Excepts from "Corrosion Costs and Preventative Measures"
published by CC Technologies Laboratories in Dublin OH (contact Michiel Brongers mbrongers@cctlabs.com for additional information)

SEE www.corrosioncost.com for detailed reports for each industrial sector. Or view techbreif.pdf and preventive.pdf and for aircraft corrosion facts & prevention aircraft.pdf

CORROSION COSTS AND PREVENTIVE STRATEGIES IN THE UNITED STATES Publication No. FHWA-RD-01-156 FHWA Contact: Y. Paul Virmani, HRDI, (202) 493-3052, paul.virmani@fhwa.dot.gov

PURPOSE OF THIS STUDY Previous studies have shown that corrosion is very costly and has a major impact on the economies of industrial nations. A 1975 benchmark study by Battelle-NBS pointed out the severe impact on the U.S. economy. The estimates based on the Battelle-NBS study are that the cost of corrosion in the United States alone was approximately $70 billion, which was 4.2 percent of the gross national product (GNP). A limited study in 1995, updating the 1975 figures estimated the total cost of corrosion at approximately $300 billion. However, that study did little more than apply a multiplication factor to the 1975 cost that was equivalent to the GNP growth from 1975 to 1995.

Through discussions between NACE International (The Corrosion Society) representatives, members of Congress, and the Department of Transportation (DOT), an amendment for the cost of corrosion was included in the Transportation Equity Act for the 21st Century (TEA-21), which was passed by the U.S. legislature in 1998. The amendment requested that a study be conducted in conjunction with an interdisciplinary team of experts from the fields of metallurgy, chemistry, economics, and others, as appropriate. Subsequently, the Federal Highway Administration (FHWA) initiated a systematic study to estimate the total metallic corrosion cost and to provide preventive strategies to minimize the impact of corrosion. In the period from 1999 to 2001, CC Technologies Laboratories, Inc. conducted the study in a cooperative agreement with FHWA and NACE International.

OBJECTIVES AND SCOPE The primary objectives of this study were: 1. Develop an estimate of the total economic impact of metallic corrosion in the United States. 2. Identify national strategies to minimize the impact of corrosion. The work to accomplish these objectives was conducted through the following main activities: " Determination of the cost of corrosion based on corrosion control methods and services. " Determination of the cost of corrosion for specific industry sectors. " Extrapolation of individual sector costs to a national total corrosion cost. " Assessment of barriers to progress and effective implementation of optimized corrosion control practices. " Development of implementation strategies and recommendations for the realization of cost-savings.

APPROACH A critical review of previous national studies was conducted. These studies have formed the basis for much of the current thinking regarding the corrosion costs to the various national economies. The earliest study was reported in 1949 by Uhlig, who estimated the total cost to the economy by summing materials and procedures related to corrosion control. The 1949 Uhlig report, which was the first to draw attention to the economic importance of corrosion, was followed in the 1970s by a number of studies in various countries, such as the United States, the United Kingdom, and Japan. The national study by Japan conducted in 1977 followed the Uhlig methodology. In the United States, Battelle-NBS estimated the total direct cost of corrosion using an economic input/output framework. The input/output method was adopted later by studies in two other nations, namely by Australia in 1983 and Kuwait in 1995. In the United Kingdom, a committee chaired by T.P. Hoar conducted a national study in 1970 using a method where the total cost was estimated by collecting data through interviews and surveys of targeted economic sectors.

Although the efforts of the above-referenced studies ranged from formal and extensive to informal and modest, all studies arrived at estimates of the total annual cost of corrosion that ranged from 1 to 5 percent of each country's GNP.

In the current study, two different approaches were taken to estimate the cost of corrosion. The first approach followed a method where the cost is determined by summing the costs for corrosion control methods and contract services. The costs of materials were obtained from various sources, such as the U.S. Department of Commerce Census Bureau, existing industrial surveys, trade organizations, industry groups, and individual companies. Data on corrosion control services, such as engineering services, research and testing, and education and training, were obtained primarily from trade organizations, educational institutions, and individual experts. These services included only contract services and not service personnel within the owner/operator companies.

The second approach followed a method where the cost of corrosion was first determined for specific industry sectors and then extrapolated to calculate a national total corrosion cost. Data collection for the sector-specific analyses differed significantly from sector to sector, depending on the availability of data and the form in which the data were available. In order to determine the annual corrosion costs for the reference year of 1998, data were obtained for various years in the last decade, but mainly for the years 1996 to 1999. For many of the sectors, the information is public and could be obtained from government reports and other publicly available documents. Discussions with industry experts provided the basis of the industry sector data collection. Corrosion cost information from the private industry sectors was more difficult to obtain. This stemmed from the fact that either the information was not readily available or could not be released because of company policies. In this case, information from publicly available industry records on operation and maintenance cost was obtained and, with the assistance of industry experts, corrosion-related costs were estimated.

The industry sectors for corrosion cost analyses represented approximately 27 percent of the U.S. economy gross domestic product (GDP), and were divided among five sector categories: infrastructure, utilities, transportation, production and manufacturing, and government.

The total cost of corrosion was estimated by determining the percentage of the GDP of those industry sectors for which direct corrosion costs were estimated and extrapolating these numbers to the total U.S. GDP. The direct cost used in this analysis was defined as the cost incurred by owners or operators of the structures, manufacturers of products, and suppliers of services.

The following elements were included in these costs: " Cost of additional or more expensive material used to prevent corrosion damage. " Cost of labor attributed to corrosion management activities. " Cost of the equipment required because of corrosion-related activities. " Loss of revenue due to disruption in supply of product. " Cost of loss of reliability. " Cost of lost capital due to corrosion deterioration.

For all industry sectors studied in this report, the direct corrosion costs were determined. For highway bridges, a life-cycle cost analysis was performed in which both the direct and indirect costs of corrosion were addressed. Indirect costs are incurred by individuals other than the owner or operator of the structure. Measuring and valuing indirect costs are generally complex assessments, and several different methods can be used to evaluate potential indirect costs. Owners or operators can be made to assume the costs through taxation, penalties, litigation, or payment for clean-up of spills. In such cases, these expenses become direct costs. In other cases, costs are assumed by the end-user or the overall economy. In the case of highway bridges, indirect costs, such as traffic delays during bridge maintenance, repair, and rehabilitation, are more difficult to turn over to the owner or operator of the structure. Once assigned a dollar value, the indirect costs are included in the cost of corrosion management of the structure and treated the same way as all other costs.

RESULTS The two methods used in this study to estimate the cost of corrosion to the United States are based on: (1) the cost of corrosion control methods and services, and (2) corrosion costs of specific industry sectors. Past studies have indicated that the second method is more likely to incorporate the majority of the major corrosion-related costs and the first method is likely to miss the significant cost of corrosion management, the cost for direct services related to the owner/operator, and the cost of loss of capital due to corrosion.

Method 1 - Corrosion Control Methods and Services With this method, the annual direct cost of corrosion was estimated by adding the cost of corrosion control methods and services. The corrosion control methods that were considered include protective coatings, corrosion-resistant alloys, corrosion inhibitors, polymers, anodes, cathodic protection, and corrosion control and monitoring equipment. Other contributors to the total annual direct cost that were reviewed in this report are contract services (i.e., non-owner/operator services), corrosion research and development, and education and training.

Summary - A total annual direct cost of corrosion by summing the costs of corrosion control methods and services was estimated at $121 billion, which is 1.38 percent of the U.S. GDP of $8.79 trillion in 1998. The largest portion (88.3 percent) of this cost is the organic coatings group at $107.2 billion. Notably, the categories of Research and Development and Education and Training indicated unfavorably low numbers.

Method 2 - Industry Sector Analysis In this study, the U.S. economy was divided into five sector categories and 26 sectors, as follows:

Infrastructure: Highway Bridges Gas and Liquid Transmission Pipelines Waterways and Ports Hazardous Materials Storage Airports Railroads

Utilities: Gas Distribution Drinking Water and Sewer Systems Electrical Utilities Telecommunications

Transportation: Motor Vehicles Ships Aircraft Railroad Cars Hazardous Materials Transport

Production and Manufacturing: Oil and Gas Exploration and Production Mining Petroleum Refining Chemical, Petrochemical, and Pharmaceutical Pulp and Paper Agricultural Food Processing Electronics Home Appliances

Government: Defense Nuclear Waste Storage

The cost of corrosion was estimated for each of the above categories. When summed, the total annual cost of corrosion for the industry sectors examined was $137.9 billion. The breakdown of these costs among the five sector categories is given in figure 1. Not all industries were examined in this study; therefore, the total economic impact on the U.S. economy would naturally be greater than the $137.9 billion given here.

Summary of Total Cost - The cost of corrosion was estimated for the individual economic sectors discussed above. The total cost due to the impact of corrosion for the analyzed sectors was $137.9 billion per year (see table 1). Since not all economic sectors were examined, the sum of the estimated costs for the analyzed sectors does not represent the total cost of corrosion for the entire U.S. economy. By estimating the percentage of U.S. GDP for the sectors for which corrosion costs were determined and by extrapolating the figures to the entire U.S. economy, a total cost of corrosion of $276 billion was estimated (see figure 2). This value shows that the impact of corrosion is approximately 3.1 percent of the Nation's GDP (see figure 3). This cost is considered to be a conservative estimate since only well-documented costs were used in this study. Other costs of corrosion were discussed (not estimated) in the individual sectors, but were left out due to lack of documentation.

The indirect cost of corrosion is conservatively estimated to be equal to the direct cost; giving a total direct plus indirect cost of $552 billion (i.e., 6 percent of the GDP). Evidence of the large indirect corrosion costs are: (1) lost productivity because of outages, delays, failures, and litigation, (2) taxes and overhead on the cost of the corrosion portion of goods and services, and (3) indirect costs of non-owner/operator activities.

PREVENTIVE STRATEGIES The current study showed that technological changes have provided many new ways to prevent corrosion and the improved use of available corrosion management techniques. However, better corrosion management can be achieved using preventive strategies in non-technical and technical areas. These preventive strategies include: (1) increase awareness of significant corrosion costs and potential cost-savings, (2) change the misconception that nothing can be done about corrosion, (3) change policies, regulations, standards, and management practices to increase corrosion cost-savings through sound corrosion management, (4) improve education and training of staff in the recognition of corrosion control, (5) implement advanced design practices for better corrosion management, (6) develop advanced life prediction and performance assessment methods, and (7) improve corrosion technology through research, development, and implementation.

While corrosion management has improved over the past several decades, the United States is still far from implementing optimal corrosion control practices. There are significant barriers to both the development of advanced technologies for corrosion control and the implementation of those technological advances. In order to realize the savings from reduced costs of corrosion, changes are required in three areas: (1) the policy and management framework for effective corrosion control, (2) the science and technology of corrosion control, and (3) the technology transfer and implementation of effective corrosion control. The policy and management framework is crucial because it governs the identification of priorities, the allocation of resources for technology development, and the operation of the system.

Incorporating the latest corrosion strategies requires changes in industry management and government policies, as well as advances in science and technology. It is necessary to engage a larger constituency comprised of the primary stakeholders, government and industry leaders, the general public, and consumers. A major challenge involves the dissemination of corrosion awareness and expertise that are currently scattered throughout government and industry organizations. In fact, there is no focal point for the effective development, articulation, and delivery of corrosion cost-savings programs.

Therefore, the following recommendations are made: 1. Form a Committee on Corrosion Control and Prevention of the National Research Council. 2. Develop a national focus on corrosion control and prevention. 3. Improve policies and corrosion management. 4. Accomplish technological advances for corrosion-savings. 5. Implement effective corrosion control. Researcher: This study was performed by CC Technologies, 6141 Avery road, Dublin, Ohio 43016, Telephone No. (614) 761-1214. Contract No. DTFH61-99-X-00004. Distribution: This TechBrief is being distributed according to a standard distribution. Direct distribution is being made to the Resource Centers and Divisions. Availability: The publication will be available in March 2002. Copies will be available from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161. A limited number of copies will be available from the R&T Report Center, HRD-11, FHWA, 9701 Philadelphia Court, Unit Q, Lanham, MD 20706, telephone: (301) 577-0818, fax (301) 577-1421. Key Words: Cost of Corrosion, preventive strategies, sector studies, corrosion cost, direct cost, indirect cost, economic analysis, control, management, technology, design, practice, corrosion. Notice: This TechBrief is disseminated under the sponsorship of the Department of Transportation in the interest of information exchange. The TechBrief provides a synopsis of the study.