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INFORMATION MANUAL ON POLLUTION ABATEMENT AND CLEANER TECHNOLOGIES SERIES : IMPACTS/14/2006-07

Cost Benefit Analysis for Changeover of HgwCell to Membrane Cell Technology

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Chlor,wAlkali Industry

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CENTRAL POLLUTION CONTROL BOARD MINISTRY OF ENVIRONMENT & FORESTS


Website: www.cpcb.nic.in e-mail: cpcb@nic.in September, 2006

INFORMATION MANUAL ON POLLUTION ABATEMENT AND CLEANER TECHNOLOGIES SERIES: IMPACTS/14/2006-07

Cost Benefit Analysis for Changeover of Hg-Cell to Membrane Cell Technology

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Chlor=Alkali Industry

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CENTRAL POLLUTION CONTROL BOARD


(Ministry of Environment & Forests, Govt. of India) Parivesh Bhawan, East Arjun Nagar Delhi--110032 Website : www.cpcb.nic.in e-mail : cpcb@nic.in

CPCB 200 Copies, 2006

Published By : Dr. B. Sengupta, Member Secretary, Central Pollution Control Board, Delhi - 32 Printing Supervision & Layout : P.K. Mahendru and Mrs. Anamika Sagar Composing & Laser Typesetting : Mohd. Javed Printed at : DSIDC

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Central Pollution Control Board


(A Govt. of India Organisation) Ministry of Environment & Forests Phone: 22304948/22307233

Dr. V. RAJAGOPALAN, IAS


CHAIRMAN

FOREWORD
Mercury is bio-accumulative, toxic and poses health hazards. In India, one of the industrial sectors using mercury is the chlor-alkali industry which manufactures caustic soda, chlorine and other co-products. Indian Chlor-Alkali industry has converted many existing mercury cell process to Hg-free technology Membrane Cell Process in many plants. In India, still there are plants operating on Hg cell process and the Central Pollution Control Board (CPCB) is pursuing for their early conversion. One of the action points of Corporate Responsibility of Environment Protection (CREP) is the plan for switching over to membrane cell from Hg cell process. The Task Force, constituted by the Ministry of Environment & Forests for implementation of CREP action points, has agreed for conversion by 2012 or earlier.

In order to examine the problems being faced by the chlor-alkali industry in the
conversion process, CPCB had sponsored a study to National Productivity Council (Energy Group), New Delhi on "Cost Benefit Analysis for Changeover of Hg-Cell to Membrane Cell Technology in Chlor-Alkali Industry". The findings of the study establish techno-economic feasibility of such conversion based on IRR estimate considering power, labour, raw material costs & capacity utilisation, etc. The findings also recommend speeding up of the conversion process and that the industry be provided some incentives. The study was coordinated and report finalized by Dr. Inamul Haq, Addl. Director, Shri N.K. Verma, Addl. Director and Dr. B. Sengupta, Member Secretary. The information provided by Alkali Manufacturers Association of India (AMAI) and individual industries for completing the study is acknowledged. Typing assistance was provided by Shri K.P. Rathi, DEO. We hope, this report would be useful to all concerned.

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(Dr. V. Rajagopalan)

'Parivesh Bhawan', C.B.D.-cum-Office Complex, East Arjun Nagar, Delhi-1 10 032 Fax: (011)22304948/22307078 e-mail : cpcb@alpha.nic.in Website : http://www.cpcb.nic.in

CONTENTS
Page No. Executive Summary 1.0 Introduction 1.1 1.2 1.3 1.4 2.0 Mercury Cell Process Membrane Cell Process Diaphragm Process Global Scenario I - VI 1 2 3 3 3 5 5 6 6 7 9 9 10 12 14 15 15 15 17 17 19 22 22 25 26 28 29 30 36 38-45

Background, Objective & Scope of the Study 2.1 2.2 2.3 Background Objective Scope of the Study

3.0 4.0

Emission Standards for Chlor-Alkali Sector Chlor-Alkali Industry India 4.1 4.2 4.3 4.4 4.5 Import/Export of Caustic Soda Status of Mercury Units in India Production Cost of Caustic Soda Price of Caustic Soda International Price of Caustic Soda

5.0

Survey Findings 5.1 5.2 Operating Cost Profile Capacity Utilization of Mercury Cell Plants

6.0

Need for Conversion 6.1 Basis

7.0

Economics of Conversion 7.1 7.2 7.3 7.4 7.5 7.6 Cash Inflow Cash Outflow Calculation of Internal Rate of ReturnScenarios Considered for Conversion Analysis Result Sample Calculation for Internal Rate of Return

8.0

Recommendation

Annexure 1 6

EXECUTIVE SUMMARY
The chlor alkali industry in India is around 60 years old. It began with a modest capacity of a few thousand tonnes per annum and has since grown into a 2.468 million (2004-05) tons per annum capacity industry. The domestic consumption of caustic soda during the year 2004-05 was around 1.856 million tons. In India there are at present 32 units manufacturing caustic soda, chlorine and associated products. The share of membran process in the overall installed capacity of caustic soda production is 75 % (2004-05) and 24 % is constituted by mercury process. The diaphragm process constitutes a very negligible share in the production of caustic soda and chlorine. As per the latest feed back a number of units are in the various stages of conversion/phasing out the mercury process. By the year 2010, when majority of these units expected to be converted to membrane cell technology, the percentage of mercury cell process (installed capacity) will come down to 5% of the total share of caustic soda production capacity. The industry association has agreed .for conversion of Hg cell to membrane cell process by 2012. However, the industry is advancing the conversion process and as reported majority of the existing Hg cell plant would be completed by 2010. The technology share has seen a major shift towards the membrane process during the last twenty years and the migration tend of technology in the country is shown below

Though there are a lot of factors influencing the cost viability of the conversion of technology, few important are the market, capacity utilization, energy price & specific energy consumption. As per the data, caustic soda units are unable to achieve 100 % capacity utilization mainly due to the market constraints. The average capacity utilization by the Indian industries is about 87% (2004-05). The power consumption is higher in mercury cell pltints compared to membrane cell plants (higher by 20 % to 35% depending on the plant) and is one of the driving force for the existing mercury units for considering for conversion. The average share of electrical energy in the total production cost is around 70 %. Hence the cost benefits

for conversion would mainly dependent on the cost of power and the specific electricity consumption of the unit At present except few units the average specific power consumption of the mercury cell units is in the range of 3100 - 3250 KWh/Ton of caustic soda. If the power cost increases more than the inflation rate then the Internal Rate of Return (IRR) for the investment would become more attractive. Apart from the electricity cost other major factors contributing to the production cost is labour cost and maintenance cost. The average manpower cost in a new membrane cell units is less by 85 % compared to mercury cell units whereas the average maintenance cost is higher by 180 % for mercury cell units in comparison with membrane cell units. There are a few mercury plants whose man power and maintenance cost are almost at par with a membrane plants but they are exceptions. Though the cells have to be converted for any changeover, the investment required for a unit for conversion of technology varies on case to case basis based, on rectifier capacity, salt quality, available Chlorine cooling capacity etc. However after discussions with vendors and units, converted, an investment of Rs 600 Million Rupees to Rs 700 Million Rupees is taken for a 100 TPD plant conversion. The internal rate of return (IRR) for an investment of Rs 600 million was calculated to be 23.1 % for a typical 100 TPD plant for one to one conversion with 100 % capacity utilization. All the annual operating costs viz, labor, maintenance, brine treatment, energy etc were considered for evaluating the IRR. Except for a very few mercury cell units which are highly energy efficient (<_ 3000 KWh/Ton), access to cheap source of electricity (<_ Rs 3/KWh) having good maintenance practices and having captive consumption, all other units would have to make some major decision in near future due to non viability of operation & stiff competition. The units are aware about the economic benefits due to the conversion, however are not venturing to invest mainly due to the high price fluctuation of the caustic soda and chlorine as well as financial position of the units etc. The above IRR which is reasonably attractive is achieved in an ideal case suggesting that the industry can go for conversion. However the actual scenario is different in many cases i.e. in terms of reduced capacity utilization, inability of the units to reduce manpower cost, 'fluctuation of product selling price, low electricity tariff etc. These factors can make the returns from investment less attractive. The IRR would become 17.23 % in the above case for 85% capacity utilization (Average capacity utilization-of majority of Mercury cell plant is 85%, 2002-03) of the plant. Along with reduced capacity utilization, if the units are unable to reduce the manpower cost, the IRR would become unattractive. The IRR of the scheme worked out under different conditions are provided in Table:1. In different part of the country, the raw material cost varies and as the energy constitutes the major production cost, IRR for the conversion of technology has been worked out (Table 2) with different energy price on a regional basis considering the average price of the major raw materials in that region.

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Though the present price of Rs 17200 /Ton of electrochemical unit (ECU) is reasonably good, the IRR for the conversion is not highly attractive, mainly due to the low price increase of caustic Soda, as the price is scheduled to increase at average of 2 % (considered after observing the price index of caustic soda in the last 10 years) compared to the inflation rate considered at 5%. In spite of these factors, there are units going ahead with the plans for conversion and the reasons can be attributed to some of the factors like the products are consumed in-house, plan of expansion of the entire company, stringent environmental laws and also due to the long term vision of staying in the market. However some of the units would take more time for actually going ahead with conversion due to the above mentioned reasons. In order to speed up the conversion process it is suggested to provide incentive to these units by means financial support by providing technological up gradation fund/loan at a lower interest. This can be considered in similar line to the scheme introduced by Govt. of India for Textile & Jute Industries, whereby interest reimbursement of 5% p.a. would be made available to borrowers availing assistance under Technology Up gradation Fund. With a 5 % interest reimbursement support from the Government, the IRR for a typical 100 TPD plant conversion (100 % capacity ululation) requiring 600 Million Rupees or 700 Million Rupees would be 26.27 % and 19.84 % respectively. Along with the interest reimbursement as mentioned, providing 100% depreciation benefits for the capital goods for the new plant could further act as an incentive for conversion for profit making units. In IRR calculation, the site remediation cost is not considered as adequate site specific data on mercury contamination in soil and ground water, quantum of ground water etc are not available. In case of ground water, depending on the level of contamination, treatments like conventional chemical methods followed by activate carbon column or ion exchange has to be done to bring mercury concentration consistent with drinking water standards. In order to determine industry wise cost, separate study may be required. Keeping in view large volume of ground Water required to be treated, the remediation cost would be enormous and if the same is worked out for individual units based on site specific conditions and included in the IRR, the conversion to membrane technology would become attractive. Further it is to be noted that if the ground water is being used for irrigation, there are chances of soil contamination with Hg, which may require soil remediation which is highly expensive option. However, authenticated actual ground water and soil contamination of Hg at near by site are not available, it is suggested to regularly monitor the Hg contamination in ground water, soil and air near to the individual site and to establish the level of contamination for remedial measures. In order to determine such remedial cost industry wise, a separate study is required. The investment for conversion on purely cost economics for the units is a risky proposition and it is difficult to provide a time frame for conversion on cost economics basis. However as the operating - cost is very much on the higher side, most of the mercury units would be finding it very difficult to stay in the market for long. However, a financial incentive would help units planning to

convert for long to speed up The process. It is, therefore, recommended to provide (a) 100% depreciation benefits for the capital goods for plants converting to membrane cell may be provided. This 100% depreciation benefit may also be extended to units which are fully converted to membrane cell technology after implementation date (i.e. after March 2003) of CREP recommendations. An assistance of minimum 5% interest reimbursement in order to facilitate the units to speed-up conversion.

(b)

The schemes may be available till March 2010 to help maximum number of units to take its advantage. The units however have to make the .financial closure for the deal latest by December 2009 to avail the scheme. The above financial incentives along with a very strict environmental norms and monitoring of Hg in groundwater, effluent and air for mercury emission, would help in speeding up the technology conversion process.

1.0 INTRODUCTION
Sodium Hydroxide or caustic soda is an important chemical which is required for various sectors viz, pulp & paper, alumina, soaps & detergents, inorganic, etc. Chlorine and sodium hydroxide are co-products that are produced through electrolysis of common salt in a fibrine solution. About 1.1 tons of sodium hydroxide and 0.028 Tons of Hydrogen is produced for every ton of chlorine produced. The caustic soda is usually sold in the form of liquid (lye with 48 50 % concentration) and in solid form (flakes, prills). The solid form which requires concentration is an expensive product and the users are limited, whereas liquid form is widely used. The largest consumption sector of caustic soda is paper including newsprint followed by viscose and aluminum respectively. The percentage breakup of various caustic soda consuming sectors is depicted in the pie-diagram shown below.

The largest consumption sector of chlorine in India is pulp & paper. The percentage breakup of various chlorine consuming sectors is shown below:

The following three process are used for the production of caustic soda & chlorine. Mercury Cell process Diaphragm Process Membrane Cell process

In India, mercury and membrane cell technology are predominantly used for caustic soda production and share of diaphragm process is negligible. The percentage share of technology in India for the production of caustic soda during the year 2003-04 is depicted below:

1.1

Mercury Cell Process In mercury cell process the electrolysis of brine takes place in main cell with Mercury as cathode and dimensionally stable Titanium anodes. At cathode sodium ions are converted into sodium, which forms an amalgam with mercury. This amalgam is made to react with DM/soft water over graphite in secondary cell (decomposer) to produce sodium Hydroxide at 47 % to 50 % concentration with the evolution of hydrogen. Mercury is pumped back to the cells. Chlorine which is the other byproduct is cooled, dried, compressed and liquefied before storage or sale. Ener Energy Net Electricity Use: 3250 kWh/ton of Caustic Soda & Environmental Facts of Mercury cell process Other Wastes! Effluents Emissions Byproducts Spent graphite from Source: Source: Waste decomposer cells, spent water from Fugitive & caustic filtration cartridges brine pumps, point source from the filtration of caustic brine section, emissions cell wash water, soda solution, spilled (Chlorine, mercury from sumps, and sumps. HCI and mercury cell "butters", brine Mercury) mud, spent H2SO4, ETP sludge, etc.

1.2 Membrane-Cell Process In the membrane process, the anode and cathode section are separated by a cationexchange membrane that selectively transmits sodium ion but suppresses the mitigation of hydroxyl ions from the cathode section into the anode section. Saturated brine is fed into the anode compartment, where chorine gas is evolved at the anode and sodium ions migrate into the cathode section through the membrane. In the cathode section, hydrogen is evolved at the cathode, leaving hydroxyl ions, which together with sodium ions constitute the caustic so da. Energy & Environmental Facts of Membrane ce ll process Energy Emissions Effluents Other Wastes/ [ Byproducts Net Electricity Source: Fugitive Source: Process Scrapped Cell & point source waste water from parts (Used Use: 2400 kWh/ton of emissions C12/H2 handling Membranes, Caustic Soda (Chlorine & HCI) Anodes & section, HCI Cathodes) spent section, ion exchange, waste H2SO4 brine mud etc. wa ter etc. 1.3 Diaphragm Process Diaphragm cells contain a porous diaphragm, which is used to separate two halves of the cell, allow a flow of brine, and to prevent chlorine and hydrogen from mixing. Brine flows continuously into the anode chamber and then through the diaphragm to the cathode. Chlorine gas is formed at the anodes, and sodium hydroxide solution and hydrogen gas are formed directly at the cathode.
Ener y & Envir onmen tal Fac ts of d iaphragm proiis Other Wastes/ Effluents Emissions Energy Byproducts Scrapped Net Electricity Source: Fugitive Source: Wash water diaphragm (lead from chlorine Use: 2550 & point source asbestos) and Cell emissions processing and kWh/ton of parts, spent H2SO 4 (Chlorine, HC ) other section I C austic Soda

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1.4 Global Scenario There are around 500 Chlor alkali industries world wide with an installed capacity of around 58 million tons of caustic soda production. USA is the largest producer of caustic soda with an installed capacity of 15.3 million tons closely followed by Western Europe with an installed capacity of 12.5 million tons. The global annual consumption of caustic soda is around 45 million tons and as per one study it is growing at a rate of 3 % per annum.

The technology share for production of caustic/chlorine by various process world over is depicted in the following pie-diagram.

The percentage technology share of the various process in major caustic soda producing countries is as followed: Merc ury ^ 10% 50 % 25 % -% 28% Membrane Diaphra g i 21 % 65% _ 2 0% 4 % 71 % 100% -% 72% -%
th

USA W.Eu rope Brazil Japan India

Others 4% 4% -% % -%
April 2004)

Source: WCC Indian Chlor Alkali Plants Mercury Conference (15-16

There are around 125 Mercury Based Chlor Alkali Plant in the world and Western European Countries with 55 plants (1999) has the maximum number of mercury based plants. The major share of Chlorine production by western European countries is through mercury process. The distribution of chlorine production process in Western European Countries is given in Annexure-2. Through sustained efforts, the mercury cell units in Western European Countries have substantially reduced the mercury emission. The following graphs indicates the mercury emission to air, water and products /Ton of chlorine in European countries.

Source: Mercury Emission from Western Chlor-Alkali Industry, Euro Chlor

From 1977 to 1995 the ch.foralkali industry in the Europe reported decreased emissions of mercury to the environment from 220 tons to 18 tons, a decrease of 92%. The above results were achieved by the European countries by investing more than 800 million ECU for plant sophistication and stricter control. As per Euro Chlor report, a voluntary commitment was made by 28 European chlorine producers using mercury cell to reduce the mercury emission and the salient features are given below
Commitments: No new mercury chlor-alkali plants Mercury cells not to be shipped to third parties A challenging and quantified mercury emissions reduction programme Reporting and auditing of individual plant emissions End of existing mercury plants by 2020 Safe disposal of metallic mercury from shutdown cells

Western European countries, which are having the maximum chlorine production through mercury cell technology, are decommissioning the plants. However the major reasons for the decommissioning is economical. Following table illustrates the decommissioning rate of mercury cell plants in Western European Countries.
Scenario 1982-95 1995- Till date Annual decom m issioning rate 150000 Tons _ 70000 Tons

The list of decommissioned mercury cell units in Western Europe (1986-2002), United States (1989-2002) and Canada (1973 1995) is depicted in Annexure 5(a), 5(b) and 6 respectively.
2.0 BACKGROUND, OBJECTIVE & SCOPE OF THE STUDY 2.1 Background

The chlor alkali industry in India is around 60 years old. !t began with a modest capacity of a few thousand tons per annum and has since grown into a 2.077 million tons per annum (2004-05) capacity industry. As per the information during 2004-05 there were thirteen units in India operating with mercury cell technology and contribute around 24% of the total production. The mercury cell technology process that is more than a century old is currently facing severe pressure from strict environmental regulations as well as from rising cost of energy. In India, last two decade showed very clear shift towards the membrane cell technology mainly due to environmental regylation and energy efficiency. Considering the hazardous nature of. mercury, the government along with industries cooperation made an action points under Corporate Responsibility of Environmental Protection (CREP) for regulation of mercury release. Conversion of Hg cell to membrane cell process is one of the action points and AMAI as 5

member of Task Force has agreed that for conversion of mercury cell to membrane cell technology will be completed by 2012. However, it was felt the lower energy consumption of the membrane cell process itself can be an incentive for Mercury cell units for early conversion in order to be competitive in the market. In this background Central Pollution Control Board has entrusted National Productivity Council the task of conducting a cost benefit analysis for changeover from mercury cell technology to membrane cell technology. 2.2 Objective To conduct in-depth study in (i) caustic soda plants based on mercury cell process, (ii) plants which have already converted from mercury cell process to membrane cell process, and (iii) units which are based on membrane cell technology, for comparative evaluation of energy consumption and cost savings etc. 2.3 Scope of the Study To collect information from all Chlor-alkali units through a detailed questionnaire in consultation with CPCB with an objective to assimilate various details required for comparative assessment of switch over of mercury cell process to membrane cell process. 2. 3. To carry out detailed literature survey through internet to understand the above changeover scenario in other countries. To conduct preliminary field visit (six units) covering two units each from the following categories. Units, operating with membrane cell process. Units operating with mercury cell process. Units which are switched over to membrane cell process from mercury cell process. a. Within the six units where preliminary field visits will be conducted, indepth field study will be taken up in two units under the following categories: One unit, which had already switched over to membrane cell process from mercury cell process. One unit that is going to switch over to membrane cell process from mercury cell process. The field study in the unit which has switched over to membrane cell process will bring out the advantages gained by the unit in terms of resources conservation & environmental benefit etc and also about the

hurdles faced, if any. The field study in the other unit which is in the process of switching over will help to -identify the constraints, cost involved and time required for switching over to the membrane cell process.

5. 6.

Efforts will be made to interact with technology vendors to collect the information available for the above said conservation. Based on findings of the field studies. and vendor interactions, a detailed analysis will be made to establish the economics and time required for technology change over. The payback for technology shift will be established, considering the following: Net energy saving. Cost saving & environmental benefits accrued due to avoidance of mercury sludge disposal requirement. The report will also consider the import duties of Government for investment envisaged for the membrane cell process. Additional Investment to be incurred by the unit to meet the recommended norms as per CREP's action points (Annexure-I) dealing with mercury release.

7.

To conduct preliminary study at few units committed for change over with in two to three years to assess the problems being considered for early changeover to compare with those proposed for changeover at later date.

3.0 EMISSION .STANDARDS FOR CHLOR-ALKALI SECTOR


Various countries have made stringent norms for the consumption and emission of mercury. In Japan, use of mercury has been totally banned since 1984, whereas Mercury consumption in European countries s extremely low in comparison to India. In India commissioning of new mercury plants is totally banned. Comparison of international standards is given in the table:
USA 0.1 gm/MT Refer Annex 4b non Under hazardous category after recovery Germany 0.04 gm/MT Total emission 1.3gm/MT and Recover then BDL Japan Banned China 0.05 mg/I 0.012 gm/m3 India 0.1 gm/MT holder H2 gas stack: 0.2 m /Nm 3 Leached standard mg/I 0.1 at (proposed)

Waste water Air

Brine Sludge

Legislative Measures and/or Voluntary Programme to change over to membrane cell technology for the major Chlorine producing countries are as given

USA

>

W Europe

Japan Brazil

India

No requirement to adopt membrane technology Membrane technology investment are made on economic grounds by private companies Many mercury cell factories have closed. Superceding factories are often located in a new geographic location, owing to economic grounds. (e.g. better proximity to customers) Since 1996, voluntary program by US mercury cell firms to reduce consumption of mercury (70% reduction to date) No legislation/regulation except in Belgium, Netherlands, Sweden which requires phasing out Hg Based Plants by 2010 Voluntary commitments of Euro Chlor to fully change over to membrane cell by 2020, based on `end of economic life' of each plant Voluntary program by EUro Chlor members to reduce mercury emissions and consumption Government requirement to replace 20+ mercury cell factories. T his was completed by 1986 y No new plant or expansion can be based on mercury or asbestos No legislation to phase out existing mercury cell plants Voluntary program by Abiclor members to reduce emissions and consumption No new plant or expansion based on mercury cell Voluntary commitment to phase out/change over latest by 2012 , many plants planning to change over before 2012
-

Country USA

Legislative Max 2300 gms/day to atmosphere per plant 1.8 gm/ton caustic capacity to atmosphere. 0.9 gm/ton in Germany 0.04 m /NM 3 0.05 mg/NM 3 in work zone and

Voluntary Norms None

Target New regulation by Dec 2006 2.2 gm/ton caustic production 0.9 gm/ton by 2007

W Europe

0.9 gm/ton by 2007

Brazil India.

None 2 gm/T caustic production by Dec 2005

No Change 2 gm/T caustic production by Dec 2005

Regulations that control releases from environmental sources that contain mercury with respect to Chlor alkali sector (CANADA) & National Emission Standards for Hazardous Air Pollutants: Mercury Emissions From Mercury Cell

Chlor- Alkali Plants (Environmental Protection Agency) is given in Annexure 4a & 4b respectively. 4.0 CHLOR ALKALI INDUSTRY - INDIA The chlor alkali industry in India is around 60 years old. It began with a modest capacity of a few thousand tons per annum and has since grown into a 2.077 million tons per annum (2004-05) capacity industry. The domestic consumption of caustic soda during the year 2004-05 was around 1.856 million tons. The last few years have shown a small but steady increase in the production of caustic soda and the same is shown below:

There are 32units (2004-05) in India manufacturing caustic soda, chlorine and associated products. The membrane process accounts for 76 % of total production and 24 % is constituted by mercury process during the year 2004-05. In India the diaphragm process constitutes a very negligible share in the production of caustic soda and chldrine. 4.1 ImportiExport of Caustic Soda As per the available data (2002-03), the total import of caustic soda is around 118098 Tons. This constitutes around 6.8% of the total domestic consumption during that year. The percentage break up of the total import of caustic is as given below

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The import of caustic soda in India during the last three years is depicted below:

The total export of Caustic soda by Indian companies during the year 2002-03 was 41804 Tons, which includes lye, flakes and prills. As per the available data there is a decreasing trend in the import of caustic soda during the year 2003-04. One of the reasons for this may be the antidumping law against cheap import of caustic soda. 4.2 Status of Mercury Units in India In India at present (2005) thirteen units are using mercury process, which are energy and labor intensive and also it release mercury to the environment. Five of these units are operating both mercury & membrane process for manufacturing caustic soda. Some of these units during the various stages have incorporated membrane process along with the mercury process. The mercury consumption per ton of caustic soda production ranges from 30-85 ton. There has been a steady effort by the plants to reduce the mercury consumption. The performance of Indian units in comparison with the western European countries, which are operating with Hg requires much improvements. The annual mercury consumption of the chior alkali units in Western Europe is around 112 Tons for producing 6.6 million Tons of caustic soda, which include the mercury released to the environment as well as in sludge and the un-accounted losses.

10

As per the latest information, few of the caustic soda plant which are operating with mercury cell technology will be converting to membrane cell technology or will phase out the mercury process within the next four years. The details of such units are given below: S. N.
Name of the Unit Installed capacity Hg ppcess T/Yr 51048 Actual Production* T/Yr _ Remark

_
1. Bihar Caustic & Chemicals Ltd., Dist. P alamau, Jharkaha nd Kanoria Chemicals & Industries Ltd., Sonebhadra, UP The TravancoreCochin Chemicals Ltd., Kochi, Kerala Shriram Fertilisers & Chemicals, Kota, Raja sthan Andhra Sugars, Kovvur, AndhraPradesh

52452

Likely conversion Feb. 2006

2.

52000

47569

3.

33000

33000+

Closed (Aug. 2004) Converted March 2006

4.

49600

45074

5.

46200

25,410

M/s. Standard Alkalies 43,325 _ & Chemical s Ltd . 2,75,173 TO TAL j 2,03,505 * Average of previous few years (through Hg cell process) 6.
----

Hg Cell converted (July 2005) likely conversion of KOH plant by 2006 Closed 2004

Field visit were made to some of the units to understand their decisions for conversion in spite of the stiff market conditions. Shriram Fertilizers & Chemicals has a major plan for expanding its PVC plant and as Chorine is the raw material, the Chlor-Alkali plant has to go for capacity addition. The group has high technical capability and hence they planned for conversion by getting different equipments from various vendors to reduce the initial investment. Travancore Cochin Chemicals Ltd has already converted and for the new capacity addition of 25 TPD, the unit is getting assistance from Kerala State Financial Corporation. The energy & mercury consumption for the Travancore Cochin Chemicals Ltd was also very high. The central pollution control board, India has enforced many standards for reducing the mercury consumption in caustic soda and the latest is the CREP

11

recommendation, which is a voluntary agreement in concurrence with industries and association. The CREP requires several measures to be implemented by the units for reducing the mercury consumption. As per the feedback received from the units through questionnaire, to adhere to the CREP recommendations most of the mercury cell units will have to incur an average maintenance & monitoring expenditure of around Rs 40 Lakhs (cost varies from unit to unit). The total investment so far been made (2005-06) by the Hg cell Chlor-Alkali units under CREP were about 2.5 crores. The existing mercury cell technology based units are under pressure from various environmental monitoring agencies and other organizations. It is highly likely that the environmental laws will be more stringent in near future and the investment required by the units to adhere them will be higher. 4.3 Production Cost of Caustic Soda In case of mercury cells the fixed costs are usually labour and maintenance considering that most plants are fully depreciated by now. Variable costs mainly constitutes of salt, handling of lye and power costs. In case of membrane plants the cost structure is similar except for the steam required for concentrating caustic solution. Energy is the most important component in caustic soda production. On an average the energy cost varies from 63% to 72% of the total production cost. The percentage share of the various components in the production of caustic soda and chlorine for a typical membrane cell and mercury cell technology operating units is given in the following table. Components Power Concentration (49% NaO H ) Con tr act Demand Salt Brine T rea tment Cost Mercury Cost ___ __-Sala r ies & Wag es ___ __ _ M ai ntenanc e M ar keting Slud ge Tr eatment/Disposa l Ov e rheads CREP Recommendation Operating & Mai nt enan ce c ost TOTAL PR ODU CTION COS T _ _Membrane _ M ercu _ Rs/MT NaOH 8400 11375 330 0 1500 175 7 1600 16 00 55 0 450 0 __ ____3 0 ___ 70 0_ 1 3 00 _ 142 5_ 650 430 430 5 0 __ 245 200 __ 300 ^_ 150 0 _ 14 410

t _1906 2 _

12

The percentage share of various components in production for a typical mercury & membrane cell unit is shown below:

The average unit electricity cost in most of the countries, which are major producers of caustic soda, is less than that in India and considering that the electricity accounts for the major share in the total manufacturing cost, the chlor alkali industries in those countries are in a better.footing. It is imperative that to counter the onslaught from abroad, Indian companies have to adopt the latest technology along with highly disciplined operational practices. The electricity price of various countries are presented below (also refer annexure-3 )

13

4.4 Price of Caustic Soda

The caustic soda is one chemical whose price fluctuation is very high. The price can vary from Rs 10,000 Rs 18,000/ Ton. The price index fluctuation of caustic soda and chlorine for a period of 10 years (1994-2003) is depicted in the following graphs. It can be broadly stated that the price of the caustic soda is strongly influenced by chlorine, which is a co product. If the caustic demand grows at the same rate as chlorine, then the price of both the products will be stable. When the chlorine demand is less the caustic production has to be reduced, as chlorine is difficult to store and this situation increases the price of caustic, with reduction in chlorine price.

14

4.5. International Price of Caustic Soda The price of caustic soda also fluctuates highly in the international market. During the last 8 years the price of caustic soda fluctuated from 90 US$ to 260 US$. The graph below represents the average price of the caustic soda during the corresponding years

5.0 SURVEY FINDINGS The survey sample covered sixteen caustic chlorine units across the country, operational during the study period (2004-05), using mercury amalgam as well as membrane process. Among the unit's responded, installed capacities ranges from 10500 TPA to 82800 TPA in mercury cell technology and 41250 TPA to 156950 TPA in membrane cell technology.

5.1

Operating Cost Profile The key constituents considered in operating cost profile for caustic soda manufacturing are overall energy cost, salt, brine treatment chemicals, cell maintenance, cathode, anode, membrane, effluent treatment. (i) Energy Cost

The overall energy cost in Rs/MT is seen to range from 8400 to 14060 and the key variants are process, specific energy consumption, cost of energy. Extent of sourcing from captive/other sources is also a key to lower energy costs in some units. The SEB electricity cost ranges from Rs 1.9 - 5.4/KWh and hence dependence on other sources viz, captive power generation is increasing towards cost effectiveness. Another reason for dependence on captive power generation is the impact of power trips on plant performance. The number of hours lost during 2003-04 is in the range of 30 Hrs to 150 Hrs due to voltage fluctuations/power trip and in one of the unit 361 Hours was lost due to above reason. The impact on pollution level, cell stability etc are felt to be more

15

predominant due to the tripping. The average KVA requirement per TPA capacity is around 0.54 for mercury process and 0.45 for membrane process.
(ii) Salt
.

Salt, a key raw material in caustic soda process is also emerging as a major cost component. On account type of salt source, transportation costs and quality, salt costs have a major bearing on the competitiveness of caustic production and importantly, the resultant pollution levels. The salt cost per MT caustic produced is seen to range from Rs 450 to Rs 1700 in the survey sample, a variation of 375% range, which is very significant. The units in the Western part of the country have significant advantage in terms of low cost of salt.
(iii) Brine treatment Chemicals

Cost of brine treatment chemicals, variant with process and salt quality are seen to range from Rs 440/MT NaOH to Rs 540/MT NaOH, being on higher side for membrane plants.
(iv) Maintenance Cost

The maintenance costs of mercury cell units varies from Rs 520/MT to Rs 2500/MT of caustic and the average cost is around Rs 1400/MT caustic. The average maintenance cost of membrane cell units is Rs 500/MT of Caustic. The costs is inclusive of maintenance cost towards recoating of anode/cathode its maintenance etc
(v) Rectifier Efficiencies

AC to DC conversion efficiency is a crucial stage where energy losses ranging from 5-10% takes place. Design rectifier efficiencies range from 91.6% (old plant) to 98%, while the operational efficiencies are 0.5 to 1.0% less than design as reported. Thyrister converters and rectiformers are both in vogue. Apart from contact cleanliness, cooling, ventilation, the actual loading on the rectifier system is understood to have an influence on the efficiency. Also on load tap changers (OLTC) are being deployed to take care of voltage variations.
(vi) Instrumentation

Metering accuracy is a point of serious concern and there is a prevalence of static (electronic) energy meters as well as the conventional electromagnetic instruments. Accurate testing of rectifier system efficiency with both AC side and DC side measurements is called for at regular intervals.
(vii) Current Efficiencies

Current efficiencies are seen to range from 92% to 96% mainly variant with type of coatings deployed, condition and frequency/periodicity of recoating.

16

(viii) Captive Power Usage Many Chlor Alkali Units are having captive power generation and among the units surveyed, the installed. capacity ranges from 1095 KVA to 70 MVA. With captive power generation, the power cost on an average reduces by 50-60% of SEB cost and hence the industry is benefited by better energy cost effectiveness. 5.2 Capacity Utilization of Mercury Cell Plants The mercury cell unit in the country has a capacity varying from 30 TPD to 240 TPD. Six broad categories covering all the mercury cell units is given below Capacity 30 TPD 40 60 TPD 100 TPD 120 150 TPD 160 170 TPD 225 TPD No of Units 2 4 1 6 2 ^ 1

__

As per the published data of caustic soda production (2002-03), the average
capacity utilization of the units in the above mentioned capacity range is given below:

6.0 NEED FOR CONVERSION Among the various technologies available for commercial production of caustic soda, the most energy efficient one is the membrane cell technology. The world over new capacity addition is based on the membrane technology. The mercury cell technology, which is an alternative technology for production of caustic soda,

17

not encouraged due to the obvious reason of the release of highly toxic mercury to the environment. In this back ground during the last three decades the membrane cell technology slowly gained ground and has now become an established technology. There exist several advantages for membrane cell technology vis - -vis a mercury cell technology and some of them are as depicted below n/ Highly Energy Efficient No Reduced operating cost due to reduction in chemicals, manpower requirement etc * Higher product purity n/ Reduced cell downtime n Increase in capacity * Avoidance of short-circuiting Avoidance of mercury During the study period in 2004-05 there were thirteen units operating with mercury cell technology. As mentioned earlier the mercury cell unit in the country has a capacity varying from 30 TPD to 240 TPD. The average installed capacity of different mercury cell units are depicted below

18

Most of the units are very old and using vintage technologies for manufacturing of caustic soda. The unit Bihar Caustic & Chemicals Ltd., Jharkhand established in 1984 is the latest mercury based plant in India. As per the available data the age of the existing mercury plants in India are depicted in the following graphs

The mercury-based plants are located in different parts of the country and the breakup along with production capacity is shown below:

The majority of the plants based on mercury cell process are located in Eastern & Southern part of the country.

6.1

Basis
Though in general plant lifetimes can be of the order of > 45 years, predicting the economic viability of chlor alkali plants much beyond 18-20 years is difficult considering the dynamic nature of developments in the chemical industry. Hence to calculate the return of investment an economic life of 18 years is considered for Hg cell plant.

19

6.1.1 Technical Issues Normally the conversion to membrane cell is carried out for the entire cell room instead of the sporadic conversions over a period of time within the cell room. The reasons for that are given below A separate re circulated brine system could be required because even traces of mercury can significantly deter the performance of the membranes. The cell layouts are totally different for membrane and mercury cells, and the power densities and heat loads are also different. This suggests need for a separate power supply system (rectifiers). The mercury cell room layout is designed to enable mercury to be contained. Operating membrane cells within the samo cell room would require some mercury containment activities. This can be done by either retaining the building shell and replacing totally the mercury cells with membrane cells or building a new cell room altogether. The first option depends on the quality of the building structure and the decontamination required prior to installation of membrane cells. In building a completely new cell room either in the same location, will reduce the down time required and the decision will be unit specific. The reuse of the rectifiers, a major cost item, will depend on the type of membrane cell configuration and its power requirements, the rectifier refurbishment options if any, and the age of the rectifier etc. However any savings from the reuse of inefficient rectifiers (the achievable efficiency of new rectifier is around 96%) could potentially be offset to some extent, depending on the circumstances, due to loss of production (including downstream processes) from disruption during changeover. Another factor, which is not considered here is while the conversion has to be done, relocate the factory to a new location to take advantage for the economic factors. This has to be considered keeping in mind the relocation of employees and the cost of erecting and commissioning a new grass root plant that will be higher by around 50 %. It has been observed that there is no major variation in the price of membrane during the last six years. Increased current density reduces capital costs of an installation because the production per unit cell capacity is higher. However there is a trade-off because higher current densities mean higher power consumption, and the unit cost of electricity can be a factor when determining the appropriate tradeoff between capital cost and power consumption.

20

The quality of salt is of utmost importance for caustic soda production using membrane cell technology. The survey revealed that few of the mercury units are using very law quality salts and they will have to change the source of salt when considering the replacement.

6.1.2 Other Issues


The other major issues related to the conversion is given below 1. The price of the caustic soda as mentioned earlier is highly fluctuating. This along with varying price of energy and raw material especially NaCl makes it very difficult for the mercury cell plant operators to make a major decision like the conversion. The good quality salt purchased by units in Eastern Coast is almost three times the cost that is purchased by units in Western Coast. The units before taking a decision for conversion is looking for assured market but unfortunately for the sector there is no such market. With the PVC market not growing as expected and also pressure due to environmental aspects to avoid the usage of Chlorine in some of the important user sectors, the market is really tough. The way out is to have drastic cost cutting measure, improve the product quality and improve the marketing strategies. There are very large capacity caustic soda plants coming up in Middle East. The cost of energy is much cheaper and with latest technology they are at much better footing. Though there exist antidumping law against cheap import, to keep track of imports from various sources will be a difficult task. in that scenario, the mercury cell units especially the smaller units will find it extremely difficult to sustain in the market..
,

2.

3.

4.

When the plant is converted or shut down there is a possibility of release of the mercury to environment and, therefore, very careful planning and execution of mercury removal and disposal is to be carried out. The investment required for converting a typical 100 TPD plant is considered as Rs 600-700 Million, however, it can also be less depending upon the vendor selection, type of the equipments ordered, technical capability of the concerned units etc. Power failure can deteriorate the life of the membrane, while considering the investment the captive power plant cost is not,considered due to the folowings reasons

5.

6.

21

Many mercury plants are already having captive power generation. A 15 MW power plant may require an additional investment of around Rs 450 million
2 Based on an average 1.8 tons mercury in cells for each 1000 tons of chlorine

production capacity (Mercury Cell & Alternative technologies, prepared for European Commission

7.0 ECONOMICS OF CONVERSION The following points illustrates the financial benefits for conversion of a mercury cell unit to a membrane cell unit. 7.1 Cash Inflow

7.1.1 Reduction in energy cost The reduced energy consumption is the most important economic benefit for conversion of mercury cell technology to membrane cell technology. In mercury cell technology, the average specific energy consumption by Indian industries is around 3250 KWh/Ton which is inclusive of auxiliary power consumption. In case of membrane cell technology the average specific energy consumption is around 2400 KWh/Ton. The reduction in specific energy consumption is to the tune of around 850 KWh/Ton, The average electricity cost is around Rs 3.5/ KWh. The reduction in specific electricity cost by going in for membrane process would be around Rs 2975/Ton. However in membrane cell the steam is required for concentrating the caustic lye from 33% to 48%. The average specific steam required for this would be 0.6 Ton/Ton of Caustic. The steam cost (@Rs 550/Ton) would be Rs 330/Ton of Caustic. Hence the reduction in energy cost by converting a mercury cell plant to a membrane cell plant would be around Rs 2645/Ton of Caustic during the first year. There will be an annual increase in specific electricity consumption by the membrane plant to the tune of 40 KWh/Ton from second year till the end of the life of membrane i.e. 4.5 years. Hence by the end of 4.5 year the average reduction in energy cost would be around Rs 2015/Ton of Caustic with out considering the present value of money. 7.1.2 Reduction in maximum demand As per the feed back received the average KVA requirement per TPA capacity is around 0.54 for mercury process and 0.45 for membrane process. The average Contract Maximum Demand (CMD) for a typical 100 TPD mercury cell plant would be around 20 MW and the average CMD for a 100 TPD membrane cell plant would be around 16.5 MW. Considering the average monthly demand charges as Rs 200/KVA, the annual saving G" hieved by surrendering the 22

excess demand would be to the tune of Rs 84 Lakhs. How ever the units whose production is increased after the conversion and the units which rely on 100% captive power generation, the above advantage cannot be realized. 7.1.3 Reduction in electrode coating cost In case of membrane plants generally both the anode and cathode needs re coating. The recoating is done by TITANOR Components Limited, Goa and the life of coating is nine years (Nowadays the guaranteed period by the recoating agents are 8 years, however the survey revealed that many units are easily achieving a recoating period of 9 years by proper maintenance). The cost incurred for recoating the electrode is around Rs 25000/r 2 . In case of mercury plants the guaranteed period by the supplier for anode recoating is around 2.2 years, however the average reported figures by the units are 2 years. The cost of the recoatrng is Rs 18000/m 2 . In both the cases the transportation cost are not included and also the units will have a spare electrodes and the production will not be hampered during the period in which one set of electrodes are sent out for re-coating. Though the coating cost per m 2 of electrodes for membrane plants is higher compared to the coating cost of mercury plants, the overall cash out flow on this account by membrane plants is less due to increased coating life. 7.1.4 Reduction in manpower cost The issues related to manpower reduction by the various units under different states is not under the preview of the study. However it is felt appropriate to mention the difference in manpower cost incurred for production of caustic soda by both the technology. As per the feed back received from the user units, the manpower cost required can be reduced by around 40 % from mercury cell technology (based on the financial outflow of the units). However actual manpower required and its cost implications can be ascertained only after conducting a detailed manpower study, which would be unit specific. The manpower cost for a new membrane plant which started its operation with membrane cell technology is around Rs 700/Ton caustic, which includes salary and wages. In case of mercury cell plants the average manpower cost is around Rs 1300/Ton of caustic soda The average percentage of the salary in the total turn over of the company is around 7% and the same is found to be as high as 41% in one of the unit operating with mercury cell technology. The likely reduction in cost due to reduction in manpower by switching over would be around Rs 600/Ton of caustic soda, while accepting the different wage structures prevalent in various units. It has to be thought off redeploying the employees in a productive manner. Further it is suggested that the individual unit may conduct a detailed man power study from a reputed third party to establish the manpower requirement with the new process. Based on the recommendation the actual manpower required can be established.

23

7.1.5 Reduction in maintenance cost

The prevailing maintenance cost of the mercury cell plant is around Rs 1425/Ton of Caustic Soda. In case of membrane plants the average maintenance cost is only around Rs 650/Ton of Caustic Soda.
7.1.6 Reduction in mercury abatement measures

At present the unit operating with mercury cell have following operational & maintenance cost from environmental point of view for reducing the mercury related hazards. 1. 2. 3. 4. Waste Water Treatment Plant for mercury bearing effluents Brine sludge filtration system Hydrogen demercurisation system Mercury bearing sludge Treatment &. Disposal (Stabilization)

Apart from this the unit will incur additional cost for further reducing mercury emission to atmosphere as per the CREP recommendations. The action point under CREP are given below 1. 2. 3. 4. 5. 6. Complete recycle of mercury bearing effluent Treatment of cell room ventilation gas for Mercury De mercurisation of caustic soda Mercury reduction in H2 gas Capping of existing completed disposal site Brine sludge treatment, disposal & water leachable mercury content in brine mud before secure landfill etc

The average operating and monitoring cost incurred under this head would be around Rs 150/Ton of caustic soda. Hence the total operating and maintenance/monitoring cost incurred by the units for controlling the mercury emission control would be around Rs 395/Ton of caustic soda. In case of units operating with membrane cell technology the annual saving incurred by avoiding the operating and maintenance cost of mercury abetment measures would be around Rs 114 Lakhs for a 100 TPD plant.
7.1.7 Miscellaneous cost savings

Apart from the above mentioned recurring benefits there are some minor one i.e. time cost savings while switching over to membrane cell technology which are shown below

24

(a)

Avoidance of new mercury abatement measures

As per the CREP requirements, the units have to incur around Rs 40 Lakhs annually (based on feedback from units and the cost varies from unit to unit) for various mercury abatement measures. If the unit decides for technology change over they can avoid this expenditure.
(b) Selling the mercury, copper/aluminium

A typical 100 TPD plant will have around 60 tons of elemental mercury within. the cells. At present the units purchase the mercury at an average price of around Rs 350-400/Kg. Even a price of Rs 250/kg Hg, while selling 1100 the collected Hg after conversion can fetch for a 100 TPD plant around Rs 150 Lakhs. After proper de mercurisation, there are some equipments/parts which can fetch good value from the market and the prominent one are the copper and aluminum that are used in the plants. There exist a re-melting/recycling market for the above metals. Even by considering the unit receive 60 % of market value of these, the income that can be earned from selling these metals by a 100 TPD plant would be around Rs 45 lakhs. In IRR calculation the cash inflow from selling these were taken in the third year of operation of membrane plants considering the various procedures that may be involved.
7.2 Cash Out Flow

The major cash outflow due to the investment for technology change over are mentioned below
7.2.1 Interest

It is assumed that the unit would have internal funds to provide the advance payment for the technology (i.e 150-200 Million Rupees) and the balance is raised through loans from various lenders. To have corporate loans from financial institutions would be difficult for a few mercury plants as one of criteria for eligibility is that the unit has to show profit for the last three years. Actual rate within the prevailing rate would depend upon creditworthiness of borrower and risk perception. The interest rate considered for finding the IRR is 14 % and the term for loan is 7 years. Though many of the lenders require the repayments on quarterly basis, which of course would be case to case basis depending on the projected cash flow of borrower, in this report annual repayment is considered for simplicity in calculation.

25

7.2.2 Membrane Cost

The membrane is the most important component in a membrane based chlor alkali plant. The most commonly used membrane size by the Indian industries is 2.7 m 2 . The membrane is supplied by either M/s' Dupont or M/s Asahi Kasai, M/s Asahi Glass and Dupont has the major market share in the country. The average cost of the membrane is around US $550/m 2 which can vary marginally depending on the client and order value. At present the customs duty for membrane is 5 %. The membrane deterioration extent can vary depending on brine purity and stability of cell house operations. There is a tendency among some of the units to prolong the use of membrane even after their life span to defer high re-membraning investments at the cost of incremental specific power consumption. The new generation membrane have a guaranteed life of around 4 years (current density of 4.0 kA/m 2 ), however due to better operating & maintenance practice some of the units have achieved 4.5 years with out compromising much on membrane performance. The total cost for replacement of membrane for a 100 TPD plant at the end of 4.5 years would be around Rs 186 Lakhs.

7.3 Calculation of Internal Rate of Return

The conversion project involves cash flows at different point of time and hence simple payback period which does not consider the time value of money is not considered for establishing the cost economics. Hence IRR, which gives the rate of return the investment is expected to yield is considered for evaluating the cost benefits of conversion.
Major Basis/Assumptions for IRR Calculation

The plant is converted from an existing 100 TPD mercury cell plant to a 100 TPD membrane cell plant. The selling price of Electrochemical Unit (ECU) is taken as Rs 17200/Ton and from the past ten years trend, the average annual increase in caustic soda price is considered as 2%, and average annual increase in Chlorine price is considered as 5 %. The selling price of caustic soda is highly fluctuating and market dependent. However the cost index during the past 10 years suggest that average annual increase of price of caustic soda and chlorine are 2% & 5 % respectively. The inflation rate considered is 5 %. The electricity cost of the plant is Rs 3.5 /KWH. In the year 2002-03 the average electricity cost of SEBs of Southern & Eastern India is Rs

3.88/KWh. However considering some of the units are using captive power generation, the cost is taken to Rs 3.5/KWh. The project life is 18 years. The unit has internal resource of 25 % of the total value of the project and the balance is raised through loans. The interest rate for the loan amount is 14 % and the repayment has to be completed within a time frame of 7 years. The repayment is done on annual basis and the payment will be done at the end of each year as the returns from the investment will be received after the end of the year. The total project execution period is 2 years which include floating of the tender, selection of vendor, project execution and commissioning. The electricity consumption by a membrane plant is 2400 KWh/Ton of caustic soda including the auxiliary power consumption. The electricity consumption by a mercury plant is 3250 KWh/Ton of caustic soda including the auxiliary power consumption. The cost incurred for steam which is required for caustic lye concentration is taken as Rs 330/Ton of caustic soda (Rs 550/Ton of steam & 0.6 Ton of steam/Ton of caustic soda) y The market will be available for the converted unit during the projected life of the project. Though the guaranteed membrane life is 4 years due to better operating & maintenance practice, many of the units have extended the membrane life to four & half years with marginal increase in energy consumption. The calculations are based on membrane life of 4.5 years. The recoating of electrode is usually done during the second re-membraning period and recoating period assumed is 9 years. There would be annual incremental energy consumption of 40 kWh/Ton till the end of the life of membranes. The Individual units conversion cost benefits is not considered, as there exist a various cost dynamics involved in the conversion, which are highly unit specific.

27

As it is obvious that the varying cost electricity price and selling price of ECU will effect the IRR, a table depicting the IRR vis a vis the selling price and electricity cost is presented at 7.6.4. 7.4 Scenarios Considered for Conversion The following Scenarios were considered for the conversion of mercury cell plant to a membrane cell plants. To understand the benefits the base capacity of the converted plant is kept as 100 TPD (except scenario #6)of caustic soda. In all scenarios except # 2 it is assumed that the unit would be able to reduce the manpower cost, whereas in scenario #2, the IRR for conversion is worked out with the existing manpower cost. Scenario #1 The plant is converted by changing the cell house and investment required for conversion is Rs 600 Million for a 100 TPD plant. Here the primary brine system is same as that for the existing mercury cell plant. The internal rate of return is established assuming that 100 % capacity utilisation can be achieved. Scenario #2 Everything similar to the first scenario, except the unit operates with the existing manpower cost. Scenario #3 The plant is converted by changing the cell house and Investment required would be same as scenario #1 i.e Rs 600 Million. The internal rate of return is established assuming that 85 i capacity utilisation can only be achieved. Scenario #4 The plant is converted by changing the cell house and replacing existing rectifiers and brine system with new one and investment envisaged is Rs 700 Million for a 100 TPD plant. The internal rate of return is established assuming that 100 % capacity utilisation can be achieved. Scenario #5 The plant is converted similar to Scenario # 4 and the internal rate of return is established assuming that 85 % capacity utilisation can only be achieved. Scenario #6 The plant is converted by changing the cell house and investment required for conversion is Rs 900 Million for a 150 TPD plant. Here the primary brine system is same as that for the existing mercury cell plant. The internal rate of return is established assuming that 100 % capacity utilisation can be achieved.

28

Scenario #7
The plant is converted by changing the cell house and investment required for conversion is Rs 600 Million for a 100 TPD plant. The unit gets an interest reimbursement support 5 %. 7.5 Analysis Result The detailed internal rate of return has been calculated for the various options mentioned in the above chapter and the results are as summarized below S. No 1. 2. IRR Invest Capacity Interest men t Utilisation Scenario # 1 23.10 % 14% 60 100 % Crore Scenario # 2 60 14.93 % 14% 100% Crore I _ _I __ __ _ _ Scenario # 3 60 17.23 % 85% 14% Cro re Scenario # 4 70 16.40% 100% 14% Crore Scenario # 5 70 85% 14% 1 10.12 % Crore 20.94% Scenario # 6 90 14% 100% Crore Scenario # 7 26.27% 60 100% 9 %0 - -- 1 - ---^ Crore _ ^Option Remarks Scheme reasonably Attractiv e Scheme is on the fringe & requires critical analVsis_ is Scheme marlt alit' attractive is Scheme marginally attractive Scheme is not viable Scheme reasonably attractive Scheme reasonably attractive

3. 4. 5. 6. 7.

As depicted above the Internal Rate of Return for Scenario # I and # 6 is

reasonably attractive and Scenario # 3 & # 4 is marginally attractive. Scenario 5 is not attractive and Scenario 2 requires further analysis. The major reason for
reduced attractiveness of the options is as listed below: The uncertain market whereby the price can fluctuate exceptionally and makes it difficult to predict the future profit margin from the project.

The market is very tough and the unit to have 100 % capacity utilization is
a tall order.

Some of the units may find it difficult to reduce the manpower cost and with existing manpower cost, the cost of production would be higher. It has to be noted that schemes with the present ECU price may become
unviable if the units are unable to reduce their existing manpower cost per Ton of Caustic soda & could not achieve 100% capacity utilization.

29

7.6

Sample Calculation for Internal Rate of Return Units Rs/kWh Days TPD TPD -TPD Rs/MT Rs/MT Value 3.5 350 100 88.00 2.20 1000 17200

Power Tariff (Existing) No of Days for Production ProductionJNaO Production (Chlorine) Production (Hydrogen)_____ Cost of NaCl Selling Price of ECU

The calculation shown below for cost benefit is only for the first year of operation of the converted Membrane cell process vis a vis mercury cell operation. 7.6.1.a Mercury Process Units kWh/MTNaOH kWh/MTNaOH_ kWh/MT NaOH Rs/MT NaOH kVA Rs/kVA - Rs/MTNaOH MT/MT NaOH - Rs/MT NaOH Rs/MT NaOH gm/MT NaOH Rs/MT NaOH Rs/MTNaOH Ri/MTNaOH Rs/MTNaOH Rs/MT NaOH Rs/MT NaOH Rs/MT NaOH
Vue

Power Consumption (CellHouse) AC Power Consumption (Auxffla!y_ Total Power Consumption Power Cost ContractDemand Cost of ContractDemand SpecificCostofContract Demand NaCl Consumption NaCl Consumpn Cost Brine Treatment Chemical Cost Mercury Consumption Mercury Cost SalariesandWages MaintenanceCost Marketing _& Related _Expenditure Sludge Treatment/Disposal Cost Overheads CREP Recommendations Operation & Maintenance Cost

_ 3000
250

- 3250
11375 20500 250 1757 1.6-1600 450 - 75 30 1300 1425 - 429 _88 5 300 150.00

30

7.6.1.b Profit Loss Analysis (Mercury Process)


Units i--_ Value `s Rs/M T Na OH 19062.02

Cost of P rodu ct ion

Ann ual Production Cost A nnual Prod u c tion Sa les (NaOH) ^ An nua l Pro duct ion Sales (Chlorine) Annual Producti on Sa les Hydrogen Net P rofit Gross P ro fit afte r_ tax

Rs (Lakhs) R s Lakhs Rs (Lakhs) Rs (Lak hl)

6671.71 3850 2156

12.32
-653.39 -653.39

Rs ( L akhs) E R s (L a khs)

7.6.2.a Membrane Cell Process Value Power Consumption ( Cell House) AC -- kW h / MT NaO H 2150 Power C onsumption Auxilia L __ kWh/MT NaOH 2 50 Total Powe r Consption _ k Wh/ MT N a OH 24 00_ Power Cost Rs/M T N O H 8400 Co ntract Demand ^k VA 17500 Cost of Contract De m and A Rs/kV 250 Specific Cos t of Contract Dem an d R s/MT NaOH 1500 ^ NaC l Consumption MT/M T NaOH ____ 1. 6 NaCI Consu mpt ion Cost _ 1600 R s/MT Na O^ Brine Treatment Chemical Co st Rs/MT N aOH 5 50 Steam Co nsum pti on MT/M T NaO H 0.6 _ 330 Steam Cos t Rs /MT Na OH Marke ting & Related expenditure 429.88 Rs/MT NaOH 700 Salarie s and Wages RsIMT NaOH 650 R s/MT NaO H Maintena nce C ost Rs/MT NaOH 50 Sludge Treat m ent/ Di posal C ost 200 Rs/M T NaOH Overhe ads
Units
r

31

7.6.2.b

Profit Loss Analysis (Membrane Cell Process)

i
Cos t of Production Annu al Pro ducti on Co st Annual Production Sales (NaOH ) Annual Pro duction Sales (Chlorine) Annu al Production Sales (Hydroge n)
e

Units Rs/M T NaOH R s Lak hs Rs Lakhs Rs (Lakhs) Rs (L akhs)

_ _Val ue 1 4409.88 5 04 3.46 3850.00 215 6.00

974 .86 Rs (L Gross Profit ------- - ---._ _ __------- --- --------akh s) ------ --^ __ 0 .00 _ Rs (Lakh s) Inter est 974.86 Rs (Lakhs) Gr oss Profit B efor e Tax 35 .00 Tax % ------ --------- ------------- ----- -- I 63 3. 66 R s (L akhs) _ iGross Profit after, tax 1287.05 t Rs Lakhs [Vet Prof it A fter Conversion _

CiimiL `fear TRs Crores)

1st Yea r 0 2 nd Yea r --- --- ---0 _ 1 2. 8 7 3rd Yea r_ -_ ----- 13 . 96 4th Yea r____ 1 5.49 5th Year Electrode Coating 17.72 6t h Yea r 7th Year 16. 62_ 18.98 8th Ye Year -- - ----- --T- - -- _ _ Electrode Coating _ 20.83 9t h Yea r 1 9.7 7 1 0t h Ye ar 11th Year 20.13 2 2.60 12th Year t 2 .21 13th Year 1. 0 5 1 4th Ye ar 0 . 32 15th Year - - --_ 0.82 16th Yea r --0.85 17th Year 18th Yea r _ -------^-- --- - 3. 14 --19th Year -5 63 . 2 0th Yea r 8 32
-Y .

32

Cash Outflow Rs e!j TotalInvestment 60 OYear 6.0 9.0 1 Year 2_Year 3.5 3 Year 10.5! 10.5 4 Year 10.5 5 Year Membrane Replacement 6 Year 12.36 7 Year 10.5 8 Year 10.5 9Year 7 Membrane Replacement & Electrode Coating 10 Year 5.36 Membrane Replacement 15 Year 1.86 Total Investment Years Rs(Crores) 60

0 Year lYear 2 Year 3 Year 4 Year 5 Year 6_Year 7 Year 8 Year 9Year 10 Year 15 Year

7.2 9 3.5 10.5 10.5 10.5 12.36 10.5 10.5 7 5.36 1.86

Initial Investment of 10% & Processing & Administration Fees (2 Yo)


(

Membrane Replacement

Membrane Replacement & Electrode Coating Membrane Replacement

The IRR for the above project is 231%.

33

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35

8.0 RECOMMENDATION

In the long run investing in membrane plant would be very wise decision, considering the higher operational cost and environmental issues associated with a mercury plant. In an ideal case IRR is found to be reasonably attractive suggesting that the industry can go for conversion. However the actual scenario is different in many cases i.e. in terms of reduced capacity utilization, inability of the units to reduce manpower cost, fluctuation of product selling price, low electricity tariff etc. These factors can make the returns from investment less attractive. Though some of the units are in various stages of conversion of technology, most of the units are hesitating to make a final decision. n In this scenario an option that can be considered for speeding up the process of conversion is to set up a technology up gradation fund/loan to be given at a lower interest to the unit to facilitate in the conversion. This can be thought about in similar line to the one Govt. of India introduced for Textile & Jute Industries, the salient feature of which are given below Government of India has introduced the Technology Up gradation Fund Scheme (TUFS) for Textile and Jute Industries in April 1999, which will be in operation for a period of five years from April 1999 to March 2004. The Scheme is intended to provide induction of state of art or near state of art technology in Textile Industry.
Promoter's contribution: Minimum 20% of the cost of the Scheme. Rupee Loan: Normal applicable rates prevailing at the time of sanction/execution of loan documents. Ministry of Textiles (MoT), Government of India, has indicated that interest reimbursement of 5% p.a. would be made available to borrowers availing assistance under TUFS. Foreign Currency Loan: As applicable for normal FC Loan. However, MoT, Gol would provide a cover for actual adverse exchange fluctuations not exceeding 5% from the base rate, the base rate being the weighted average rate covering all disbursements of the loan Period of loan: To be linked to repaying capacity, normally not exceeding 10 years (inclusive of moratorium). Security: First charge on fixed assets. Additional security such as personal/other guarantees and/or pledge of promoter's shareholdings might be stipulated by the lender, if considered necessary.

36

Along with the interest reimbursement as mentioned above, 100% depreciation benefits could be provided for the capital goods for the units converted, will further act as an incentive for conversion for profit making units. The 100 % depreciation benefit may also be extended to units, which are fully converted to membrane cell technology after the CREP recommendation implementation date (ie after March 2003) n The schemes may be available till March 2010 to help maximum number of units to take its advantage. The units however have to make the financial closure for the deal latest by December 2009 to avail the scheme. Considering the unpredictable market, unit's performance, its financial position etc., it is difficult to visualize a time frame for the sectoral conversion to membrane technology, purely in terms of the cost economics. However, at present operating costs, most of the mercury units are finding it very difficult to survive in the market for long. In the IRR calculation remediation cost is not considered. If the Hg contamination in ground water, soil and air near to the individual site is monitored regularly and the sources of the contamination are established, remediation can be insisted from such units within a stipulated time frame. Considering the cost involved for remediation, the units are expected to very seriously consider technology conversion. In order to facilitate earlier conversion, it would be worthwhile to consider providing the financial incentive as mentioned earlier, along with very strict environmental norms for groundwater, soil effluent and air for mercury level.

37

Annexure 1

Corporate Responsibility for Environmental Protection (CREP) Recommendations: Chlor-Alkali Industry


1. 2. 3. Complete recycling of mercury bearing effluent by December 2003. Installation of continuous on-line mercury analyzer by June 2003. Treatment of cell-room ventilation gas limit for mercury not to exceed 1 gm/t of product by December 2005. De-mercurisation of caustic soda & limit for mercury in caustic soda at 0.1 gm/t of product by December 2004. Reduction of mercury in H2 gas at 0.5 gm/t by December 2004. Installation of common full-fledged salt washery unit at source by Dec. 2003. Capping of existing completed disposal sites by June 2004 (Action plan to be submitted by June 2003). Installation of mercury distillation units by June 2003 Brine sludge treatment and water leachable mercury content in brine mud at < 0.1 mg/I before disposal in Secured Landfill. Reduction of mercury consumption at < 50 gm/t of product by December 2005 Total mercury release to environment at < 2.0 gm/t of product by December 2005. The mercury cell plants will switch over to membrane cell technology in a time bound manner for which action plan will be prepared by respective plants within six months. Industry to submit action plan covering the pollutional and safety aspects for C1 2 handling to prevent any accident / release of C1 2 , within three month.

4.

5 6.

7.

8. 9.

10.

11.

12.

13.

38

Annexure 2

Distribution of the chlorine production processes in West European countries


Mercury Diaphragm Membra ne O ther processes TOTAL process process process i I West European number capacity Number capacity Number capacity Number capacity capacity countries of inst (000'T) of inst (000'T) of inst (000'T) of inst (000'T) (000'T) AUSTRIA 1 550 55 BELGIUM 5 662 1 1 (HCI) 832 0 120 50
^ ^

FINLAND FRANCE GERMANY GREECE IRELAND ITALY NETHERLANDS NORWAY PORTUGAL SPAIN SWEDEN SWITZERLAND UK

1 7 13 1 9 1 1 9 2 3 ^3

40 874 1762 37 3 3 560 1446

1 2 4 1

75 232 844 6 170 414 50 46 40 90 1 105 1 (Na) 3 (HCI) 20 230

1150 16860 4282 0 370 60 9820 6240 1800 890 801 5 3100 103 5 1181 0

812 70 43 7615 220 1035 856 2 220 1 1 140 130

1 2 2 2 1 1 4

TOTA L

55

624 10 _2496

23 _2247

300_ 11284 0

Source: Integrated Pollution Prevention and Control (IPPC) Reference

Document on Best Available Techniques in the Chlor-Alkali Manufacturing


industry Dec 2001.

39

Annexure 3

Electricity Sales Price in Different Countries Electricity Sales Price in Different Countries (Cent/kWh)
Country

Australia Austria Bejgum Canada Denmark Finland France Germany Greece Irland Italy Japan Mexico Netherland New Zealand Portugai Spain Sweden Switzerland Turkey U.K. U SA Europe OECD

1995 4.6 8.1 68 N.A 6.9 6.3 6.0 10.0 6.2 6.6 93 18.5 3.1 7.5

1996 6.3 8.1 65 N.A. 7.3 6.2 57 8.6 5.9 6.6 101 15.7 3.8 71

Industry 1997 - 1998 N.A. 5.6 8.1 7.8 5.5 N.A. N.A. N.A. 6.4 6.8 5.2 5.0 4.7 4.9 7.2 6.7 5.4 5.0 6.3 6.0 94 95 14.6 N.A. 4.6 4.3 6.2 6.3

1999 N.A. N.A. N.A. N.A. 6.9 4.9 N.A. N.A. N.A. 6.0 95 N.A. 4.1 6.4

2000

N.A. N.A. N.A. N.A. 6.5 4.6 N.A. N.A. N.A. 5.6 78 N.A. 4.2 6.1 3.6 8.0 N.A. N.A. 9.6 7.6 N.A. 4.0 N.A. N.A.

3.8

122 11.2 8.1 8.0 4.5 9 125 12.0 768.5 6.8 6.5 4.7 4.6 71 74 79 7.4

4.4 --

4.0 9.8 6.5 3.4 10.2 7.7 6.5 4.4 6.5 6.8

3.5

3.5

9.4 8.5 N.A. 5.9 N.A. N.A. 10.1 10.2 77.7 6.5 6.9 4.0 3.6 N.A. 6.6 N.A. 5.1

Note. In most of the European countries & USA, the average electricity price is lower than in India

40

Annexure 4a

Regulations that control releases from environmental sources that contain mercury with respect to Chlor alkali sector (CANADA)
The Chlpr-Alkali Mercury Release Regulations under CEPA (1999) limit the release of mercury into ambient air from mercury cell chlor-alkali plants. The regulations prescribe the following release limits: The quantity of mercury that the owner or operator of a plant may release into the ambient air from that plant shall not exceed a) 5 grams per day per 1,000 kilograms of rated capacity, where the source of the mercury is the ventilation gases exhausted from cell rooms; b) 0.1 gram per day per 1,000 kilograms of rated capacity, where the source of the mercury is the hydrogen gas stream originating from denuders, c) 0.1 gram per day per 1 000 kilograms of rated capacity, where the source of the mercury is the ventilation gases exhausted from end boxes; and d) 0.1 gram per day per 1,000 kilograms of rated capacity, where the source of the mercury is the gases exhausted from retorts. 2. No mercury shall be released directly into the ambient air from a tank. 3. Notwithstanding subsection (1), the total amount of mercury that the owner or operator of a plant may release into the ambient air from the sources specified in subsection (1) shall not exceed 1.68 kilograms per day. The Chior-Alkali Mercury Liquid Effluent Regulations under the Fisheries Act limit the level of mercury contained in effluent from Chlor-alkali plants. The regulations state that mercury deposited in effluent in any day must not exceed 0.00250 kilogram per tonne of chlorine times the reference production rate of the particular plant. The regulations include provisions with respect to sampling, testing and reporting.

SOURCE: UNEP Global Mercury Assessment (The above regulations are as of November 2002)

41

Annexure 4(b)

National Emission Standards for Hazardous Air Pollutants: Mercury Emissions From Mercury Cell Chlor- Alkali Plants (Environmental Protection Agency)
Emission Limitations For new or reconstructed mercury cell Chior-alkali production facilities, the final rule prohibits mercury emissions For existing mercury cell Chlor-alkali production facilities with end box ventilation systems, the final rule requires that aggregate mercury emissions from all by-product hydrogen streams and end box ventilation system vents not exceed 0.076 g Hg/Mg C12 for any consecutive 52-week period For existing mercury cell Chlor-alkali production facilities without end box ventilation systems, the final rule requires that mercury emissions from all by-product hydrogen streams not exceed 0.033 g Hg/Mg C12 for any consecutive 52-week period, For new, reconstructed, or existing mercury recovery facilities with oven type mercury thermal recovery units, the final rule requires that total mercury emissions not exceed 23 mg/dscm from each oven type unit vent. For new, reconstructed, or existing mercury recovery facilities with non-oven type mercury thermal recovery units, the limit in the final rule is 4 mg/dscm

Source: Federal Register / Vol. 68, No. 244 / Friday, December 19, 2003 / Rules and Regulations.

42

Annexure 5 (a)

Decommissioned mercury cell Chlor-alkali plants in Western European Countries


-WESTERN EUROPE (1986-2002)DETAILS OF MERCURY CELL CHLOR-ALKALI PLANT CLOSURES OR CONVERSIONS (this list is incomplete)
Closure or conversion years 1986 1990-92 1991 1992 1993 1993 1993 1994 1994 1994 1994 1996?? 1996 1997 1998 1998 1998 1998 1998?? 1999 1999 1999 2000 2001 2002 Est. chlorine Production capacity (tonnes) 85,000 129,000 35,000 45,000 90,000 45,000 24,000 75,000 13,000 115,000 58,000 20,000 40,000 32,000 6,000 25,000 53,000 65,000 40,000 300,000 200,000 60,000 146,000 130,000 157,000

Last owner

Country Sweden Italy Sweden Finland UK Italy Spain UK Sweden Italy Finland Italy Norway Italy Ireland Portugal Austria Germany Germany Germany Germany Germany Netherlands Germany Germany

Location Skoghal Montova Domsja Aetsa Fleetwood Tavazzano Ubeda Elesmere Port Koepmanholmen Gela Kuusankoski Saline di Volterra Sarpsborg Brescia Fermoy Povoa di Sanata ir Hallein Bitterfeld Luelsdorf Dormagen Schkopau Gersthofen Linne Herten Uerdingen Burghausen

Akzo Nobel
Enichem Domsja Finnish Chem ICI Soc. Elettrochim Elec Andaiuza Octel Nob Forss Enichem

Akzo Nobel
Anaconda Borregaard Caffaro Micro-Bio Ltd. Solvay Solvay ECI Vestolit Bayer Dow Clariant Solvay Bayer Wacker

Note: Due to simultaneous modifications and expansions of other Western European operating mercury cell chlor-alkali plants (especially in 1994 and 1997), as well as transfers of mercury to other plants for consumption during routine operartions, the quantities of mercury that reached the international market were considerably less than the full inventories represented by these closures. Source: Euro Chlor (1998, 2001 a, 2001 b, 2001 c, 2002a) personal communication with A. Seys, Euro Chlor.

43

Annexure 5 (b)

Decommissioned mercury cell Chlor-alkali plants in United States


UNITED STATES (1989-2002) DETAILS OF MERCURY CELL CHLOR-ALKALI PLANT CLOSURES OR CONVERSIONS Closure or conversion years
1980-1988 1984-1987 1984-1988 1980-1988 1988 1988 1989-1994 1991 1991 1992 1994 1997-99 1998-99 2000 2002
:

Last owner
LCP Olin Monsanto Pennwalt OxyChem LCP LCP Akzo LCP Olin OxyChem Georgia Pacific Holtrachem Holtrachem Westlake

Est. chlorine Production capacity (tonnes)


85,000 109,000 36,500 n.a. 51,000 n.a. 96,200 70,800 78,900 81,600 33,600 81,600 50,000 76,000 120,000

City
Linden Mcintosh East St. Louis Calvert City Niagara Falls Syracuse Brunswick Lemoyne Moundsville Niagara Falls Mobile Bellingham Acme S. Orrington Calvert City

State
NJ AL IL KY NY NY GA AL WV NY AL WA NC ME KY

Note Some plants have been listed as open in one year and closed in another non-consecutive year, leaving one to assume closure or conversion at some point during that time period. Source Anscombe (2002).
:

44

Annexure 6

Decommissioned mercury cell Chlor-alkali plants in Canada


Plant Location Start Date 1964 1967 1938 1962 1966 1952 1948 1970 1965 1947 1959 1949 1965 1970 1935 1963 Close Date 1978 1978 1979 1975 1973 1977 1973 1973 1973 1976 1969 1990 1991 1992 1995 Operational Years

Prince Albert Pulp Domtar ICI Shawinigan


-

Saskatoon, Sask Lebel- sur-Quevillon, Que Shawinigan, Que Dryden, Ont Thunder Bay, Ont Marathon, Ont Sarnia, Ont Sarnia, Ont Hamilton, Ont Arvida, Que Shawinigan, Que Beauharnois, Que Squamish, BC Abercrombie, NS Cornwall, Ont Dalhousie, NB

14 11 41 13 8 25 25 3 8 29 10 41 26 22 60

G L Forest Products Dow Chemicals American Can Dow Chemical 1 Dow Chemical 111 ICI Hamilton
-

Alcan Shawinigan Chemical PPG Inc. Con Oxy Ltd. Canso Chemicals ICI Cornwall
-

ICI Dalhousie
-

45