p.1 

OAR Box 1107 

Prepped by Ollie Stewart 

Document Number: 

6DIV-B-11 

Docket Number: 

A-81-21 

Printed 4/11/2008 3:03:47 PM Sheet 61 of 90 
P.2 

, RADIAN 

-* ;" CORPORATION 

4 K-_ v 

A-8I-2L 

IV-B-ll 

MEMORANDUM 

DATE: July 18, 1986 

FROM: Karen K. Fidler 

TO: Vinyl Chloride Docket 

SUBJECT: Economic Impact Analysis for Vinyl Chloride Standard Revisions 

Attached are portions of an economic analysis prepared during review of 

the standard. Because this information was referred to in response to two 

separate public comments on page 2-65 of the promulgation BID, it is being 

included in the docket. 

Attachment 

KKF/jq 
P.3 

ECONOMIC IMPACT ANALYSIS 

This report presents information needed to examine the potential economic 

impacts of possible revisions to the vinyl chloride standard on three industrial chemical products: ethylene dichloride (1,2,-dichloroethane), vinyl 

chloride monomer (chloroethylene), and polyvinyl chloride. This report is 

divided into three major parts. Section 1.0 provides an industry profile for 

each chemical in order to identify the factors and trends that would influence 

the nature and magnitude of the economic impact. Section 2.0 addresses those 

tests of macroeconomic impact which aid in determining whether or not a more 

detailed regulatory analysis would be required under Executive Order 12291. 

In order to comply with the Regulatory Flexibility Act (RFA), Section 2.0 

also considers the extent to which small businesses might be differentially 

impacted. Finally, Section 3.0 contains the references employed in this 

study. 

1.0 INDUSTRY PROFILE 

1.1 INTRODUCTION 

The principal chemical of interest is ethylene dichloride (EDC). 

However, there is a close economic relationship among EDC, vinyl chloride 

monomer (VMC), and polyvinyl chloride (PVC). The vast majority of EDC 

produced enters into the production of VCM, and similarly most VCM produced 

enters into the production of PVC. Therefore, VCM and PVC are included in 

the discussion here to provide insight into the economic environment for EDC. 

Additionally, EDC and VCM are frequently produced at the same location. 

Further, a large percentage of the EDC produced is used captively. 

1.2 NUMBER AND SIZE DISTRIBUTION OF THE MANUFACTURERS 

Table 1-1 identifies the producers of EDC and VCM. Ethylene dichloride 

is produced by 12 firms in 21 plants. Total annual nameplate capacity of EDC 
P.4 

TABLE 1-1. IDENTIFICATION AND CAPACITIES OF ETHYLENE DICHLORIDE/ 

VINYL CHLORIDE PRODUCERS1"

6 

(Capacity in thousands of metric tons) 

Producer 

Atlantic Richfield 

Borden Chemical 

Conoco Chemical0 

Diamond Shamrock 

Dow Chemical 

Ethyl Corporation 

Formosa Plastics 

Georgia-Pad f1c 

B.F. Goodrich0* 

PPG Industries 

Shell Chemical 

-

Union Carbide 

Vulcan Materials 

Location 

Port Arthur, TXa 

Geismar, LAa 

Lake Charles, LA 

Deer Park, TXa»

c 

Plaquemine, LAa 

Oyster Creek, TX 

Freeport, TX 

Baton Rouge, LA 

Pasadena, TX 

Point Comfort, TXa 

Baton Rouge, LA 

Plaquemine, LAa 

Calvert City, KY 

Convent, LAa 

La Porte, TXa 

Lake Charles, LA 

Norco, LAS 

Deer Park, TX 

Texas City, TX 

Taft, LA 

Geismar, LA 

Total 

Capacity 

EDC 

205.0 

232.0 

525.0 

145. 

864.0 

477.0 

727.0 

318.0 

102.0 

386.0 

250.0 

750.0 

455.0 

364.0 

720.0 

1,230.0 

545.0 

636.0 

68.2 

68.2 

159.0 

9,226.4 

VCM 

277.0 

318.0 

0 

568.0 

341.0 

68.2 

136.0 

241.0 

136.0 

455.0 

455.0 

455.0 

409.0 

318.0 

382.0 

4,559.2 

aBegan operation since promulgation of the vinyl chloride regulation 1n Oct., 1976. 

DAcquired by DuPont on September 30, 1981. 

cDiamond Shamrock operates Deer Park under a toll agreement. 

dB.F. Goodrich has postponed a 726,000 metric tons per year VCM 

plant at Convent, LA, Indefinitely. 

eClosed Indefinitely. 
P.5 

is 9,226,400 metric tons. Dow Chemical is the largest producer with more 

than one-quarter (28 percent) of total EDC capacity. The four largest firms 

(Dow, BFG, Georgia-Pacific, and PPG) account for 61 percent of capacity 

(Shell is excluded based on Norco's indefinite closure). B. F. Goodrich is 

ranked second out of the 12 firms. B. F. Goodrich's EDC facility located at 

Calvert City, Kentucky, accounts for 5 percent of total capacity while the 

Convent, Louisiana, plant accounts for another 4 percent and the La Porte, 

Texas, plant another 8 percent. The smallest EDC producers are Union Carbide 

and Vulcan Materials with slightly more than 1 percent of total capacity 

each. Almost 90 percent of total capacity is concentrated in two States: 

Louisiana (56 percent) and Texas (33 percent). 

In addition to EDC, Table 1-1 also shows the producers, location of 

plants, and capacities for VCM. There are 9 producers of VCM which own 14 

plants. As in the case of EDC, Dow is also the largest VCM producer with 

some 22 percent of total nameplate capacity of 4,559,200 metric tons. The 

three largest firms (Dow, BFG, and Georgia-Pacific) account for more than 

one-half of total capacity. As was the case with EDC, 90 percent of total 

capacity is concentrated in the States of Louisiana (57 percent) and Texas 

(33 percent). 

Table 1-2 displays similar information for the producers of PVC. There 

are 17 producers with 35 plants. Of the 17 producers, B. F. Goodrich is the 

largest with 7 plants representing 22 percent of the total annual nameplate 

capacity of 4,065,300 metric tons, followed by Tenneco, Hooker, and Borden. 

Conoco, Georgia-Pacific, and Shintech are tied for fifth place with 7 percent 

of total capacity each. The top four producers account for almost one-half 

of all PVC capacity, while the top seven account for some 70 percent. The 

smallest producers are Keysor Corporation, and Talleyrand Chemical with 

0.50 percent, and 1.00 percent of the total capacity, respectively. Again, a 

significant amount of capacity is concentrated in Louisiana (18 percent) and 

Texas (26 percent), but this time Texas has the larger share. 

Some analysts feel that, given foreign competition and the nature of the 

business cycle and the construction cycle, the ranks of PVC producers may 

; gr 

11 

thin to a mere dozen or so firms in a few years. The likelihood is great 

that these PVC producers will be those with their own EDC feedstocks, 
P.6 

TABLE 1-2. IDENTIFICATION AND CAPACITIES OF POLYVINYL CHLORIDE PRODUCERS 

(Capacity in thousands of metric tons) 

7-9 

Producer Location Capacity 

A1r Products 

Borden, Inc. 

CertainTeed 

Conoco 

Ethyl Corporation 

Formosa Plastics 

General Tire 

Georgia-Pacific 

B.F. Goodrich 

Goodyear Tire 4 Rubber 

Calvert City, KYa 

Pensacola, FL 

Geismar, LA 

Illiopolis, IL 

Leominster, MA 

Lake Charles, LA 

Aberdeen, MS 

Oklahoma City, OK 

Baton Rouge, LA 

Delaware City, DE° 

Delaware City, DEC 

Point Comfort, TX 

Ashtabula, OH 

Plaquemine, LA 

Avon Lake, OH 

Deer Park, TX0" 

Henry, IL 

Long Beach, CAe 

Louisville, KY 

Pedricktown, NJ 

Plaquemine, LA 

Niagara Falls, NY 

CONTINUED 

90.9 

90.9 

86.4 

145.0 

90.9 

86.4 

207.0 

118.0 

81.8 

68.2 

127.0 

241.0 

56.8 

318.0 

182 

118.0 

90.9 

68.2 

170.0 

182.0 

86.4 

31.8 
P.7 

TABLE 1-2 (CONCLUDED). IDENTIFICATION AND CAPACITIES OF POLYVINYL CHLORIDE 

PRODUCERS7' (Capacity in thousands of metric tons) 

Producer 

Hooker Chemicalf 

Keysor Corporation 

Pantasote 

Shintech 

Talleyrand Chemical 

Tenneco 

Union Carbide 

Location 

Baton Rouge, LA 

Burlington, NJ 

Perryvllle, MD9 

Pottstown, PA 

Saugus, CA 

Passaic, NJ 

Freeport, TX 

New Bedford, MA9 

Burlington, NJ 

Fleming ton, NJ 

Pasadena, TX 

South Charles town, WV 

Texas City, TX 

TOTAL 

Capacity 

104.3 

86.4 

118 

109.0 

22.7 

25.0 

309.0 

35.4 

72.7 

47.7 

318.0 

22.7 

56.8 

4,065.3 

a

Idle since March, 1982. 

bpurchased from Diamond Shamrock in 1982. 

cPurchased from Stauffer in 1982. 

dPurchased from Diamond Shamrock in 1981. 

eGoodrich has postponed a 500,000 metric tons/yr. unit at Convent, 

LA, indefinitely. 

Subsidiary of Occidental. 

9Shut down at present and may be so permanently. 
P.8 

1.3 OUTPUT AND REVENUE 

Output, the value of output, and the value of merchant sales (i.e, 

noncaptive sales) for EDC are presented in Table 1-3. Their respective 

average annual growth rates are presented in Table 1-4. Ethylene dichloride 

output grew at a 9.1 percent annual rate over the 1970-74 period and then 

declined to a 6.4 percent annual rate over the 1975-79 period. It has 

recently been experiencing negative growth at an 8 percent annual rate. In 

1981, EDC output was 4,523,000 metric tons valued at $797.9 million. 

As Table 1-4 shows, growth rates in the dollar value of output and in 

the dollar value of merchant sales have tended to fare better in good times 

when EDC prices are rising than growth rates in physical output. They have 

also tended to fare worse than output in hard times. Thus indicating that 

prices fluctuate more than physical output. The merchant market has experienced the greatest decline over the 1980-81 period, declining at a 32 percent 

annual rate. A likely explanation for this is that most EDC is used captively 

in the production of VCM, and only about 8 to 10 percent is sold commercially. 

Similar to the information presented above for EDC, Table 1-5 displays 

output, the value of output, and the value of merchant sales for VCM. 

Table 1-6 displays their respective average annual growth rates. Vinyl 

chloride monomer output grew at an 8.6 percent annual rate over the 1970-74 

period, and then declined slightly to finish out the decade at an 8.0 percent 

annual rate. Like EDC, VCM has recently been experiencing negative growth at 

a 6.4 percent annual rate over the 1980-82 period. In 1982, VCM output was 

2,907,000 metric tons and was valued at $897.4 million. 

Both the value of output and the value of merchant sales have experienced 

healthy annual advances over the 1970-79 period. Since 1980, however, they 

have been declining at double digit rates. Merchant sales are also declining 

in importance. In 1977, merchant sales accounted for 70 percent of the total 

value of output, while in 1981 they accounted for only 45 percent. 

Tables 1-7 and 1-8 present similar data for PVC. Polyvinyl chloride 

output advanced at a 9.7 percent annual pace over the 1970-74 period, and 

then declined to a 6.8 percent rate. In recent years, it has been declining 
P.9 

TABLE 1-3. OUTPUT, THE VALUE OF OUTPUT, AND THE VALUE OF MERCHANT SALES 

OF ETHYLENE DICHLORIDE, 1970-8112 

Year 

1981 

1980 

1979 

1978 

1977 

1976 

1975 

1974 

1973 

1972 

1971 

1970 

Output 

(Thousands of 

Metric Tons)3 

4,523 

5,038 

5,349 

4,989 

4,987 

3,647 

3,618 

4,156 

4,214 

3,541 

3.428 

3,383 

Value 

(Mi 

of 

$ 

1 

1 

of Output 

11 Ions 

Dollars) 

797.9 

,110.9 

,129.4 

880.1 

879.7 

643.3 

638.2 

458.2 

278.8 

234.2 

226.8 

223.8 

Value of 

Merchant Sales 

(Millions 

of Dollars) 

$ 68.7 

114.2 

151.2 

82.6 

123.1 

110.0 

61.7 

68.6 

40.5 

38.9 

36.6 

38.3 

aTo convert from metric tons to short tons multiply by 1.1 
P.10 

TABLE 1-4. AVERAGE ANNUAL GROWTH RATES FOR OUTPUT, THE VALUE OF OUTPUT, 

AND VALUE OF MERCHANT SALES: ETHYLENE DICHLORIDE 

Average Annual Growth Rate 

Time Period 

1980-81 

1975-79 

1970-74 

Output 

-8.0% 

6.4 

9.1 

Val ue of Output 

-14.9% 

21.0 

22.3 

Value of 

Merchant Sales 

-32.1% 

25.9 

16.2 
P.11 

TABLE 1-5. OUTPUT, VALUE OF OUTPUT, AND VALUE OF MERCHANT SALES OF 

VINYL CHLORIDE MONOMER, 1970-198213,14 

Year 

1982 

1981 

1980 

1979 

1978 

1977 

1976 

1975 

1974 

1973 

1972 

1971 

1970 

Output 

(Thousands 

of Metric Tons) 

2,907 

2,983 

2,956 

3,421 

3,148 

2,715 

2,574 

1,903 

2,549 

2,427 

2,308 

1,966 

1,832 

Value of Output 

(Millions 

of Dollars) 

$ 897.4 

1,118.2 

1,173.2 

1,433.2 

902.4 

718.4 

567.6 

419.6 

449.6 

214.1 

203.6 

173.4 

161.6 

Value of 

Merchant Sales 

(Millions 

of Dollars) 

$ 

503.7 

569.5 

728.1 

618.4 

507.5 

314.8 

221.3 

259.6 

147.5 

132.6 

125.3 

107.0 
P.12 

TABLE 1-6. AVERAGE ANNUAL GROWTH RATES FOR OUTPUT, THE VALUE OF OUTPUT, 

AND VALUE OF MERCHANT SALES: VINYL CHLORIDE MONOMER 

Average Annual Growth Rate 

Time Period 

1980-82 

1975-79 

1970-74 

Output 

-6.4% 

8.0 

8.6 

Val ue of Output 

-14.2% 

27.9 

29.6 

Value of 

Merchant Sales 

-16.7% 

25.6 

22.8 

10 

J 
P.13 

TABLE 1-7. OUTPUT, VALUE OF OUTPUT, AND VALUE OF MERCHANT SALES OF 

POLYVINYL CHLORIDE, 1970-198215,16 

Year 

1982 

1981 

1980 

1979 

1978 

1977 

1976 

1975 

1974 

1973 

1972 

1971 

1970 

Output 

(Thousands 

of Metric Tons) 

2,494 

2,600 

2,496 

2,817 

2,666 

2,389 

2,061 

1,676 

2,151 

2,984 

1,960 

1,559 

1,413 

Value of Output 

(Millions 

of Dollars) 

$1,319.8 

1,662.6 

1,761.2 

1,798.8 

1,528.4 

1,369.6 

1,181.6 

886.9 

1,090.9 

689.3 

561.8 

446.9 

405.0 

Value of 

Merchant Sales 

(Millions 

of Dollars) 

$ 

1,463.2 

1,486.1 

1,647.3 

1,322.5 

1,155.3 

925.6 

666.3 

907.8 

597.9 

503.1 

402.7 

383.5 

11 
P.M 

TABLE 1-8. AVERAGE ANNUAL GROWTH RATES FOR OUTPUT, THE VALUE OF OUTPUT, 

AND VALUE OF MERCHANT SALES: POLYVINYL CHLORIDE 

Average Annual Growth Rate 

Time Period 

1980-82 

1975-79 

1970-74 

Output 

-3.8% 

6.8 

9.7 

Val ue of Output 

-9.4% 

11.9 

22.5 

Value of 

Merchant Sales 

-5.7% 

15.2 

20.5 

12 
P.15 

at a 3.8 percent annua-! rate - a rate which is half of the EDC decline and 

about two-thirds of the VCM decline. In 1982, PVC output was 2,494,000 metric 

tons and was valued at $1,319.8 million. 

As was the case for EDC and VCM, the value of output and the value of 

merchant sales of PVC have also experienced healthy growth rates over the 

last decade. They have also experienced similar declines lately, declining 

at 9.4 percent and 5.7 percent annually. The trend in merchant sales of PVC 

as a percentage of the total value of output, however, has been up, rather 

than down, as was the case for VCM. In 1975, merchant sales of PVC were 

75 percent of the total value of output; while by 1981, they were 88 percent 

of the total. 

1.4 CAPACITY UTILIZATION 

Capacity utilization rates for VCM and PVC for the 1975-82 period are 

displayed in Table 1-9. Both VCM and PVC reached a peak in utilization rates 

in 1979 (93.2 percent and 87.4 percent, respectively). Since 1979, utilization 

rates have steadily declined with both VCM and PVC experiencing operating 

rates of approximately 62 percent of capacity. This percentage represents 

the lowest rate in the last 8 years for VCM, and the second lowest rate for 

PVC in the same time span. Given increased foreign competition (see 

Section 1.7), operating rates in the 60 percent and 70 percent range may be 

the new reality. 

1.5 PRICES 

Table 1-10 presents unit prices of ethylene, EDC, vinyl chloride, and 

PVC for the 1970-83 period. Ethylene prices are included since changes in 

ethylene prices start a ripple effect that works its way out to PVC. For 

example, in January 1982 an announced increase in the price of ethylene by 

6.6^/kg and chlorine by l.ltf/kg prompted Dow and PPG to announce a 4.4<£/kg 

18 increase in the price of VCM. In turn, Goodrich announced an 8.8<t/kg hike 

in PVC, but was forced to roll the price back. Now that the market for PVC 

is improving (May 1983), Goodrich will try to make an 17.6tf/kg price hike 

stick.19 

13 
P.16 

TABLE 1-9. CAPACITY UTILIZATION RATES FOR VINYL CHLORIDE MONOMER 

AND POLYVINYL CHLORIDE, 1975-198220 

Year 

Capacity Utilization Rates3 

~VCT— — mr 

1982 62.0 62.2% 

1981 66.2 70.7 

1980 80.4 71.9 

1979 93.2 87.4 

1978 88.5 85.4 

1977 80.8 76.7 

1976 72.2 67.4 

1975 62^7 57.5 

aNo data on capacity utilization rates for 

EDC were available. 

14 
P.17 

TABLE 1-10. UNIT PRICES OF ETHYLENE, ETHYLENE DICHLORIDE, VINYL CHLORIDE, 

AND POLYVINYL CHLORIDE: 1970-198321,22 

(Dollars per kilogram) 

Year 

1983a 

1982 

1981 

1980 

1979 

1978 

1977 

1976 

1975 

1974 

1973 

1972 

1971 

1970 

Ethylene 

0.495b«

c 

0.40 

0.55 

0.48 

0.31 

0.29 

0.26 

0.24 

0.20 

0.18 

0.07 

0.07 

0.07 

0.07 

Ethylene 

Dichloride 

0.336 

0.31 

0.18 

0.22 

0.24 

0.18 

0.18 

0.18 

0.18 

0.11 

0.07 

0.07 

0.07 

0.07 

Vinyl 

Chloride 

0.46 

0.40 

0.37 

0.40 

0.42 

0.29 

0.26 

0.22 

0.22 

0.18 

0.09 

0.09 

0.09 

0.09 

Polyvinyl 

Chloride 

0.62 

0.53 

0.64 

0.70 

0.68 

0.57 

0.57 

0.57 

0.53 

0.51 

0.33 

0.29 

0.29 

0.29 

aPrices as of April 18, 1983. 

b

The price of ethylene on a weight basis is greater 

than the price of EDC or VCM. This is explained by 

the fact that one pound of ethylene produces approximately three and a half pounds of EDC and approximately two pounds of VCM on a stoichiometric basis. 

c

To convert from kilogram to pounds multiply by .454 

15 
P.18 

As Table 1-10 shows, ethylene prices were stable at 6.6<t/kg until the 

oil embargo resulted in a 166 percent increase in the price in 1974. The 

price continued to rise until 1981 when it peaked at 55<£/kg. The current 

ethylene price (April 15, 1983) of 49.5<£/kg is 650 percent higher than it was 

in 1973. 

The EDC price was also stable at 6.6<t/kg prior to embargo. The price 

jumped 66 percent in 1974 and another 60 percent in 1975. It leveled off at 

17.6<£/kg until 1979, when it jumped another 38 percent. The current 

(April 1983) EDC price of 33.6<t/kg is more than 400 percent higher than the 

1973 price. 

Vinyl chloride monomer prices also rose dramatically during 1974, 

increasing 100 percent over the 1973 price. The price increased another 

25 percent in 1975, 20 percent in 1977, and 46 percent in 1979. At 46.2c/kg, 

the current price is about 425 percent higher than it was before the embargo. 

Finally, the PVC price was also relatively stable prior to 1973; then, 

it too increased rapidly. However, the rate of inflation of PVC prices has 

been less dramatic than has been true in the case of ethylene, EDC, or VCM. 

The current (April 1983) price of PVC, 61.6<t/kg, is only 87 percent higher 

than it was in 1973. 

1.6 DEMAND DETERMINANTS 

Table 1-11 presents the percentage distribution of domestic consumption 

of EDC over the 1972-1982 period. The largest use of EDC is in the production 

of VCM, which accounts for almost 90 percent of domestic consumption. The 

share of EDC production devoted to VCM has been rising over time. In 1972, 

it constituted roughly 84 percent of total domestic consumption, whereas it 

constituted almost 90 percent in 1982. The second largest consumer of EDC is 

1,1,1-trichloroethane (1,1,1-TCE), a metal cleaning solvent, which accounts 

for 4 percent of domestic consumption. Its share has also been rising over 

time. Each of the other uses of EDC account for 2 percent of total consumption or less. With the exception of perhaps vinylidene chloride, these other 

uses are declining and offer little prospect for growth. 

16 
P.19 

TABLE 1-11. PERCENTAGE DISTRIBUTION OF DOMESTIC CONSUMPTION OF 

ETHYLENE DICHLORIDE, 1972-198224 

Use 1972 1978 1982 

Vinyl Chloride Monomer 

1,1,1-Tri chloroethane 

Ethyleneamines 

Vinylidene Chloride 

Perchloroethylene 

Trichloroethylene 

Lead Scavenger 

Miscellaneous3 

TOTAL 

83.5% 

3.6 

3.0 

1.9 

2.6 

2.7 

2.6 

0.1 

100.0 

87.1% 

3.8 

2.5 

1.8 

1.7 

1.6 

1.4 

0.1 

100.0 

88.7% 

4.1 

1.9 

2.0 

1.3 

1.3 

0.6 

0.1 

100.0 

3Includes uses as solvent, fumigant, and intermediate for production of polysulflde elastomers. 

17 
P.20 

Net exports account for approximately 4 percent of total EDC output. 

Given the increases that are expected in foreign EDC capacity (see 

Section 1.7), net exports are expected to decline over the next few years. 

Imports have generally been zero, except in the 1974-76 shortage period when 

23 approximately 34,000 metric tons annually were imported. 

Since 97 percent of VCM goes into the production of PVC, the demand for 

VCM parallels the demand for PVC. Relatively small amounts of VCM are 

consumed as a comonomer in the production of polyvinylidene chloride and 

other copolymer resins. Vinyl chloride monomer is also used as an intermediate in the production of 1,1,1-TCE. However, since the VCM is not 

isolated during the process, its volume is not recorded. 

The percentage distribution of the domestic consumption of PVC is 

displayed in Table 1-12. Construction is by far the largest market for PVC, 

accounting for almost 60 percent of the total. One sector, pipe and conduit, 

accounts for almost half of total PVC consumption. In fact, this sector has 

become the decisive factor in determining overall PVC demand. It has increased 

in importance since 1979, as plastic pipe has begun to replace conventional 

materials. Other PVC markets are either mature or highly penetrated markets, 

with the exception of electrical/electronic uses (especially home computers). 

1.7 SUPPLY DETERMINANTS 

The major determinants of the supply of EDC are the price and availability 

of ethylene, chlorine, and energy. As noted in Section 1.9, the future of 

petrochemical production lies with those counties with cheap energy and raw 

materials. Thus, more and more ethylene production will occur in Saudi Arabia, 

Mexico, Libya, Iran, and Indonesia. Nonetheless, over the short term, the 

potential domestic supply of EDC should be approximately 8,868,000 metric 

tons annually over the 1983-1987 period. This is more than sufficient to 

meet the projected 1987 EDC demand of 6,400,000 metric tons (see Section 1.9). 

The major determinant of the supply of VCM is the price and availability 

of EDC. Although the price of EDC will rise once the economy recovers, the 

increase should not jeopardize the supply of VCM. Although B. F. Goodrich 

18 
P.21 

TABLE 1-12. PERCENTAGE DISTRIBUTION OF DOMESTIC CONSUMPTION OF 

POLYVINYL CHLORIDE, 1979 AND 198225 

Use 1979 1982 

Construction 

a. Pipe, conduit, siding, 

and window hardware 

b. Flooring, wall coverings, and pool liners 

Consumer goods 

Electrical/electronic uses 

Packaging 

Transportation 

Home furnishings 

Miscellaneous 

TOTAL 

(46.7) 

(9.5) 

56.2% 

12.5 

9.3 

8.1 

4.0 

3.0 

6.9 

100.0 

(49.1) 

(9.4) 

58.5% 

11.7 

9.0 

7.7 

3.8 

2.8 

6.5 

100.0 

19 
P.22 

postponed a 726,000-metric tons per year facility at Convent, Louisiana, the 

existing capacity of 5,210,000 metric tons should be more than adequate to 

satisfy the projected 1987 VCM demand of 3,413,000 metric tons. 

Finally, the major determinant of the supply of PVC is the price and 

availability of VCM. Even as the price of VCM firms up, this should not 

adversely impact on PVC supply. B. F. Goodrich postponed a 500,000-metric 

ton (annual capacity) PVC expansion indefinitely, but the current capacity of 

4,517,000 metric tons will be sufficient to meet the projected 1987 PVC 

demand of 3,214,000 metric tons. 

1.8 FOREIGN COMPETITION 

At present, the United States is a net exporter of EDC with gross 

exports running about 4 percent of production and gross imports of zero in 

most years. The U. S. is also a net exporter of VCM. Gross exports average 

between 5 and 8 percent of VCM production, but industry experts expect 

?6 

exports to decline to less than 5 percent in the next few years. Imports 

of VCM run approximately 2 percent of production, mostly from Canada and 

Mexico. With respect to PVC, exports are approximately 5 percent of production, and little growth is expected in light of the expected increase in 

foreign capacity. 

Foreign competition should intensify in the near future in light of the 

following developments: 

§ Production of petrochemicals and plastics will occur increasingly 

in those counties with cheap energy and cheap raw materials. 

Countries such as Canada, Mexico, Indonesia, Libya, Saudi Arabia, 

and Iran are undertaking plans to expand ethylene capacity by 

14 billion pounds annually (635,000 metric tons) by 1986. This 

new capacity will make upstream processing of VCM and PVC possible. 

By the year 2000, the U. S. could very well be a net importer of 

27 ethylene derivatives. 

• Imperial Chemical Industries (ICI) and Marley, Ltd., plan to merge 

subsidiaries which process PVC. The goal of the merger, according 

20 
P.23 

to ICI, is the formation of a United Kingdom-based PVC processing 

business that will be fully competitive with foreign and domestic 

28 suppliers. 

• South Korea is building a PVC plant that is expected to be 

29 operational in mid-1984. 

30 

• Mexico expects to more than double its PVC capacity by 1984. 

• Canada's status as a net PVC importer was reversed in 1980 with 

the addition of 400 million Ibs/yr (182,000 metric tons) capacity 

due to an expansion by B. F. Goodrich Canada, Ltd., and to a new 

plant by Diamond Shamrock/Alberta Gas. Production is expected to 

double by 1990.31 

• Finally, the retrenching of the European PVC business appears to 

have eased, but no new plants or expansions are scheduled. A 

similar situation exists in Japan - no expansions - yet no more 

shutdowns are expected. 

1.9 ECONOMIC OUTLOOK 

One member of the industry foresees a 7 percent annual growth in demand 

32 for PVC resins between now and the end of the 1980's. The largest advances 

will come in the rigid pipe market, vinyl windows and siding, and personal 

33 computers. Other industry experts expect 4 to 6 percent annual growth. A 

chemical/plastics industry consultant expects growth in the near term to be 

closer to 5 percent, given the uncertainties surrounding possible bans of 

34 plastic pipe in construction. 

If one accepts the 5 percent growth rate in PVC demand as the most 

realistic rate, and if one assumes that the 1983 PVC demand will be approximately 2,644,000 metric tons, then the demand for PVC would be 3,214,000 metric 

35 tons by 1987. This would represent a 79 percent capacity utilization rate, 

assuming capacity remains at the 1983 level of 4,065,300 metric tons. Assuming 

that 97 percent of VCM production is used in the formation of PVC and that 

1.03 units of VCM produce one unit of PVC, then the derived demand for VCM in 

21 
P.24 

1987 would be 3,413,000 metric tons. This would represent a capacity utilization rate of 75 percent. Finally, assuming that 88 percent of EDC is used in 

the manufacture of VCM and that 1.65 units of EDC are required to produce one 

unit of VCM, then the demand for EDC in 1987 would be 6,400,000 metric tons, 

representing 69 percent of nameplate capacity. Thus, no capacity limitations 

should be encountered in the short-run. 

2.0 SOCIO-ECONOMIC IMPACT ASSESSMENT 

2.1 EXECUTIVE ORDER 12291 

The purpose of Section 2.1 is to address those tests of macroeconomic 

impact as presented in Executive Order 12291. Executive Order 12291 stipulates as "major rules" those that are projected to have any of the following 

impacts: 

• An annual effect on the economy of $100 million or more. 

• A major increase in costs or prices for consumers; individual 

industries; Federal, State, or local government agencies; or 

geographic regions. 

t Significant adverse effects on competition, employment, investment, 

productivity, innovation, or on the ability of U. S.-based enterprises to compete with foreign-based enterprises in domestic or 

export markets. 

The annualized control costs associated with each of the revisions to 

the standard under consideration is well below $100 million which is the 

figure used to identify a major rule. No major increases in cost or prices 

is foreseen. 

Most of the industry is concentrated in Louisiana and Texas. However, 

no adverse impacts are expected in either State because all firms are in 

compliance with the existing standard, and because revisions to the standard 

under consideration are administrative only. 

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2.2 REGULATORY FLEXIBILITY 

The RFA of 1980 requires that differential impacts of Federal regulations 

upon small business be identified and analyzed. The RFA stipulates that an 

analysis is required if a substantial number of small businesses will experience significant impacts. Both measures must be met, i.e., substantial 

numbers of small businesses and significant impacts, to require an analysis. 

If either measure is not met, then no analysis is required. The EPA definition 

of a substantial number of small businesses in an industry is 20 percent. 

The EPA definition of significant impact involves three tests, as follows: 

(1) prices for small entities rise 5 percent or more, assuming costs are not 

passed onto consumers; or (2) annualized investment costs for pollution 

control are greater than 20 percent of total capital spending; or (3) costs 

as a percent of sales for small entities are 10 percent greater than costs as 

a percent of sales for large entities. 

The Small Business Administration's (SBA) definition of a small business 

for Standard Industrial Classification (SIC) Code 2821 (Plastics) is 500 

employees. Table 2-1 presents 1982 employment for EDC producers and miscellaneous sources. Even the firm with the smallest number of employees 

(Vulcan Materials) is well in excess of 500 employees. Therefore, none of 

the companies meets the SBA definition of a small business, and thus no 

regulatory flexibility analysis would be required. 

23 
P.26 

TABLE 2-1. 1982 EMPLOYMENT FOR EDC PRODUCERS AND MISCELLANEOUS SOURCES 

Producer Number of Employees 

Conoco3 41.50036 

Convent Chemicals NA 

37 Diamond Shamrock 10,880 

Dow Chemical 56,OOO38 

39 Ethyl Corporation 14,500 

r 40 

Georgia-Pacific 44,000 

B. H. Goodrich 27.65141 

ICI Americas NA 

Mobay Chemical 6.04042 

PPG 37,OOO43 

e

4 4 

Shell Chemical 36,504e 

45 

Union Carbidef 15,394c 

Vulcan Materials 5,93746 

a1980 employment. 

Not applicable. Wholly-owned subsidiary of B. F. Goodrich. 

c1979 employment. 

Not applicable. Foreign parent corporation. 

eShell Oil Company. 

Includes only the Chemicals and Plastics Division. 

24 
P.27 

3.0 REFERENCES 

1. U. S. Environmental Protection Agency. Vinyl Chloride: A Review of 

National Emission Standards. February 1982. Appendix C. ~~ 

2. SRI International. 1983 Directory of Chemical Procedures, United States, 

p. 584, 964, 965. 

3. U. S. Environmental Protection Agency. Emissions Control Options for 

the Synthetic Organic Chemicals Manufacturing Industry: Ethylene ~ 

Dichloride Project Report. November 1978, p. 11-3. 

4. Stanford Research Institute. Chemical Economics Handbook, p. 651.5031 E. 

5. Chemical Marketing Reporter. June 13, 1983. p. 54. 

6. Chemical Marketing Reporter. June 20, 1983. p. 66. 

7. Chemical Marketing Reporter. June 27, 1983. p. 23. 

8. Reference 1. 

9. Reference 4, p. 580.1882 F. 

10. "PVC: A Plastic in Turmoil." Chemical Engineering. May 17, 1982. 

pp. 49-51. 

11. "Dynamit Nobel Wants Out of Losing PVC Business." Chemical Marketing 

Reporter. July 26, 1982, p. 3 and 28. 

12. U. S. International Trade Commission. Synthetic Organic Chemicals. 

1978-1981. Table 1, p. 200. 

13. Reference 3. 

14. "PVC Success Breeds Problems." Chemical Marketing Reporter. July 5, 

1982. p. 3 and 52. 

15. Reference 3. 

16. Reference 14. 

17. Reference 10. 

18. "Dow, PPG Boost VCM Price." Chemical Marketing Reporter. December 13, 

1982, p. 48. 

19. "Goodrich to Raise Price of PVC Resins Eight Cents a Pound." Wall 

Street Journal. May 18, 1983, p. 4. 

25 
P.28 

20. Reference 14. 

21. Reference 3. 

22. Chemical Marketing Reporter. April 18, 1983, pp. 40, 43, and 45. 

23. Reference 4, p. 651.5031 D. 

24. Reference 4, p. 651.5031 C. 

25. Reference 4, p. 580.1881 E. 

26. Reference 4, p. 580.1881 E. 

27. "1983 HPI Market Forecast." Hydrocarbon Processing. November 1982, 

pp. 38B-38J. 

28. "ICI Plans to Merge PVC Processing Units." Chemical Marketing Reporter. 

February 7, 1983, p. 5 and 12. 

29. "PVC Unit is Slated." Chemical Marketing Reporter. February 28, 1983, 

p. 4. 

30. Reference 10. 

31. Reference 10. 

32. "Plastics Industry Ponders the Possibility of a Turnaround." Chemical 

Marketing Reporter. June 28, 1982, p. 3 and 49. 

33. "Plastics Consumption to Grow." Chemical Marketing Reporter. 

November 1, 1982, p. 7. 

34. Reference 14. 

35. Reference 14. 

36. Conoco, 1980 SEC 10-K Report, p. 1. 

37. Diamond Shamrock, 1982 Annual Report, p. 1. 

38. Dow Chemical, 1979 Annual Report, p. 1. 

39. Dun & Bradstreet Inc., Million Dollar Directory 1983, p. 697. 

40. Georgia-Pacific, 1979 SEC 10-K Report, p. 5. 

41. B. F. Goodrich, 1982 SEC 10-K Report, p. 5. 

26 
P29. 

•r 

42. Reference 39, p. 1483. 

43. PPG, 1982 SEC 10-K Report, p. 3. 

44. Shell Oil Company, 1982 Annual Report, p. 58. 

45. Union Carbide, 1982 SEC 10-K Report, p. 5. 

46. Reference 39, p. 2297. 

27