Economic Impact Analysis for the Secondary Aluminum Supplemental Proposal

September 8, 2014

1. Background

This report is the economic impact analysis for the supplemental proposal for the Secondary 

Aluminum NESHAP. In this supplemental proposal, we are soliciting comment on revisions to 

certain rule corrections and clarifications that were in the 2012 proposal as well as alternative 

compliance options related to sweat furnaces. These proposed amendments would: 

• Revise the limit on the number of allowed furnace operating mode changes per year (i.e., 

frequency) in proposed section 63.1514(e) of four times in any 6 month period, with an 

ability of sources to apply to the permitting authority, (for major sources), or the 

Administrator, (for area sources), for additional furnace operating mode changes;

• Revise wording in proposed section 63.1511(b)(1) related to testing under worst-case 

scenario clarifying under what conditions the performance tests are to be conducted;

• Revise requirements to account for fugitive emissions during performance testing of 

uncontrolled group 1 furnaces, including installation of hooding according to ACGIH 

guidelines or use of a 67 percent capture/control efficiency. In certain cases where 

installing ACGIH hooding is impractical, the facility may petition the permitting 

authority, (for major sources), or the Administrator, (for area sources), to use alternative 

testing procedures that will minimize fugitive emissions;

• Revise the requirement that emission sources comply with the emission limits at all times 

including periods of startup and shutdown. A definition of startup and shutdown is being 

proposed as well as an alternative method for demonstrating compliance with emission 

limits;

• Revise monitoring requirements in section 63.1510(d)(2) that require annual inspection 

of capture/collection systems;

• Revise compliance dates of 180 days for certain requirements and 2 years for other 

requirements;

• Remove proposed affirmative defense to civil penalties for violations caused by 

malfunctions; and

• Revise operating and monitoring requirements to provide alternative compliance options

for sweat furnaces. 

Details on this supplemental proposal can be found in the preamble contained in the public 

docket for this rulemaking. 

1
The EPA defined the Secondary Aluminum source category in 1992 as any establishment using 

clean charge, aluminum scrap, or dross from aluminum production, as the raw material and 

performing one or more of the following processes: scrap shredding, scrap 

drying/delacquering/decoating, thermal chip drying, furnace operations (i.e., melting, holding, 

sweating, refining, fluxing, or alloying), recovery of aluminum from dross, in-line fluxing, or 

dross cooling. The Secondary Aluminum Production source category includes facilities that 

produce aluminum from scrap aluminum material and consists of the following operations: (1) 

Preprocessing of scrap aluminum, including size reduction and removal of oils, coatings, and 

other contaminants; (2) Furnace operations including melting, in-furnace refining, fluxing, and

tapping; (3) Additional refining, by means of in-line fluxing; and (4) Cooling of dross.

Table 1. NESHAP and Industrial Source Categories Affected By This Final Action

Source Category NESHAP NAICS 

code1

Secondary Aluminum Production

Primary aluminum production facilities

Aluminum sheet, plate, and foil manufacturing facilities

Aluminum extruded product manufacturing facilities

Other aluminum rolling and drawing facilities

Aluminum die casting facilities

Aluminum foundry facilities

Secondary 

Aluminum 

Production

331314

331312

331315

331316

331319

331521

331524 1 North American Industry Classification System

The secondary aluminum industry consists of approximately 161 secondary aluminum 

production facilities, of which the EPA estimates 53 to be major sources of HAP. Several of the 

secondary aluminum facilities are co-located with primary aluminum, coil coating, and possibly 

other source category facilities. 

The revisions of the supplemental proposal impose no costs. Therefore, there is no economic 

impact. The rest of this document focuses on the economic impact of the 2012 amendments. 

The requirements for the uncontrolled furnaces are the only part of the 2012 amendments that 

impose cost. The elements that impose costs are the following:

• require uncontrolled furnaces to install testing hooding that meets American Council of 

Government Industrial Hygienists (ACGIH) guidelines,

• require uncontrolled furnaces to test for hydrogen fluoride (HF) in addition to hydrogen 

chloride (HCl), and

2
• allow furnaces to switch designations, such as from a controlled Group 1 furnace to 

uncontrolled Group 2 furnace.

The costs of the rule, and the economic and small business impacts associated with the rule, can 

be found in Section 3. Section 2 below provides a profile for the secondary aluminum industry.

2. Industry Profile

This section introduces the secondary aluminum industry and provides aggregate statistics on the 

amount of secondary aluminum produced and other economic data about the secondary 

aluminum industry.

The secondary aluminum industry is based around recovery of aluminum, or production of 

aluminum from recycled aluminum (scraps). Recovered aluminum, along with primary 

aluminum, is used for: containers (such as aluminum cans) and packaging (which in 2010 

accounted for 22.4 percent of end-use shipments in the United States and Canada), buildings and 

construction (10.2 percent), and transportation (28.2 percent) (Bray, 2011, 5.1).1

From 2006 to 2010 secondary recovery of aluminum, on average, accounted for 64 percent of 

total aluminum production in the United States. In 2010, 2,800 metric tons of aluminum were 

recovered in the U.S. (Table 1-1). Secondary recovery decreased by 36 percent from 2006 to 

2010. The annual decreases became progressively severe until the industry, at least temporarily, 

stabilized from 2009 to 2010.

Table 2. Salient Aluminum Statistics (Thousands of Metric Tons)

2006 2007 2008 2009 2010

Primary Production 2,284 2,554 2,658 1,727 1,726

Secondary Recovery Total: 4,380 4,110 3,630 2,820 2,800

New Scrap 2,800 2,450 2,130 1,570 1,550

Old Scrap 1,580 1,660 1,500 1,260 1,250

Note: New Scrap is generated in the manufacturing of primary aluminum and semi-fabricated aluminum mill, 

finished industrial and consumer products (EPA, 1999, 6). New scrap that is recycled by the same company that 

generated it is generally not counted in scrap consumption and secondary production data. Old scrap comes from 

recycled aluminum products (products recovered after their useful lives) such as used beverage cans (UBC) (EPA, 

1999, 7).

1 Primary aluminum is produced from alumina/bauxite (EPA 1999, 7)

3

 
Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum [Advanced Release]” USGS. Table 1. 

<http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1-2010-alumi.pdf>

Secondary Aluminum is produced by several different types of firms (Table 3). The principal 

manufacturers of recovered aluminum are Secondary Smelters and Independent Mill Fabricators. 

To simplify, this industry profile now focuses on firms whose sole purpose is to 

Table 3. U.S. Consumption and Recovery from Purchased New and Old Aluminum 

Scrap, by Class (Metric Tons)

Calculated Recoverya

Class Consumption Aluminum Metallic

2009

Secondary smelters 1,450,000 1,020,000 1,090,000

Independent mill fabricators 1,620,000 1,390,000 1,470,000

Foundries 74,800 61,200 65,400

Other Consumers 6,870 6,330 6,350

Total 3,160,000 2,470,000 2,630,000

Estimated full Industry Coverage 3,390,000 2,650,000 2,820,000

2010

Secondary Smelters 1,610,000 1,150,000 1,230,000

Independent mill fabricators 1,450,000 1,240,000 1,320,000

Foundries 50,700 41,400 44,200

Other Consumers 6,290 6,290 6,290

Total 3,120,000 2,430,000 2,590,000

Estimated full Industry Coverage 3,370,000 2,620,000 2,800,000

a

Metallic Recovery includes both aluminum recovery and alloying metals, Aluminum Recovery is the aluminum 

content of the recovered metals.

Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum [Advanced Release]” USGS. Table 3. 

<http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1-2010-alumi.pdf>

process aluminum scrap into molten aluminum or aluminum ingot. The Secondary Smelting and 

Alloying of Aluminum industry (NAICS 331314) “comprises establishments primarily engaged in 

(1) recovering aluminum and aluminum alloys from scrap and/or dross (i.e., secondary smelting) 

and making billet or ingot (except by rolling) and/or (2) manufacturing alloys, powder, paste, or 

flake from purchased aluminum” (U.S. Census Bureau, 2007). Secondary Smelters were 

responsible for 44 percent of total aluminum recovery in 2010.

4
2.1 Key Statistics

The Secondary Smelting industry’s shipments (output) expanded by 35 percent from 2005 to 

2007. This expansion not only stalled but was overwhelmed by a 57 percent decrease in output 

from 2007 to 2009, likely due to the overall economic recession during that period. There was an 

overall decrease in output of 43 percent from 2005 to 2009 (Table 4). Other indicators (payroll 

and number of employees) likewise exhibit this pattern of industry expansion from 2005 to 2007 

followed by drastic contraction from 2007 to 2009. Payroll increased by 10 percent and the 

number of employees increased by 12 percent from 2005 to 2007 but fell by 46 percent and 

43 percent from 2007 to 2009. 

Table 4. Key Statistics: Secondary Aluminum Manufacturing (North American 

Industry Classification [NAICS] 331314) ($2009)

2005 2007 2009

Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Annual payroll ($1,000) 366,891 404,999 217,198

Employees 6,727 7,524 4,224

Sources: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).

The average shipments per employee and shipments per dollar of payroll followed the same 

pattern as the aggregate statistics but the fluctuations were mostly less extreme. Average 

shipments per employee increased from 2005 to 2007 only to fall below the 2005 level by 2009. 

There was an overall decrease in average shipments per employee of 9 percent. Average 

shipments per dollar of payroll expanded by 25 percent from 2005 to 2007 only to fall back to 

the 2005 level by 2009. The average annual payroll per employee was unique as it did not 

increase before decreasing, but rather decreased slightly (1.3 percent) from 2005 to 2007 and 

decreased slightly more (4.5 percent) from 2007 to 2009 (Table 5).

5
Table 5. Industry Data: Secondary Aluminum (NAICS 331314) ($2009)

Industry Data 2005 2007 2009

Total Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Average Shipments per employee 898 1,083 814

Average Shipments per $ of payroll 16 20 16

Average Annual payroll per employee 54,540 53,827 51,420

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).

2.2 Supply and Demand Characteristics:

Secondary aluminum demand is determined by the industries that use secondary aluminum as an 

input into their manufacturing process. Historically, data on the use of aluminum in product 

markets has not differentiated between the demand of primary and secondary (EPA, 1999, 41). 

Conversely, there is more detailed data available for the supply and inputs used in secondary 

production.

2.2.1 Goods and Services Used in Secondary Aluminum

Material cost consistently accounted for the lion’s share (around 80 percent) of the value of 

shipments in secondary aluminum manufacturing from 2005 to 2009. This suggests that the cost 

of aluminum scrap has a major influence on the cost of secondary aluminum manufacturing. 

Total employee compensation took up a much smaller amount—an average of 7.3 percent of the 

value of shipments. About half of total compensation went to production workers’ wages. 

Purchased electricity (ranging from 3 to 4.7 percent) and purchased fuel (1.7 to 3.2 percent) 

accounted for small but not insignificant portions of the total value of shipments through the 

period (Table 6).

2.3 Firm and Market Characteristics

2.3.1 Location

The concentration of the Secondary aluminum industry has been attributed to the cost of 

transportation which causes establishments to locate near scrap supplies and consumers of 

secondary aluminum. “A cursory look at the distribution of secondary smelters in the U.S. 

reveals a heavy concentration of smelters in the automotive and appliance manufacturing areas 

of the country” (EPA, 1999, 19). The secondary aluminum industry was concentrated in the 

central U.S. in 1997 and remained that way through 2007. In 2007, Indiana had the most 

6
secondary aluminum establishments, followed by Texas, Tennessee, Michigan and California. 

Similarly, Indiana had the highest concentration of establishments, followed by Tennessee, 

Kentucky and New Hampshire (Table 7).

Table 6. Cost of Goods and Services Used in Secondary Aluminum Manufacturing 

(NAICS 331314) ($2009)

Industry Ratios 2005 Share 2007 Share 2009 Share

Total shipments ($1,000) 6,037,839 100.0% 8,149,043 100.0% 3,440,336 100.0%

Total compensation ($1,000) 487,199 8.1% 533,852 6.5% 280,485 8.6%

Annual payroll ($1,000) 366,891 6.1% 404,999 5.0% 217,198 6.3%

Fringe benefits ($1,000) 120,308 2.0% 128,853 1.6% 63,287 1.8%

Total employees 7,390 7,785 4,224

Total production workers’ wages 

($1,000)—2007 nonleased

246,744 4.1% 267,385 3.3% 125,503 3.7%

Average production workers per year 5,513 5,798 3,082

Total production hours (thousands) 12,603 14,066 6,429

Total cost of materials ($1,000) 4,793,596 79.4% 6,404,830 78.6% 2,840,494 82.6%

Materials, parts, packaging etc. used 

($1,000)

4,360,670 72.0% 5,697,489 70.0% 2,537,663 73.8%

cost of resales ($1,000) 134,966 1.6% 62,094 1.8%

Purchased electricity ($1,000) 114,150 1.9% 262,814 3.2% 59,873 1.7%

Cost of purchased fuel ($1,000) 260,314 4.3% 241,124 3.0% 162,076 4.7%

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).

7
Table 7. Establishment and Employee Concentration in Secondary Aluminum 

Manufacturing (NAICS 331314) (2007)

Geography

Number of 

Establishments

Average Number 

of Paid 

Employees per 

Pay Period 

Population/ 

Employees

Average 

Number of 

Employees per 

Establishment

Population/ 

Establishments

United States 134 7,468 40,388 56 2,250,904

Alabama 4 — — — 1,156,963

Arkansas 2 — — — 1,417,399

California 10 473 77,280 47 3,655,322

Florida 6 228 80,049 38 3,041,874

Georgia 3 — — — 3,181,583

Illinois 9 369 34,831 41 1,428,061

Indiana 15 898 7,066 60 423,019

Kentucky 7 454 9,342 65 605,925

Michigan 11 515 19,557 47 915,620

Minnesota 1 — — — 5,197,621

Missouri 4 165 35,627 41 1,469,604

New Hampshire 2 — — — 657,914

New York 6 901 21,418 150 3,216,288

Ohio 9 329 34,854 37 1,274,102

Pennsylvania 4 127 97,896 32 3,108,198

Tennessee 11 — — — 559,702

Texas 12 — — — 1,992,032

Wisconsin 3 — — — 1,867,213

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Table 1: Selected 

Industry Statistics for the U.S. and States: 2007.” <http://factfinder.census.gov>; (December 13, 2011).

2.3.2 Employment

Secondary aluminum manufacturing employment and the concentration of employment by state 

follows that of establishments fairly closely with the exception of New York which had 

relatively large amount of employees per establishment (Table 7). Indiana had the highest 

concentration of employees, followed closely by Kentucky, and less closely by Michigan and 

New York.

8
2.3.3 Energy Use

The U.S. Energy Information Administration has not typically published energy consumption 

data disaggregated enough to build a time trend of the secondary aluminum industry’s energy 

use. However, energy consumption data specific to the secondary aluminum was published in 

2006 (Table 8). This shows that the industry almost entirely uses natural gas to fuel aluminum 

production.

Table 8. Energy Use by Fuel Type, NAICS 331314 

Fuel Type (Unit: Trillion Btu) 2006

Total 21

Net electricity 2

Residual Fuel Oil —

Distillate Fuel Oil —

Natural Gas 18

LPG and NGL —

Coal —

Coke and Breeze 0

Other —

Source: U.S. Department of Energy, Energy Information Administration. 2009. “First Use of Energy for All 

Purposes (Fuel and Nonfuel), 2006” <http://www.eia.gov/emeu/mecs/mecs2006/2006tables.html>

2.3.4 Size Distribution

The Small Business Administration defines any Secondary Smelting and Alloying of Aluminum 

firm with less than 750 employees as small.2

 As only 13 of 110 secondary smelting firms had 

more than 500 employees, it is fair to say that most firms in the industry will be classified as 

small. In spite of the high proportion of firms being classified as small, only a slight majority 

(56 percent) of the employees worked for firms with less than 500 (Table 9).

2

 U.S. Small Business Administration, Table of Size Standards. November 5, 2010. Found on the Internet at 

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf. 

9

 
Table 9. Distribution of Economic Data by Enterprise Size in Secondary Aluminum 

Manufacturing (NAICS 331314)

Enterprises with

Variable Total

1 to 20 

Employees

20 to 99 

Employees

100 to 499

Employees

500+ 

Employees

Firms 110 55 32 10 13

Establishments 133 55 35 14 29

Employment 4,683 305 1,413 927 2,038

Source: U.S. Census Bureau. 2011. “Number of Firms, Number of Establishments, Employment, and Annual 

Payroll by Enterprise Employment Size for the United States, All Industries: 2009” 

<http://www.census.gov/econ/susb/>

The industry’s Concentration Ratios emphasize the relative dominance of large companies. 

While 108 companies were documented in 2007, the largest 50 companies accounted for 

95.9 percent of the total value of shipments and the largest 4 companies accounted for 

54.8 percent (Table 10). Also shown in Table 10 is the Herfindahl-Hirshman Index (HHI) for 

NAICS 331314, which is 930.8. This HHI is at the upper end of the unconcentrated range (HHIs 

over 1,000 are considered moderately concentrated). 

Table 10. Secondary Aluminum Manufacturing (NAICS 331314) Concentration Ratios 

Companies

Total Value 

of 

Shipments

Percent of Total 

Value of 

Shipments (5)

HerfindahlHirschman Index

All companies 108 7,823,492 100.0 930.8

4 largest companies — 4,287,274 54.8

8 largest companies — 5,132,211 65.6

20 largest companies — 6,470,028 82.7

50 largest companies — 7,502,729 95.9

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31: 

Manufacturing: Subject Series: Concentration Ratios: Share of Value of Shipments Accounted for by the 4, 8, 20 

and 50 Largest Companies for Industries: 2007.” <http://factfinder.census.gov>: (December 20, 2011).

10
2.3.5 Production and Capacity Utilization

Capacity utilization of secondary aluminum manufacturing increased from 2004 until 2007 

before starting a steep decline which left the industry well below the 2004 level by 2010

(Table 11).

Table 11. Capacity Utilization for Aluminum Manufacturing (NAICS 3313) 

2005 2006 2007 2008 2009 2010

Capacity Utilization 86.7% 83.7% 78.8% 74.1% 59.3% 63.8%

Source: Charles Gilbert, Senior Economist, Federal Reserve Board. Capacity Utilization data for NAICS 3313. 

Personal Communication with Christopher Sichko, RTI International, January 5, 2012. 

2.3.6 Profitability

While Total and Business receipts increased slightly from 2006 to 2008, Net Income, and Profit 

Margins decreased slightly from 2006 to 2007 then collapsed in 2008. It should be noted that 

these statistics are for the Metal Manufacturing Industry not the secondary aluminum industry 

specifically because more disaggregated data is not available (Table 12).

Table 12. Corporate Income and Profitability for Secondary Aluminum Manufacturing 

(NAICS 331) ($2009)

2006 2007 2008

Total receipts 298,104,481 305,773,370 312,467,335

Business receipts 286,730,514 292,550,057 302,877,203

Net income 22,503,070 21,519,223 13,694,559

Before-tax profit margin 7.8% 7.4% 4.5%

After-tax profit margin 5.6% 5.1% 2.9%

Source: Internal Revenue Service, U.S. Department of Treasury, 2008 (1), 2007 (1), 2006 (1) “Corporation Source 

Book of Statistics of Income: Primary Metal Manufacturing” <http://www.irs.gov/taxstats/article/ 

0,,id=168246,00.html>; (December 14, 2011)

2.3.7 International Trade

The U.S. consistently (from 2005–2010) was a net importer of aluminum. Imports for 

consumption fell fairly constantly each year for an overall decrease of 23 percent. Exports 

increased by 38 percent from 2005 to 2008 before decreasing by 17 percent from 2008 to 2009, 

then increasing again in 2010 (Table 13). While imports were more than double the volume of 

11
exports in 2005, imports exceeded exports by a smaller fraction, about one-third, in 2010. Note 

that the international trade data is for all aluminum production, not just secondary.

Table 13. U.S. Imports and Exports of Aluminum (Metric Tons)

2005 2006 2007 2008 2009 2010

Imports for consumption 5,330,000 5,180,000 4,490,000 4,200,000 4,110,000 4,120,000

Exports 2,370,000 2,820,000 2,840,000 3,280,000 2,710,000 3,040,000

Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum” USGS. 2006 Tables 8 and 11; 2008 Tables 9 and 11; 

2010 Tables 10 and 12. <http://minerals.usgs.gov/minerals/pubs/commodity/aluminum>

2.4 2011 and Future Trends 

Fueled by low-cost power contracts and recovering aluminum prices, productive capacity shut 

down in 2008 and 2009 was scheduled to restart in late 2010 and early 2011. Still, this is a small 

step and capacity use likely remained low through 2011. “World demand for aluminum in 2011 

was expected to remain at levels lower than in 2008 owing to depressed levels in automobile 

manufacturing and home construction” (Bray, 2011, 5.7).

Low demand for aluminum in U.S. domestic industries and other developed economies is likely 

to persist for several more years, as these economies have not recovered from the 2008 

downturn. However, the demand for aluminum in emerging economies is likely to increase more 

rapidly in the near future (Bray, 2011, 5.7). Table 13 shows that in 2010 aluminum exports were 

heading back towards their 2008 level, and this trend seems likely to continue.

12
3. Impact Results

Section 2 provides information on the entire Secondary Aluminum industry. In this section, we 

provide the economic and small business impacts associated with the 2012 amendments. This 

analysis is focused on those businesses that will incur costs associated with the 2012 

amendments. 

Based on information in the cost memo, there are 28 parent companies that are expected to incur 

costs associated with this rule. Nine of these companies have fewer than 750 employees, and 

thus are small businesses according to the Small Business Administration (SBA) size standards 

for the predominant NAICS code for companies subject to this rule (331314). 

The total annualized costs (TAC) of the rule for each parent owner company, which includes the 

annualized control, monitoring and recordkeeping costs as taken from the cost memo prepared 

for US EPA3

, are in Table 14. A negative TAC denotes an estimated cost savings to the firm 

associated with the rule. Small businesses are identified in the table. The nationwide total 

annualized costs of the 2012 amendments are about $1.7 million. All costs are in 2011 dollars, 

and are based on the estimates presented in the cost memo for the rule. 

Table 14. TAC for each Parent Owner

Parent Company TAC per Owner Small Business? (N= 

No, Y=Yes)

Number of 

Employees in 2011

Alcoa $932800 N 59,000

Aleris 166800 N 6,500

Aluminum Recovery 

Technologies -12000 Y

20

Aluminum Shapes, LLC 43300 N 1,100

Beveridge Packaging

(owner of Reynolds 

Foil) 110050 N 25,500

Metal Exchange 

Corporation (owner of 

Continental Aluminum

and Electro Cycle) -24000 Y 201 to 500

Hydro (owner of Hydro 43900 N

3 U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “Updated Cost Estimate for 

Rule Changes to Secondary Aluminum NESHAP .” Prepared by RTI, Inc. for Rochelle Boyd, U.S. Environmental 

Protection Agency, Office of Air Quality Planning and Standards. July 10, 2014.

13

 
Aluminum Wells North 

America)

23,000

J.L. French Corp. -12000 N 2,000

Jupiter Aluminum -36000 Y 200

JW Aluminum -48000 N 772

Kaiser Aluminum -12000 N 2,470

Logan Aluminum 43300 N 1,000

Metalico (owner of 

Metalico Aluminum 

Recovery) -12000 N 800

Toyota Tsusho (owner of 

Most, Inc.) -12000 N 31,081

Quanex (owner of 

Nichols Aluminum) -36000 N 2,340

Noranda 151500 N 2,400

Novelis 72250 N 11,000

Owl's Head Alloys -12000 Y 50-100

Rio Tinto (owner of 

Alcan) 216500 N 77,000

Ritchey Metals -12000 Y 80

Orkla ASA (owner of

Sapa Extrusion) 109250 N 30,000

Scepter -48000 Y 250

Smelter Service -24000 Y 10

Southwire 43700 N 4,180

Superior Aluminum 

Alloys -12000 Y 5-9

Tennessee Aluminum 

Processors -24000 Y 180

Tredegar (owner of 

William L. Bonnell) 64950 N 2,000

Wise Metals Group 62600 N 1,000 aA negative sign denotes a cost savings to the parent owner. 

Of the nine small businesses expected to incur costs associated with this rule, all of them are 

expected to experience negative costs (or cost savings), based on estimates from the cost memo. 

We do not provide impact estimates for these businesses, and the large businesses with cost 

savings, since these estimates are positive. These cost savings are a result of the change in 

proposal to allow facilities to switch furnace designations from Group 1 to Group 2. In the cost 

memo, EPA presumed that one-fourth of the 200 affected furnaces would switch. For each of 

the 50 furnaces that switch, the cost savings is estimated at $12,000 annually. This cost savings 

is a result of shutting off a furnace that is controlled and the following effects:

14
• Fan power is approximately 50 kW

• Control device shut off 4000 hours per year

• Electricity cost of 10 cents/kWh.

More information on the cost estimation procedure is available in the cost memo for the final 

rule. 

This analysis identified the businesses that will be affected by this rule and provides an analysis 

at a screening level to assist in determining whether this rule is likely to impose a significant 

economic impact on affected businesses. The analysis employed here is a “sales test” that 

computes the annualized compliance costs as a share of sales for each company. The annualized 

cost per sales for a company represents the maximum price increase in affected product needed 

for the company to completely recover the annualized costs imposed by the regulation. 

The “sales test” is the impact methodology EPA employs in economic impact analysis such as 

this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a 

share of profits.4

 This is because revenues or sales data is commonly available data for entities 

normally impacted by EPA regulations and profits data normally made available is often not the 

true profits earned by firms due to accounting and tax considerations. Firms and entities often 

have ways legally available in the tax code to minimize their reported profits; thus, using 

reported profits may lead to a less than accurate estimate of the economic impact of a regulation 

to an affected firm or entity and their consumers. While screening level analyses are often 

employed to estimate impacts to small business or entities as part an analysis in compliance with 

the Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA), a screening level analysis can also be employed in an 

economic impact analysis such as this one whose focus is on the regulated companies. 

Economic impact estimates are shown in Table 15 below. The table lists the ultimate parent 

companies impacted by the rule that have positive or negative costs, the costs of the rule for each 

company basis, the annual revenues for these companies, and then the impact to the company on 

a cost to sales basis. Revenues are for the ultimate parent owners, and are for 2011 to be 

consistent with the year for the cost estimates. Applying such a calculation yields the following 

results as shown below. Impacts are only shown for those companies estimated to experience a 

positive cost as a result of the final rule. 

4 More information on sales and profit tests as used in analyses done by U.S. EPA can be found at 

http://www.epa.gov/sbrefa/documents/rfaguidance11-00-06.pdf, pp. 32-33. 

15

 
Table 15. Economic Impacts to Parent Companies

Parent 

Company

TAC per 

Owner 

(2011

dollars)

Total Annual 

Revenues for 

Parent Owners 

Small 

Business? 

(N= No, 

Y=Yes)

Impact 

Estimates 

(Annualized 

Compliance 

Cost/Revenue

s in % Terms)

Reference for 

Economic 

Dataa

Alcoa $932800 $21,013,000,000 N 0.0018

http://www.sec.go

v/Archives/edgar/

data/4281/000119

312511039230/d1

0k.htm

http://www.elkem

.com/eway/default

.aspx?pid=242&tr

g=MainLeft_6886

&Main_7127=688

6:0:4,4130:1:0:0::

:0:0&MainLeft_6

886=6271:33029::

1:7126:1:::0:0

Aleris 166800 3,000,000,000 N 0.0013

Reference USA

http://www.aleris.

com/about-aleris

and 

http://www.forbes

.com/lists/2010/21

/privatecompanies10_AlerisInternational_IDN

6.html

Aluminum 

Recovery 

Technologies -12000 10,460,000 Y <0b Reference USA

Aluminum 

Shapes, LLC 43300 175,000,000 N 0.019 Reference USA

Beveridge 

Packaging 

(owner of 

Reynolds Foil) 110050 N

http://www.reyn

oldsgroupholdin

gs.com/Financia

ls/2011/28Mar2

011-RGHL16
9,972,000,000 0.0005

7

2010-Results-

Presentation.pdf

, p. 4.

Metal Exchange 

Corp. -24000 99,400,000Y <0

http://www.meta

lexchangecorp.c

om/cf/metal/SN

A.asp?asm=sna

&tmp=C011&x

=714&sid=714

&t=About%20U s and 

http://www.insid

eview.com/direc

tory/metal-

exchange-

corporation

Hydro 43900 17,977,000,000N 0.000126

http://www.hydr

o.com/en/Invest

or-

relations/Reporti

ng/2010/Key-

figures/

J.L. French 

Corp. -12000 550,447,000N <0 Reference USA

Jupiter 

Aluminum-36000 50,000,000Y <0 Reference USA

JW Aluminum-48000

250,000,000 -

500,000,000N <0

http://www.zoo

minfo.com/com

pany/JW+Alumi

num+Company-

33687486

Kaiser 

Aluminum -12000 1,079,100,000N <0 Reference USA

Logan 43300 1,140,000,000N 0.002 Reference USA

Metalico -12000 291,733,000N <0 Reference USA

Toyota Tsusho

(owner of Most, 

Inc.)-12000 54,839,454,000N <0

http://www.toyo

ta-

tsusho.com/engl

ish/ir/report/ann

ual/uploadfiles/s

ection03_E.pdf

Quanex-36000 798,314,000N <0 Reference USA

Noranda 151550 1,226,400,000N 0.0065 Reference USA

Hindalco (owner 

of Novelis) 72250N

http://www.hind

alco.com/invest

17
12,800,000,000 0.00015

ors/downloads/

Hindalco_Annu

al_Report_2009-

10.pdf

Owl's Head 

Alloys -12000 22,550,000 Y <0 Reference USA

Rio Tinto 

(owner of 

Alcan) 216500 14,324,000,000 N 0.00076

http://www.rioti

ntoalcan.com/E

NG/media/medi

a_releases_1717

.asp

Ritchey Metals -12000 80,080,000 Y <0 Reference USA

Orkla ASA 

(owner of Sapa 

Extrusion) 109250 9,822,000,000 N 0.00056

http://markets.ft.

com/research/M

arkets/Tearsheet

s/Financials?s=

ORK:OSL&sub

view=IncomeSta

tement&period=

a

Scepter -48000 54,700,000 Y <0 Reference USA

Smelter Service -24000 28,100,000 Y <0 Reference USA

Southwire 43700 1,340,000,000 N 0.0018 Reference USA

Superior 

Aluminum 

Alloys -12000 7,980,000 Y <0 Reference USA

Tennessee 

Aluminum 

Processors -24000 81,180,000 Y <0 Reference USA

Tredegar (owner 

of William L. 

Bonnell) 64950 740,000,000 N 0.004

http://www.tred

egar.com

Wise Metals 

Group 62600 618,000,000 N 0.0032

http://www.usatod

ay.com/printeditio

n/news/20110125/

states25_st.art.ht

m

a

Economic data includes revenues and employee size for each affected firm in 2011. 

b

<0 = cost impact of less than zero, since the costs for the firm will be less than zero (cost savings).

18
As shown in this table, no firm will experience an annualized compliance cost of greater than 

0.02 percent of its sales, according to this analysis, as a result of this rule. 

It should also be noted that this analysis does not presume any incidence of the costs on the 

consumers of secondary aluminum and other products made by these companies. Thus, no 

estimate of the impact of this rule on secondary aluminum consumers, for intermediate or enduse, is included in this report. However, it should be noted that available estimates show that the 

price elasticity of demand for secondary aluminum is -1.05, and the price elasticity of supply for 

secondary aluminum is 0.6.6 Based on this information, one can conclude that demand will 

respond 1:1 with a change in secondary lead price, and that supply is inelastic (i.e., will respond 

less than 1:1) with a change in secondary lead price. Thus, the direct impact of this rule appears 

quite minor, and thus it is reasonable to infer that the impact on secondary aluminum consumers 

from this rule should also be minor. The TAC is taken from the cost memorandum mentioned 

earlier that was prepared by U.S. EPA for the final rule and in that memorandum can be found 

more information on the cost analysis. 

5 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “Impact of Carbon Price Policies on US Industry.” RFF 

Discussion Paper 08-37). Http://Www.Rff.Org/Publications/Pages/Publicationdetails.Aspx?. 

Publicationid=20680. Accessed August 2009. Table 8.A.6.

6 Broda, C., N. Limao, and D. Weinstein. 2008a. “Export Supply Elasticities.” 

http://faculty.chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/TradeElastic

ities.html. Accessed September 2009.

19