Economic Analysis

of Air Pollution Regulations:

Miscellaneous Cellulose

Manufacturing Industry

Industry Profile

Prepared for

Eric L. Crump

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Innovative Strategies and Economics Group (ISEG)

(MD-15)

Research Triangle Park, NC 27711

Prepared by

Robert H. Beach

George L. Van Houtven

Mark C. Buckley

Brooks M. Depro

Research Triangle Institute

Center for Economics Research

Research Triangle Park, NC 27709

EPA Contract Number 68-D-99-024

RTI Project Number 7647-001-011

February 2000
EPA Contract Number 68-D-99-024

RTI Project Number 7647-001-011

Economic Analysis

of Air Pollution Regulations:

Miscellaneous Cellulose

Manufacturing Industry

Industry Profile

February 2000

Prepared for

Eric L. Crump

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Innovative Strategies and Economics Group (ISEG)

(MD-15)

Research Triangle Park, NC 27711

Prepared by

Robert H. Beach

George L. Van Houtven

 Mark C. Buckley

Brooks M. Depro

Research Triangle Institute

Center for Economics Research

Research Triangle Park, NC 27709
DRAFT

iii

CONTENTS

Section Page

2 Industry Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

2.1 Production Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

2.1.1 Viscose Category Production Process . . . . . . . . . . . . . . . . . . . . 2-3

2.1.2 Cellulose Ether Category Production Process . . . . . . . . . . . . . . 2-6

2.1.3 Costs of Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

2.2 The Demand Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

2.2.1 Characteristics of Miscellaneous Cellulose Products . . . . . . . . 2-8

2.2.2 Consumption and Uses of Miscellaneous Cellulose Products . . 2-8

2.2.3 Substitution Possibilities in Consumption . . . . . . . . . . . . . . . . . 2-9

2.3 Industry Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10

2.3.1 Market Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10

2.3.2 Manufacturing Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-11

2.3.3 Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-14

2.3.3.1 Employment and Sales Distribution . . . . . . . . . . . . . 2-14

2.3.3.2 Identifying Small Businesses . . . . . . . . . . . . . . . . . . 2-14

2.3.3.3 Issue of Vertical and Horizontal Integration . . . . . . . 2-16

2.3.2.4 Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-17

2.4 Market Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

2.4.1 Cellulose Food Casings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

2.4.2 Rayon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

2.4.3 Sponges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

2.4.4 Cellulose Ethers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R-1
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iv

LIST OF FIGURES

Number Page

2-1 Generic Process Diagram for the Viscose Category . . . . . . . . . . . . . . . . . . . . . 2-5

2-2 Cellulose Ether Manufacturing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

2-3 Geographic Distribution of Miscellaneous Cellulose Manufacturing

Plants in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

2-4 Chain of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15

2-5 Distribution of Miscellaneous Cellulose Companies by Size . . . . . . . . . . . . . 2-17
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v

LIST OF TABLES

Number Page

2-1 Miscellaneous Cellulose Manufacturing Facilities . . . . . . . . . . . . . . . . . . . . . 2-11

2-2 Facility Employment and Sales, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-13

2-3 Affected Parent Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16
DRAFT

2-1

SECTION 2

INDUSTRY PROFILE

Cellulose is a natural polymer found in plant cell walls. The cellulose extracted from

trees or other plants provides the basic raw material for all of the commercial products

produced by the miscellaneous cellulose manufacturing industry. The miscellaneous

cellulose manufacturing industry can be divided into two major categories: the viscose

category and the cellulose ether category. Both of these categories use some type of cellulose

as the primary raw material, normally either wood pulp or cotton linters, but their production

processes differ. Although production of viscose products is not identical for all of the

viscose outputs, the processes are very similar. 

Relatively few firms are involved in the production of these miscellaneous cellulose

products. Only 17 miscellaneous cellulose manufacturing facilities are operated in the United

States. The final products of these facilities compete in markets with products made from

alternative materials, especially plastics. Cellulose products have generally been declining in

market share over time as newer noncellulose products have been introduced.

Fourteen of the 17 facilities in the United States are considered major sources of

hazardous air pollutants (HAPs). The primary pollutant associated with this industry is

carbon disulfide (CS2), which is used in the viscose production process and may be emitted at

several steps during production. Another pollutant generated during the viscose production

process is hydrogen sulfide (H2S). The HAP emitted during the manufacture of cellulose

ethers depends primarily on the type of cellulose ether being manufactured. Methanol,

methyl chloride, ethylene oxide, and propylene oxide are the primary HAPs released by the

cellulose ether manufacturing facilities in the United States.

This industry profile considers five outputs of miscellaneous cellulose manufacturing. 

The viscose category features four types of products—cellulose food casings, rayon,

cellophane, and cellulosic sponges—and cellulose ethers are considered a single category. 

Brief descriptions of each of these categories are provided below.

 Cellulose food casings: Cellulose food casings were developed in 1925 as a

substitute for natural casings and are used in manufacturing meat products such as
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2-2

sausages, hot dogs, salamis, bologna, and other processed meats. The meat is

stuffed into a casing that holds the shape of the product during processing. 

Casings are commonly removed from the meat products prior to retail sale.

 Rayon: Rayon was the first man-made fiber and serves in a wide variety of uses. 

It is used in apparel, household goods, and various nonwoven fabrics. Textile

fabrics may be woven of rayon alone or rayon in combination with other yarns. 

Nonwoven rayon products include feminine hygiene products, baby wipes,

computer disk liners, and surgical swabs.

 Cellophane: Cellophane is a thin, transparent material used in food packaging

(especially for candy, cheese, and baked goods); adhesive tapes; and membranes

for industrial uses such as batteries. 

 Cellulosic sponges: This type of artificial sponge was introduced in 1931 as an

alternative to natural sponges. Cellulosic sponges are used for cleaning purposes.

 Cellulose ethers: Various cellulose ethers are produced, including methyl

cellulose (MC), carboxymethyl cellulose (CMC), hydroxyethyl cellulose (HEC),

hydroxypropyl cellulose (HPC), and hydroxypropyl methyl cellulose (HPMC). 

These cellulose derivatives are used mainly as thickeners, viscosifiers, and binders

in the food, pharmaceutical, paper, cosmetic, adhesive, detergent, and textile

industries. 

The affected products are classified in the following Standard Industrial Classification

(SIC) codes:

 SIC 2823, Cellulosic Manmade Fibers;

 SIC 2869, Industrial Organic Chemicals—Not Elsewhere Classified; and

 SIC 3089, Plastics Products, Not Elsewhere Classified.

Under the North American Industry Classification System (NAICS), the codes for

miscellaneous cellulose manufacturing are the following:

 NAICS 32511, Petrochemical Manufacturing;

 NAICS 325199, All Other Basic Organic Chemical Manufacturing;

 NAICS 3252, Resin, Synthetic Rubber, and Artificial and Synthetic Fibers;

 NAICS 326121, Unsupported Plastics Profile Product Manufacturing; and

 NAICS 326199, All Other Plastics Product Manufacturing.
DRAFT

1

The majority of the information on production processes was drawn from Schmidtke and Holloway (1999).

2-3

In the remainder of this section, we provide a summary profile of the miscellaneous

cellulose industry in the United States as background information for understanding the

technical and economic aspects of the industry. Section 2.1 provides an overview of the

production processes for the various products of this industry. Section 2.2 discusses the

demand side of the markets for these cellulose products. Section 2.3 summarizes the

organization of the U.S. miscellaneous cellulose manufacturing industry, including a

description of U.S. manufacturing plants and the companies that own them. Finally,

Section 2.4 provides market data on U.S. production, consumption, foreign trade, and prices.

2.1 Production Overview

This section provides an overview of the various processes for manufacturing

miscellaneous cellulose products.1

 Both the viscose and cellulose ether categories use some

type of cellulose as the raw material and begin the production of cellulose products by

reacting the cellulose with a sodium hydroxide (NaOH) solution and shredding the cellulose

pulp (not necessarily in that order) to produce alkali cellulose. The NaOH breaks the

cellulose pulp into shorter lengths by adding a sodium ion to the cellulose chain. This step

lowers the viscosity of the generated product (e.g., viscose solution for the viscose category)

and creates a site to add constituent groups (e.g., methyl, ethyl, or propyl groups for the

cellulose ether category). After this common initial step, the viscose and cellulose ether

categories diverge in their production methods. Therefore, process descriptions for the

viscose and cellulose ether categories are provided separately below. No major by-products

or co-products are associated with the manufacture of miscellaneous cellulose manufacturing

process. 

2.1.1 Viscose Category Production Process

The manufacturing processes for the different products in the viscose category are

very similar. They all essentially include the same raw materials and process steps. The

main difference is simply the shape through which the viscose is extruded at the end of the

process. The raw materials used in all of the different viscose manufacturing processes

include cellulose, NaOH, CS2, and sulfuric acid (H2SO4). The steps in the process are

 production and aging of alkali cellulose,

 reaction with CS2 to produce sodium cellulose xanthate,
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2-4

 production and aging of viscose solution,

 extrusion/regeneration and washing to produce the viscose product, and

 acid or salt recovery.

Figure 2-1 illustrates a generic process flow diagram for the viscose category.

The alkali cellulose is aged to decrease the degree of polymerization of the cellulose. 

The amount of time for the aging step is based on the desired cellulose chain length. The

aged alkali cellulose is then reacted with CS2 to form sodium cellulose xanthate. Following

completion of the reaction, most of the viscose category facilities apply vacuum to the reactor

and/or purge the reactor with air or nitrogen (N2) to remove unreacted CS2. The CS2 levels

are the most concentrated at the beginning of the reactor evacuation and fall as evacuation

continues. The reactor area of the facility is well-ventilated at most of the viscose category

facilities, helping to reduce operator exposure to CS2.

Following the reactor, the sodium cellulose xanthate is dissolved in a caustic solution

to form a viscous material referred to by the industry as “viscose.” The viscose solution is

aged or “ripened” and then filtered to remove unreacted alkali cellulose. At most of the

viscose category facilities, the viscose is also deaerated to remove entrapped air and filtered

to remove any undissolved solids. The exception is sponge manufacturing facilities, which

do not include these steps. The viscose is then extruded or formed into various shapes or

products; the product forming may occur in an acid bath or by electrifying, depending on the

type of viscose manufacturing process. At the majority of the viscose manufacturing

facilities, the cellulose precipitates out of a H2SO4 solution, and the sodium atom on the

cellulose polymer reacts with the H2SO4 to generate Na2SO4 (i.e., the sodium cellulose

xanthate decomposes back to cellulose and CS2). H2S is also generated in the

extrusion/regeneration steps and emitted. The acid bath for the extrusion/regeneration step

becomes diluted from the water in the viscose solution, and a portion of the acid bath solution

is treated in the acid recovery area and returned to the acid bath. In sponge plants, glauber

salts are added to the viscose prior to generation of the product and are recovered and reused

as part of the production process. The formed cellulose product is then washed, dried,

finished, and packaged.
DRAFT

2-5

Cellulose

CS2

H2

S

Steeping Shredding

Alkali

Cellulose

Aging

Reaction Mixing

Viscose

Aging/

Ripening

Packaging Finishing Drying Washing

Extrusion/

Regeneration

Filteringa

Deaerateda

CS2

NaOH

solution

Sodium

Cellulose

Xanthate

Viscose

CS2

H2

S

NaOH solution

CS2 CS2

Figure 2-1. Generic Process Diagram for the Viscose Category

a Sponge manufacturers do not include the deaeration and filtering steps. 
DRAFT

2-6

Pollutants can be emitted into the atmosphere from several sources during viscose

processing. The primary HAP emitted from the manufacturing process is CS2. CS2 is

emitted from the reactors and can be emitted from the slurry tanks used to generate viscose

solution. Both CS2 and H2S are emitted from the regeneration baths and the wash steps. 

2.1.2 Cellulose Ether Category Production Process

All cellulose ether processes include the following steps:

 production of alkali cellulose from cellulose and NaOH,

 reaction of the alkali cellulose with chemical compound(s) to produce a cellulose

ether product,

 washing and purification of the cellulose ether product, and

 drying of the cellulose ether product. Cellulose ether products may also be ground

to uniform size and coated or blended.

Figure 2-2 displays a simplified flow diagram of the processes used to produce cellulose

ethers. 

Following the production of alkali cellulose, the raw materials used in the cellulose

ether process vary according to the particular ether being produced. To produce MC, CMC,

HEC, and HPC, alkali cellulose is reacted with methyl chloride, chloroacetic acid, ethylene

oxide, and propylene oxide, respectively. HPMC is produced by reacting alkali cellulose

with both methyl chloride and propylene oxide. All of these raw materials (methyl chloride,

chloroacetic acid, ethylene oxide, and propylene oxide) added to the alkali cellulose to form

the various ether products are considered HAPs. 

As shown in Figure 2-2, pollutants can be emitted at various points in the

manufacturing process. The primary HAP(s) emitted from the manufacturing of cellulose

ethers depends on the type of ether product being produced, as mentioned above.

2.1.3 Costs of Production

The input costs into the production of miscellaneous cellulose products are reported

as confidential business information (CBI).
DRAFT

2-7

Cellulose

sheets or

rolls

Shredder

Reactor

or Vessel

Hold Tubs or

Dump Tanks

Packaging

Dryer Blend Tanka Dump Tanka

NaOH

solution

Chloroacetic Acid

Ethylene Oxide

Methyl Chloride

Propylene Oxide

Cellulose

ether slurry

Purification solvent or

hot water wash to

dissolve salts or

by-products

HAP

Non-HAP

solventa

Blending/

Surface

Treatmenta

Mixera

Centrifuge or

Filterb Grindinga

HAP

HAP

Purification solvent or

hot water containing

dissolved salts or byproducts

Non-HAPsolvent andNaOHsolution

Figure 2-2. Cellulose Ether Manufacturing Process

a Not all cellulose ether processes use this material or equipment.

b Some cellulose ether processes have multiple centrifuge/filter and wash steps; the solvent is reused and

flows countercurrent to the cellulose ether product.

2.

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DRAFT

2-8

d side of the market, including product characteristics, the uses of the final products, the

consumers of these products, and the substitution possibilities available.

2.2.1 Characteristics of Miscellaneous Cellulose Products

Cellulose products have many advantageous physical attributes that led to their

introduction into various markets. Some of the useful characteristics of cellulosics include a

unique combination of toughness and transparency at relatively low cost, an almost unlimited

color range, good grease resistance, little effect on mechanical properties due to moisture,

and suitability of some grades for use with food products. One of the chief disadvantages is

that using a natural polymer base causes greater variation in properties than a truly synthetic

polymer (“Cellulose,” 2000). Since the introduction of these cellulose products, advances in

plastics technology have allowed products made from synthetic polymers to enter many of

the markets in which the products comprising the miscellaneous cellulose category compete. 

2.2.2 Consumption and Uses of Miscellaneous Cellulose Products

The main uses of these products vary depending on which of the outputs is being

considered. In general, the miscellaneous cellulose products under consideration are

intermediate goods serving as inputs into other production processes. 

Cellulose food casings are purchased primarily by meat packers as an input in the

production of processed meat products and are used to encase hot dogs, sausages, deli meats,

and whole hams. The casing may either be left on the final product or removed following

production. 

Rayon can be purchased as a continuous filament yarn or as cut (staple) fiber. Rayon

is used as an input in the production of a variety of products, but rayon is typically used as an

input for two main categories of products: textiles and nonwoven materials. The buyers of

textile fibers produce yarn from the fiber, often as a blend with other fiber materials, and

weave the yarns into fabrics used to produce apparel and upholstery, among other things. 

Nonwoven fibers are used by a variety of producers to make wipes, computer diskette liners,

and feminine hygiene products.

Cellophane normally serves as an intermediate good as well and is purchased

primarily for packaging items such as food and confectionary products (especially candy,

cheese, and baked goods) and batteries; it is also used in adhesive tape. 

Cellulosic sponges are the one category under consideration here that is not typically

an input into the production of another good, although manufacturers of sponges may sell
DRAFT

2-9

their output to other firms in large blocks and these firms may then cut, package, and sell the

sponges. The main use for these sponges is cleaning various surfaces, and they can be

purchased by households or businesses for this purpose. 

Cellulose ethers are used as an input into a variety of goods. They are chiefly used as

thickeners, viscosifiers, and binders and are used in producing paints, personal care products,

inks, pharmaceuticals, and industrial coatings. 

2.2.3 Substitution Possibilities in Consumption

The markets in which the miscellaneous cellulose outputs compete generally consist

of the cellulose product in addition to several viable alternatives. With advances in the

production of plastics, plastic alternatives to cellulose products have become increasingly

competitive over time. In many cases, the manufacturers of miscellaneous cellulose goods in

the United States have seen their market shares shrinking recently under pressure from

substitute products and foreign producers of cellulose goods. 

In the food casing market, the major alternatives to cellulose are collagen and plastic. 

Another category in the industry, known as fibrous, actually contains regenerated cellulose

and is considered under cellulose casings. Natural (intestine) casings are also used by some

producers, especially in making sausage. Buyers of casings make their choice as to which

type of casing will be purchased based on the type of meat product being produced, desired

shelf life, whether edible casing is desired, smoke permeability, and appearance.

Many fibers, such as cotton, wool, and polyester, among others, can be used in

textiles instead of rayon. The textile mills choose which fibers to use for a particular

application based on characteristics like comfort, warmth, ease of washing and drying, and

resistance to unwanted creasing and wrinkling. As textile production has moved outside of

the United States, sales of rayon fibers for use in textiles have declined rapidly. Sales of

rayon fibers for use in nonwoven applications have shown much more strength in recent

years than sales of textile fibers (Acordis, 1998).

There are very strong substitutes for cellophane as well. Cellophane has been facing

increasing competition in recent years from plastics such as polypropylene and polyethylene. 

Cellophane twist wrap (used for wrapping single-piece candy) fell from a position of about

85 percent of the U.S. market in 1992 to 35 percent by early 1997 (Duschene, 1997). 

According to Plastics World (1995), polypropylene “has all but replaced cellophane in many

packaging applications, such as for snack food and tobacco....”
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2-10

Cellulosic sponges seems to be the category where there is the least competition from

alternative products, because natural sponges are far more expensive and have a relatively

small market share. Several retailers were contacted and these retailers sold cellulose

sponges exclusively. However, there are still substitute products for cleaning such as paper

towels and dishtowels.

The cellulose ethers are used in many different end uses and have numerous possible

substitutes, depending on the particular application for which they are being used. Ethers

generally compete with each other and with water-soluble polymers, both synthetic polymers

(polyvinyl alcohol, polyurethane associative thickeners, polyacrylates), and natural

polymers(xanthan, carageenan, locust bean gum). The specific product used depends on the

tradeoff between performance and price and availability (Chemical Economics Handbook,

1998).

2.3 Industry Organization

This section discusses the products and producers that constitute the market. The

affected facilities and parent companies are identified, and their sales and employment

distribution are summarized.

2.3.1 Market Structure

Market structure is of interest because it determines the behavior of producers and

consumers in the industry. If an industry is perfectly competitive, then individual producers

are not able to influence the price of the output they sell or the inputs they purchase. This

condition is most likely to hold if the industry has a large number of firms, the products sold

and the inputs purchased are homogeneous, and entry and exit of firms are unrestricted. 

Entry and exit of firms are unrestricted for most industries except, for example, in cases

where government regulates who is able to produce, where one firm holds a patent on a

product, where one firm owns the entire stock of a critical input, or where a single firm is

able to supply the entire market.

Very few U.S. facilities are involved in manufacturing each of the cellulose products

under examination, implying imperfectly competitive markets. However, there is vigorous

competition from foreign sources in this industry. In addition, there are many viable

substitutes for these products. Therefore, despite the small number of domestic producers,

the miscellaneous cellulose manufacturing facilities are likely to behave fairly competitively. 
DRAFT

2-11

2.3.2 Manufacturing Plants

Based on facility responses to the Section 114 letters, the Agency identified 17 plants

in the United States currently manufacturing miscellaneous cellulose products. These

facilities are identified in Table 2-1. Figure 2-3 shows the geographic distribution of U.S.

miscellaneous cellulose manufacturing plants by final product. As shown, many of these

plants are concentrated in the north-central region of the United States. Since only 14 of the

17 facilities are major sources subject to the maximum achievable control technology

(MACT) standard, subsequent discussion focuses on this subset of the miscellaneous

cellulose manufacturing facilities affected by the proposed regulation.

Table 2-1. Miscellaneous Cellulose Manufacturing Facilities

Facility Facility Location Major Product(s)

Devro-Teepak, Inc. Danville, IL Cellulose food casings

Viskase Corp. Loudon, TN Cellulose food casings

Viskase Corp. Osceola, AR Cellulose food casings

Acordis Cellulosic Fibers, Inc. Axis, AL Rayon

Lenzing Fibers Corp. Lowland, TN Rayon

UCB Films, Inc. Tecumseh, KS Cellophane

Nylonge Corp. Elyria, OH Cellulosic sponges

Spontex, Inc. Columbia, TN Cellulosic sponges

3M Corp. Prairie du Chien, WI Cellulosic sponges

3M Corp. Tonawanda, NY Cellulosic sponges

Dow Chemical Co. Midland, MI Cellulose ethers (MC, HPMC)

Dow Chemical Co. Plaquemine, LA Cellulose ethers (MC)

Hercules Inc., Aqualon Co. Hopewell, VA Cellulose ethers (CMC, HEC, HPC)

Hercules Inc., Aqualon Co.a Parlin, NJ Cellulose ethers (HEC)

MAK Chemical Corp.a Muncie, IN Cellulose ethers (crude CMC)

Penn Carbose, Inc.a Somerset, PA Cellulose ethers (crude CMC)

Union Carbide Corp. Institute, WV Cellulose ethers (HEC)

a Hercules-Parlin, MAK, and Penn Carbose are area sources not subject to the MACT standard.
DRAFT

2-12

● = Rayon manufacturer■ = Food casing manufacturer▲ = Cellophane manufacturer◆ = Sponge manufacturer✘

Legend

= Cellulose ether manufacturer

▲

■

●

◆

■

✘

●

◆

■

◆

◆

✘

✘

✘

✘

✘

✘

Figure 2-3. Geographic Distribution of Miscellaneous Cellulose Manufacturing Plants

in the United States
DRAFT

2-13

Facility-level sales and employment data are available for 11 of the 14 affected

facilities, as reported in Table 2-2. The Spontex facility has the lowest employment and

sales, while Dow Chemical in Plaquemine, LA, has the highest. For the facilities with

available data, using the midpoint of the reported ranges gives an average employment of 510

employees and an average of $103 million in sales. For facilities that reported this data as

CBI, the more accurate CBI data will be used for our economic analysis. We will provide

data by final product as CBI.

2.3.3 Companies

Table 2-2. Facility Employment and Sales, 1998

Company Facility Location

Employment

Range

Sales

($ millions)

Food Casings

Devro-Teepak, Inc. Danville, IL 501-750 NA

Viskase Corp. Loudon, TN 230 50-100

Viskase Corp. Osceola, AR 170 20-50

Rayon

Acordis Cellulosic Fibers Inc. Axis, AL 425 NA

Lenzing Fibers Corp. Lowland, TN 400 100-500

Cellophane

UCB Films, Inc. Tecumseh, KS 100-249 20-50

Sponges

Nylonge Corp. Elyria, OH 100-249 10-20

Spontex, Inc. Columbia, TN 140 NA

3M Corp. Prairie du Chien, WI 500-999 100-500

3M Corp. Tonawanda, NY 250-499 20-50

Ethers

Dow Chemical Co. Midland, MI 60 NA

Dow Chemical Co. Plaquemine, LA 50 NA

Hercules Inc., Aqualon Co. Hopewell, VA 395 NA

Union Carbide Corp. Institute, WV 134 20-50

Note: Italicized rows indicate companies for which we have CBI data.

Sources: InfoUSA Inc. 1999. American Business Disc. Omaha, NE.

Section 114 requests and plant trip reports.
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2-14

Companies that are directly affected by the regulation include entities that own

miscellaneous cellulose manufacturing plants. As shown in Figure 2-4, the chain of

ownership may be as simple as one plant owned by one company or as complex as multiple

plants owned by subsidiary companies. Based on survey and publicly available source data,

the Agency identified 11 ultimate parent companies that own and operate the 14 directly

affected facilities. For the economic analysis, EPA obtained sales and employment data from

one of the following secondary data sources:

 Hoover’s Company Profiles (Hoover’s, 2000)

 Business and Company ProFile (Information Access Corporation, 2000)

 Ward’s Business Directory (Gale Research, 1998)

 Wrights Research Service (Winthrop Corporation, 2000)

Data are available for all 11 companies and are included in Table 2-3. 

2.3.3.1 Employment and Sales Distribution

Company size is likely to be a factor in the distribution of the regulatory action’s

financial impacts. The parent companies affected by this regulation are relatively large in

general. The 11 firms owning the 14 affected manufacturing facilities range in size from 200

to 73,600 employees, with all but one firm having over 3,000 employees. Over half of the

companies have more than 10,000 employees. Table 2-3 shows the size distribution of

potentially affected firms by total company employment. Company sales ranged from $15

million to $28 billion in 1998 for the potentially affected firms. Seven of the 11 companies

had sales over $1 billion. 

2.3.3.2 Identifying Small Businesses

The Regulatory Flexibility Act (RFA) of 1980 as amended by the Small Business

Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires that the Agency give

special consideration to small entities affected by federal regulation. Companies operating

miscellaneous cellulose manufacturing plants can be grouped into small and large categories

using Small Business Administration (SBA) general size standard definitions. The SBA

defines a small business in terms of the sales or employment of the owning entity, and these

thresholds vary by industry classification (SIC code) of the affected company. For this

analysis the Agency identified three primary SIC codes with small business definition ranges
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ABC

Other Companies

or Legal Entities

Subsidiary

Company

(Direct Owner)

Subsidiary

Company

(Direct Owner)

Facility Facility Facility

Parent Company Parent Company Parent Company

(Direct Owner)

Figure 2-4. Chain of Ownership

as follows:

 2823 and 2869—1,000 or fewer employees

 3089—500 or fewer employees
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Based on the reported company employment and SIC size standard, one company can be

classified as small, or 9.1 percent of the total (see Figure 2-5).

2.3.3.3 Issue of Vertical and Horizontal Integration

Vertical integration is a potentially important dimension in analyzing firm-level

impacts because the regulation could affect a vertically integrated firm on more than one

level. The regulation may affect companies for whom cellulose manufacturing is only one of

several processes in which the firm is involved. For example, a company may produce

cellulose products as part of a vertical operation that manufactures and assembles the final 

Table 2-3. Affected Parent Companies

Company Sales ($ millions) Employment Small Business

3M 15,659 73,564 no

Acordis 2,285 18,300 no

Devro-Teepak 438 3,687 no

Dow Chemical 18,929 39,000 no

Hercules 2,145 12,357 no

Lenzing AG 751 4,723 no

Nylonge 15 200 yes

Total Fina S.A. 28,418 57,126 no

UCB Films 1,597 8,726 no

Union Carbide 5,870 11,627 no

Viskase 409 3,050 no

Sources: Hoover’s Incorporated. 2000. Hoover’s Company Profiles. Austin, TX: Hoover’s Incorporated. 

<http://www.hoovers.com/>.

Gale Research. 1998. Ward’s Business Directory of U.S. Private and Public Companies. Gale

Research. New York. 

Disclosure Incorporated. 1999. Worldscope [computer file]. Bethesda, MD: Disclosure Incorporated.

Winthrop Corporation. 1999. “Wright Investor’s Service Corporate Information.” Bridgeport, CT. 

<http://profiles.wisi.com/profiles/Chemicals.htm>.

Information Access Corporation. 1999. Business & Company ProFile [computer file]. Foster City,

CA: Information Access Corporation.
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commodity. Increased production costs of cellulose manufacturing will affect the cost of the

final products that use these as intermediate inputs.

Horizontal integration is also an important dimension in firm-level impact analysis

because diversified firms may own facilities in unaffected industries. This may give them

resources to spend on complying with this regulation—if they so choose. Several of the

larger firms are involved in several different industries other than cellulose manufacturing. 

For example, Total Fina S.A.’s other operations include petroleum, natural gas, and tires

while 3M provides pharmaceutical, automotive, and dental products (Hoover’s, 1999;

Information Access Corporation, 2000). 

2.3.3.4 Trends

Recently, some of the industries potentially affected by this regulation have

experienced consolidation and plant closings. According to UCB Films, Inc.’s site visit

report, the cellophane manufacturing industry has been declining since the 1950s. At one

time, there were 10 to 12 cellophane plants operating in the U.S. By the mid-1990s, only

Flexel, Inc. still produced cellophane in the U.S. Flexel, Inc. filed for bankruptcy in 1997 and

Small

1 (9%)

Large

10 (91%)

Figure 2-5. Distribution of Miscellaneous Cellulose Companies by Size
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sold one of its two U.S. facilities to Belgium’s UCB Films, Inc. (Chemical Market Reporter,

1997). They have stopped producing cellophane at the other plant, leaving UCB as the only

Western cellophane producer remaining. The domestic market for rayon has also been in

decline as textile production moves out of the United States. Only two rayon manufacturers

are left in the United States, and they are currently involved in joint venture discussions

(Westervelt, 1999). 

2.4 Market Data [WILL BE INCLUDED AS A CBI SECTION]

2.4.1 Market Quantities

This section includes data on production, exports, imports, and apparent consumption

of cellulose food casings, rayon, cellophane, cellulose sponges, and cellulose ethers, but it is

provided as a CBI section.

2.4.2 Market Prices

Historical price data are presented as CBI.

2.4.3 Future Projections
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REFERENCES

Acordis. 1998. Akzo Nobel Annual Report 1998. p. 59–61.

“Cellulose.” <http.//mc.mit.edu/2.01/Taxonomy/Characteristics/Cellulose.htm>. As

obtained on January 3, 2000.

Chemical Market Reporter. 1997. “UCB to Buy Cellulose Film Plant from its Bankrupt

Owner, Flexel.” Chemical Market Reporter 251(24):24-30.

Disclosure Incorporated. 1999. Worldscope [computer file]. Bethesda, MD: Disclosure

Incorporated.

Duschene, Stephanie. 1997. “Converter Casts a New Twist on Candy Wrap.” Converting

Magazine 15(3):110-114.

Gale Research. 1998. Ward’s Business Directory of U.S. Private and Public Companies.

Gale Research. New York. 

Hoover’s Incorporated. 1999. Hoover’s Company Profiles. Austin, TX: Hoover’s

Incorporated. <http://www.hoovers.com/>.

Hoover’s Incorporated. 2000. Hoover’s Company Profiles. Austin, TX: Hoover’s

Incorporated. <http://www.hoovers.com/>.

Information Access Corporation. 1999. Business & Company ProFile [computer file]. 

Foster City, CA: Information Access Corporation.

Information Access Corporation. 2000. Business & Company ProFile [computer file]. 

Foster City, CA: Information Access Corporation

InfoUSA Inc. 1999. American Business Disc. Omaha, NE.

Plant trip reports.
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Plastics World. 1995. “The Fundamentals of BOPP.” Plastics World 53(8):35-37.

Schmidtke, Karen, and Thomas Holloway. July 16, 1999. Memorandum to William

Schrock, EPA/ESD/OCG. Industry profile of miscellaneous cellulose manufacturing

facilities in the U.S.

Section 114 requests.

Westervelt, Robert. 1999. “Acordis, Lenzing, Discuss Venture.” Chemical Week. 161:16.

Winthrop Corporation. 1999. “Wright Investor’s Service Corporate Information.” 

Bridgeport, CT. <http://profiles.wisi.com/profiles/Chemicals.htm>.