Economic Contributions of U.S. Chlor-Alkali Industry 2021

ECONOMIC CONTRIBUTIONS OF THE U.S. CHLOR-ALKALI INDUSTRY January 2021

Disclaimers This analysis of the implications of an asbestos ban on the chlor-alkali industry and the U.S. economy is being done to inform ACC s regulatory and legislative advocacy in this area. The analysis is based on historic data. No projections are being made in our analyses about conversion to other technologies or future production, which are independent business decisions.

Asbestos Use in Chlor-Alkali Manufacturing U.S. Chlorine Capacity by Technology (2019) Asbestos 78% Diaphragm 50% Membrane 49% Non- asbestos 22% Other 1% Mercury cell 1% Source: Chlorine Institue, ACC

Asbestos Use in Chlor-Alkali Manufacturing Diaphragm technology is the dominant technology in the U.S. and accounts for half of U.S. chlorine capacity. In the electrolysis process, chlorine are caustic soda are co- produced. The diaphragm separates the chlorine and caustic soda into two chambers The diaphragms are made of asbestos and/or fluoropolymer fibers According to the Chlorine Institute, 38% of U.S. chlorine capacity depends on asbestos diaphragm technology

Simplified Chlorine Chemistry Chain

About Chlorine and Caustic Soda Chlorine is a naturally-occurring element that is essential to life. Chlorine is most commonly found as a salt (also known as sodium chloride NaCl) Chlorine is co-produced with caustic soda (also known as sodium hydroxide) via electrolysis of brine There are 3 main technologies to produce chlorine: Membrane Diaphragm Mercury cell

Why is Chlorine Important? Disinfection Drinking water chlorination has been used for 100 years and is the major factor in preventing cholera and other waterborne disease Approximately 98% of public drinking water treatment facilities use some form of chlorine-based disinfectant, according to the American Water Works Association Chlorine disinfectants are also used extensively in food production and healthcare settings to guard against life-threatening germs Chemical and Plastic Manufacturing More than half of chemical products include the chlorine molecule directly or chlorine is used in its synthesis Chlorine is used to create building block chemicals, such as trichloroethylene, phosgene, chlorinated hydrocarbons, hydrogen chloride, and ethylene dichloride These building blocks are used to produce polyurethanes, neoprene, epoxy, polycarbonate, polyvinyl chloride (PVC) which are ultimately used in literally thousands of industrial and consumer products. Chlorine chemistry is essential to 88% of all pharmaceuticals, 20% of all medical plastics, 50% of all disposable medical goods, and 89% of crop protection chemicals Other Uses Paper manufacturing Titanium and magnesium metal production Some indirect applications include the production of wool, flame retardant materials, and special batteries (lithium and zinc) and silicon used in semiconductors and solar panels. Chlorine is also used in the processing of fish, meat, vegetables, and fruit

Why is Caustic Soda Important? Environmental controls (scrubbers) Water treatment (acid neutralizer) Pulp and paper Aluminum production Soaps & detergents Natural gas processing Cotton processing Glass manufacturing Chemical manufacturing Acid neutralizing (pH control), dehydrochlorinating agent, catalyst, source of sodium molecules, intermediates for: coatings, thickeners, gold extraction chemicals, aspirin

Chlorine, Caustic Soda and Derivatives U.S. Production of Chlorine, Caustic Soda and Derivatives, 2019 In 2019, total production of chlorine and caustic soda was $11.9 billion. Including $48.4 billion of derivatives, more than $60.4 billion in basic chemicals and resin output is directly related to chlorine chemistry. Output ($ billions) $11.9 $12.9 $19.7 $15.9 $60.4 Chlorine and Caustic Soda Inorganic Derivatives Organic Derivatives Plastic Resins Total Chemicals and Resins Plastic Products* $71.6 In addition, more than $71 billion in plastic products were produced using chlorine-derived resins *Articles made of PVC or polycarbonate resins (i.e., pipe, vinyl siding, components for bike helmets, etc.)

Upstream Economic Impacts Chlorine, Caustic Soda and Derivatives Production The combined output of chlorine, caustic soda and derivatives production was $60.4 billion in 2019. The industry generated more than 48,000 jobs and $4.8 billion in payroll. Payroll ($ bill) Output ($ bill) Employment Direct Indirect (Supply Chain) Payroll-Induced 48,100 208,200 185,000 $4.8 $15.6 $9.7 $60.4 $82.3 $33.1 Total Including supply chain impacts ($82 billion) and economic activity supported by household spending ($33 billion), nearly $176 billion of output is supported by the economic activity associated with production of chlorine, caustic soda and key derivative products. 441,300 $30.1 $175.7 Analysis of upstream economic impacts was done with the IMPLAN model, using industry spending patterns and output-to-labor ratios. Direct Jobs, wages, and output generated from the manufacturing of insulation. Indirect (Supply Chain) Jobs, wages, and output created by the businesses in the supply chain that sell goods and services to insulation manufacturers (and their suppliers) Payroll-Induced Jobs, wages, and output supported by the household spending of wages and salaries of direct and indirect employees.

End-Use Industries that Depend on Chlor-Alkali Products Shipments ($ bill) Payroll ($ bill) Jobs Basic & Specialty Chemicals Paper Pharmaceuticals Aluminum Soaps & Detergents Plastic Pipe and Plumbing Fixtures Water Treatment Glass Natural Gas Polyurethane Foam Products Crop Protection Silicon/Silicones $441.5 $191.1 $232.4 $41.2 $38.5 $20.9 $12.3 $27.6 $90.6 $11.4 $15.0 $3.9 396,267 364,546 305,921 60,585 54,756 52,088 45,026 45,026 37,878 37,339 12,943 4,880 $36.1 $25.1 $36.6 $4.2 $4.9 $3.0 $2.9 $2.9 $5.6 $1.9 $1.1 $0.4

Potential Impact of Asbestos Ban on Chlor-Alkali Because 38% of the U.S. chlorine capacity depends on access to asbestos, a ban on asbestos could have harmful short-term economic consequences. A curtailment chlorine production from asbestos diaphragm technology will reduce chlorine production by 38%, as there is limited spare capacity. Chlorine trade is limited (less than 2%). As a result, a reduction in U.S. chlorine production cannot be replaced by imports. A reduction in domestic chlorine availability will drive production of derivatives abroad. Imports of chlorine derivatives and products made with them will increase. As China is the largest global producer of chlorine and many derivatives, so it is expected that much of those imports are likely to come from there, further expanding the trade deficit. The U.S. is currently a net exporter of caustic soda. A reduction of 38% of caustic soda production (because it is co-produced with chlorine) will eliminate the current trade surplus and encourage more imports of caustic soda and its derivatives.

Potential Upstream Economic Impacts of Reduced Production of Chlorine, Caustic Soda and Derivatives A 38% reduction current U.S. chlorine and caustic soda production ($4.5 billion) and lost derivatives output ($18.4 billion) could lead to as much as $22.9 billion in direct lost output. Payroll ($ bill) Output ($ bill) Employment Direct Indirect (Supply Chain) Payroll-Induced 18,300 79,100 70,300 $1.8 $5.9 $3.7 $22.9 $31.3 $12.6 Total Including supply chain impacts ($31.3 billion) and economic activity supported by household spending ($12.6 billion), a total of $66.8 billion of output is at risk. 167,700 $11.5 $66.8 Analysis of upstream economic impacts was done with the IMPLAN model, using industry spending patterns and output-to-labor ratios. Direct Jobs, wages, and output generated from the manufacturing of insulation. Indirect (Supply Chain) Jobs, wages, and output created by the businesses in the supply chain that sell goods and services to insulation manufacturers (and their suppliers) Payroll-Induced Jobs, wages, and output supported by the household spending of wages and salaries of direct and indirect employees.

Potential Downstream Economic Impacts of Reduced Production of Chlorine, Caustic Soda and Derivatives Looking downstream, shortages of chlorine, caustic soda and their derivatives could negatively impact supplies of: Water disinfecting chemicals used to treat much of the 322 billion gallons of water per day used in the U.S. (USGS) Disinfection products used in hospitals to reduce the 1.7 million hospital acquired infections that occur each year (CDC) Crop protection chemicals used to produce $190 billion in grain, fruits and vegetables (USDA) Aluminum production at a time when the U.S. is already imposing 10% tariffs on some aluminum imports Paper products, pharmaceuticals, soaps & detergents, natural gas, titanium, coatings, semiconductors, and many of the other supply chains that rely on chlorine, caustic soda, and/or their derivatives.

ACCs Economics and Statistics Department The Economics & Statistics Department provides a full range of statistical and economic advice and services for ACC and its members and other partners. The group works to improve overall ACC advocacy impact by providing statistics on American Chemistry as well as preparing information about the economic value and contributions of American Chemistry to our economy and society. They function as an in-house consultant, providing survey, economic analysis and other statistical expertise, as well as monitoring business conditions and changing industry dynamics. The group also offers extensive industry knowledge, a network of leading academic organizations and think tanks, and a dedication to making analysis relevant and comprehensible to a wide audience. The primary author of this analysis was Martha Moore. Dr. Thomas Kevin Swift Chief Economist and Managing Director kevin_swift@americanchemistry.com Martha Gilchrist Moore Sr. Director Policy Analysis & Economics martha_moore@americanchemistry.com Heather R. Rose-Glowacki Director, Chemical & Industry Dynamics heather_rose@americanchemistry.com Emily Sanchez Director, Surveys & Statistics emily_Sanchez@americanchemistry.com Zahra Saifi Exec. Assistant, Office of CFO and CAO zahra_Saifi@americanchemistry.com