A11103 Qbbbe3 NBS SPECIAL PUBLICATION 511-2 U.S. DEPARTMENT OF COMMERCE / National Bureau of Standards rnpRn^JiON IN THE UNITED STATES (Appendix B) A Report to NBS by 3ttpMA CotMmhii«; laboratories ^1 ECONOMIC EFFECTS OF METALLIC CORROSION IN THE UNITED STATES - - - A Three Part Study for Congress - - - NBS Special Publication 511-1. Economic Effects of Metallic Corrosion in the United States. A Report to Congress by the National Bureau of Standards. (Inc- luding Appendix A, Estimate of Uncertainty). SD Stock No. SN-003-003-0 1926-7. Price $2.30. NBS Special Publication 511-2. Economic Effects of Metallic Corrosion in the United States. Appendix B. A Report to NBS by Battelle Columbus Laboratories. SD Stock No. SN-003-003-01927-5. Price $4.25. Order these two publications by SD Stock No. from U.S. Government Printing Office, Superintendent of Documents, Washington, DC 20402 NBS GCR78-122. Battelle Columbus Laboratories Input/Output Tables. Ap- pendix C of "Economic Effects of Metallic Corrosion in the United States". Order this report by PB-279 430 from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161, Price $21.50. OV STANDARDS hlBRA RY viUL 1 q 1978 ECONOMIC EFFECTS OF METALLIC .u^, ^ CORROSION IN THE UNITED STATES-Appendix B Part II A Report to NBS by Battelle Columbus Laboratories J.H. Payer, D.G. Dippold, W.K. Boyd, W.E. Berry, E.W. Brooman, A.R. Buhr, and W.H. Fisher Battelle Columbus Laboratories 505 King Avenue Columbus, Ohio 43201 U.S. DEPARTMENT OF COMMERCE, Juanita M. Kreps, Secretary Dr. Sidney Harman, Under Secretary Jordan J. Baruch, Assistant Secretary for Science and Technology U NATIONAL BUREAU OF STANDARDS, Ernest Ambler, Director • • . Issued May 1978 Library of Congress Catalog Card Number: 78-600033 National Bureau of Standards Special Publication 511-2 Nat. Bur. Stand. (U.S.), Spec. Publ. 5li-2, 249 pages (May 1978) CODEN; XNBSAV U.S. GOVERNMENT PRINTING OFFICE WASHINGTON: 1978 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 SD Stock No. 003-003-01927-5 Price $4.25 (Add 25 percent additional for other than U.S. mailing). FOREWORD From the beginning of formal discussions on this study in the fall of 1976, many people and organizations were contacted. Through them the information necessary to estimate effects of corrosion was gathered. The cooperation from industry, government, professional societies, and trade organizations was excellent. All corrosion effects were expressed as changes to coefficients and elements in the Corrosion Input/Output Model. Supportive material for cost estimates reported here, i.e.. Input /Output Tables, and a compilation of all adjustments for corrosion effects with their cause, are on file at Battelle's Columbus Laboratories and copies were sent to the National Bureau of Standards. An advisory Panel participated throughout the study: Dr. Seymour L. Blum The MITRE Corporation Mr. C. P. Dillon C.P. Dillon and Associates Dr. Mars G. Fontana Materials Technology Institute of the Chemical Process Industries, Inc. Dr. E. W. Haycock Shell Development Corporation Mr. Howard Jelinek/Dr. Richard Priest Sears, Roebuck and Company Mr. Tom F. Kearns Naval Air Systems Command Dr. Tom Passell/Dr. Ed Zebroski Electric Power Research Institute Dr. E. H. Phelps U.S. Steel Corporation Mr . L . C . Rowe General Motors Corporation Their valuable contributions, review, and guidance are gratefully acknowledged Significant contributions were made by Dr . E. B. Berman of the MITRE Corporation, who was an economic consultant to National Bureau of Standards for this study. iii The National Bureau of Standards staff actively participated in many aspects of the study, including the preliminary planning, definitions, and the data gathering efforts. Dr. L. H. Bennett, Dr. J. Kruger, Dr. E. Passaglia, and Dr. H. Yakowitz are specifically acknowledged for their worthy contributions. Also contributing from NBS were J. Ambrose, Y. Bertocci, J. Carroll, B. Christ, E. Escalante, W. Gerhold, A. Melmed, F. Ogburn, R. Parker, C. Reimeinn, A. Ruff, G. Ugiansky and J. Young. iv TABLE OF CONTENTS Page SUMMARY 1 1 INTRODUCTION 4 2 BACKGROUND 6 2.1 Impact of Corrosion on U.S. Economy 6 2.2 Approach to Determination of Costs of Corrosion 7 2.3 Principal Concepts 8 2.3.1 Definition of Cost of Corrosion 8 2.3.2 Elements of the Cost of Corrosion 9 2.3.2.1 Replacement of Equipment and Buildings 9 2.3.2.2 Loss of Product 10 2.3.2.3 Maintenance and Repair 10 2.3.2.4 Excess Capacity 10 2.3.2.5 Redundant Equipment 10 2.3.2.6 Corrosion Control 10 2.3.2.7 Technical Report 10 2.3.2.8 Design 10 2.3.2.9 Insurance 11 2.3.2.10 Parts and Equipment Inventory 11 2.3.3 Avoidable and Unavoidable Costs 11 2.3.4 Best Corrosion Control Practice 12 2.3.5 Input/Output Analysis 12 2.3.6 Direct and Indirect Costs 13 2.3.7 World I, World II, and World III 13 2.3.8 Ex-Ante Approach for Estimation 13 3 METHODOLOGY 14 3.1 Introduction 14 3.2 Assumptions 16 3.2.1 Linearity Assumption 16 3.2.2 Homogeneous Product Assumption . 16 3.2.3 Inelasticity of Substitution Assumption 17 3.2.4 Steady Growth Assumption 17 3.2.5 Average Technology 17 3.2.6 Full Employment Assumption 17 3.3 The "A" Matrix 17 3.3.1 Value Added 18 3.3.2 Social Savings 18 3.3.3 Foreign Trade 19 3.3.4 Disaggregations 20 3.3.5 The Ex Ante Approach 21 3.4 Capital Matrix 22 3.4.1 The General Concept of the Capital Module 22 3.4.2 The B-Matrix 24 3.4.3 The Growth Matrix 25 3.4.4 The Replacement Matrix 26 V TABLE OF CONTENTS (Continued) Page 3.4.5 The Modified Dynamic Inverse 27 3.4.6 The Final Capital Matrices 28 3.5 Final Demands 28 3.5.1 Generation of Stipulated Final Demands (FD) 29 3.5.1.1 Composition of GNP 29 3.5.1.2 The Consumption Module 29 3.5.1.3 Other Final Demands 31 3.5.1.4 Inventory Change 32 3.5.2 Disaggregations 32 3.5.3 Durable Goods 33 3.6 Specific Industry Cost Parameters 34 3.6.1 Direct Cost of Corrosion Per Unit of Output 35 3.6.1.1 Value-Added Adjustments 36 3.6.2 Total Direct Costs of Corrosion 37 3.6.3 Direct and Indirect per Unit Costs of Corrosion .... 38 3.6.4 Total Direct and Indirect Costs of Corrosion 39 4 DETERMINATION OF COSTS OF CORROSION . 40 4.1 Data Gathering Procedure 40 4.2 Procedure for Coefficient Determination 43 4.2.1 Replacement of Equipment or Buildings 43 4.2.2 Loss of Product 46 4.2.3 Maintenance and Repair 46 4.2.3.1 Maintenance and Repair Construction 49 4.2.3.2 Maintenance and Repair Equipment 50 4.2.4 Excess Capacity 53 4.2.5 Redundant Equipment 54 4.2.6 Corrosion Control 54 4.2.6.1 Corrosion Inhibitors and Water Treatment .... 54 4.2.6.2 Organic and Metallic Coatings and Platings ... 55 4.2.6.3 Cathodic Protection 56 4.2.7 Research and Development, Engineering and Other Technical Support 58 4.2.8 Design 60 4.2.9 Insurance 61 4.2.10 Parts and Equipment Inventory 61 4.3 Avoidable Costs of Corrosion-Best Corrosion Control Practice 62 4.3.1 Approach Adopted for Avoidable Costs 63 4.3.2 Treatment of Avoidable Costs in I/O Model 63 4.4 Description of Industry by Industry Coefficient Adjustments 67 4.4.1 Agriculture, Forestry, and Fishery 67 4.4.2 Extraction of Mineral Resources 68 4.4.2.1 Solid Minerals 68 4.4.2.2 Gas and Oil 69 4.4.3 Manufacture of Food, Leather, and Textile Products. 70 4.4.4 Wood and Paper Products 71 vi TABLE OF CONTENTS (Continued) Page 4.4.5 Petroleum and Chemical Products 72 4.4.6 Stone, Clay, and Glass Products 75 4.4.7 Primary Ferrous Metals and Manufacturers 76 4.4.8 Primary Non-Ferrous Metals and Manufacturers 78 4.4.9 Fabricated Metal Products 79 4.4.10 General Machinery and Components 80 4.4.11 Specialized Machinery 81 4.4.12 Motor Vehicles and Miscellaneous Transportation Equipment 82 4.4.13 Aircraft and Air Transportation 84 4.4.14 Water Transportation Services and Equipment 86 4.4.15 Railroad and Equipment Related Services 88 4.4.16 General Electrical Apparatus 90 4.4.17 Special Electrical Apparatus 91 4.4.18 Scientific and Measuring Devices 92 4.4.19 Business Machines and Supplies 93 4.4.20 Miscellaneous Manufacturers 94 4.4.21 Highway Passenger Transport, Motor Freight and Warehousing, and Transportation Services 95 4.4.22 Pipelines 96 4.4.23 Public Utilities 97 4.4.23.1 Telecommunication 97 4.4.23.2 Electric Power 98 4.4.23.3 Gas 98 4.4.23.4 Water and Sanitary Services 99 4.4.24 Construction 100 4.4.25 Trade and Business Services 103 4.4.26 Other Services 104 4.4.27 Government Enterprise-Post Office 104 4.4.28 Final Demands 105 4.4.28.1 Changes in Non-Durable Goods 105 4.4.28.2 Adjustments to Durable Goods 107 5 COSTS OF CORROSION: ANALYSES OF RESULTS 108 5.1 Quantification of Total Costs 108 5.2 Sectoral Attributions of Costs 109 5.2.1 Industry Indicators and Examples of Their Use 109 5.2.2 Analysis of Industry Indicators 115 5.2.3 Costs of Corrosion for Components of Final Demand .