December 6, 2007

MEMORANDUM

SUBJECT:	Economic Impact Analysis for Iron and Steel Foundries Area
Source Rule

FROM:	Tom Walton

Economist

ABCG (C439-02)

TO:		Conrad K. Chin

Engineer, MMG (D243-02)

This document addresses   SEQ CHAPTER \h \r 1  the economic impacts of
Iron and Steel Foundries Area Source Rule.   The economic impact
analysis focuses on changes in market prices and output levels.  If
changes in market prices and output levels in the primary markets are
significant enough, impacts on other markets are also examined.

 Both the magnitude of control costs needed to comply with the rule and
the distribution of these costs among affected facilities can have a
role in determining how the market prices and quantities will change in
response to rule.  In this case, at the facility level, we estimated
revenues based on average prices (see Table 1).

This analysis covers two alternatives.  Under the first alternative, the
threshold for large foundries would be set at 10,000 tpy.  Under the
second alternative, the threshold for large foundries would be set at
20,000 tpy.

For each alternative, the revenues, described above, were combined with
Monte Carlo results facility control cost estimates to estimate
cost-to-sales ratios at a facility level.  Mean estimates are used from
the Monte Carlo results for estimating total annual costs and average
costs-to-sales estimates.  For highest costs-to-sales estimates and
number of firms above 1% and 3% thresholds the mean is provided with the
95% confidence intervals in parentheses immediately after the mean. 
This makes the second number in the parenthesis the number corresponding
to the 97.5 percentile, which should be interpreted as a number that has
only a 2.5 percent chance of being exceeded. 

10,000 tpy threshold

Iron Foundries

For iron foundries, the total annualized costs associated with the
regulation are 6.0 million dollars.  The facility level average
cost-to-sales for iron foundry facilities is 0.2%.  The following table
shows more about the distribution of costs.  The highest cost-to-sales
for an iron foundry facility is 3.4% (2.3% - 4.5%).

	Facilities	cost/sales >= 1%	cost/sales

 >= 3%

Small Entities	188	13 (8-17)	1 (0-3)

All	242	18 (12–23)	1 (0-3)



											Table 1

	Ductile iron castings	Gray iron castings	Malleable iron castings	Steel
castings	Steel investment castings	Iron total	Iron total      Steel
total









	Value of shipments (millions) 2003	       $3,203 	       $3,213 	      
   $145 	       $1,417 	   $1,562 	       $6,561.1 	       $2,979.1 

Shipments for sale (thousands of short tons) 2003	         3,630 	      
  3,160 	              49	           726 	          31 	       6,838.5 	
         756.9 

Price per short ton 2003	         $882 	       $1,017 	       $2,982 	  
    $1,951 	 $51,044 	$959.44 	$3,935.97 

Marshal & Swift 2003 cost index	1123.6







Marshal & Swift 2005 cost index	1244.5







Price 2005 ($/ton)	         $977 	     $1,126 	      $3,303 	 $2,161 	
$56,536 	$1,062.67 	$4,359.48 









	  HYPERLINK "http://www.census.gov/industry/1/ma331a03.pdf" 
http://www.census.gov/industry/1/ma331a03.pdf 







Value of shipments as reported in Table 2.







Shipment quantities taken from Table 3.







Note: for sale quantity for malleable not reported directly





	obtained through subtraction of ductile, grey iron, and





	steel (non-investment) from Iron and steel castings





	(except investment castings) for sale quantities in Table 3.





	For iron foundries, these costs are not projected to impose a
significant impact on a substantial number of small entities.  No
significant market impact is expected because of the small total
national cost and the small cost increase compared to revenues whether
the costs are absorbed or passed on to the buyers. 

 

Steel Foundries

For steel foundries, the total annualized costs associated with the
regulation are 1.2 million dollars.  The steel foundry facility level
average cost-to-sales is 0.05 %.  The following table shows more about
the distribution of costs. The highest cost-to-sales for a steel foundry
facility is 1.6% (0.81% - 1.9%).

	Facilities	cost/sales >= 1%	cost/sales

 >= 3%

Small Entities	132	1 (0-2)	0 (0-0)

All	186	2 (0-5)	0 (0-0)



For steel foundries, these costs are not projected to impose a
significant impact on a substantial number of small entities.  No
significant market impact is expected because of the small total
national cost and the small cost increase compared to revenues whether
the costs are absorbed or passed on to the buyers.

20,000 tpy threshold

Iron Foundries

For iron foundries, the total annualized costs associated with the
regulation are 4.2 million dollars.  The facility level average
cost-to-sales for iron foundry facilities is 0.1%.  The following table
shows more about the distribution of costs.  The highest cost-to-sales
for an iron foundry facility is 2.0% (1.6% - 2.3%).

	Facilities	cost/sales >= 1%	cost/sales

 >= 3%

Small Entities	188	4 (1-6)	0 (0-0)

All	242	9 (5-13)	0 (0-0)



For iron foundries, these costs are not projected to impose a
significant impact on a substantial number of small entities.  No
significant market impact is expected because of the small total
national cost and the small cost increase compared to revenues whether
the costs are absorbed or passed on to the buyers.

 

Steel Foundries

For steel foundries, the total annualized costs associated with the
regulation are 0.63 million dollars.  The steel foundry facility level
average cost-to-sales is 0.03 %.  The following table shows more about
the distribution of costs. The highest cost-to-sales for a steel foundry
facility is 0.5% (0.18% - 0.80%).

	Facilities	cost/sales >= 1%	cost/sales

 >= 3%

Small Entities	132	0 (0-0)	0 (0-0)

All	186	0 (0-0)	0 (0-0)



For steel foundries, these costs are not projected to impose a
significant impact on a substantial number of small entities.  No
significant market impact is expected because of the small total
national cost and the small cost increase compared to revenues whether
the costs are absorbed or passed on to the buyers. 

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