent formulation, 10% other.

Northeast

Approximately 50% - detergent formula-

tion, 20% - kraft pulping, 20% glass

fining, 10% other.

Source: Contractor's estimates.

5170 44

63%

16%

14%

7%

100%

f. Captive Requirements

Production of sodium sulfate for captive use by producing

companies is insignificant in the U.S. Nearly 90% of U.S. production is

as by-product or co-product sodium sulfate. The small amount produced

as primary product is produced for sale to end users. Table 14 shows

a comparison of sodium sulfate production and shipments for the years

1962-1972. Shipments have averaged 99% of production over the last

decade.

Production of by-product sodium sulfate during chlorine dioxide

bleach manufacture at pulp mills, is the only significant case where

by-product sodium sulfate is used in another operation by the same

company.

g. Other Market Characteristics

Most of the sodium sulfate produced in the U.S. sells for about

$20 per ton, with price as the main basis for competition. In this price

range, freight costs become a significant consideration in marketing

and distribution of the product. Local shipment may cost up to $15

per ton, and long distance shipping rates may be $24 per ton and more.

These rates are relatively high compared to transatlantic bulk shipping

rates of about $7 rer ton, and allow foreign producers to compete

effectively with U.S. companies located on the Atlantic coast.

Within the U.S., the relatively high freight costs cause

local demand to be highly dependent on the proximity of sodium sulfate

supply. Substitution may occur when freight-equ2lized costs of another

product make its use more economical. An example is caustic soda as

a source of sodium values for kraft pulping operations.

3. Supply Characterization

, a. Manufacturing Routes

Sodium sulfate has rarely been produced in quantity for its

own sake. A summary of sodium sulfate production by process, from

1964 to 1971, is given in Table 15, Only about one-third of the pro-

duction classified as "natural" is recovered solely for sodium sulfate

value, and in 1972, approximately 90% of U.S. production could be

classified as by-product or co-product sodium sulfate.

By-product sodium sulfate is defined as sodium sulfate formed in

a process which produces one or more other products of significantly

higher value. These processes include manufacture of rayon and

cellophane, lithium and strontium processing, and the chemical

synthesis of sodium bichromate and resorcinol.

Co-product sodium sulfate is formed in a process which con-

currently produces products having a value comparable to that of sodium

45

S471

TABLE 14

CAPTIVE VS. COMMERCIAL CONSUMPTION OF SODIUM SULFATE

(Thousands of Tons)

Year Production Shipments!

1962 1,194 1,170

1963 1,233 1,226

1964 1,316 1,303

1965 1,404 1,364

1966 1,445 1,398

1967 1,364 1,384

1968 1,483 1,469

1969 1,475 1,439

1970 1,373 1,386

1971 1,356 1,377

1972 1,364 --

: Including interplant transfers.

Source: Current Industrial Reports, U.S. Department of Commerce.

JI

-_—

~}

a)

46

Year

1964

1965

1966

1967

1968

1969

1970

1971

Sovrce:

Table 15

PRODUCTION OF SODIUM SULFATE BY PROCESS

(Thousands of Tons)

Mannheim Polymer

Furnace By~Product

214 356

224 382

228 387

196 346

165 404

181 388

177 354

162 362

Sodium

Dichromate

and Other

201

190

217

228

254

282

278

210

U.S. Department of Commerce.

47

Natural

544

608

613

594

660

624

564

622

Total

1,315

1,404

1,445

1,364

1,483

1,475

1,373

1,356

sulfate. Examples of such processes are the Mannheim and Hargreaves

processes for producing hydrochloric acid, and the recovery of sodium

sulfate from natural brines and salts which contain a variety of in-

organics of similar value.

One producer, with about 10% of U.S. capacity, has plants which

sell sodium sulfate recovered from natural brines as their sole source

of revenue. This is the only significant case in which sodium sulfate

is produced as a primary product.

Methods for sodium sulfate production may be divided into three

categories: recovery from natural sources, production as a by-product

of rayon and cellophane manufacture, and production accompanying the

synthesis of various chemicals.

Recovery from natural brines accounts for about half of U.S.

sodium sulfate production. Figure 4 illustrates, in flow chart forn,

a typical process for recovery of both anhydrous sodium sulfate and

Glauber's salt, a hydrated form of sodium sulfate. The natural brine,

containing dissolved sodium sulfate and other inorganics, is pumped into

a natural salt deposit to reduce the solubility of sodium sulfate. When

the saturated solution is cooled, Glauber's salt precipitates. The

mixture is filtered, and the hydrated sodium sulfate is collected for

direct sale or for further processing to anhydrous sodium sulfate.

Production of sodium sulfate as a by-product of viscose rayon

or cellophane production is responsible for about 30% of U.S. sodium

sulfate capacity. Figure 5 is a schematic diagram for production of

sodium sulfate as a rayon by-product. The sodium sulfate is formed in a

spinning bath when the basic viscose rayon dope is forced through the

fine holes of a spinneret into a solution containing sulfuric acid. Sodium

sulfate is produced at a rate of about 1.2 pounds per pound of rayon or

cellophane. The spinning bath must be refreshed periodically by removing

the sodium sulfate which has formed and replenishing the sulfuric acid.

The production of certain industrial chemicals results in the

formation of sodium sulfate as a natural result of the process used.

Approximately 20% of U.S. sodium sulfate capacity is of this type.

Figure 6 is a simple flow diagram for the Mannheim hydrochloric acid

process. Salt (sodium chloride) and sulfuric acid are heated together

to form hydrogen chloride and crude sodium sulfate. The crude sodium

sulfate may be further refined or converted to Glauber's salt depending

on relative demand for the two products.

Other examples in this third category of sodium sulfate production

include the Hargreaves process for hydrochloric acid, formation with

sodium bichromate when sodium chromate is treated with sulfuric acid,

and production accompanying the synthesis of phenol and resorcinol.

b. Producers

In 1972 there were 22 companies producing sodium sulfate in

32 locations. These companies, plant locations and capacities, and

oe in| 48

FIGURE 4

RECOVERY OF SODIUM SULFATE FROM NATURAL BRINES

Natural Brine Chill

(-112 er

7-11 Na,S0,) | — —#1 Crystallizer

" 4

Vz

Salt

Deposit Filter

Dryer —~<_ Evaporator ~~

Anhydrous Sodium Sulfete

(Na,SO, )

Glauber's Salt

(Na,SO,-10 H,0)

49

5475

FIGURE 6

FIGURE 5

PRODUCTION OF SODIUM SULFATE IN THE MANNHEIM PROCESS

PRODUCTION OF SODIUM SULFATE IN VISCOSE RAYON PROCESS a

Sulfuric Acid Hydrochloric Acid—®To Recovery

Viscose Solution _ H,80,) (HC1)

.Viscsss tem (Cellulose Xanthate + NaOH solution) | 4

Salt H

(NaCl) a

Furnace

Rayon Fibers

To bobbin ~iSolution Tank

Sodium Sulfate

H,SO, + 2 NaOH —e Na,SO0, (Na,SO,)

Spinning Bath

—<g-

To Solution Tank~—*— Filter —t———+ Chiller —

-w- Dryer —s Anhydrous Sodium Sulfate

(Na,SO,) Glauber's Salt

(Na,SO,° 10 H,0)

51

asf? 7 ~

176 50 a

TABLE 16

processes involved are given in Table 16. The five major producers

accounted for 70% of 1972 U.S. capacity. Seven companies (10 plants) SODIUM SULFATE PRODUCERS -- LOCATION AND CAPACITY

produce sodium sulfate from natural sources. Only one of these (Th ate of %

companies has facilities (2 plants) which produce sodium sulfate as their ousands of Tons)

sole source of operating revenue. The others produce it as either a by-

product or co-product along with other inorganics.

Five companies (1l plants) produce sodium sulfate as a by- Producer Location Annual Capacity Process

product of rayon or cellaphane manufacture, and ten companies (11 plants)

produce sodium sulfate as a by-product or co-product of chemical synthesis Akzona Inc.

operations. American Enka Co., div. Enka, N.C. 20 Polymer by-product

Lowland, Tenn. 36 Polymer by-product

Seven plants having approximately 100,000 tons-per-year capacity

each, were responsible for 60% of 1972 U.S. capacity, and would be

classified as large producers of sodium sulfate. Fifteen plants, of Allied Chem. Corp

25,000 tons-per-year capacity or less, accounted for 12% of 1972 U.S. Industrial Ch Di

capacity, and would be classified as small. The remaining ten plants, we —_— _ ealesasee, WS. 0

with capacities between 25,000 and 100,000 tons per year each, accounted

Bichromate by-product

for 28% of 1972 U.S. capacity. American Cyanamide Co

I . .

The base materials from which sodium sulfate is produced as a — are See Ft. Worth. Tex 13 Catalyst by-prod

by-product are long-established chemical commodities. It is there- IRC Fibers Co., subsid. Painesville, Ohio 33 ee Ped ate sony

fore not surprising that many of the plants producing sodium sulfate

are fairly old. Most plants have been operating at least ten years;

some nearly twenty years. Chem. Met Corp. Chicago, Ill. oo

c. Manufacturing Economics

Climax Chem. Co. Monument, N.M. 36 Mannheim furnace

Raw materials for sodium sulfate production are either natural

(HCl by-product)

brines and salt deposits or sodium alkalis and sulfuric acid. In

either case, nearly all of the manufacturing cost is represented by

separation, drying, and packaging costs. In the case of natural sources, GHUSSSUTeD CROTD CHUESED, Ms. ie Tapes, Als. a Polyner by-product

depletion costs must be covered; where sodium sulfate is formed as a

joint product of some manufacturing process, raw material costs are El Paso Natural Gas Co.

often allocated to each product according to its relative value. Beaunit Corp, subsid.

' Beaunit Fibers Div. Elizabethton, Tenn. 25 Polymer by-product

We understand that water pollution abatement costs have been

developed only for chrome saltcake, i.e., that sodium sulfate produced

as by-product from sodium bichromate manufacture. For that reason, our FMC Corp.

sodium sulfate manufacturing cost estimates are included with the sodium American Viscose Div. Fredricksburg, Va.

bichromate costs. Fort Royal, Va.

Lewistown, Pa. -

| inens tek. Be. 275 Polymer by-product

4. Supply/Demand Balance Nitro, W. Va.

Parkersburg, W.Va.

Sodium sulfate has had an inverse relationship from that most

often associated with the law of supply and demand. With nearly 90%

of sodium sulfate production resulting from processes in which it is a Great Salt Lake Minerals &

by-product or co-product of some other material, and with both a low Chems. Corp. Ogden. Utah 150 Natural: co-

price and low profit margin, demand for this product has traditionally ° . ’ wenSy Go-yesmuet

followed supply.

Green Bay Packaging, Inc. Green Bay, Wisc. -- By-product

5479

Producer

Cult Resources & Chem. Corp.

Lithium Corp. of America -

Inc. ,subsid.

Yercules, Inc.

Coatings & Specialty

Products Dept.

Kerr-McGee Corp.

Kerr-McGee Chem. Corp.

subsid.

Koppers Co., Inc.

Organic Materials Div.

Morton-Norwich Products, Inc.

Morton Chem. Co. div.

Nalco Chem. Co.

Industrial Div.

Ozark-Mahoning Co.

Pratt Sodium Co.

Reichhold Chems., Inc.

Stauffer Chem. Co.

Indust. Chem. Div.

U.S. Borax & Chem. Corp.

>ources

int

TABLE 16 (Continued)

Location

Bessemer City, N.C.

Glens Falls, N.Y. f

Hopewell, Va.

Trona, Calif.

Petrolia, Pa

weeks Island, La.

Chicago, Ill.

Brownfield, Tex.

Seagraves, Tex.

Casper, Wyo.

Tuscaloosa, Ala.

San Francisco, Calif.

West End, Calif.

Boron, Calif.

Wilmington, Calif.

Annual Capacity

18

20

250

15

120

10

185

44

Total: 1,555

Trade journals, industry reports.

54

Process

By-product

Bichromate by-product

Polymer by-product

Natural, co-product

Resorcinol by-prcJuct

Hargreaves furnace

(HCl by-product)

By-product

Natural, sole product

Natural, sole product

Natural, by-product

Phenol by-product

Boric acid co-product

Natural

Boric acid co-product

Boric acid co-product

With this type of relationship, there is often a time lag be-

tween increased supply and the development of new applications for the

product. While supply often exceeds demand, the reverse is rarely true.

Evidence of this relationship of demand following supply is

seen in the use pattern of sodium sulfate. From a technological point

of view, very few uses of sodium sulfate result from unique chemical

or physical properties of the compound. Rather, because of its rela-

tively low price, sodium sulfate is often used wherever its chemical or

physical properties allow its substitution in place of a more expensive

material.

Substitution of sodium sulfate for higher cost materials wherever

possible is a healthy economic practice, and does not detract from the

importance of this chemical to both manufacturers and consumers. Even

so, an excess of supply over demand is likely in the future, as water

pollution abatement guidelines become more stringent. More rigorous

water quality standards will have a dual effect: increasing recovery of

by-product sodium sulfate, and decreasing consumption of sodium sulfate

by kraft pulping mills and detergent manufacturers. Rayon and cellophane

manufacturers, for example, currently recover only about one-third of

the sodium sulfate produced by the industry. Kraft pulping mills,

on the other hand, experienced sodium sulfate "losses" (in plant

effluent) of about 250 pounds per ton of pulp in 1950, had reduced

these losses to approximately 100 pounds per ton by 1972, and may be

forced to reduce these losses by an gdditional 50% in the next decade.

This lower demand as a result of kraft pulping effluent guidelines is

in addition to reduced demand due to technical changes in bleaching and

pulping operations.

In view of the joint-product nature of most U.S. sodium sulfate

production, capacity figures are less meaningful for this chemical than

for most others. Reported capacity is often much lower than theoretical

capacity, and depends on the degree of commitment to recovering the sodium

sulfate produced. Nevertheless, in terms of reported capacity, pro-

duction of sodium sulfate has varied from 75% of capacity in 1964,

to 100% in 1968. Production in 1972 represented approximately 90% of

reported capacity.

On a regional basis, the U.S. south, northcentral. and northeast

are net consumers of sodium sulfate, while the west and northwest are

net producers. European sources supplement supplies to the U.S. south,

and Canadian sources provide additional sodium sulfate to northern U.S.

markets.

5. Prices

Published and actual prices of sodium sulfate for representative

years since 1950 are given in Table 17, The published price for lower

purity sodium sulfate (saltcake) has been $28 per ton since 1955. Actual

prices for this grade have varied erratically in a narrow range from

$20 to $22 per ton, indicating an average discount of 25%.

55 «5481

TABLE 17

SODIUM SULFATE PRICES -- PUBLISHED VS. ACTUAL

(Dollars per Short Ton)

Publisined Price! Actual Price?

Year Lower Purity High Purity Lower Purity Hi Purit

1950 : 22 40 12 27

1955 28 52 22 27

1960 28 54 22 29

1965 28 56 21 27

1970 28 48 20 21

1971 28 43 21 20

1972 28 -- -- oo

Published prices bulk, works, 100% =. SO, basis for lower purity; bags,

carlots, delivered East for high purity Na,SO,.

,

Actual price: Value of Shipments/tons shipped.

Sources: Chemical Marketing Reporter, U.S. Department of Commerce,

and Contractor's estimates.

mAs?

56

Prices for higher grades of sodium sulfate are more difficult

to characterize due to the number of different grades in this category,

but it appears that considerable discounting occurs, and that the

average price commanded by higher grades has declined in recent years.

In 1971, the average price of high-purity sodium sulfate was below

that of the lower quality grade. This unusual situation is most likely

the result of increased recovery of this high-purity grade from rayon

manufacture.

C. TITANIUM DIOXIDE

l. Summary

In 1972, U.S. titanium dioxide (TiO,) consumption, including

imports, was approximately 787,000 tons, with paint, paper and

plastics applications accounting for nearly 80% of the total. Market

demand growth in recent years has been at a 3% to 4% rate and is

expected to continue at least at that rate through 1975. Imports remain

a relatively small proportion (10%) of sales and are generally used only

in non-critical, lower-cost applications.

While Ti0, is sold in volumes comparable to those of some

commodities, it is marketed more as a specialty chemical rather than

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 expertise,

individual producers frequently are strong in one market segment,

such as paper, but do not fare as well in another--paint, for instance.

Current list prices are 28.5¢ per pound for rutile grades,

24¢ per pound for paper grade, and, at these prices, TiO, frequently

is one of the more expcusive raw materials in its end-use application.

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. <A long-established l¢ per pound price differential between

anatase and rutile grades disappeared in 1971 and both grades are currently

offered at the same list price. 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.

Prices have firmed in recent months.

TiO. is manufactured by either of two processes--sulfate and

chloride. urrent domestic manufacturing capacity is about 817,000 tons,

approximately 54% of which is sulfate. The sulfate process is older and

employs sulfuric acid to separate and recover TiO. 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 sulfates

(copperas). Depending on processing steps employed, both anatase and

rutile, the two chemical forms of Ti0., can be produced. Estimated

current manufacturing cost for pigment via the sulfate process is

approximately 2l¢ per pound, including pigment finishing steps.

The alternate method of production, and the one employed in every

TiO, plant built since 1956, is the chloride process. In this process,

57

ASS

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% 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, Du Pont will begin production of both

anatase and rutile grades upon conversion of its Edgemoor, Delaware,

plant to 100% 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. Current chloride process manufacturing cost is

estimated at nearly 23¢ per pound.

TiO, for commercial production is obtained from four principal

sources--ilmenite, rutile, leucoxene, and slag. Ilmenite contains

approximately 50% TiO,, is mined virtually worldwide, and is the

basic raw material for the sulfate process and for Du Pont's chloride

process plants. World supply is plentiful with present production of

nearly three million short tons per year. U.S. production is

approximately 700,000 short tons. Rutile, containing 95+% Ti0,,

is the raw ore for most chloride production and is found almost exclusively

in Australia. World supplies are believed to be limited to 20-25 years

at present production rates of over 400,000 long tons per year. No

rutile is mined in the U.S.

Leucoxene and titanium slag, used in sulfate production, are

relatively minor sources of TiO, worldwide, although over 100,000 tons

of Canadian slag are imported into the U.S. every year.

2. Market Characterization

a. Market Size and Growth

U.S. market demand for TiO, pigments in 1972 was approximately

787,000 short tons, valued at neasty $433 million on a delivered basis.

Table 18 shows the recent history of TiO, production, trade and ship-

ments data. Since 1965, overall market growth has been at an annual

rate of 3% to 4%, although certain individual end-use segments, such as

plastics, have grown considerably faster.

Exports of TiO, have remained quite small, less than 2% to 3%

of domestic production, and have actually declined somewhat in recent

years. Imports, on the other hand, have ranged in recent years from 5%

to 10% of total apparent consumption, although 1972 saw a large jump to

86,400 tons, or 11% of apparent consumption. Imports will probably

continue at present percentage levels for the foreseeable future.

b. Product Uses

Table 19 identifies the major end uses and recent consumption

history tor TiO> pigments. Paint and coatings applications, currently

“1 58

TABLE 18

oc

TiO. APPARENT CONSUMPTION AND INDUSTRY SHIPMENTS

(Thousands of Tons)

Commercial

Shipments

Total

Shipments

Apparent

Consumption

Stocks

Imports Exports

Production

Year

524.5

573.0

606.3

576.7 49.6 17.0 101.7

1965

545.4

593.3

48.0 15.0 98.5 630.7

594.5

1966

542.5

582.3

617.4

103.3

46.8

589.4

1967

564.4

632.1

53.3 15.0 94.2 671.1

623.7

1968

590.1

654.5

53.2 14.0 100.8 684.3

664.3

1969

59

560.9

643.7

60.2 15.0 106.9 691.4

655.3

1970

581.2

684.7

723.6

14.0 89.7

42.8

677.8

1971

86.4 10.0 66.3 787.1

687.3

1972

U.S. Department of Commerce "Current Industrial Reports" and Tariff Commission trade data.

Sources:

“91S

TABLE 19

TiO, MARKET CONSUMPTION

(Thousands of Tons)

1965 1970

Paint and Coatings 345 375

Paper 110 147

Plastics 27 59

Rubber 31 35

Floor Covering 29 30

Printing Ink 12 18

Ceramics 10 i7

Synthetic Fibers 6 10

Roofing Granules 4 5

Other _26 _34

Total 600 730

Source: Contractor's estimates.

1h} 60

accounting for 50% of total consumption, constitute the major use for

Ti09. Two other end uses, paper and plastics, have grown rapidly in recent

years, and in 1972, accounted for an additional 30% of Ti0, consumption.

(1) Paint and Coatings

The paint and coatings industry is comprised of two basic segments--

trade and industrial--with trade sales accounting for about 60% or

235,000 tens of TiO, consumption in the paint industry. Due to its

interior hiding power and dispersibility (relative to rutile), anatase

grade TiO, is rarely used, exceptions being low-cost applications such

as highway paint. Within rutile grades, chloride process pigments account

for about 60%, or 240,000 tons of paint pigment.

Sulfate producers have worked hard in recent years to eliminate

previous performance deficiencies of sulfate rutile grades, and for

many trade sales applications, such as interior wall paint and exterior

house paint, sulfate and chloride grades are interchangeable. In in-

dustrial applications, the chloride process pigments, with Du Pont's

R-900 series grades as the industry standards, enjoy clear superiority.

A critical factor in selling Ti07 to the paint industry is a

customer-oriented marketing effort. With TiO, pigment cost typically

comprising 10% to 25% of paint selling price, paint manufacturers demand

quality technical service and grade development to meet ongoing paint

application needs. Imported Ti0, has fared poorly in the paint industry

due to lack of good customer service.

2) P r

1972 TiO, sales to the paper industry were about 158,000

tons and sales to the industry have been growing at 6% per year. Anatase

grade pigments, because of their lower cost, account for about 70%,

or 110,000 tons, of pigment sales. (TiO. frequently competes with

10 to 12¢ per pound clays for whitening and opacity filler applications;

hence cost is a critica) /actor, and imported anatase grades have made

their most successful penetration in this market.)

There are two main application areas within the paper industry--

beater and coatings. Beater applications call for pigment addition

directly to the paper pulp, and there is much grade and supplier

interchangeability. A recent trend in beater use has been an increased

TiO, requirement as paper sheet has become thinner while retaining

opacity. In the coating area, use of rutile giade Ti0, has been increas-

ing, and there is less grade interchangeability than in beater use.

(3) Plastics

The fastest growing market segment for TiO, is plastics, with

1972 consumption of about 78,000 tons and a recent growth rate of nearly

61

S187

17% a year. Major application areas inciuded polyethylene injection

molding and film production, polystyrene extrusions, and vinyl extrusions,

such as outdoor siding and moldings. Product performance is the critical

factor in plastics use, and rutile accounts for over 95% of TiO» sales.

Rutile pigment, both chloride and sulfate, is superivr to anatase in

dispersion and resistance to discoloration and weatmering. Technical

service is very important, and it is common for producer and user to

work together in developing new applications. Impurted Ti05, again due

to lack of customer service, has made little hea¢way in this market.

(4) Other Applications

The remaining applications shown in Table 19 make up the re-

maining 161,000 tons of TiO, consumed in 1972. Individual applications

and their consumption relative to the total are as follows: rubber,

4%; floor covering, 4%; printing ink, 2.6%; ceramics, 2.6%; synthetic

fibers, 1%; roofing granules, 0.5%.

c. Substitute Products

TiO, use presently is threatened by substitute products in only

one market Segment, paper. There TiO, enjors the advantage of being an

effective opacifier, but it is at a cost disadvantage to alumina and

silica clays, some of which offer nearly equivalent brightness as Ti0,.

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, Ti0, 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 Ti0,'s present position.

d. Captive Consumption

The major captive use of Ti0, pigment is in the paint industry,

where three of the top six TiO, consumers have their own pigment plants.

Table 20 details captive TiO, consumption and shows the rise in

captive use as a percentage of apparent consumption from 8% in 1965

to 14% in 1971. Sherwin-Williams, Du Pont, 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.

3. Supply

a. Manufacturing Processes

Two commercial processes are presently employed to produce TiO

pigments--the sulfate process and the chloride process. The sulfate process

is older and is the process employed by most of the existing worldwide

62

=

Pi

D

TABLE 20

140, CAPTIVE CONSUMPTION

(Thousands of Tons)

Total Commercial Captive l Pon

Year Sh nts Shipments Consumption Consumption

1965 573.0 524.5 48.5 8.0

1966 593.3 545.5 47.8 7.6

1967 582.3 547.5 39.8 6.4

1968 632.1 564.4 67.7 10.1

1969 654.5 590.1 64.4 9.4

1970 643,7 560.9 82.8 12.0

1971 684.7 581.2 103.5 14.3

lcaptive consumption is calculated as total shipments - commercial shipments.

Source: Current Industrial Reports, U.S. Department of Commerce.

63

capacity. The chloride process was developed in the 1950's and is

used in all new TiO, plants built in the U.S. since 1956. In recent

years chloride procéss plants have become increasingly widespread in

Europe as well.

(1) Sulfate Process

Figure 7 left-hand side, is a schematic representation of

the sulfate process. In the first step ilmenite, an ore or sand con-

taining 40-60% TiO,, or titanium slag, containing 60-70% Ti0,, is

digested with sulfuric acid. The amount of acid required ranges from

2.5 to 4.5 pounds per pound of finished pigment and depends on the TiO

content of the ore. In addition to the formation of titanium sulfate

salts, substantial amounts of ferrous sulfate are also formed since the

other major component of ilmenite is iron oxide, FeO. The remainder

of the process involves separating the various sulfate salts, with iron

being removed from the process as hydrated ferrous sulfate, copperas, and

TiO, being precipitated in the hydrolysis step. This final chemical

form of the TiO, pigment, anatase or rutile, is determined by the

nucleus crystal“used to seed precipitation in this step. The TiO

precipitate is next calcined at temperatures of up to 1250° C, during

which adsorbed sulfur trioxide and water are driven off and, if rutile

seeds were used in the hydrolysis step, rutile-type pigment is formed.

The pigment finishing process will be described later.

(2) Chloride Process

The chloride process typically utilizes rutile ore containing

90% to 97% TiO. as its raw material. Du Pont has developed the capability

to use ilmenité, thereby lowering its raw material costs significantly.

Figure 7 right-hand side, outlines the process. In the first step,

rutile ore is burned with chlorine gas to produce titanium tetrachloride.

This material is separated from the reaction mixture via distillation,

then is oxidized at high temperature to produce TiO, particles, which

are quickly quenched. The quenching process allows extremely close

control of pigment particle size which is essential in developing

hiding power of the pigment. Chlorine is recovered in the oxidation

process and is recycled for use in the first step. As in the sulfate

process, the refined TiO, pigment is sent to finishing steps which

enhance the surface propérties of the pigment particles.

Although the chloride process is conceptually straightforward

and does not produce the substantial quantities of waste materials

that the sulfate process does, it hes been extremely difficult to operate

commercially. One problem has been the extreme corrosiveness of the

high temperature chlorine employed. A second, more fundamental problem,

has been the oxidation step, which is extremely sensitive to burner

configuration and to product recovery methods. Du Pont is the most

successful in this regard and holds significant patent protection in

this technology.

64

130

FIGURE 7

Ti0, PIGMENT MANUFACTURING PROCESSES

SULFATE PROCESS

CHLORIDE PROCESS

Sulfuric

Ilmenite Acid Titanium Slag Carbon Rutile Chlorine

Digestion Digestion Chleriontion |

. Scrap

Reduction [a Iron Ti Cl

4

Clarification Clarification Purificati

on

cl,

Crystallization y Recycle

Waste and/or

Nuclei By-product \

| Oxidation

Copperas

(FeSO,+ 7H,O) Titani Ti0>] Rutile

- 2 - Hydrolysis Titanium :

' Chlorine Recovery

Filtration

Calcination Neutralization

TiO?

Rutile or Anatase

Pigment

SS —_——

Finishing and Coating

Finished TiO) Pigment

65

5491

(3) Pigment Finishing

Before pigment from either process is sold, it is processed

through a series of finishing operations in which specific particle

surface properties are developed. These properties in turn determine

characteristics such as pigment dispersibility and durability. For

instance, pigment intended for plastics use is usually treated with an

organic agent, dimethyl siloxane, to enhance the pigment's compatibility

with the plastic system. Sulfate producers have made their pigments

more competitive with chloride pigments in recent years through careful

control of particle size and coating characteristics obtained in finish-

ing operations. Such finishing steps generally add 1-2¢ to the basic

manufacturing cost of the pigment.

b. Producers

At the end of 1972, there were 11 domestic TiO, producers operating

15 plants, all but one of which are in the eastern half of the U.S.

Table 21 summarizes pertinent information regarding these facilities.

Since 1956, chloride process facilities have accounted for all new TiO,

pigment plant construction. Possibly reflecting producer's uncertainty

about process technology and economics, individual capacity of most

chloride plants is in the 25,000 to 30,000 ton range. The notable

exception is Du Pont, which is increasing the capacity of their New

Johnsonville, Tennessee, plant to 195,000 tons by year-end 1973 and is

actively considering a new 100,000 ton chloride facility in Georgia.

Two producers, PPG and NL Industries, have recently closed their chloride

facilities, moves reportedly due to raw material supply and economics

problems.

Several of the large producers-~-Du Pont, NL Industries, and

Glidden-Durkee--have integrated their operations backward to provide

captive supplies of ilmenite ore. (No domestic producer has a captive

source of rutile as virtually all of this raw material is imported from

Australian producers.) These three producers have also achieved forward

integration through captive TiO, supply for their paint products. No

other domestic producers have achieved integration to a comparable

extent. Most TiO, plants are isolated manufacturing facilities, although

a few are part of larger, multi-product facilities, and most plants

produce and sell titanate and othe" salts as by-products from the

process.

c. Manufacturing Economics

Tables 22 and 23 summarize estimated manufacturing economics

and profitability for a 25,000 ton sulfate plant. The costs for raw

materials, utilities, direct labor, and overhead, are based on current

estimates for these items. For the sulfate process, two investment

bases are used--replacement and depreciable. The replacement basis is

an ADL estimate of current plant replacement cost and is used for

calculation of insurance and maintenance, since these items are best

reflected by current costs and replacement value. A depreciable basis

60

. 02922

TABLE 21

TiO. MANUFACTURING LOCATIONS AND CAPACITIES

“a

(Thousands of Tons)

Start-Up

Annual

Capacity

Process“

Year

Raw Material

Location

Company

1955

1966

Imported ilmenite, slag

Imported rutile

70

40

110

Savannah, Ga.

American Cyanamid

Cc

1964

Imported rutile

27

Ashtabula, Ohio”

Camden, N.J.

Cabot

n.a.

Combustion Engineering

n.a.

27

Wilmington, Del.

1963

Imported rutile

Antioch, Cal.

Du Pont

Bete

1935

1956

Captive mixture of ilmenite/

Captive ilmenite, slag

Edgemoor, Del. l

1959

leucoxene, imported rutile

Captive mixture of ilmenite/

New Johnsonville, Tenn. 2

leucoxene, imported rutile

1946

1965

42 Slag

Gloucester City, N.J.

Hamilton, Miss.

N.J. Zine (Div. of GéW)

Kerr-McGee

toa)

sw

Imported rutile

45

n.a.

108

115

Mapleton, Ill.

Lonza

utes

1923

1918

Captive ilmenite

Captive ilmenite

Imported rutile

St. Louis, Mo.

Industries

1966

Sayreville, N.J.?

1956

1970

Captive ilmenite, slag

Imported rutile

Baltimore, Md.

Glidden-Durkee

(Div. of SCM)

1969

Imported rutile

Ashtabula, Ohio 27

Sherwin-Williams

Penn Yan, N.Y. n.a.

Transelco

,»000 tons by year end 1973.

C = Chloride.

Converting to all-chloride process and expanding to 112

SPlant being operated by N

Expanding to 195,000 tons by year end 1973.

Announced closing January 1973.

S = Sulfate;

1

2

3

4

©4343

-J. Zinc (Div. of G&W) under lease-purchase agreement.

Sources: Chemical Economics Handbook and Contractor's estimates.

TABLE 22

MANUFACTURING ECONOMICS--SULFATE PROCESS

Basis: Sulfate Process

25,000 T/Yr, 100% of Capacity

330 Days/Yr 103 TABLE 22 (Continued)

Replacement Investment--$26,325,000°’

Depreciable Investment--$15,000,000

$/Ton LABOR SCHEDULE

Item Unit $/Unit Units/Ton Pigment T10, PRODUCTION--SULFATE PROCESS

Raw Materials

Ilmenite (56% Tio,” Ton 21.00 1.87 39.27

Sulfur Ton 30.00 0.88 26.40 Supervisors Operators Helpers

Caustic Ton 55.00 0.20 11.00

jchoe Gueptente pope Siete 30.00 Feed Preparation Section 1 1 2

106.27

Digestion and Separation Section 4 3

.

Utilities”

U es Hydrolysis--Precir‘tation Section l 3 2

Water MGal 0.10 220 22.00

Electricity kwh 0.014 525 7.35 Purification Section l 1 l

Natural Gas MMBtu 0.60 10 6.00

35.35 Calcination--Dry Milling Section 1 l l

2 ~

Direct Labor ’ After Treatment Section 1 3 3

Supervision Man Hr 7.50 1.58 11.85

Operators Man Hr 5.00 4.43 22.15 Sulfuric Acid Plant a 1

Helpers Man Hr 4.00 3.80 15.20

49.20

Total--Men/Shift 5 14 12

Overhead

3 100% Direct Labor ---- ---- 49.20

Maintenance, Labor, and Supplies

@ 7% of Replacement Investment/Yr 73.71

Depreciation

2 9.1% of Depreciable Investment/Yr 54.60

Insurance and Local Taxes

1 2.0% of Replacement Investment/Yr 21.06

Total Manufacturing Cost Per Ton $389.39

| Manufacturing Cost Per Lb. Pigment $ 0.195

“Capital investment based on Contractor's estimates.

jAssumes Wage rates and utilities rates of New Jersey area.

Assumes capital cost of H,SO/ plant included. Does not include solid waste

handling capital or operating costs.

“See labor schedule included. . 69

Source: Contractor's estimates. 68

AGA | 5495

TABLE 23

iO. PIGMENT PROFITABILITY--SULFATE PROCESS

4) eee

Investment:

Manufacturing Cost:

Pigment Selling Price

Gross Profit/Lb.

Gross Profit/Ton

Freight at 5% of List Price Sales/Ton

General, Selling, & Administrative

@ 7.5% of List Price Sales/Ton

Profit Before Taxes/Ton

Profit After Taxes/Ton

Profit After Taxes as % of Sales

Profit After Taxes/Ton

Plus Depreciation/Ton

To*al Cash Flow/Ton

Total Cash Flow @ 25,000 Tons

Investment

Working Capital (3 months'

operating costs)

Payback (Yrs)

% Return on Capital Employed

Source: Contractor's estimates.

5496

$15,000,000

$0.195

70/30 Anatase

Rutile Rutile/Anatase Paper

Grade Mix Grade

$0.275/Lb. $0.26/Lb. $0.24/Lb.

0.080 0.065 0.045

160.00 130.00 90.00

27.50 27.50 27.50

41.25 41.25 41.25

91.25 61.25 21.25

46.62 30.62 10.62

8.3 5.9 2.2

CASH FLOW

46.62 30.62 10.62

54.60 54.60 54.60

101.22 85.22 65.22

2,540,000 2,130,000 1,630,000

15,000,000 —->

2,433,000 —>

17,433,687 —»>

6.9 8.2 10.7

15.0 12.0 9.3

70

of smaller dollar size than replacement value is used for depreciation

since most sulfate plants are 20 to 30 years old, and current depreciable

assets are restricted to recently replaced process equipment and newly

installed finishing equipment. A depreciation rate of 9.1% per year is used

as this rate is the highest allowed by the Internal Revenue Service for chemical

industry facilities. Since all TiO, grades are sold on a delivered basis,

a freight charge of 5% of list price has been included in Table 23. General

selling and administrative charges of 7.52% of list price sales reflect

the relatively expensive selling effort required for TiO, pigments.

Table 23 shows that depending on grade and price, after tax

profitability tanges from 7.1% down to 2.2% of sales. In addition,

return on capital could theoretically be as high as 13.7% after tax,

although 11.5%, based on a product mix of 70:30 rutile/anatase grades,

is probably more representative of actual industry performances.

Tables 23 and 24 detail similar costs and profitability figures

for a 25,000-ton chlorine plant. The depreciable and replacement invest-

ment basis are considered the same in this case since most chloride plants

not only are relatively new with substantial original book value remain-

ing, but also have experienced the updating of process and finishing equip-

ment found in sulfate process plants. As seen in Table 25, while the

after-tax profit percentage is low, 3.6%, the return on capital, at

10.2%, is considerably higher. By virtue of a large depreciation tax

shield, the chloride process apparently generates substantial cash flow,

despite low-book profits. It should be noted that chloride profit margins

have shrunk recentiy, largely due to the dramatic rise in rutile ore prices,

now $175 per ton and higher. Ore cost comprises over 50% of the cost of

manufacture, and this item has been most responsible for the elimination

of the chloride process’ earlier cost advantage over the sulfate process.

Chloride pigment producers are anxious to see this cost drop 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 after the oxidation

step. The highly corrosive nature of chlorine makes this step difficult,

but failure to do so can result in extraordinarily high use of make-

up chlorine.

d. Raw Materials

Ready availability of inexpensive raw materials is one of the

key requirements for the continued production of low-cost TiO, pigments.

Economic production via the chloride process has been sorteusty

threatened by the recent, dramatic increase in rutile ore prices. In

contrast, ilmenite prices have risen cnly siightly to $35 per ton. The

reason for these different behaviors is the supply/demand balance for

each ore.

Ilmenite is mined virtually worldwide, with 1971 world production

being almost 2.9 million short tons. U.S. ilmenite production has de-

clined from 930,000 tons in 1969 to 680,000 tons in 1971, but worldwide

71

WZ

TABLE 24

TiO, MANUFACTURING ECONOMICS--CHLORIDE PROCESS

Basis: Chloride Process

25,000 T/Yr, 100% of Capacity

330 Days/Yr

Investment (Depreciable and ,

Replacement )--$21, 330,000

Ltem Unit $/Unit Units/Ton

Raw Materials

Rutile Ton 175.00 1.17

Coke Ton 24.00 0.35

Chlorine Ton 50.00 0.21

Chemical Additives --- ----- ----

‘ 2

Utilities

Water MGal 0.10 23

Electricity kwh 0.014 750

Natural Gas MMBtu 0.60 10

Refrigeration Ton/Day 3.00 2.5

Direct Labor 3

Supervision Man Hr 7.50 0.95

Operators Man Hr 5.00 5.4

Overhead

@ 100% Direct Labor

Maintenance, Labor, and Supplies

4 6% of Investment/Yr

Jepreciation

@ 9.1% of Investment/Yr

Insurance and Local Taxes

2 2% of Replacement Investment/Yr

Total Manufacturing Cost Per Ton

Manufacturing Cost/Lb Pigment

Re .

\Capital Investment based on Contractor's estimates.

[Assumes wage and utilities rates of New Jersey.

See labor schedule included.

72

Alay

34.12

51.19

77.63

17.06

$454.01

$ 0.227

TABLE 24 (Continued)

LABOR SCHEDULE

Ti0, PRODUCTION--CHLORIDE PROCESS

Operators

Load in

Chlorination reactor

Quench, TiCl, recycle, storage

Sludge filter, waste

Ticl, purification

TiCl, vaporizer, preheat, additives -

Oxidation chamber

Ticl, quench, cyclones, bag filter

Chlorine recovery

After treatment

Bagging, warehouse

Oxygen plant

Total

Supervisors

Chlorination, purification

Oxidation

After treatment

Total

73

Men/Shift

_—

MN Jee ee

Ww |- - -

439

TABLE 25

TiO. PIGMENT PROFITABILITY--CHLORIDE PROCESS

Investment: $21,330,000

Manufacturing Cost: $0.227/Lb.

(Rutile Grade)

Pigment Selling Price $0.275/Lb.

Gross Profit/Lb. 0.048

Gross Profit/Ton 96.00

Freight at 5% of List Price Sales/Ton 27.50

General, Selling, & Administrative

@ 7.5% of List Price Sales/Ton 41.25

Profit Before Taxes/Ton 27.25

Profit After Taxes/Ton 13.625

Profit After Taxes as % of Sales 2.5

CASH FLOW

Profit After Taxes/Ton 13.62

Plus Depreciation/Ton | 77.63

Total Cash Flow/Ton 91.25

Total Cash Flow @ 25,000 Tons 2,281,375

Investment 21,330,000

Working Capital (3 months’ operating costs) 2,837,500

24,167,500

Payback (Yrs) 10.6

% Return on Capital Employed 11.7

supply has been filled by increased production in Australia and Norway.

Present reserves of ilmenite are such that, at the present annual world

consumption rate of nearly three million tons, adequate supplies of

sufficient quality ore should be available for nearly 100 years.

The rutile ore supply situation, however, is not so bright.

Rutile production in recent years has remained constant at slightly

over 400,000 tons and is confined almost erclusively to the east coast

of Australia. Significant deposits are believed available in Sierra

Leone, but technical problems have hampered attempts to exploit this

source. There is no rutile ore mined in the U.S. A large increase in

worldwide chloride pigment process capacity has greatly increased

demand, and present rutile reserves are estimated to be barely 20 years.

These conditions have fostered a rise in rutile ore price from $100 per

ton in 1965 to $180 per ton presently.

A major hope in the bleak rutile supply situation is the

commercialization of synthetic rutile production. This process involves

chemical leaching of ilmenite ore to remove iron impurities and to upgrade

the T1i0, content to approximately 90%. Since nearly two tons of ilmenite

are required to produce one ton of synthetic rutile, waste disposal

considerations will adversely affect the rapid development of domestically

available synthetic rutile, although both Sherwin-Williams and Kerr

McGee are actively pursuing this technology. Semi-commercial synthetic

plants are in operation in Australia and Japan, and the product has

been tested and found acceptable in most U.S. chloride process pigment

plants. Chloride producers anticipate that synthetic rutile will begin

to appear commercially by 1975 at $130-150 per ton and feei that this

material will be significant in keeping chloride pigment production

economically viable.

The other significant factor in chloride process raw materials

has been the development of Du Pont's ability to utilize ilmenite ore

in its chloride plants. Although this capability has always been tech-

nically feasible, it has been uneconomic due to the high chlorine loss

resulting from chlorinating the 40% of iron oxide present in ilmenite.

Du Pont, however, has developed the ability to minimize chlorine use

and is able to produce chloride pigment for an estimated 1-2¢ per

pound less than rutile-based chloride processes. Since ilmenite is

much more widely available than rutile, other chloride producers are

working on both ilmenite beneficiation technology and direct ilmenite

use capibility in chloride processing. Thus far, however, Du Pont

remains the only producer using ilmenite directly.

The last major source of TiO, is titanium slag, which is produced

in Canada from plentiful, low-quality ilmenite ores. The ilmenite used

here is closely intermixed with iron ores, and smelting is employed to

produce pig iron and titanium slag containing 70% to 72% TiO,. Slag

cannot be used in the chloride process due to the formation of in-

soluble chloride salts which plug up processing equipment. While other

raw materials such as chlorine, coke, and sulfuric acid are used in

75 | 5501

TiO. pigment production, these items are widely available and do not con-

strain the production process to the degree that TiO, ores do. TABLE 26

TiO, INDUSTRY PLANT CAPACITY UTILIZATION

4. Supply/Demand Balance; Prices

(Thousands of Tons)

Industry capacity has been sufficient to supply demand as almost

continual additions to capacity have been made. Table 26 summarizes

capacity and production figures for recent years and shows that capacity Deresne

Capacity Production Utilization

utilization has been in the 75% to 85% 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

tight-supply situation with NL Industries announcing the closing of 1965 713 576.7 81

its chloride facilities in Sayreville, New Jersey. Du Pont'’s announced

expansions won't be operational until year-end 1973. 1966 725 594.5 82

This supply situation is substantially different from that of 1967 . 766 589.4 77

1970-71 when over-supply forced a sharp depression in prices. Table 27

summarizes recent shipment valuation history and confirms industry claims 1968 746 623.7 84

that the 1970-71 period saw severe price competition, despite stable 1969

list prices. Demand and prices have improved with the economic recovery 778 664.3 85

and recent list prices stand at: standard anatase and rutile grades,

1970 817 655.3

° 81

bulk--28.5¢ per pound; paper grade anatase--24¢ per pound. Most

producers are running at full capacity presently, and shipments are 1971

805 677.8 84

being made at list prices.

1972 817 687.3 84

Sources: Chemical Economics Handbook and Current Industrial Reports.

e-¢°--19 .

27. hee 76 77 55.3

Rutile

. 26

. 26

. 26

. 26

.27

.27

. 26

3

List Prices

Anatase

. 26

.25

.25

.25

.25

- 26

. 26

TABLE 27

COMMERCIAL SHIPMENT VALUES

2

Value/Lb.

. 261

. 256

.255

. 256

.255

.248

.226

Value!

277.2

288.8

301.1

277.8

262.4

274.7

279.7

(Shipments in Thousands of Tons)

Total

TiO

Value in $ Millions.

Value in $ per Pound.

Carlot, $ per Pound.

524.5

545.4

542.6

564.4

590.1

560.9

581.2

1

2

3

Shipments

Commercial

Current Industrial Reports, U.S. Department of Commerce.

1965

1966

1967

1968

1969

1970

1971

Source:

D. SODIUM CHROMATE AND BICHROMATE

1. Summary

The U.S. sodium bichromate market has been characterized by

essentially static demand during the past five years at approximately

150,000 tons annually. The market outlook for the next five years

is for a slight overall contraction in demand with deteriorating markets

in water treating and textiles (resulting from more stringent water

quality standards) only partially offset by modest demand growth for

chromic acid, chrome colors and catalyst applications. Very nearly

half of current demand for sodium bichromate is for chrome colors

and chromic acid. Other uses include leather tanning, metal treating,

textiles, water treating and catalyst manufacture. Substitute products

(or processes) exist for most bichromate derivatives, constraining

demand growth.

There are currently three producers of sodium chromate and

bichromate--Allied Chemical, Diamond Shamrock and PPG Industries.

Aggregate captive requirements of these three companies approximate

35% of current production. U.S. producers of sodium bichromate are

dependent on foreign sources, primarily the Republic of South Africa,

for chromite ore, the basic raw material.

Manufacturing costs are estimated at $212 per ton. Assuming

GS&A at 5.5% of sales and a weighted average selling price of $262

per ton (including some chrome salt cake by-product credit), the industry

after-tax income in 1972 approximated $18.50 per ton, equivalent to a

7.1% return on sales.

During the period 1960-1971, actual prices (as calculated from

Commerce Department data for dollar values and tonnages) received by

the industry have remained in a remarkably narrow range between $240

and $255 per ton. Although confirming Commerce Department data are not

yet available, list price increases made recently probably have been

reflected in somewhat higher plant prices. These price increases are

believed to have been made possible primarily as a result of a somewhat

less aggressive posture by foreign production sources, notably Italy

and Japan. Producers in both these countries are understood to be

facing higher manufacturing costs as a result of more stringent water

pollution abatement standards. Nonetheless, imports have exceeded

exports in seven of the last ten years.

79

2. Market Characterization

In Table 28 is shown the apparent U.S. consumption of sodium

chromate and bichromate for the period 1960 through 1972. For most of TABLE 28

this period, U.S. production, as reported by the Department of Commerce,

has varied between 135 and 155 thousand tons annually. As indicated, APPARENT U.S. CONSUMPTION OF SODIUM CHROMATE AND BICHROMATE

these data include both sodium chromate and sodium bichromate. While (Thousands of §

some of the sodium chromate produced in the initial phase of the manu- aCe Ties, Na,Cr40, 2H,0)

facturing process is marketed as such (an estimated 15 thousand tons

of bichromate equivalent), most of the sodium chromate filtrate is .

further processed to produce sodium bichromate. Year Production puasens

—- ns Imports Exports Consumption

Imports, primarily from the U.S.S.R. and Japan in 1972, have 1960 121.9 1.9

varied in the last several years between 3.5 and 6.5 thousand tons. The ° 9.6 114.2

sharp drop in imports from 1966 to 1967 reflected decreased U.S. demand. 1961 120.9 1.6

As a result of the Kennedy round agreements, the import rate of duty ° 7.1 115.4

was reduced to $0.87 per pound as of January 1, 1972. 1962 127.5 2.5 5.0 -

. ° 5.0

Exports, primarily to Canada, have trailed imports in recent 1963 133.9 3.5

years. In 1972 exports totaled 4.03 thousand tons valued at $0.93 million. : 5.1 132.3

Canada received the bulk (70%) of 1972 exports, with Colombia next at 1964 137.9 3.4

very nearly 20%. For purposes of estimating apparent consumption, we have , , 6.7 134.6

ignored changes in stocks of chromium chemicals at producer plants. 1965 141.0 18.0 4.0 198.0

On a long-term basis (in the post-World War II period), apparent 1966 141.5 24.1 2

U.S. consumption of sodium chromate and sodium bichromate has increased ° -6 163.0

at an average annual compound rate of 2.4% per year. In each of the last 1967 135.3 8.2 3

three years, however, consumption has declined; the outlook is for a ’ 3 140.2

continuation of the recent trend. 1968 146.0 11.6 4.8 152.8

a. Uses 1969 152.6 6.5 5.1 134.0

In Table 29 is shown the estimated 1971 use pattern for sodium 1970 153.5 3.6 4.9

chromate and bichromate. Very nearly 50% is consumed in the manufacture : . 152.2

of chrome colors and chromic acid. In descending order of bichromate 1971 138.2 6.4 3.1

consumption, the most important chromate colors are chrome yellow and : ¥ 141.5

1972 137.1 5.7 4.0 138.8

orange, chromium oxide green, molybdate orange, and zinc yellow and

chrome green. Production of chromium pigments in 1971 and the estimated

bichromate equivalent requirements is shown in Table 30. Requirements

for U.S. sodium bichromate in pigment production would have been higher

were it not for the substantial imports of chrome colors. Imports of

chromium-containing pigments in 1971 included chromium yellow, 6.2

thousand tons; chromium oxide green, 0.9 thousand tons; chrome

green, 0.3 thousand tons; zinc yellow 1.08 thousand tons; and molybdate

orange, 0.3 thousand tons. Total value of these products and miscellaneous

other chrome colors was $4.5 million, 17% higher than in 1970.

Source: U.S. Department of Commerce.

A major use for chrome yellow is the yellow center strip line for

highways. Chromium oxide green is used where chemical and heat resistance

is required, e.g., in ceramic colors, for coloring cement and in green

asphalt roofing. Zinc yellow finds application as a corrosion inhibitor

SBOG 80

81

TABLE 29

ESTIMATED 1971 USE PATTERN FOR SODIUM CHROMATE AND BICHROMATE

(Thousands of Tons)

TABLE 30

PRODUCTION OF CHROMIUM PIGMENTS CONSUMPTION OF SODIUM BI TE EQUIVALENT, 1971

End-Use Consumption ore of Tons)

Consumption of

Pigments 36.2 Bichromate

Pigment Production Equive lent

Chromic acid 32.0

Yellow and Orange 29.0 14.8

Leather tanning 28.0 Oxide Green . 6 9.0

Molybdate Orange 11.4 5.9

Metal treating 16.2

Zinc Yellow 5.6 5.8

Textiles and dyes 10.1 Chrome Green 2.7 0.7

Miscellaneous 19.0

—— 55.3 36.2

Total 141.5

4 ontractor's estimates.

a ' Source: U.S. Department of Commerce and Contractor's estimates.

83

82 55°9

for light metals and steel. For example, in combination with red lead

it is used in priming structural steel. It also is part of the

formulation for automotive body prime coats. Sodium bichromate-based

pigments are also used in printing inks and plastics.

The second largest outlet for sodium bichromate is for the

manufacture of chromic acid, produced by reacting concentrated sulfuric

acid with sodium bichromate. Chromic acid, in turn, is used primarily

in chrome plating processes but also finds use 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.

Chromic acid imports have constrained domestic production.

The third most- important outlet for sodium bichromate 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 (i.e., calfskins, goat- and kidskins, sheep- and lambskins).

Chrome tannage is used in shoe uppers, glove leathers, garment leathers,

and bag leather. In the tanning process, sodium bichromate is reduced

with glucose to make the solutions of chromium salts employed in chrome

leather tanning.

Various metal treating and finishing processes are the next most

important outlet for sodium bichromate. For example, a solution of

sodium bichromate 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

corrosion protection and decorative effects, as well as to provide a

good base for painting metal surfaces.

In the textile industry, sodium bichromate is used in a variety

of ways. For example, among its applications are mordanting of wool,

dyeing nylon and wool, dyeing with chromate colors, as an after-

treatment on cotton to retard fading of dyes during washing and for

stripdyed wool.

A miscellaneous category of uses, including chemical applications,

wood preservative applications and corrosion control, accounted for

approximatelv 13% of U.S. sodium bichromate consumption in 1971.

A small quantity of sodium bichromate is used in the oxidation of

various organic chemicals, including pharmaceuticals. The bleaching of

fats, oils, and waxes also requires use of the bichromate as an

oxidant. Perhaps the major chemical use for sodium bichromate is in

the manufacture of catalysts. Chromates and bichromates are an im-

portant ingredient in the preservatives and fire retardants used by the

wood preserving industry. Chromates are also used to inhibit corrosion

in recirculating water-based systems (e.g., in cooling towers and large

central air conditioning facilities).

b. Substitute Products

The primary substitution effect is represente

asterisle (or processes) for derivatives of cana oat therpennod

tha for the bichromate per se. As an example, aluminum or high-impact

plastics can be substituted for chrome plated trim on motor vehicles

(It should be noted that processes have been developed to chrome plate

ogee e.g-, ABS, although uncoated plastics are also used in automo-

2 e trim.) As another example, cadmium yellow can be used in place of

rome yellow pigments. Market growth for chrome leather is limited by

lower cost substitutes, specifically, the poromeric materials. Tin-

free steel cans coated with chrome compete with aluminum cans and seam-

less, deep-drawn steel cans coated with tin. The existence of these

alternate materials both limits market rowth

and r

on higher sodium bichromate sutens. & epresents a constraint

c. Captive Requirements

Table 31 presents Commerce Department data for

and bichromate production, shipments, a shipment adie ae a eee

1960 to 1971. Excluding inventory fluctuations and losses, the

difference between total production in any given year and the quantity

of shipments reflects the amount of sodium bichromate consumed at the

producing plants for derivative manufacture. In recent years, this

ela nog Ra ve rraeane Rnony med ngprsnoreeas 33% of total production.

- S, ca

approximates 35% of production. en Se ee

3. Supply Characterization

a. Manufacturing Routes and Economics

Sodium chromate and bichromate are made by cal

(chromite) with soda ash or with soda ash and iene. ior cee

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 bichromate is produced by

treating a sodium chromate solution with sulfuric acid. Sodium bichromate

and the sodium sulfate by-product produced are separated and recovered

by crystallization. Sodium bichromate is the principal commercial product

because it is usually priced to cost l

chromate. ess per unit of cro, than sodium

As indicated, 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 in-

clusions 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 refractory grade. Chromite

85

wh]

TABLE 31

SHIPMENTS OF SODIUM CHROMATE AND BICHROMATE

Shipments*

i

1960 121.9 89.1 22.7 254.77

1961 120.9 85.2 20.5 240.61

1962 127.5 97.0 24.8 255.67

1963 133.9 88.2 21.2 240. 36

1964 137.9 99.6 22.9 239.92

1965 141.0 103.7 24.2 233.37

1966 141.5 94.2 23.9 253.72

1967 135.3 94.0 23.0 244.68

1968 146.1 100.0 23.9 239.00

1969 152.6 97.5 23.1 236.92

1970 153.5 103.2 24.8 240.31

1971 138.2 88.2 21.9 248.30

*Including interplant transfers.

Source: U.S. Department of Commerce.

86

has not been mined in the U.S. since 1961, when a small tonnage was

produced under the government's Defense Production Act. With the ex-

ception of government stockpile releases, U.S. producers of chromium

chemicals are therefore dependent on foreign sources. No commercially

feasible process for upgrading domestic chromite bearing materials to

compete with foreign ores 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.

Estimated manufacturing costs for sodium bichromate are

shown in Table 32. The manufacturing cost estimates are based on

a plant with 150 tons per day capacity and an investment (assuming the

plant was built in 1960) of $5.7 million. The indicated manufacturing

cost is $212. Included in this total is the cost of producing by-

product sodium sulfate, amounting to approximately $20 per ton of

bichromate.

Assuming a 1972 selling price for sodium bichromate of $245

per ton, plus by-product credit for 0.8 tons of sodium sulfate valued

at $17, the total unit sales value is $262. Taking GS&A at 5.5% of

sales, tie indicated after-tax profit is $18.50 per ton for an after-

tax return on sales of 7.1%.

b. Supply/Demand Balance

The producers of scdium bichromate are shown on Table 33. The

two largest producers. Allied Chemical and Diamond Shamrock, have heavily

integrated positions, both with respect to raw materials and

derivative products. For example, Allied is a major producer of soda

ash and sulfuric acid, and, along with Diamond Shamrock, is a major

producer of chromic acid. Similarly, Diamond Shamrock produces both

soda ash and sulfuric acid and several other derivatives of sodium

bichromate in addition to chromic acid. PPG Industries produces soda

ash at Corpus Christi and has nominal captive outlets for the sodium

bichromate in pigments. Hercules, Inc., had produced bichromate in a

small (approximately 30 tous per day) plant in Glens Falls, N.Y., for

captive consumption in pigment manufacture. This facility has been

closed.

The newest facility of the three producing plants is Diamond

Shamrock's. Diamond Shamrock brought its Castle Hayne, North Carolina,

facility on-stream late in 1971. The new plant replaced two older,

less efficient plants at Painesville, Ohio, and Kearny, New Jersey.

Including Diamond's new facility, total industry capacity is estimated

at 175,000 tons per year. Compared with reported production of 137-

138,000 tons per year, the industry operating rate in both 1971 and

1972 was slightly under 80%.

87

“ish

TABLE 32

ESTIMATED MANUFACTURING COST, SODIUM BICHROMATE

Production:

Operation:

Investment:

ltem

Raw Materials

Chromite (44% Cr 703)

Soda Ash (Na 7C03)

Lime (CaO)

Sulfuric Acid (66°Be)

Utilities

Power

Fuel

Water

Direct Labor

Supervisors

Operators

Helpers

Uverhead

Maintenance

Maintenance Supplies

Depreciation

Taxes and Insurance

Cost

Units uSS/Unit Units/Ton (US$/Ton Product)

short ton 19.00 1.30 24.60

100 1b 2.40 17.00 40.80

short ton 20.50 0.80 16.40

short ton 26.00 0.50 13.00

MKwh 15.00 0.50 7.50

MMBtu 0.70 40.00 28.00

MGal 0.10 14.00 1.40

Man-hr 5.00 3.40 17.00

Man-hr 3.75 6.00 22.50

60% Direct Labor 24.48

5.50

4.00

(3.0% of investment) 3.52

(1.3% of investment) 1.50

Total Manufacturing Cost 211.50

Source: Contractor's estimates.

150 Tons/Day sodium bichromate

330 operating days

$5,700,000 (Assuming plant was built in 1960)

88

Source:

Utilities

Power

Water

Direct Labor

Supervisor

Maintenance Supplies

Maintenance Labor

Tax and Insurance

TABLE 32 (Continued)

MANUFACTURING COSTS FOR BY-PRODUCT Na.SO

2—

Units USS$/Ur it Units/Ton

MKwh 15.00 0.10

MGal 0.10 30.00

Man-hr 7.50 0.30

Man-hr 5.00 1.00

Man-hr 3.75 2.00

(0.4% of total investment)

(0.2% of total investment)

(0.1% of total investment )

Contractor's estimates.

US$/Ton

1.50

3.00

———oroee

TABLE 33

CURRENT PRODUCERS OF SODIUM BICHROMATE

(Thousands of Tons Hydrous Sodium Bichromate Equivalent)

Location

Company

Allied Chemical Corp. Baltimore, Md.

Diamond Shamrock Corp. Castle Hayne, N.C.

PPG Industries, Inc. Corpus Christi, Tex.

Total

Source: Trade sources.

9516 90

Capacity

75

70

30

175

4. Prices

A comparison of list prices versus actual prices as calculated

from the Commerce Department data on reported value and quantity of ship-

ments is shown in Table 34. Throughout the period, actual unit values

realized by producers have been less than list prices. For example, in

1971 the actual price was 12.4 cents per pound versus a list price of

16.0 cents per pound.

List prices were increased by approximately 1 cent per puund in

1973 as they were in 1970 and 1971. Although shipment values for the

industry for 1972 are not yet available from Commerce Department, actual

prices received by producers are believed to have declined slightly. We

have assumed an average industry plant price of $245 per ton in 1972 for

our profitability estimates.

For the period shown, actual prices have varied very little. The

static price pattern reflects low demand growth, competition from imports,

the availability of substitute materials for derivative products, and

an over-capacity situation in the industry. Static plant prices have

been offset somewhat during this period by declining costs for the

chromite ore. Bichromate producers are believed to have written favorable,

long-term contracts for chromite ore. These contracts, however, will be

phasing out over the next several years. Renegotiations will probably

be at higher levels, reflecting both increased ore costs anc higher ocean

freights.

91

SSL7

Year

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

lcranular, bags, carlots, truckloads, works.

ACTUAL VS. LIST PRICES FOR SODIUM BICHROMATE

TABLE 34

(Cents per Pound)

List Price!

13.

13.

13.

13.

13.

13.

14

14.

14.

14

15.

16.

16.

17.

00

00

00

00

00

00

.00

00

00

.00

00

00

00

25

Actual Price”

12.74

12.03

12.78

12.02

12.00

11.67

12.69

12.23

11.95

11.85

12.02

12.42

Not available

Not available

calculated from U.S. Department of Commerce reported value and

quantity of shipments.

92

E. POTASSIUM CHROMATE AND BICHROMATE

While sodium chromate and sodium bichromate are by far the major

chromium chemicals, a number of other chromium compounds are also pro-

duced from chromite ore. These secondary chromium chemicals include

potassium chromate and potassium bichromate, ammonium bichromate, and

chromium potassium sulfate. There are no government data for any of these

materials on an individual basis. Commerce Department does report on

an annual basis the dollar value of shipments for "other chromium

compounds." In 1971, the most recent year for which data are available,

the shipments of other chromium compounds were valued, f.o.b. plant,

at $9.5 million. This dollar total has varied between $9.5 and $10.5

million for the last five reporting years.

Although potassium chromate and bichromate are the most important

of the secondary chemicals, production of the potassium compounds in

the U.S. only totals 3,000 tons annually. There are a variety of

miscellaneous uses for potassium chromate and bichromate, the most im-

portant of which are pigments and reagent grade materials. Allied is

the only U.S. producer of importance.

Potassium chromate and bichromate can be made by a process

similar to that for producing sodium bichromate by substituting potassium

carbonate for sodium carbonate in the raw material mix. However,

potassium bichromate is normally made from sodium bichromate and potassium

chloride. Estimated manufacturing costs for potassium bichromate are

shown in Table 35. The sodium bichromate has been charged into the

potassium bichromate process essentially at manufacturing cost. As

indicated, total manufacturing costs were estimated at $402.75 per ton.

Assuming plant netback at $475 per ton (the list price for potassium

bichromate is 24¢ per pound) and GS&A at 5% of sales, the after-tax

profit per ton is $24 per ton. This would be equivalent to an after-

tax return on sales of 5.0%.

93

TABLE 35

ESTIMATED MANUFACTURING COST, POTASSIUM BICHROMATE

Production:

Operation:

Investment:

Item

Raw Materials

Sodium Bichromate

(content in solution)

Potassium Chloride

Utilities

Power

Fuel

Water

Direct Labor

Supervisors

Operators

Helpers

Overhead

Maintenance Labor

Maintenance Materials

Depreciation

Tax and Insurance

«>

<

. “he

.

.

15 Tons/Day of Potassium Dichromate

330 Working Days

$2,400,000 (Estimated)

Cost

Units uSs$/Unit Units/Ton

ton 212 1.2

ton 35 0.7

MKwh 15 0.3

MMBtu 0.7 15

MGal 0.1 10

man-hr 7.50 0.6

man-hr 5.00 3

man-hr 3.75 3

(100% Direct Labor)

(6.5% of Investment)

(1-1/2% of Investment )

Total Manufacturing Cost

94

(US$/Ton Product)

254.40

24.50

402.75

III. IMPACT ANALYSIS--INITIAL STUDY PRODUCTS

A. ALUMINUM CHLORIDE

l. Treatment Costs

As developed in the Development Document, water treatment costs

for aluminum chloride producers total $3.77 annually per ton of

product for E.P.P., B.P.T., and B.A.T. This amount would apply to

plants operating on a chlorine-rich basis to produce yellow aluminum

chloride, which is preferred for the manufacture of some dye and

pigment intermediates.

Aluminum chloride plants operating on either a stoichiometric

or aluminum-rich basis would have less waste chlorine stack gas and there-

fore lower pollution abatement costs. At least one producer is able to

manufacture and sell 28% aqueous aluminum chloride solution derived

from its scrubber effluents.

2. Price Impact

The maximum treatment cost of $3.77 per ton represents approxi-

mately 1.3% of the current selling price of aluminum chloride. Further,

it is estimated that it will cost an additional 0.4% of the current

selling price to concentrate the dilute scrubber solution for yellow

aluminum chloride. Although capacity utilization (at about 65%),

captive usage, and demand growth are relatively low, and therefore act

as price increase constraints, these facturs are outweighed by the low

level of foreign competition, the absence of substitute products, and

the existence of only a few products all with equal treatment costs.

‘All producers of yellow aluminum chloride will be faced with approximately

the same water effluent charges.) Some level of price increase is there-

fore possible, and producers of aluminum chloride should be able to

cover at least part of their added treatment costs. Any costs which

could not be passed on as a price increase would have to be absorbed

by the manufacturers.

3. Plant Shutdown Impact

No plant shutdowns are expected as a direct result of additional

water pollution abatement costs. Given the moderate degree of integration,~~

the fact that plants with a water pollution problem will have already

made a large investment in air pollution abatement equipment, and a

relatively high emotional commitment on the part of the aluminum chloride

producers, the very low level of added cost for water treatment is too

small to result in plant shutdowns.

95

B. ALUMINUM SULFATE

l. Treatment Costs

Water treatment costs for nonexemplary aluminum sulfate plants

are estimated to be $0.93 per ton of product above existing B.L.P.

treatment, or $1.72 per ton total. This added cost will raise average

treatment level to zero discharge of process or cooling water effluent,

which in this case is equivalent to E.P.P. Additional investment for

a 40 ton-per-day plant is estimated to be $60,000.

The treatment process which will effect zero discharge involves

clarification and additional pond settling of mud and digestion wastes,

followed by recycle of process water. Depreciation and operating costs

exclusive of power account for 46% and 23% respectively of total treat-

ment costs.

2. Price Impact

Since there are no suitable substitute products, foreign com-

petition is minimal, and market share is concentrated among several

producers, water treatment costs will probably be passed on as small

price increases. The amount of the increases, however, will vary with

each producer's local competitive situation. Although before-tax treat~-

ment costs are small relative to product price, the cost per ton of

product is highly dependent on plant capacity, which varies from

5,000 to 70,000 tons per year for individual facilities. Such a dis-

parity in capacity will enable the large producer to cover his unit

treatment costs with a smaller price increase than the small producer

will require.

The nature of the aluminum sulfate market, however, will probably

allow most smaller producers to continue operations at reduced profit

levels. Many small plants have been located near paper mills in order

to supply aqueous aluminum sulfate economically for paper manufacture.

Despite higher unit production costs, 4 smaller plant can supply at a

lower delivered cost than a larger, more distant plant can, due to the

cost of transporting water solution. Aluminum sulfate is sold dried

and bagged only where plants and customers are widely scattered, and the

product must be transported long distances. It is anticipated, therefore,

that larger producers will raise prices to cover their increased costs

as fully as possible. Smaller producers will probably raise prices only

to the point where they can still marginally undersell their larger, more

distant competitors--a point which most likely will not permit the small

producer to fully recover his costs, but which will allow continued

operation at lower profitability. Im any case, it is not expected

that prices need be raised more than 5% due to water treatment costs.

3. Plant Shutdown Impact

Recent years have seen the closing of some small plants and

a trend toward larger, more efficient facilities. As demand for aluminum

c_cleye?

+. We As 96

sulfate as a water treatment chemical increases

the trend toward larger

plants should continue. A large scale shutdown of small aluminum pe ll

facilities, however, is not expected to occur

as th

increases in water treatment costs. e result of anticipated

A very few marginally profitable plants may shut d

plants probably would have shut down anyway as a m= Arar cae”

from larger plants. These occurrences will most likely be limited to

situations in which a small plant cannot raise prices enough to remain

profitable, while still underselling a larger, more distant competitor,

and added water treatment costs represent th

continued operation. P e final negative factor against

Industry capacity should continue to be suffici

ent to supply demand

and no increase in imports, with accompanying detrimental effects on '

balance of payments, is anticipated.

C. CHLORINE AND CAUSTIC SODA

l. Treatment Costs

As estimated in the Development Document, the cost of water

treatment for a 175 ton-per-day mercury cell plant to achieve effluent

conditions equivalent to B.L.P. is $2.14 per ton of chlorine produced.

B.L.P. was defined in the Development Document as reduction of mercury

to less than 0.5 pounds per day. For the exemplary plant investigated

the same investment, and therefore the same cost, was sufficient to

reduce mercury to E.P.P. standards, i.e., less than 0.15 pounds per day.

An incremental cost of $0.60 per ton of chlorine above E.P.P. was estimated

for catalytic conversion of sodium hypochlorite to sodium chloride

bringing the mercury cell plant to B.P.T. control level. An increnental

cost of $0.86 per ton above E.P.P. was estimated to achieve zero dis-

charge (B.A.T.) and involved B.P.T. treatment plus evaporation and

reuse of sodium chloride.

Similarly, the Development Document has estimated that the ‘unit

cost (in terms of chlorine) to achieve B.L.P. standards for a 2300

ton-per-day diaphragm cell plant is $0.038 per ton, the treatment being

restricted to settling ponds. The incremental cost for this same plant

over and above B.L.P. to achieve E.P.P. standards is $0.254 per ton of

chlorine. This same unit cost is estimated to achieve B.P.T., but the

assumption is made that there are no incremental operating costs

associated with B.P.T. because hydrochloric acid recovered is assumed

equal to cost. There is an incremental investment of $430,000 estimated

above E.P.P. to cover the installation of the hydrochloric acid plant

for the chlorine tail gas. Finally, the incremental unit cost above

E.P.P. to utilize B.A.T. standards for this plant is estimated at

$0.52 per ton of chlorine.

97

i -

» Yeoe

As a percent of the estimated $100.90 industry average revenue

in 1972 per ECU (1.0 tons of chlorine plus 1.1 tons of caustic soda),

the before-tax unit cost above B.L.P. and E.P.P. (which are equal) for

the mercury cell plant is 0.59% for B.P.T. and 0.85% for B.A.T. The

comparable ratio for the diaphragm cell plant is 0.25% for E.P.P. and B.P.T.

and 0.52% for B.A.T. Compared to the average industry profit margin of

$4.12 per ton for mercury cell plants (estimated in the initial study

project) the incremental after-tax cost for B.P.T. in the mercury cell

plant represents 7.3% of unit profits while B.A.T. represents 10.4% of

industry profits. The comparable figures for the diaphragm cell plant

(using $4.33 per ton as average unit profit) are 2.93% for both E.P.P.

and B.P.T. and 6.03% for B.A.T.

2. Price Impact

Chlorine/caustic producers have the theoretical option of

attempting to recover water treatment costs through price increases

for chlorine and/or caustic soda. In our judgment, the opportunity for

defraying some or all the water treatment costs through higher chlorine

prices is better than via raising caustic soda prices. Both capacity

utilization and captive usage are atypically high on average for chlorine.

Demand growth is good (at 6% per year) and foreign competition is non-

existent. Although there are a relatively large number of producing

companies (approximately 30), the water pollution abatement costs faced

by mercury plants are not significantly different than those for diaphragm

plants. The difference is insufficient to put the mercury plants at a

significant disadvantage if prices were to be raised only to cover the

water treatment costs experienced by diaphragm cell plants.

More severe constraints exist for price increases in caustic

soda. Except for periods of abnormally low chlorine demand (e.g.-,

that experienced in the 1970-71 recession), caustic soda has usually

presented a disposal problem to most chlor-alkali producers. Because

normal caustic soda demand growth has been insufficient to match caustic

soda supply (which, in turn, is a function of chlorine demand), the

excess caustic has been sold in competition with other sodium alkalis,

notably soda ash, at distressed price levels. We expect a long-term

continuation of the caustic soda excess and therefore continued down-

side pressure on caustic soda prices.

3. Plant Shutdown Impact

On the basis of the treatment costs estimated in the effluent

guideline Development Document (and mentioned above), and based on the

conclusion that most if not all of the nominal incremental costs for

water treatment will be passed on through chlorine price increases,

we foresee no plant shutdowns for producers who have already achieved

B.L.P. However, an estimated 13% of the mercury cell plants have not

yet made this investment. Instead of the $0.86 per ton incremental costs

mentioned above to reach B.A.T., these producers would be faced with a

$3.00 per ton cost. Some of these producers, assuming that they tend to

be marginal plants, but probably no more than 5% of the industry (one or

two plants), would he subject to shutdown.

98

D. HYDROCHLORIC ACID

ein

l. Treatment Costs

Treatment costs have been supplied for the chlo

— ae a method which accounts for at most 12% ae Gee hydro-

de ap greece For a 40 ton-per-day chlorine-burning facility

poe He oy st to apply B.A.T. is $0.30 per ton of product (100% HCl)

e incremental cost above B.L.P. is $0.05 per ton. The treatment

Gly Sek ae oe of weak acid effluent which is generated

rtup. ccordi to the

ment Document there is no stent-seate wane poor

Additional investment required for B

-A.T. for the 40 to -

plant is only $5,000. Depreciation and operating costs enahentee of ”

power account for 35

cost of $4,250. % and 47% respectively of the total annual treatment

By-product proauction of hydrochloric acid from hydroc

arbon

page typ (which accounts for 88% of total ouaieashath em not covered

n the effluent guideline Development Document. The effluent guideline

Development Document indicated, however, that there are no water treat-

ment costs directly attributable to by-product production. =

2. Price Impact

Due to its overwhelming preponderance of.

by-product route controls iediotiinete acid ae at ee ee van

Sone neta Dee Be se to bear the direct water treatment costs which

» hence, it is not anticipated that the treatme t

costs incurred by a small industry segment wil 1

price increases. The likelihood of r= greens _ crap dinadd mn ygae

by the presence of many producers holding fragmented market shares and

the fact that, despite a recent trend toward a more balanced supply/

sg situation, production has exceeded consumption by as much as 32%

since 1961. This situation has been brought about by by-product acid

supply being a function not of hydrochloric acid demand, but of the non-

related demand for chlorinated hydrocarbons and has had a strongl Posey

pressing effect on hydrochloric acid prices. The decreasingly iouas

portion of the industry which is faced with water treatment costs

therefore, will be hard pressed to seek relief in the form of rice

increases and will be forced to absorb these costs. ‘

3. Plant Shutdown Impact

Only those direct producers not in a chlor-a

possibility of plant shutdown as the result of aay saa ee ho

weak acid waste stream from direct production in a complex can be used

to neutralize caustic waste from other parts of the complex, and the

producer essentially incurs no waste treatment cost on hydrochloric acid.

99

There is only one known isolated, direct burning plant in the

country, and it is located near a larger chior-alkali complex which pro-

vides a readily available site for waste acid disposal at nominal cost.

The fact that there are no direct burning hydrochloric acid plants

unable to dispose of water wastes at nominal cost leads us to conclude,

therefore, that water treatment costs will not directly result in shut-

downs of direct-burning hydrochloric acid plants.

E. HYDROFLUORIC ACID

l. Treatment Costs

As estimated in the effluent guideline Development Document, total

treatment costs for a 40 ton-per-day hydrofluoric acid plant to achieve

E.P.P., B.P.T. and B.A.T. are $4.04, $4.89 and $12.95 per ton, respectively.

Costs for B.L.P. were estimated at $3.57 per ton. Annualized costs to

to bring the industry to E.P.P., B.P.T. and B.A.T., respectively, from

B.L.P. therefore would amount to $0.47, $1.32, and $9.38 per ton. As a

percent of the estimated average industry's 1972 selling price of $370

per ton, the annualized treatment costs for E.P.P., B.P.T. and B.A.T.

would be 0.13%, 0.36% and 2.54%, respectively.

The initial study project suggested a range for after-tax pro-

fitability on sales of 4% to 10%. Taking 5% as average, the after-tax

profit margin on a $370 netback price would be $18.50 per ton. The

after-tax treatment cost as a percent of this profit margin for E.P.P.,

B.P.T. and B.A.T. is 1.30%, 3.57% and 25.4%, respectively. New investment

in treatment facilities for E.P.P., B.P.T. and B.A.T. as a percent of

net fixed plant investment is 0.60%, 1.00% and 1.50%, respectively.

2. Price Impact

Conditions in the hydrofluoric acid industry are such that price

increase constraints are low. Specifically, there are no economically

viable substitute products for hydrofluoric acid in its major end-use

applications. Captive usage is exceptionally high at about 75% of current

consumption. Similarly, plant utilization is high at nearly 85% of the

392,000 tons of in-place capacity at the end of 1972. Demand growth is

strong at 5% to 7% per year. Imports have been negligible so that there

has been no threat of foreign competition. (Imports of hydrofluoric acid

from Mexico will very probably increase in the future, however. Four

U.S. companies have announced plans to build acid plants in that country

with the apparent intent--initially at least--of using the acid captively

for U.S. derivatives manufacture. There is the long-term possibility

that increased pressure will be brought to bear by Mexico for manufacture

of the derivatives of hydrofluoric acid in Mexico as well.) The price

elasticity of demand for hydrofluoric acid is low. Market shares are

relatively concentrated with two producers, Allied and Du Pont, accounting

for more than 50% of capacity.

SH26 100

All of the foregoing considerations suggesti i

constraint on price increases by far cueetah tin a rsa Rag

conditions tending to constrain price increases, viz. the relatively large

number of producers (nine) and the fact that price is the primary

basis for competition. Moreover, the magnitude of the price increase

necessary to defray treatment costs even for B.A.T. (2.54% of the estimated

industry selling price) is less than one-half cent per pound.

3. Plant Shutdown Impact

Since we have concluded that the industry woul

on the treatment costs through price increases md enc lle dl dye

there will be no plant shutdowns on the basis of the treatment costs

provided us. The magnitude of these treatment costs on an after-tax basis

as compared with industry profitability and cash flows

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Appendix — EI Du Pont De Nemours & Co. v. Train · 430 U.S. 112 | Frix