# Appendix — EI Du Pont De Nemours & Co. v. Train > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2168%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1977 - **Citation:** 430 U.S. 112 ## Text 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 he Si - =" ~ * _ , ~—-s. & . ~ " ”. . one. BS ee eee ate - s.- ‘ ~ ~s" ‘ er. af afte tt WS ie Faced : , “es . me SOS tee ee —» r = ‘* 4 JF" — += - . : . - - . = $ a om - > . Sd eat -- . — i . . . . ;> mB s “APRIL 1974 2 > iA: rs >* AT ? : , ‘ : = : ? . ' So oor >= > .s~ a + ~. - . - : ‘ a “a >. Se 9 <> ——) a INDEX ES igs Pee eS S, | - ' -—— . *+ 2" Z * 2 : af “~ .- fs “ ~Saee O® . >» . " . . is -4 a > oll : - =. — . ne > 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. 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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 ~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. 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 «> 10 114 for water treatment control is relatively high in comparison to the investment in existing plant. The three plants are isolated and could not achieve treatment economies with other company products. Finally, the industry faces in addition to water treatment investment both air pollution and above normal OSHA costs. With respect to the latter, the toxic nature of chromium will require safety measures beyond normal plant practices. Although on a superficial basis the industry is integrated both backward and forward, the raw material requirements-~soda ash and sulfuric acid--are insufficient to justify continued operation on that basis alone. Similarly, the primary downstream derivative--chromic acid-- is considered part (and a less important part) of the chromate operation. If the sodium bichromate plant were considered uneconomic, the chromic acid facility would be shut down as well. 115 “HAL V. IMPACT ANALYSIS--ADDITIONAL PRODUCTS In this section, we have provided: (a) summary comments of expected economic impacts on each of the additional products and (b) back-up commentary for the summary comments only on those critical points as indicated by the impact analysis matrix. Specifically these points were those: (a) which mitigated against the possibility of the producers’ raising prices to cover the additional cost for effluent treatment; and (b) where treatment costs and estimated profitability were such as to affect a plant shutdown decision. As indicated by the commentaries for each individual product and the impact analysis matrix, we have tended not to comment on those individual factors which were not relevant to the impact judgment. A. SODIUM BICARBONATE 1. Summary We foresee nc nificant economic impact on the producers of sodium bicarbonate due to requirements to reach either exemplary plant practice, best practicable technology levels of treatment or best avail- able technology levels. This conclusion is based on the extremely modest capital requirement and operating costs specified by the Develop- ment Document to reach necessary control levels and the apparent pricing flexibility available to the producers. The ability of the producers to raise prices over the past several years has been assisted by significant reductions in capacity at a time of relatively rapidly increasing demand. These capacity reductions were brought about by the closing down of iwo Solvay process sodium carbonate plants which served as sources of raw material for the production of sodium bicarbonate by these companies. 2. Price Impact As shown in the impact analysis matrix, the costs of effluent control are an extremely small proportion of the selling price. Increases in selling price in the past decade have been of such magnitude as to dwarf the control cost to insignificance. We foresee no reason that future price increases could not be effected to offset additional control costs and in fact, it would not even be noticed in the trend of rising prices. The list price for sodium bicarbonate in 1952 was at $2.10 per hundred weight. This prevailed until 1967 when it was raised to $2.55 per hundred weight. By 1966, it was again increased to $2.80 per hundred weight and in 1969 to $3.10 per hundred weight. By 1970, the price had increased to $3.40 per hundred weight and by 1973 to $4.40 per hundred weight. The average price has quite probably been somewhat lower than the list price published for sodium bicarbonate. The average prices as 116 em calculated from the current industrial reports of the U.S. of Commerce are, however, probably more misleading than oy eo This government data provides tonnage of finished bicarbonate shipped and the value. In 1971, this calculated to $49.00 per ton. These average’ prices, however, are probably distorted by the relationship that exists between Church and Dwight and Allied Chemical. Church and Dwight markets both crude and high purity sodium bicarbo mate manufactured by Allied Chemical in Syracuse, New York. The company also oqmeme rg sodium bicarbonate plant in Green River, Wyoming, to convert trona to sodium bicarbonate. The Government data may include shipments of crude product to Church and Dwight's plants, thus distorting the average price. As shown in the impact analysis matrix, onl . y a low captive usage and the relatively low demand growth would indicate on a shennenined " basis the difficulty in raising prices. We do not believe in practice, however, that either one of these considerations will tend to limit future price increases so as to offset the mod — * est cost of effluent a. Capacity and Captive Consumption Estimated producers capacities in 1973 are as follows: Church and Dwight, Green River, Wyoming 100,000 tons Church and Dwight, Syracuse, New York 100 ,000 Diamond Shamrock, Painesville, Ohio 28 ,000 BASF Wya-.Jotte, Wyandotte, Michigan 36,000 264,000 tons These producers sell a great majority of their production of sodium bicarbonate for application in the manufacture of industrial or consumer products. The food industry takes 35-40% of the total bicar- bonate shipments, rubber and chemicals take about another 20%, the pharmaceutical requirement is around 13%, and fire extinguishers about 12%. The remainder is used in the soap and detergent industry, textile, paper amd leather industry. The major marketer, Church and Dwight, does account for some captive consumption through consumer sale of sodium bicarbonete under the Arm & Hammer brand. The significance of the relatively low captive consumption in the price restraint is small when considered in the light of the small number of producers competing for the business and the relatively high capacity utilization. Capacity utilisation has been assisted by both an imcrease in a recent growth of demand and, more significantly, by the shutting down in 1971 of a 23,000 ton per year plant of Olin Corporation and @ 35,000 ton per year unit of PPG. Reportedly, these umits were closed down because the Solvay process soda ash plants, which provided raw material for the manufacture of sodium bicarbonate, were uneconomical. 117 S543 b. Demand Growth Sodium bicarbonate is a relatively mature product with only modestly increasing demand. The U.S. Department of Commerce current industrial report indicates shipments of sodium bicarbonate expressed as soda ash increasing from 100,000 tons per year in 1961 to 156,000 tons per year in 1971, or at at. overall rate of 4 1/2% per year. The demand growth rate increased somewhat over the last five years to an average of 6% per year. No substantial change in the 10-year growth rate is foreseen for the remainder of the decade. Growth in demand has teen steady over the past decade with each year's requirements larger than the previous. There are no apparent or announced plans for significant expansion; therefore, the outlook for the foreseeable future is that capacity utilization will remain rela- tively high in spite of a modest growth in demand. c. Basis for Competition Sodium bicarbonate like other commodity chemicals is sold on specification. The exception to this is the consumer sales of sodium bicarbonate under the recognized brand name. As indicated above, we believe that this is a relatively small proportion of total U.S. requirements. Actually under present conditions, competition is probably not only on the basis of price but also on the basis of assured supply. Even during periods when the capacity was more significantly in excess of demand, this did not inhibit steadily increasing prices as described above. 3. Plant Shutdown Impact The Development Document indicates annual treatment costs for a 100,000 ton sodium bicarbonate plant at $2500 a year under current practices. To reach best precticable technology or best available technology conditions requires a total of $4250 per year for the same plant. An increase of only $1750 per year, therefore, is required to go from current conditions to the more stringent effluent controls foreseen. As shown in the impact analysis matrix, this is an extremely modest proportion of the estimated total after tax net income. As estimated, sodium bicarbonate producers at present price levels received an 8% after-tax return. Even should this estimate be signifi- cantly higher than actual practice, it is hard to imagine that the very modest additional cost requirements for effluent control would signifi- cantly affect any decision on plant shutdown. a. Integration We have classed the degree of integration as low chiefly because there is very little forward integration in the industry. In a practical 118 oe Te a | sense, there is a high degree of backward integration in Church and Dwight operates under long term pi rare By Prey Re Ae for the sale of sodium bicarbonate. The only non-integrated plant in the industry is Church and Dwight's facility in Green River, Wyoming constituting about 40% of total capacity. This plant is operated on. products supplied from Allied Chemical's trona facility at Green River. We assume that this facility is protected by a long-term contract with Allied and by the long standing relationship between Church and Dwight and Allied, whereby Allied has normally acted as the manufacturing partner and Church and Dwight the marketing partner for sodium bicarbonate. b. Emotional Commitment Emotional commitment of the producers is hard to assess. We assume that Diamond Shamrock and BASF Wyandotte would have little commitment to the manufacture of sodium bicarbonate. Church and Dwight however, has not only developed a consumer marketing franchise but sodium bicarbonate and sodium carbonate constitute the bulk of sales of Church and Dwight Company Specialty Chemicals Division. c. rshi As described, most of the capacity for the production of sodium bicarbonate is controlled by multi-industry concerns, Allied, Diamond Shamrock and BASF. All of these companies do have a variety of options for employment of capital. We do not foresee, however, that there are sufficient negative concerns indicating plant shutdowns so as to restrict the very modest investment required. The Development Document indicates that currently a 300 ton per day sodium bicarbonate facility has a $10,000 investment in water pollution abatement facilities and this need only be increased to $15,000 to meet all fut control standards. uture effluent B. SOLAR SALT 1. Summary In the solar evaporation process, seawater or salt lake water is concentrated by evaporation over a period of five years in open ponds to yield a saturated brine solution. After saturation is reached (approximately 30° Baume) the brine is fed to a crystallizer where sodium chloride precipitates leaving behind a concentrated brine solu- — (bittern) consisting primarily of sodium, potassium, and magnesium salts. According to the Development Document the bittern solution, which contains all of the wastes from the process, is presently stored (ponded) at all facilities. Consequently, the solar salt industry is faced with no incremental costs to achieve zero discharge and there will be no negative impact on solar salt producers from new water 119 pollution abatement procedures. The Development Document estimates existing costs for bittern storage at the exemplary facility (annual capacity at very nearly 1 million tons) at $2.34 per ton. 2. Price Impact Although the question is academic, examination of some of the competitive factors impacting on the solar salt industry indicates that if there were incremental costs associated with water treatment, solar salt producers would be hard put to pass much if any of the costs on as price increases. a. Substitute Products Solar salt is marketed as harvested (so-called "undried stack run") or further processed (via size classification and/or purification) before sale. When sold as such it competes with rock salt (valued F.0.B. mine at approximately $3 per ton) primarily for chemical markets (basically chlor-alkali production). When purified and classified by particle size it competes with vacuum pan evaporated salt at unit values ranging between $6 and $40 per ton. Therefore, there is no other chemical that competes with solar salt as a direct substitute. The other sources of salt--particularly rock salt for which there are no waterborne wastes--are significant constraints on the solar salt producers to raise prices unilaterally. (The only exception might be the use of calcium chloride as a replacement for sodium chloride in highway snow and ice control, but even here the use of calcium chloride is complementary rather than substitutive. ) b. Demand Growth Although Commerce Department data for U.S. consumption of solar salt are not available, U.S. production of solar salt has exhibited a pattern of static to very slow growth. Actual production data for the last ten years in thousands of tons are as follows: Thousands of Tons 1972 1799 1971 1937 1970 1538 1969 1907 1968 1900 1967 1729 1966 1769 1965 1700 1964 1592 1963 1766 120 ’ . wee /_-~ «we c. Foreign Competition U.S. solar salt producers have been under extr pressure from Mexican imports of solar salt. The bulk of oe asker. salt production is in California and to a lesser extent Utah. In 1972 Mexican imports of solar salt totaled 1.25 million tons with a unit ; value of $2.29 per ton. The competitive threat of low-cost Mexi [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_2168%3A03. Public record. Not legal advice.