ANALYSIS OF ALTERNATIVES and SOCIO-ECONOMIC ANALYSIS€¦ · ANALYSIS OF ALTERNATIVES . and . SOCIO-ECONOMIC ANALYSIS . Legal name of applicant(s): Praxair Surface Technologies

ANALYSIS OF ALTERNATIVES

and

SOCIO-ECONOMIC ANALYSIS

Legal name of applicant(s): Praxair Surface Technologies

Submitted by: Praxair Surface Technologies

Substance: Chromium trioxide, EC 215-607-8 and CAS 1333-82-0

Use title: Industrial spraying or brush application of chromium trioxide

mixtures for the coating of metallic articles subject to harsh

environment, to ensure a high temperature corrosion &

oxidation resistance, as well as anti-fouling properties or

lubricity at high temperature, for automotive, aviation,

power generation machinery, Oil and Gas and marine

applications.

Use number: 1

Analysis of Alternatives and Socio-Economic Analysis

Use number: 1 Legal name of the applicant: Praxair Surface Technologies 2

C ON T E NT S

LIST OF ABBREVIATIONS ........................................................................................................ 6

1. SUMMARY .................................................................................................................... 7

2. AIMS AND SCOPE OF THE ANALYSIS ............................................................................. 10

2.1. Sector impacted by this Use and dependence to these mixtures performances ......... 11

2.2. General methodology .................................................................................................... 12

2.2.1. Scope of the AfA ..................................................................................................................... 13

2.3. Actualisation .................................................................................................................. 14

2.3.1. Inflation .................................................................................................................................. 14

2.3.2. Discounting ............................................................................................................................. 15

3. “APPLIED FOR USE” SCENARIO ..................................................................................... 17

3.1. Analysis of substance function ...................................................................................... 17

3.1.1. Praxair Surface Technologies (PST) use different metallic ceramic coating slurries ............... 17

3.1.2. PST’ slurries are made of different components in order to form a ceramic binder matrix ... 19

3.1.3. Chromium trioxide is essential to the coating process ........................................................... 19

3.1.4. PST’s chromium trioxide based products deliver essential functions and performances for

many sectors ................................................................................................................................................ 21

3.2. Market and business trends including the use of the substance .................................. 22

3.2.1. PST coating shops in the EU as third or fourth tier contractors .............................................. 22

3.2.2. Current annual tonnages ........................................................................................................ 25

3.2.3. PST coating shops in the EU: 4 situations, each adapted to their local market...................... 26

3.2.4. Overview of the revenues of Use-1 by market ........................................................................ 28

3.2.5. Overview of sales projections for chromium trioxide mixtures .............................................. 29

3.2.6. Concluding remarks on supply chain and markets considered in the applied for use scenario ..

................................................................................................................................................ 29

3.3. Remaining risk of the « applied for use » scenario ....................................................... 30

3.4. Human health impacts and the monetised damage of the applied for use scenario ... 31

3.4.1. Number of people exposed ..................................................................................................... 31

3.4.2. Medical (cancer) treatment .................................................................................................... 32

3.4.3. Mortality and morbidity ......................................................................................................... 35

3.4.4. Comparative analysis using another method to calculate the cost associated to mortality &

morbidity ................................................................................................................................................ 40

3.4.5. Complementary elements of analysis: values taking into account a 4% discount rate .......... 42

3.5. Environment and man-via-environment impacts and monetised damage of the

“applied for use” scenario ................................................................................................................. 42

3.5.1. Environment impacts and monetised damage of the “applied for use” scenario .................. 42

3.5.2. Man-via-environment impacts and monetised damage of the “applied for use” scenario .... 43

3.6. General conclusion on the impacts and monetised damage of the applied for use

scenario ....................................................................................................................................... 43

4. SELECTION OF THE « NON-USE » SCENARIO .................................................................. 44

4.1. Efforts made to identify alternatives ............................................................................ 44

4.1.1. Research and development .................................................................................................... 44

4.2. Identification of known alternatives ............................................................................. 46



4.3. Assessment of shortlisted alternatives ......................................................................... 48

4.3.1. Alternative 1 : SermeTel CF ..................................................................................................... 48

4.3.2. Alternative 2: Sermaloy J CF ................................................................................................... 53

4.3.3. Alternative 3: 1758 lubricating coating .................................................................................. 54

4.3.4. Availability of the Alternatives ............................................................................................... 54

4.3.5. Conclusions on Alternatives .................................................................................................... 59

4.4. The most likely non-use scenario .................................................................................. 60

5. IMPACTS OF GRANTING AN AUTORISATION ................................................................. 62

5.1. Economic impacts .......................................................................................................... 63

5.1.1. Loss of revenues/Benefits ....................................................................................................... 63

5.1.2. Cost of coating process implementation outside the EU ........................................................ 64

5.2. Social impacts ................................................................................................................ 64

5.2.1. Impact on employment........................................................................................................... 64

5.3. Distributional impacts ................................................................................................... 67

5.3.1. Cost of round trip parts transportation .................................................................................. 67

5.3.2. Impacts on territory Small & Medium Enterprise (SME) ......................................................... 67

5.4. Health impacts outside the EU ...................................................................................... 67

5.5. Uncertainty analysis ...................................................................................................... 67

5.5.1. “Applied for use” scenario ...................................................................................................... 68

5.5.2. “Non-use” scenario ................................................................................................................. 69

5.5.3. Uncertainty analysis - Synthesis ............................................................................................. 70

5.6. General conclusion on the impacts of granting an authorisation ................................. 72

6. CONCLUSIONS ............................................................................................................. 73

6.1. Comparison of the benefits and risks ............................................................................ 73

6.2. AoA-SEA in a nutshell .................................................................................................... 73

6.3. Information for the length of the review period ........................................................... 75

6.4. Substitution effort taken by the applicant if an authorisation is granted..................... 75

7. REFERENCES ................................................................................................................ 76

8. ANNEX – JUSTIFICATION FOR CONFIDENTIAL CLAIMS ................................................... 78



T A B L E S

Table 1. Uses of the authorisation dossier ............................................................................................................ 11 Table 2. Scope of the AfA ...................................................................................................................................... 13 Table 3. Impact period of the AfA ......................................................................................................................... 14 Table 4. Local CPI values taken into account in this dossier ................................................................................. 15 Table 5. Detailed role of hexavalent Chromium at each step of the process ....................................................... 21 Table 6. Overview of performances covered by PRAXAIR mixtures for use-1 by sector of activities ................... 22 Table 7. Quantities of chromium trioxide used for Use-1 in 2014 ........................................................................ 25 Table 8. EU PST shops activities and turnover for Use-1 ...................................................................................... 27 Table 9. Chromium trioxide coating business of PRAXAIR by sector of activity on EU for Use-1 ......................... 28 Table 10. Example of parts coated by PST EU shops ............................................................................................ 29 Table 11. Calculation of excess risk for workers per site for the Use-1 ................................................................ 30 Table 12. Number of workers per site and process .............................................................................................. 32 Table 13. Lung cancer costs in France, Germany and England the first 2 years after the diagnosis .................... 33 Table 14. Net year survival rate after lung cancer diagnosis by country (Allemani et al, 2015) ........................... 33 Table 15. Lung cancer cost per site and per worker during the review period of 7 years .................................... 34 Table 16. Total lung cancer cost per site considering the excess of risk for Use-1 ............................................... 35 Table 17. Years of life lost by site for Use-1 .......................................................................................................... 38 Table 18. Years lived with disability for Use-1 ...................................................................................................... 39 Table 19. Synthesis of YLLs, YLD and monetised damage related to the excess cancer risk associated with lung

cancer for Use-1 .................................................................................................................................................... 40 Table 20. Value of statistical life and willingness to pay to avoid cancer ............................................................. 40 Table 21. Mortality and survival rate of lung cancer in European Union in 2012 ................................................. 41 Table 22. Mortality and morbidity cost per site, uncertainty analysis .................................................................. 42 Table 23. Overall impacts of the “applied for use” scenario, Use-1, complementary analysis taking into account

a 4% discount rate................................................................................................................................................. 42 Table 24. Overall impacts of the "applied for use" scenario ................................................................................. 43 Table 25. Summary of performances covered by current mixtures and alternatives developed ......................... 47 Table 26. Testing of alternatives performed by PST ............................................................................................. 49 Table 27. Comparison of differences in cost application between Cr(VI) free (CF) and Cr(VI) mixtures .............. 50 Table 28. Summary of internal test realised by PST .............................................................................................. 55 Table 29. Duration of qualification, certification & industrialisation process since the beginning of the testing

phase and after the sunset date ........................................................................................................................... 60 Table 30. Annual business and gross operating amount for each site regarding the Use-1 mixtures .................. 63 Table 31. Total gross operating amount per site considering the 7 year review period and a 4% actualisation

rate ........................................................................................................................................................................ 64 Table 32. Loss of employment per site and in a global view considering the business related to Use-1 ............. 65 Table 33. Average individual cost of an unemployed person in UK, 2010. ........................................................... 65 Table 34. Cost per year and for a mean unemployment time of 15.3 months (in 2015 price) per site................ 66 Table 35. Cost of unemployment for each site and in a global approach for the Use-1....................................... 66 Table 36. Uncertainty analysis for mortality and morbidity ................................................................................. 68 Table 37. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ................ 69 Table 38. Gross operating rate per site considering the 7 year review period and a 4% actualisation and an

inflation of 2.7% .................................................................................................................................................... 69 Table 39. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ................ 70 Table 40. Synthesis of the monetised impacts of the “non-use” scenario ........................................................... 72 Table 41. Other impacts of the “non-use” scenario .............................................................................................. 72 Table 42. Benefits ratio calculated for each site and in a global point of view ..................................................... 73



F IG U R E S

Figure 1. SermeTel 725/2F-1 – sealed sacrificial aluminium/ceramic composite, landing gear, engine cases, IGT

disks ...................................................................................................................................................................... 18 Figure 2. Supply chain actor description ............................................................................................................... 23 Figure 3. Supply chain of Praxair Surface Technologies in EU ............................................................................... 24 Figure 4. Typical position of PST in the aerospace industry supply chain ............................................................. 25 Figure 5. Synthesis of the impact categories of the “applied for use” scenario ................................................... 31 Figure 6. Press release on hexavalent Chromium alternatives by PST corporate ................................................. 46 Figure 7. Time line of PST OEMs validation/qualification process ........................................................................ 57 Figure 8. Example of internal SNECMA timeline to substitute a varnish anti-wear .............................................. 58 Figure 9. Time line of engine test for Gas turbines ............................................................................................... 58 Figure 10. Justification timeline Use-1 review period ........................................................................................... 59 Figure 11. Uncertainty analysis for mortality and morbidity ................................................................................ 71 Figure 12. Uncertainty analysis for loss of profits and loss of employment ......................................................... 71



LIST OF ABBREVIATION S

PST Praxair Surface Technologies

OEM Original Equipment Manufacturer

EU European Union

AfA Application for Authorisation

Cr(III) Trivalent chromium

Cr(VI) Hexavalent chromium

AoA Analysis of Alternatives

US United States of America

SEA Socio-Economic Analysis

UK United Kingdom

CPI Consumer Price Index

OECD Organisation for Economic Co-operation and Development

WHO World Health Organisation

IGT Industrial Gas Turbine

EC European Community

ASTM American Society for Testing and Material

NSCLC Non-Small Cell Lung Cancer

IARC International Agency for Research on Cancer

DALY Disability-Adjusted Life Years

M Million (amount/quantity

PV Present Value

YLD Years lived with disability

YLL Years of Life Lost due to premature mortality

INCA Institut National du Cancer (French institute for Cancer)

DW Disability Weight

EU RAR European Union Risk Assessment Report

REACH Registration, Evaluation, Authorization and Restriction of Chemicals

CF Chrome Free

SVHC Substance of Very high Concern

CMR Cancerigen, Mutagen & Reprotoxic

SIDS Screening Information Data Set

ICPS International Centre for Pesticides and Health Risk Prevention

EASA European Aviation Safety Agency

SME Small & Medium Agency



1. SUMMARY

C ON T E XT

Praxair Surface Technologies (PST), a US-based company, is recognised as a

worldwide specialist in the formulation and application of surface treatment

solutions. PST, via its Only Representative, has decided to apply for the authorisation

to use chromium trioxide (EC 215-607-8) contained in anti-corrosion coating

mixtures. Please note that the uses applied for, as defined under this AfA, cover only

the uses made by PST’s own coating shops (see below).

The mixtures impacted by the sunset date of chromium trioxide are based on the

coating ability to sacrificially protect substrates from corrosion. This sacrificial

behavior is provided by the coating conductive aluminium structure, made possible

by a dense dispersion of aluminium particles within a matrix (binder) of chromate-

phosphate ceramic. These solutions are part of proprietary coating systems

(basecoat and/or top coat). The most commonly used basecoat in different

industries is the SermeTel W. Contrary to its OEM (Original Equipment Manufacturer)

customers, PST does not use this basecoat as a standalone surface treatment process

but associated with a topcoat, thus forming a complete coating process.

In practice, only four EU coating shops owned by PST apply PST’s coating systems for

parts subject to harsh environments in the automotive, aviation, power generation

machinery, Oil and Gas and marine sectors. On the other hand, PST also has direct

customers for its coating mixtures. Contrary to PST’s coating shops, the former do

not have access to the full coating systems but only to coating mixtures. Their

particular use is not covered by this AfA.

I DE NT IF I CAT IO N O F AL T E R NAT I V E S

PST is fully aware of CrVI toxicity and has engaged efforts to substitute chromium

trioxide where possible. As a result, three different alternatives have been developed

by PST to replace hexavalent chromium mixtures for the performances described

under Use-1, i.e.:

- Sacrificial Corrosion Protection

- Inhibitive Sealant

- High Temperature Corrosion

- Anti-Fouling

- High Temperature Oxidation & Hot Corrosion

- Lubricity at high temperature

Each alternative being specific to a certain set of performances (i.e. without

competing solutions), their study will be made separately in this document (§ 4.3).

The aim is therefore not to compare them in this AoA, but rather to describe how

they can be deemed technically feasible while not being available yet. The main

argument to support this AfA is indeed the time needed by PST customers to

validate/qualify these alternatives.



It should also be noted that PST is in a particular situation regarding an

application for authorisation: on the one hand, as a non-EU formulator, PST is not

subject to the same type of regulatory pressure than its EU competitors, therefore

leading to possibly different R&D strategies and maturity of alternatives.

Moreover, PST does not need to apply for the formulation step but rather, as a

downstream user, for the work performed by its entities in the EU. Indeed and on

the other hand, PST supplies its coating shops in the EU with its own mixtures.

Consequently, the coating shops have no other choice than working with PST

mixtures, limiting the scope of the analysis of alternatives to what is actually

feasible or available at PST. Any proposal of alternative outside the portfolio of PST

(present and future) is therefore irrelevant and would defeat the very purpose of

having one’s own coating shops.

“ NO N - U SE” SC ENA RI O

The most important factor which seriously impedes the continuity of business

contemplated under Use-1 is:

The time needed by users (OEM = customer of PST) to validate/qualify the new products

The non-use scenario therefore presents, on the one hand, the time and costs

associated with the possible cease of Cr(VI) coating activities in the EU since

customers will not accept downgraded alternatives during the

qualification/certification process and, on the other hand, the potential and costs for

relocation. Assessment is made for each site separately (dependence to chromium

trioxide is variable and it was chosen, for transparency reasons, not to dilute the

economic impacts) and compared to the costs avoided for keeping the substance

and exposing 2 to 26 workers (depending on the size of each site). The global impact

is then discussed.

I M P ACT S OF G RA NT I NG A UT HO RI S AT ION

On the basis of a site by site approach, there is a maximum of 26 operators

dedicated to the chromium-based surface treatment activities. From a combined

prospective, this Use covers 43 operators for a total of 0.40 tpa tonnes per year of

chromium trioxide and $ 4,908,968 (4,418,071 €) of revenues. Stringent standardised

risk management measures are put in place on each site with a consolidated

reporting and follow up to the US. Where possible (for technical, safety and

economic reasons), automatic processes have been put in place to minimise risks as

low as possible.

The risk associated with the substance use is described in the associated CSR and is

limited to the PST workers.

Moreover, considering the risk management improvement to be made on PST’s sites,

the risk presented in the associated CSR appears to be continuously reduced over the

review period.



C ON C L U SI ON S

Monetised impacts of the “applied for use” scenario include costs related to the

medical treatment, morbidity and mortality associated with the excess of risk of

cancer arising from the exposure to chromium trioxide of workers over the review

period.

The total monetised impacts of the “applied for use” scenario amount to € 943.

Monetised impacts of the “non-use” scenario include the loss of profits, and loss of

employment related to the denial of an authorisation.

The total monetised impacts of the “non-use” scenario amount to € 2.506M.

Based upon the present assessment, the socio-economic benefits outweigh the risks

arising from the use of the substance by a factor of approximately 2,658.

Based on the analysis of alternatives (from a qualification process prospective),

and the benefits/risks assessment, it is asked to the Commission to grant a 7-year

review period.



2. AIMS AND SCOPE OF THE ANALYSIS

Praxair Surface Technologies (PST) is a worldwide company specialised in the

formulation and application of surface treatment solutions. PST formulates outside

the EU numerous coating mixtures, including chromium trioxide based mixtures.

These slurries are formulated by PRAXAIR group in the US before being shipped to

the EU. In the EU, PST owns several coating shops which carry out coating activities

for several customers and in particular for several long-term customers, which are

themselves subcontractors of engine manufacturers. PST shops can also be

intermittent subcontractors for the OEM directly. Finally, PST sells part of these

mixtures directly to different customers for internal uses. The latter are however not

covered by this AfA.

The main argument of the analysis will be based on the time for PST customers to

validate/qualify the alternatives developed by PST headquarter in the US.

Moreover, attention of the reader is drawn to the fact that it will be demonstrated

that the socioeconomic benefits outweigh the risks for each of the 4 sites taken

separately but also for the 4 sites together.

For the sake of clarity, it is reminded that this use applied for is part of a broader AfA.

Praxair Surface Technologies (PST) is a worldwide company specialised

in the formulation and application of surface treatment solutions. From the

point of view of the REACh regulation, the applicant must be considered as a

downstream user of chromic acids generated from chromium trioxide for the

coating of metallic articles.

The performances described in the Use-1 are important for the aviation

sector so as to ensure the airworthiness of the material coated (in

maintaining the performance).

The most important problematic of this Use-1, is the time for PST

customer to validate and qualify the alternatives developed.



This AfA contains the two following uses:

USE USE APPLIED FOR TITLE REVIEW PERIOD

(YEARS) REASONING

1

Industrial use of chromium trioxide

mixtures for the coating of metallic

articles subject to harsh environment to

ensure a high temperature corrosion &

oxidation resistance as well as anti-

fouling properties or lubricity at high

temperature

7

Additional time

needed for the

validation and

qualification of

alternatives by

customers

2

Industrial use of chromium trioxide

mixtures for the coating of metallic

articles subject to harsh environment to

ensure either a Low Temperature-Cured

Corrosion Protection or a high

temperature corrosion & oxidation

resistance with reduction of surface

roughness or high temperature

adhesive

12

Research

program in

progress to find

appropriate

alternatives

Table 1. Uses of the authorisation dossier

2.1. Sector impacted by this Use and dependence to these

mixtures performances

The main market sector impacted by the Use-1 mixtures is the aviation sector and

more specifically the gas turbines of aircraft which represents the major market of

PST hexavalent chromium coating in the EU (approximately 65% of the Use-1

business). If applicant adds the Industrial Gas turbines sector and the Oil & Gas

sector, which are subject to the same type of testing and qualification constraints

(being themselves, frequently, aeroderivative turbines1 or elements), these 3 sectors

of activities represent more than 90% of the Use-1 business. Constraints applicable

to these sectors are moreover deemed representative since other PST customers will

also need to go through the same 3 steps before using PST’s proposed alternatives:

- A qualification step

- A certification step

- An industrialization step

1 American Energy Innovation Council, Aeroderivative Gas Turbines By Travis R. Doom, August 2013



The most important problematic of this sector is indeed to maintain the

airworthiness of the material. Even if alternative substances are available, the

companies will need to go through different steps before being ready & authorised

to use them (described in the paragraph 4.3.4).

Indeed, the applicant and therefore its customers are constrained by numerous

normative rules that do not allow them to use anti-corrosion coating alternatives

before having gone through compulsory steps.

These rules are controlled by the European Aviation Safety Agency (EASA), which

validates at the end the right to use the alternatives.

From the point of view of safety requirements, the SermeTel™ process (which is the

most representative of the Use-1 mixtures) is of the utmost importance for many

applications since it bonds inorganic coatings with metal substrates to form a

ceramic-metallic composite layer that provides unparalleled protection against

aqueous corrosion, heat scaling, erosion, abrasion and wear. These performances

are essential for aviation companies to ensure the airworthiness of their materials,

particularly the engines.

Moreover, these SermeTel systems are certified by several important aviation

companies, such as SNECMA, Airbus or Boeing.

2.2. General methodology

On the basis of the carcinogenic properties of Cr(VI) compounds for which it is

not possible to determine a threshold, and since it cannot be demonstrated that the

risk to human health or the environment from the use of the substance is adequately

controlled, the “Socio-Economic (SEA) route” applies for the present application.

The “SEA route” indeed applies where it can be demonstrated that the risk to human

health or the environment from the use of the substance is outweighed by the socio-

economic benefits and while no suitable alternative substances or techniques exist

(Art. 60(4)).

As per ECHA’s guidance, the assessment of the socioeconomic component of the

present AfA will be based upon a cost-benefit analysis approach. A comparative

assessment will therefore be carried out, between the monetised impacts related to

the “applied for use” and the “non-use” scenarios.

In order to best reflect the consequences of both scenarios, an effort was made

to place this AfA in the context of the realistic worst-case scenario. Whenever

possible:

- Over-estimating hypothesis have been used to assess the impacts of the

“applied for use” scenario and, conversely, underestimating hypothesis have

been used to assess the impacts of the “non-use” scenario;

- Representative examples have been provided and each structuring

hypothesis or assertion has been justified either based on literature or

institutional sources.



When appropriate, complementary elements of analysis will be provided,

notably concerning:

- An alternative methodology of assessment of costs related to mortality and

morbidity;

- An alternative assessment of the costs of the “applied for use” scenario,

considering a 4% discount rate

Furthermore, and so as to provide a comprehensive understanding of the limits of

the proposed assessment, an uncertainty analysis was carried out for both the

results of the “applied for use” and “non-use” scenarios. This analysis, both

quantitative and qualitative, is provided in section 5.5.

2.2.1. Scope of the AfA

Key elements of the scope of the AfA are provided in Table 2 below:

SCOPE COMMENT

Temporal

boundary

7 years post sunset date: 2017-2024. See 2.2.1 for a description of the

triggering period for each impact.

Geographic

boundaries

Impacts mainly concern UK and Italy:

- The use of the substance takes place in UK and Italy (and possibly in

Germany, discussed in the chapter 3.2.3);

Broader impacts concern PST customers, with a worldwide (or European)

scope.

Economic

boundaries

Monetised damage of the impacts on human health of the “applied for

use” scenario includes:

- Medical treatment,

- Mortality and morbidity

Main impacts of the “non-use” scenario include:

- Economic impacts on PST’s activity (in the EU) include loss of

revenues

- Social impacts related to the loss of employment;

Tonnages - Quantities used: 0.4 tons per year

- Quantities on the final product: Negligible

Table 2. Scope of the AfA



Focus on the temporal boundaries and the impacted period:

SCENARIO IMPACT IMPACT TRIGGERING

PERIOD DISCOUNTING

PERIOD

“Applied for use” scenario Medical treatment 7 years: 2018 - 2024 9 years: 2016-2024

Mortality and morbidity 7 years: 2018 - 2024 9 years: 2016-2024

“Non-use” scenario Loss of profits 7 years: 2018 - 2024 9 years: 2016-2024

Loss of employment 1 year: 2018 3 years: 2016-2018

Table 3. Impact period of the AfA

Present value is set in 2015, at the date of drafting of this document.

Considering that the sunset date for chromium trioxide takes place in the end of the

year 2017, an assumption is made that impacts will take place in 2018. Similarly, the

discounting period is set to begin in 2016.

In order to ensure consistency of analysis between impacts of both scenarios,

and as recommended by ECHA’s guidance, it was chosen to consider a common

impact and discounting period for both the “applied for use” and “non-use”

scenarios. In order to remain as close as possible to the temporal scope of the AfA, it

was chosen to assume that the impact period and discounting period of both

scenario correspond to the review period of each use of the AfA.

This assumption can be justified as follows:

- The period of time covered by the review period of the uses of the AfA

comprises the period of time with the highest mortality rates after diagnosis,

thereby encompassing the majority of the impacts;

2.3. Actualisation

The assessment of both the “use applied for” and the “non-use” scenarios

requires the actualisation of past data or the discounting of future monetary

amounts. The values used throughout this dossier are synthesised in what follows:

2.3.1. Inflation

In order to adjust the prices from the values of the original studies to the price

level in 200X, the national consumer price index (CPI) has been used by multiplying

the original price by the difference of ratio between the consumer price index for

200X and the consumer price index for 2015. Given the type of values considered

(health expenditures, social benefits), it was indeed chosen to rely on the Consumer

Price Index to carry out actualisation according to inflation. The choice of this

statistical estimate is in line with ILO/IMF/OECD/UNECE/Eurostat/The World Bank

recommendations, stating: “CPIs are widely used for the index linking of social



benefits such as pensions, unemployment benefits and other government payments,

and also as escalators for adjusting prices in long-term contracts”2.

As a statistical tool used to estimate the inflation, CPI is appropriate since it

provides synthetic measure of the general level of prices of goods and services

consumed by households on a national level with constant quality.

The following values are used in the present document based on OECD stats

about local CPI data:

PERIOD LOCAL CPI VARIATION,

ITALY*

LOCAL CPI VARIATION, UNITED

KINGDOM*

2003-2015 23.14 % 32.31 %

2008-2015 10.03 % 17.93 %

2010-2015 7.5 % 11.8 %

Table 4. Local CPI values taken into account in this dossier

*The impacted coating shops are based in Italy and the UK.

2.3.2. Discounting

Comparing the costs and benefits at different moments requires the use of

discounting techniques to translate future costs and benefits into present-days

values and therefore account for the time value of money.

The choice of discount rate is important since it can affect the cost-benefit results of

the analysis. The higher the discount rate, the more reduced the future benefits and

costs values will be, compared to present values.

In our methodology, we deliberately chose to use two different discount rates

depending on the type of future impacts evaluated.

Thus, future human health costs described in the Use applied for of this dossier will

be evaluated using a lower discount rate that the one used to consider economic

impacts in the Non-use scenario. This difference is related to the different “nature”

of these impacts and aims to reflect the society’s rate of time preference with

respect to health risks.

As per ECHA’s guidelines, the calculation of discounted values is performed on

an annualised basis, with the following formula:

( ) ∑ ( )

( )

( )

( )

Where:

- = future costs at year

2 OECD.stats inflation data



- = annual discount rate

- = last annuity of the discount period

Discounting for health impacts

A 3% discount rate was used in this dossier for health impacts. This choice is in

line with WHO3, stating: “For many years, a discount rate of 5% per annum has been

standard in many economic analyses of health and in other social policy analyses, but

recently environmentalists and renewable energy analysts have argued for lower

discount rates for social decisions. The World Bank Disease Control Priorities study

and the GBD project both used a 3% discount rate, and the US Panel on Cost-

Effectiveness in Health and Medicine recently recommended that economic analyses

of health also use a 3% real discount rate to adjust both costs and health outcomes

(Gold et al., 1996).”

Please note that, in order to ensure a complete consistency of the values with

ECHA’s requirements, a complementary assessment is provided for the “applied for

use” scenario in section 3.4.5, considering a 4% discount rate.

General discounting

Based on ECHA’s recommendation4, a 4% discounting rate will be applied to assess

the future cost/benefits value for impacts not related to health (as discussed

above).

3 World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and methods,

Assessing the environmental burden of disease at national and local levels, 2003 4 Guidance on the preparation of socio-economic analysis as part of an application for Authorisation,

2011



3. “APPLIED FOR USE” SCENARIO

3.1. Analysis of substance function

3.1.1. Praxair Surface Technologies (PST) use different metallic ceramic

coating slurries

PST’s coatings are used principally in:

- The aircraft sector (both in the gas turbine engines and on certain

airframe components)

- The power generation industry (to extend the life of turbomachinery

and provide enhanced efficiency imparted by the smooth surfaces).

But also in other less significant markets:

- The Oil and Gas market (to protect offshore components such as

fasteners from severe corrosion)

- The automotive market (to provide corrosion resistance to engine

fasteners, exhaust components and hangers)

While the primary use of these products is to protect ferrous-based alloys, they

have also been successfully employed to protect aluminium and some magnesium-

based alloys. For example, the “lipskin” nacelles of selected commercial and military

jet aircraft are coated with these materials to protect the leading edge from the

damaging effects of corrosion and rain erosion.

The products which contain chromium trioxide are liquid mixtures,

commonly referred to as “slurries”. These slurries form a coating layer when

sprayed onto a metal substrate, dried and cured. These coatings, also called

“metallic-ceramic coatings” are widely utilised for their corrosion resistance,

high temperature oxidation protection, their anti-fouling / non-stick behaviour,

and their ability to lower the surface roughness of certain components making

them aerodynamically favourable in applications such as gas turbine engines.



Figure 1. SermeTel 725/2F-1 – sealed sacrificial aluminium/ceramic composite, landing gear, engine cases, IGT disks

The different PST’s hexavalent chromium slurries subtype processes, regarding the

Use-1, are listed below:

- “SermeTel process 2F1” is a multi-layer coating system including a

basecoat (SermeTel W) with aluminium sacrificial activity and a

chromate/phosphate topcoat with sealant activity;

- “SermeTel process 5380 DP”, consists of a closely packed aluminium-

filled chromate/phosphate basecoat, sealed with a

chromate/phosphate topcoat;

- “SermaLoy J” diffuses slurry alumnide coating as a unique silicon-

enriched outer layer.

These slurries are manufactured by PRAXAIR group in the US before being shipped to

the EU.

One of the core products being addressed in this application is the SermeTel W,

which was developed and patented by Charlotte Allen in the 1960's. The basic

invention is summarized in US Patent 3,248,251.



3.1.2. PST’ slurries are made of different components in order to form a

ceramic binder matrix

Typical composition

The typical slurry formulations contain a fine aluminium powder, a liquid binder

that includes chromic acid (hexavalent chromium) and some functional pigments to

add further corrosion resistance and/or provide the desired colour.

Typical composition – example of SermeTel W:

- Aluminium: EC number 231-072-3; CAS number: 7429-90-5

- Phosphoric acid: EC number: 231-633-2 ; CAS number: 7664-38-2

- Chromium trioxide (VI): EC number: 215-607-8; CAS number : 1333-82-0

- Chromium hydroxide (III): EC number: 215-158-8; CAS number: 1308-

14-1

Short reminder of the application process

In a nutshell, the coating is deposited onto a surface using air-atomized spray

guns, which are commonly used to deposit conventional paints. The coating is then

typically dried at an elevated temperature, such as 175 ºF (80°C), and then cured at a

higher temperature between 350 ºF (176.67°C) and 650 ºF (343.33°C).

Chemistry of the process

From the point of view of the main steps of the chemical reaction, it should be

reminded that the curing process causes the coating to undergo a polymerization

process, forming a water-insoluble film.

A conversion takes place in which the Chromium (VI) compounds are converted to

Chromium (III) compounds.

The chromium compounds along with other substances form a ceramic binder

matrix which surrounds and holds the aluminium particles and other pigments in

place, and ensures adhesion of the film to the substrate.

This coating cannot be re-wetted by water or solvents, and forms a corrosion

resistant material that enables the coated component to be exposed to over 1,000

hours in severe salt fog testing (ASTM B117 used as the Standard Practice for

Operating Salt Spray Apparatus) without any appearance of red rusting (on ferrous

substrates such as 1010 steel). The coating is effective at temperatures up to

approximately 593 ºC and can be exposed to a wide range of chemicals and solvents,

including various engine fluids, without degradation.

3.1.3. Chromium trioxide is essential to the coating process

The criticality of chromium trioxide can also be understood by adopting a life cycle

approach:



Life cycle

approach Step of the process

How is the hexavalent chromium critical?

(Performance to be achieved)

USA

(United States

of America)

During the

mixing/formulation

process of the liquid

slurry

The chromium compounds passivate the

aluminium particle surfaces which enable them to

be dispersed in an acidic slurry formulation and

remain stable (non-reactive) during the

mixing/manufacturing process. The

mixing/manufacturing process can take up to 4

days, during which time the chromium compounds

react with the aluminium particles to establish a

protective layer that is stable over time.

US then in

the EU

During Storage at

the manufacturing

site, shipping to the

point of use, and

storage at the point

of use

This stability allows the material to be shipped to

the point of use, and stored for up to 12 months

prior to use. Thus, chromium trioxide is critical in

enabling the slurries to have adequate "shelf life"

(time from manufacturing until spraying), and "pot

life" (time from opening / mixing until spraying).

EU

(European

Union)

During the Spraying

Process

The chromates passivate the surface of the

substrate to contribute to the long-term corrosion

resistance and other performances, as described

under Sermatech report56

EU During the Heat

Curing Process

Chromium compounds combine with the

phosphate additives to form the bonding

mechanism which holds the aluminium particles

together (cohesive strength) and chemically bind

the film to the substrate (adhesive strength). The

heat curing process causes this binder formulation

to convert to a ductile, amorphous, water

insoluble, film. The bond strength of this coating is

excellent, as the chemical bonding mechanism

allowed by the presence of chromium trioxide

(converted to Cr(III) upon heat curing) is an

effective anchor for the overall layer.

EU In Use: The coating

during service

In addition to the importance of chromium to the

adhesion and cohesion of the coating, the

chromium compounds in the formulation form a

dispersion of chromium oxides in the finished

coating that serve to enhance the corrosion

resistance at ambient and high temperatures

(400-550 ºC) by forming a corrosion inhibitive

5 Slurry Alumnide coating process for Gas turbine component at overhaul; McMordie B, Director of SermeTel diffusion process, Sermatech international; at the Annual Gas Turbine Conference, November 1991

6 Protective coating systems for industrial gas turbine compressor section components; Specht R, Vice president Business development, Sermatech international; at the industrial and power gas turbine operation and maintenance cost management conference, 1996



dispersion. This enhances the useful life of the

substrates by providing added protection from

severely corrosive environments.

Table 5. Detailed role of hexavalent Chromium at each step of the process

3.1.4. PST’s chromium trioxide based products deliver essential

functions and performances for many sectors

PST’s Cr(VI) slurries cover the coating performances required by several clients

for different market sectors. The clients’ needs in terms of slurries performances

differ, depending on their market sectors.

6 performances have thus been analysed as being applicable to mixtures covered

under Use-1 (see table 6 below). Other performances are analysed under Use-2.

* Purpose of Cr(VI):

- SA = Stabilization of Aluminium / CA = Cohesion of Aluminium

- CB = Cohesion of Binder / AP = Adhesion Promoter



- SP = Surface Passivation / CI = Corrosion Inhibitor

Table 6. Overview of performances covered by PRAXAIR mixtures for use-1 by sector of activities

This overview shows how versatile PST’s solutions are: in Gas turbine engine for

instance (as well as in the Aviation or Power generation sectors), customers need

Cr(VI) to achieve all its purposes so as to ensure corrosion protection. Engine

fasteners (in automotive market) have a different profile since customers only need

sacrificial protection against corrosion as well as high temperature resistance. This

also explains why several substitution mixtures are considered under this AfA and

why qualifications are made complex (see section 4).

3.2. Market and business trends including the use of the

substance

3.2.1. PST coating shops in the EU as third or fourth tier contractors

PST is currently engaged in the EU marketplace in the following ways:

- Wholly-owned coating service facilities located in the UK, and Italy. The

4 coating shops falling under this AfA are part of them.

- Export of powders and slurries to customers in the EU from the

manufacturing facilities in Indianapolis USA.

It should be reminded that PST has had facilities located in the EU for over 35

years. As part of its strategy to best serve its EU clients, PST acquired SermaTech

International and its slurry coating business in 2010.

Prior to its acquisition, Sermatech had been serving the EU market for over 25 years

and had therefore created very strong local links with several major EU industries

(aerospace for instance).

From this point of view, it should be stressed again that PST does not manufacture

any parts, but provides coating services. This logically entails that the parts must be

shipped, processed and shipped back to the customer. PST therefore strategically

located its facilities close to its customers in order to reduce the timing required for

shipping and processing.

For a better understanding of PST’s market, the three following figures present:

- The actors of the supply chain ;

- The supply chain of the substance ;

- The supply chain of the articles treated by PST coating shops.



Praxair Surface Technologies corporate is the formulator and the supplier of the

Chromium trioxide containing mixtures. Moreover, regarding their EU coating shops,

PST headquarter designs and specifies the standardised processes to be used in the

EU shops.

Original Equipment Manufacturers (OEM) are manufacturers engaged in different

sectors of activities (automotive, aviation, power generation machinery, Oil and Gas

and marine). They use the mixtures either directly (downstream users) or contract

out certain activities of surface treatment.

OEM part subcontractors manufacture certain parts of the final OEM articles and

need the services of PST EU shops to apply surface treatment and therefore provide

the required performances.

PST EU shops are the contractors covered by this application. Based on the processes

defined by PST headquarter, they carry out the coating activities (as downstream

users) on parts sent to them by OEM subcontractors.

Figure 2. Supply chain actor description



Figure 3. Supply chain of Praxair Surface Technologies in EU



As a consequence, PST EU shops are very often a third- or fourth-tier contractor for

all transactions (vis-à-vis the OEM):

OEM (Tier 1) Engine Manufacturer (Tier 2) Blades Manufacturer (Tier 3)

Surface treatment (Tier 4)

Figure 4. Typical position of PST in the aerospace industry supply chain

3.2.2. Current annual tonnages

Based on the 2014 values, the current amount of Chromium trioxide at PST

shops in the EU is 470 kg. Use-1 alone represents 400 kg / year, amounting to 85% of

the total quantity of chromium trioxide used by PST’s coating shops in the EU.

2014

COATING/SOLVENT

NAME

APPROX. AMOUNT OF

MIXTURES USED PER YEAR

(LITERS)

APPROX. QUANTITIES OF

CHROMIUM(VI) USED PER

YEAR (KG)

SermaGard 1105 2,820.13 93.41

SermaLoy J 537.53 32.35

SermeTel 570A 219.55 11.62

SermeTel W 3,490.15 203.02

SermeTel 1318 0.00

SermeTel 709 124.92 4.09

SermeTel 962 897.14 44.99

SermaLube 72 15.14 1.32

Table 7. Quantities of chromium trioxide used for Use-1 in 2014

The different quantities of mixtures used in 2014 (table 7) are representative of the

use of mixtures until the sunset date regarding the Use-1.



3.2.3. PST coating shops in the EU: 4 situations, each adapted to their

local market

In details, impacted PST EU shops are present on 4 sites and 2 countries. For

quality and safety reasons, processes are standardised by PST corporate for all the

sites.

Moreover, as discussed in the CSR and the following SEA, PST decided recently to

shut down the Cr(VI) activity of Duisburg (Germany). This cease of activity will

intervene by the end of 2016, and business will be redistributed, based on a market

and geographic rationale. Based on the information available today, the activity

should be entirely transferred to the Lincoln shop (UK).

As the decision was made just before submitting this AfA and considering that the

date of cessation of activity and the final redistribution will be precisely determined

only during the year to come, the Applicant decided to use risk and economic

analysis applicable to Duisburg and redistribute them to the Lincoln (UK) site, since it

is the most likely solution today.

However, it cannot be excluded that a non-yet determined proportion of the activity

of Duisburg could go to the Ratingen shop (Germany). From this point of view, and as

described in the risk assessment, the global risk (and the adjusted exposure of

workers in the EU sites) is linked to the global business for which the Applicant

justifies under section 5.1.1 that it should remain constant over the review period. A

possible change in the repartition of the activity will therefore not affect the global

risk described in the CSR and will not change the conclusion.

The table below presents the current business of each PST EU shops regarding the

Use-1 (adapted with the cease of Duisburg activity).

PST SHOPS

NUMBER

OF

WORKERS

GLOBAL

TURNOVER

(2014)

MARKET SHARE OF EACH EU SITE

Lincoln (United Kingdom)

26 $ 3.760 M

(3.384 M€)

Ace - AircraftEnginesOil - Oil & Gas

Mar - Marine

Acs - AircraftSystemsAfr -Airframes



Monte Marenzo (Italy)

2 $ 0.479 M

(0.431 M€)

Southam (United Kingdom)

10 $ 0.468 M

(0.421 M€)

Fornovo (Italy)

5 $ 0.202 M

(0.182 M€)

Table 8. EU PST shops activities and turnover for Use-1

It can be seen from the table above that the revenues vary from one site to

another.

Moreover, it should be stressed that each site has its specificities in terms of

markets, therefore enhancing the strong local roots of these companies.

Additionally, it should be stressed that PST could move operations between different

facilities to meet customers’ requirements and demands. Each operation would

follow the same operation levels required by this AfA: quantities, RMMs, OCs etc.

Mfg -GeneralManufacturing

Oil - Oil &Gas

Ace -AircraftEngines

Igt - IndustrialGas Turbines

Oil - Oil & Gas

Aut -Automotive/VehiclesWir - Wire



3.2.4. Overview of the revenues of Use-1 by market

Use-1 represents 59% of the revenues for approximately 85% of the hexavalent

chromium quantities used (see 3.2.2).

2014 business (sectors of activity, mixtures, and sales) for Use-1, considering the 5

shops (i.e. including Duisburg), is described in the following table:

SECTOR OF ACTIVITY SUB SECTOR TOTAL OF BUSINESS BY

SUBSECTOR OF ACTIVITY

Aviation Sector

Gas Tubine Engine $ 3,169,223

7

(2,852,301 €)

Airframe Components $ 145,480

(130,932 €)

Power Generation Machinery Industrial Gas Turbines $ 191,749

(172,574 €)

Automotive Market Exhaust Components $ 9,522

(8,570 €)

Oil and Gas Sector Fasteners $ 933,080

(839,772 €)

Marine $ 79,863

(71,876 €)

General Manufacturing General Corrosion

Protection $ 379,581

(341,623 €)

Total of Use-1 Business

$ 4,908,968 (4,418,070 €)

Table 9. Chromium trioxide coating business of PRAXAIR by sector of activity on EU for Use-1

Specific parts are coated for each sector of activity, though some parts can be

common to several sectors. In the figure below, the Applicant presents two examples

of parts coated by Chromium trioxide containing SermeTel slurries in PST EU shops.

7 Exchange Rate (Boursorama website 09/25/2015) 1$ = 0.90€



Compressor blades

Flight turbine stator vanes

Table 10. Example of parts coated by PST EU shops

3.2.5. Overview of sales projections for chromium trioxide mixtures

Regarding the Use-1, the sales projection will be stable until the sunset date. If

the authorisation is granted, the use of mixtures covered by the Use-1 should also be

stable until PST customers “qualify/certify” the developed alternatives. For the main

business concerning this Use (Aerospace gas turbines), the customers will need the

time described in the following assessment to implement the use of alternatives.

3.2.6. Concluding remarks on supply chain and markets considered in

the applied for use scenario

Two comments can be made:

1- Though each coating shop is a separate legal entity, industrial processes (as well

as risk management measures from another prospective) are the same. The

fundamental reason is that the quality and reliability of PST’s coating systems are

both chemistry and process driven. This is made compulsory by the high level of

sustained performances required by PST’s customers. Consequently,

stoichiometry and handling of the spraying must be mastered and replicable.

This is also a matter of efficiency as having different processes would hamper the

good monitoring of performances, the dissemination of information and the

mutual benefits of problem solving. To allow this organisation, all information is

centralised at PST headquarter in the US and all management decisions are taken

in the US and dispatched to the EU coating shops to standardise as far as

possible the PST coating activities.

2- The location of shops is the result of an industrial strategy (see 3.2.1) whose

result is the capacity of PST in the EU to serve adequately its customers in terms

of needs and geographic proximity.



3.3. Remaining risk of the « applied for use » scenario

The excess risks that can be estimated for the review period are confirmed and

specified by air monitoring data and modelling in the associated Chemical Safety

Report (CSR). These calculations are based on RAC opinion on excess risks of several

Chromium compounds and will be used to estimate the possible impacts if

Authorisation is granted to Praxair Surface Technologies.

You will therefore find below the calculation described in the associate CSR.

Moreover, as a reminder, it is important to mention that this estimated risk is

calculated considering the transfer of Duisburg shop to Lincoln.

SITE EXCESS OF LUNG CANCER RISK

RELATED TO EXPOSURE

VALUE

WITHOUT

RPE FOR

MANUAL

SPRAYING

VALUE

WITH RPE

FOR

MANUAL

SPRAYING

VALUE FOR

AUTOMATED

SPRAYING

Lincoln

Excess risk of lung cancer, per µg/m3

of Cr(VI) based on 7 working years

(asking review period), 115 days per

year (PST Lincoln workers conditions),

8h per day considering a use of 306 kg

(Total use: 376 kg), per 26 workers

9.31x10-2

9.31x10-4

Fornovo




year (PST Fornovo workers

conditions), 8h per day, per 5

automated workers

8.43x10-5

Monte

Marenzo



(asking review period), 1.5 days per

year (PST Monte Marenzo workers

conditions), 8h per day, per 10

workers

5.73x10-4

5.73x10-6

Southam




year (PST Southam workers

conditions), 8h per day, per 2 workers

1.22x10-6

Table 11. Calculation of excess risk for workers per site for the Use-1



A synthesis of the impacts of the “applied for use” scenario is given below:

Figure 5. Synthesis of the impact categories of the “applied for use” scenario

3.4. Human health impacts and the monetised damage of the

applied for use scenario

Two different human health impacts will be described and discussed in the following

chapter:

- Impacts of cancer in terms of treatment, hospitalisation and associated

costs

- Impacts on the years of life in good health in terms of mortality and

morbidity.

3.4.1. Number of people exposed

An aggregated maximum of 43 workers are dedicated to the coating process on

the 4 sites. Moreover, 115 days per year are allocated to this activity in the worst-

case. From this point of view, the transfer of the activity of Duisburg to Lincoln will

not imply to hire new workers or dedicate workers occupied to other tasks to the

coating process. The choice has been made to have workers already dedicated to

this task in Lincoln work more, while reducing their time on other tasks. This

increase in time of exposure has been taken into account in the CSR.



MANUAL SPRAYER AUTOMATED SPRAYER

Lincoln (UK) 26 0

Southam (UK) 2 0

Fornovo (Italy) 0 5

Monte Marenzo (Italy) 10 0

Total 38 5

Table 12. Number of workers per site and process

3.4.2. Medical (cancer) treatment

Data used:

Two sets of data are used by the applicant:

- Costs of lung cancer treatment

- Net survival rate

As regards the global cost of lung cancer treatment, different studies can be

used that take into account: hospitalisation cost, medicine cost but also various

associated costs (in house care...) (8;9;10;11).

For the following analysis, the applicant decided to use the data provided in the most

recent study8 which compares the cost of lung cancer treatment in France, the UK

and Germany, based on regional or national administrative database. This study only

deals with NSCLC (Non Small-Cell Lung cancer), which represents approximately 80%

of the lung cancers. Nevertheless, a previous study in France11 showed that the cost

associated with other forms were cheaper than the NSCLC (by 50% approximately).

These considerations led the Applicant to consider a realistic worst-case scenario, in

which 100% of lung cancers are NSCLC. In a 2 years follow up approach after

diagnosis, the different costs associated with lung cancer in the 3 countries are listed

in the table below.

8 McGuire et al, Journal of Medical Economics, 2015

9 Simrova et al, Ekonomika Management, 2014

10 Chouaid et al, British Journal of Cancer, 2004

11 Braud et al, Pharmacoeconomics, 2003



Table 13. Lung cancer costs in France, Germany and England the first 2 years after the diagnosis

The two main information of this table consequently are:

- The first year care is higher than the following ones

- The highest cost is attributable to hospitalisation

Unfortunately, no comparable data (considering hospitalisation, medicine, in house

care...) were found for Italy. In order to monetise these missing impacts, the

applicant therefore decided to use the average cost for the first year (i.e. 17,672 €)

and the second year (i.e. 7,441 €).

As regards the net survival rate, the applicant also considered rates by

country at 1 year, 5 years and 10 years.

In a recent study12, the lung cancer survival rate at 5 years was calculated for

European countries (table 14 below).

No clear data in the literature are available for the 1 and 10 years survival rate in

Italy. Nevertheless, in the Eurocare 4 (IARC support) study, European global data are

available and report the following net survival rate at 1 year (36.9 %), 5 years (12%)

and 10 years (8.7%). The European value will therefore be extrapolated to monetise

the impact for Italy.

NET YEAR

SURVIVAL YEARS FRANCE UK ITALY

1 year

42 % (French

Institute for Cancer,

INCA, Survey report)

32.1 % (Cancer

Research UK data)

36.9 % (extrapolation

from European value)

5 years 13.6 % 9.6 % 14.7 %

10 years

9% (French Institute

for Cancer, INCA,

Survey report)

4.9 % (Cancer

Research UK data)

8.7 % (extrapolation

from European value)

Table 14. Net year survival rate after lung cancer diagnosis by country (Allemani et al, 2015)

12 Allemani et al, Lancet Oncology, 2015



Monetisation:

To monetise the damage on human health, we will consider the probability

to observe lung cancer on workers. The probability, in this case, corresponds to the

excess of risk to have a lung cancer.

The costs of lung cancer by site and per worker are listed in the table below, taking

into account:

- the cost of lung cancer treatment after diagnosis (we consider that the

cost per year after year 2 is the same as for year 2),

- the net survival rate at 1 year, 5 years and 10 years,

- the requested review period of 7 years without considering the excess

of risk (table 15).

LINCOLN SOUTHAM FORNOVO MONTE

MARENZO

0 to 1 year € 15,787 € 15,787 € 17,672 € 17,672

1 to 5 years (Cost for the

following year x number of

years x survival rate at 1 year)

€ 2,555 € 2,555 € 10,982 € 10,982

5 to 7 years (Cost for the

following year x number of

years until the end of the

review period x survival rate

at 5 year)

€ 382 € 382 € 2,187 € 2,187

Total of lung cancer cost per

site per worker € 18,724 € 18,724 € 30,843 € 30,843

Table 15. Lung cancer cost per site and per worker during the review period of 7 years

Considering the excess of risk and the respiratory protection equipment, the

following results are obtained:

LINCOLN FORNOVO MONTE

MARENZO SOUTHAM

Total of lung

cancer cost per

site per worker

€ 18,724 € 18,724 € 30,843 € 30,843

Individual excess

risk of lung

cancer, based on

site working

condition on

sites

3.58x10-5

1.69x10-5

5.73x10-7

6.11x10-7

Individual lung € 0.67 per € 0.52 per € 0.02 per € 0.01 per



cancer costs per

site considering

the excess of risk

worker worker worker worker

Individual lung

cancer costs per

site considering

the excess of risk

(considering a

3% discount rate

per year)

€ 0.61 per

worker

€ 0.46 per

worker

€ 0.02 per

worker

€ 0.01 per

worker

Excess risk of

lung cancer,

based on site

working

condition on

sites & number

of workers

9.31x10-4

8.43x10-5

5.73x10-6

1.22x10-6

Total lung cancer

costs per site

considering the

excess of risk

€ 17.42 for

26 workers

€ 2.60 for 5

automated

workers

€ 0.18 for 10

workers

€ 0.02 for 2

workers

Total lung cancer

costs per site

considering the

excess of risk

(considering a

3% discount rate

per year)

€ 15.74 for

26 workers

€ 2.29 for 5

automated

workers

€ 0.16 for 10

workers

€ 0.02 for 2

workers

Table 16. Total lung cancer cost per site considering the excess of risk for Use-1

The discounted lung cancer costs per site considering the excess of risk are

therefore comprised between 0.02 € (in Southam) and 15.74 € (in Lincoln).

3.4.3. Mortality and morbidity

Several ways of measuring public health have been devised, including the

Quality-Adjusted Life Year13, the Disability-Adjusted Life Expectancy14 and the

Healthy Life Year15 [16;17;18;19]. The benefits and challenges of these measures have

been examined in several publications [20;21;22,23].

13 QALY

14 DALE

15 HeaLY

16 Weinstein & Stason, 1977



3.4.3.1. Choice of a methodology

According to the WHO recommendations24, it was chosen to assess the impacts

of both mortality and morbidity associated with an excess risk of cancer through one

combined measure: the Disability-Adjusted Life Years or DALY.

The DALY method is recommended by ECHA for the assessment of mortality and

morbidity impacts [ECHA (1), 2008; ECHA (2), 2008].

The following methodology is based on the general WHO methodology for the

calculation of DALYs [WHO, 2002].

3.4.3.2. General methodology explained

The DALY is a combined measure of the time lived with disability and the time

lost due to premature mortality:

Where: YLL = years of life lost due to premature mortality and YLD = years lived with

disability.

In such an approach, time is used as a common currency for non-fatal health states

and years of life lost. Disability adjusts are thus used to formalize and quantify social

preferences for different states of health, measured as a number on a 0-1 scale,

where: “0” is assigned to a state of ideal health and “1” to a state comparable to

death.

3.4.3.3. Years of Life Lost due to premature mortality

Basic formula for calculating the years of life lost (YLL) metric is the following:

The number of deaths (N) is calculated by multiplying the number of exposed

workers by the excess risk of cancer. Life expectancy at the age of death (L) is

calculated by subtracting the average death age from the standard life expectancy.

Data on life expectancy are clearly available for Germany (81 years), UK (81 years)

and Italy (82.9 years) [Eurostat].

However, data concerning the mean average death age of lung cancer in each

country are not available. The only clear available data (on mean death age of lung

17 Murray & Lopez, 1996

18 Hyder, Rotllant & Morrow, 1998

19 Murray, Salomon & Mathers, 2000

20 Anand & Hanson, 1997

21 Williams, 1999

22 Murray & Lopez, 1999b

23 Murray et al., 2002

24 World Health Organization - The Global Burden of Disease concept



cancer) are the French data. Therefore, the applicant will consider the data available

in France as a reference (68 years), to perform the years of life lost due to premature

mortality calculation for each site [INCA French National institute for Cancer].

Finally, a 3% discount rate was applied [WHO, 2002] to the DALY components to take

into account time preference25.

The global YLL is recapitulated in the table below:


MARENZO SOUTHAM

Standard

life

expectancy

81

(UK)

82.9

(Italy)

82.9

(Italy)

81

(UK)

Mean age of

lung cancer

death

68

(Based in

French data)

68

(Based in

French data)

68

(Based in

French data)

68

(Based in

French data)

Number of

years lost 13 14.94 14.94 13

Individual

lung cancer

costs per

site

considering

the excess

of risk

3.58x10-5

1.69x10-5

5.73x10-7

6.11x10-7

Individual

YLL

(considering

a 3%

discount)

3.9x10-4

2.1x10-4

7.2x10-6

6.7x10-6

Excess risk

of lung

cancer,

based on

site working

condition on

sites &

9.31x10-4

8.43x10-5

5.73x10-6

1.22x10-6

25 The Global Burden of Disease concept WHO: For many years, a discount rate of 5% per annum has

been standard in many economic analyses of health and in other social policy analyses, but recently environmentalists and renewable energy analysts have argued for lower discount rates for social decisions. The World Bank Disease Control Priorities study and the GBD project both used a 3% discount rate, and the US Panel on Cost-Effectiveness in Health and Medicine recently recommended that economic analyses of health also use a 3% real discount rate to adjust both costs and health outcomes (Gold et al., 1996). However, the panel also recommended that the sensitivity of the results to the discount rate should be examined.



number of

workers

YLL (DALY)

(Considering

a 3%

discount)

1.0x10-2

for 26

workers

1.1x10-3

for

5 automated

workers

7.2x10-5

for 10

workers

1.5x10-5

for

2 workers

Table 17. Years of life lost by site for Use-1

3.4.3.4. Years Lived with Disability

The calculation of the years of life with disability (YLD) is based on the following

formula:

YLD = DW x N x LD

In the case of lung cancer, the value of 0.772 was used for DW [Migrin] and the

total time lived with disability was estimated by multiplying the average number of

years lived with disability (LD) by the number of exposed workers and the excess risk

of cancer (N). As described in the previous subsection, the only clear available data

(on mean death age of lung cancer and mean age of diagnosis) are French data.

To estimate the years of life with disability, the applicant will subtract the mean age

of lung cancer diagnosis (66 years) from the mean age of lung cancer death (68

years). Because this information is not clearly indicated for the country shops,

applicant will use the data in France as a reference for the calculation.

Finally, a 3% discount rate was applied [WHO, 2002] to the DALY components to take

into account time preference.

The global YLD is discussed in the table below:

Lincoln

Fornovo

(Automated

sprayer)

Monte

Marenzo Southam

Mean age of

lung cancer

death

68

(Based in

French data)

68

(Based in

French data)

68

(Based in

French data)

68

(Based in

French data)

Mean age of

lung cancer

diagnosis

66

(Based in

French data)

66

(Based in

French data)

66

(Based in

French data)

66

(Based in

French data)

Number of

years with

disability

2 2 2 2

Individual

lung cancer 3.58x10

-5 1.69x10

-5 5.73x10

-7 6.11x10

-7



costs per

site

considering

the excess of

risk

Individual

YLD

(considering

a 3%

discount)

4.6x10-5

2.2x10-5

7.4x10-7

7.9x10-7

Excess risk

of lung

cancer,

based on

site working

condition on

sites &

number of

workers

9.31x10-4

8.43x10-5

5.73x10-6

1.22x10-6

YLD (DALY)

(Considering

a 3%

discount)

1.2x10-3

for

26 workers

1.1x10-4

for

5 automated

workers

7.4x10-6

for

10 workers

1.6x10-6

for 2

workers

Table 18. Years lived with disability for Use-1

3.4.3.5. Synthesis of the monetised damage related to mortality and

morbidity

Monetised damage related to YLLs and YLDs was calculated using the central

value of life year lost recommended by ECHA [ECHA (1), 2008] and based on

[NewExt, 2003]: € 55,800 (in 2003 price levels). This value is in line with [Desaigues et

al., 2007a] in [NewExt, 2004], which estimated the central value of one year of life at

€ 50k, based on a survey of French residents and with [EurovaQ, 2010], who

proposed a value per life year of € 45,064. The inflation in the UK between 2003 and

2014 is 27.3% and in Italy is 20.20% and will be used to estimate the 2015 price of

the value of life year lost.

Final YLLs, YLDs and monetised damage are synthesised in the following table:


MARENZO SOUTHAM

Total

YLL + YLD

(DALY)

1.1x10-2

1.2x10-3

7.9x10-5

1.7x10-5

Value of life 73,832 € 68,715 € 68,715 € 73,832 €



year

(considering

the local

inflation

between 2003

& 2015)

Total cost

(approximate)

€ 838 for

26

workers

€ 80 for 5

automated

workers

€ 5 for 10

workers

€ 1 for 2

workers

Table 19. Synthesis of YLLs, YLD and monetised damage related to the excess cancer risk associated with lung cancer for Use-1

The global cost of mortality and morbidity for the 4 sites of PST in the EU is

therefore: 925 €

3.4.4. Comparative analysis using another method to calculate the cost

associated to mortality & morbidity

In order to perform a comparative analysis, these values can be compared with

another estimate methodology for mortality and morbidity, based on the value of a

statistical life and the willingness to pay to avoid a cancer case provided in ECHA’s

SEA guidance:

VALUE OF STATISTICAL LIFE WILLINGNESS TO PAY

TO AVOID A CANCER CASE

€ 1,052,000

(2003 price levels)

€ 400,000 per non-fatal case

(supposed 2008 price levels)

Table 20. Value of statistical life and willingness to pay to avoid cancer26

Please note that the value of € 400,000 per non-fatal case in the willingness to

pay to avoid a cancer case is used in the ECHA’s guidelines, without being

recommended. It was nevertheless used in this uncertainty analysis since it is in line

with the value of € 395,656 calculated by Alberini and Ščasný27.

26 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for

authorisation, Version 1, January 2011 27

Alberini and Ščasný, Stated-preference study to examine the economic value of benefits of avoiding selected adverse human health outcomes due to exposure to chemicals in the European Union, FD7. Final Report - Part III: Carcinogens, Charles University in Prague (Environment Center), September 2014.



PARAMETER VALUE COMMENT

Mortality Mortality rate

268,000 deaths for 313,000

lung cancer cases

Mortality rate: 85%

Taking into account the

average mortality rate of

lung cancer in European

Union in 201228

Morbidity Morbidity rate

45,000 survival for 313,000

lung cancer cases

Survival rate: 15%

Taking into account the

average survival rate of

lung cancer in European

Union in 201228

Table 21. Mortality and survival rate of lung cancer in European Union in 2012

Based on the parameters previously put forward, the overall impacts of cancer,

as calculated with this methodology are synthesised below:

SITE PARAMETER VALUE

Approximate COMMENT

Lincoln

Mortality Costs of

mortality € 930

Taking into account: the total excess risk of cancer

and the average mortality rate of lung cancer in

European Union28, the inflation rate in UK

between 2003&2015, and the discount rate of 3%

Morbidity Costs of

morbidity € 53


and average survival rate of lung cancer in



Total € 983 Cost by DALY approach: € 838

Southam

Mortality Costs of

mortality € 1.2





Morbidity Costs of

morbidity € 0.1





Total € 1.3 Cost by DALY approach: € 1

Fornovo

Mortality Costs of

mortality € 78.5



European Union28, the inflation rate in Italy


Morbidity Costs of

morbidity € 4.5





Total € 83 Cost by DALY approach: € 80

Monte- Mortality Costs of € 5.3 Taking into account: the total excess risk of cancer

28 GLOBOCAN 2012 (WHO), Lung Cancer Estimated Incidence, Mortality and Prevalence Worldwide in

2012



Marenzo mortality and the average mortality rate of lung cancer in



Morbidity Costs of

morbidity € 0.3





Total € 5.6 Cost by DALY approach: €5

Table 22. Mortality and morbidity cost per site, uncertainty analysis

This analysis shows that a generic approach gives a result in a same order of

magnitude with a difference of less than 15% in value between the two methods to

evaluate the mortality/morbidity. Indeed, value of DALY approach = 0.85 value of

VST/WTP.

3.4.5. Complementary elements of analysis: values taking into account a

4% discount rate

In order to ensure a complete consistency of the values with ECHA’s

requirements, monetised impacts of the “applied for use” scenario are also provided

considering a 4% discount rate:

IMPACTS COSTS

Medical treatment € 17.6

Mortality and morbidity € 874

Total € 892

Table 23. Overall impacts of the “applied for use” scenario, Use-1, complementary analysis taking into account a 4% discount rate

3.5. Environment and man-via-environment impacts and

monetised damage of the “applied for use” scenario

3.5.1. Environment impacts and monetised damage of the “applied for

use” scenario

The assessment of environmental impacts does not appear relevant for this AfA

regarding the SVHC properties stated in column 2 of entry 16 in annex XIV of REACh

(Commission Regulation (EU) No 125/2012).



3.5.2. Man-via-environment impacts and monetised damage of the

“applied for use” scenario

This approach has been described in the associated CSR with more details.

The release of the substance outside the industrial site is limited to the air via the

stack extraction after filtration.

The release of the substance outside the industrial site is limited to the air via the

stack extraction after filtration.

In different official reports on possible exposure to hexavalent chromium29, 30,

experts consider that the potential risk is in the local air compartment. Indeed,

hexavalent chromium is transformed into trivalent chromium, in water and soil, via

redox reaction 18, 31.

Moreover, no air release was considered for the use in metal treatment (except

during formulation of products), in the EU RAR about hexavalent chromium

compounds.

Finally, a simulation of the possible quantities released in air was carried out in the

associated CSR, with an excess of risk per person, on general population, estimated

at 1.09x10-7 (for the ES-1) and 2.73x10-10 (for the ES-2). The risk for general

population with this approach can therefore be considered as negligible.

3.6. General conclusion on the impacts and monetised

damage of the applied for use scenario

The overall monetised impacts of the “applied for use” scenario can be

summarised as follows:

IMPACTS LINCOLN FORNOVO MONTE-

MARENZO SOUTHAM GLOBAL

Medical treatment € 16 € 2 € 0.16 € 0.02 € 18

Mortality and morbidity

€ 838 € 80 € 5.43 € 1.24 € 925

Total € 854 € 82 € 5.59 € 1.27 € 943

Table 24. Overall impacts of the "applied for use" scenario

The global total cost estimate to continue using the substance for the Use-1 is

943€.

29 European Union Risk Assessment Report on hexavalent chromium substances (Volume 53 3

rd priority

list) 30

INERIS - Fiche de données toxicologiques et environnementales du chrome et de ses dérivés 31

EPA Ground Water Issue, Natural Attenuation of Hexavalent Chromium in Groundwater and Soils, EPA154015-941505, 1994



4. SELECTION OF THE « NON-USE » SCENARIO

4.1. Efforts made to identify alternatives

4.1.1. Research and development

PST coating shops are members of PST corporate. Given the fact that PST

corporate is a formulator of coating mixtures, PST coating shops in the EU have no

other choice but using the alternatives developed by the head office. This could not

be the case for many of PST competitors (most of them being only sprayers) who

can use the mixtures of different suppliers to improve the research of alternatives

and satisfy customers’ requests.

It should however be stressed that, in response to the identification of

hexavalent chromium Cr(VI) as a hazardous substance for health, significant efforts

were made to develop viable Cr-free replacement coatings. However, its

elimination proved to be very challenging because of the unique Cr(VI) passivating

and corrosion control properties,.

Historically, extensive R&D and substitution works were initiated by SermaTech

Co. (later acquired by PST), as well as its competitors, some 15 years ago32,33,34,35,36.

For instance, one alternative Cr-free coating that was considered was an aluminium

ceramic basecoat layer with a phosphate-based binder. The coating, when employed

in conjunction with Cr(VI) free top coating, presented properties and performances

(e.g., salt spray corrosion resistance, high temperature heat oxidation resistance,

erosion resistance, mechanical properties) comparable to the benchmark coating

systems with SermeTel W® basecoat. However, when used alone without the top

coat / sealer, these basecoats exhibited insufficient corrosion resistance: the

coatings developed red rust in the scribe and the field when subject to prolonged

testing of up to 1000 hrs in the Salt Spray test per ASTM B117.

32 Mosser M.F. – in Proceedings of ASME Turbo Expo, Vienna, Austria, June 14-17, 2004

33 Petry, L. – in Proc. of Tri-Service Corrosion Conf., Orlando, FL, Nov. 14-18, 2005

34 Mosser M.F., Eddinger K., Fox E. – in Proc. of Tri-Service Corr. Conf., Denver, CO, 2007

35 US Patent 7,789,953 by Mosser M. et al., Sept. 2010

36 US Patent 7,993,438 by Mosser M. et al., Aug. 2011

Three different alternatives have been developed by PST to replace their

hexavalent chromium mixtures, for several “standard” performances. Each

alternative is adapted to cover some specific performances and they cannot

be compared between each other. The main argument to defend this

application for authorisation is the period of time needed by PST customers to

validate/qualify these available alternatives.



Another major drawback of this iteration of Cr-free basecoat stemmed from a

significant interaction of aluminium particles with the phosphate binder in a water-

based slurry in the absence of Cr(VI) species (the latter having a passivating effect on

aluminium metal). As a result of this adverse interaction of the aluminium particles

with the phosphate binder, the basecoat slurry could not be maintained as a “one-

part” composition, in which all constituents could be mixed together into a single

formulation, without one or more of the constituents adversely affecting other

constituents of the composition.

Rather, the slurry had to be maintained in storage as a two-part slurry, in which the

aluminium powder was kept separate from the aqueous binder, until the point of use

when the binder and Al could be mixed. However, the pot life of the mixed slurry

was only about 8 hours, a duration beyond which a rapid deterioration of the

mixture could be observed and that manifested itself in agglomeration of Al particles

leading to a significant increase in the particle size. These undesirable properties

created significant complications in scaling –up and deterred anyone from employing

this Cr-free slurry in any large scale coating applications.

When PST acquired SermaTech in 2011, efforts on developing viable Cr-free

were of course continued. However, another technical direction was taken: the

present development focused on alkali silicate based binders. Indeed, after testing

multiple alkali silicates, individual and mixed ones, with different SiO2:Me2O ratios,

it was discovered that utilizing lithium-doped potassium silicate as a binder, in

combination with atomized aluminium powder, produced a ceramic coating with

outstanding adhesion to various metal substrates and very advantageous functional

properties, in particular high resistance to corrosion and cyclic heat oxidation –

corrosion exposure. US Patent has been granted to PST for this invention37.

During the next stage of this development, the goal became to develop Cr (VI) – free

top coating formulations, thus allowing REACh compliant replacements of the major

Cr (VI) containing legacy SermeTel™ coating systems. As a result of extensive

formulation and testing studies, the applicant developed top coat slurries that are

based on Cr-free acidic, metal phosphate based binders and employ different metal

oxide functional pigments, thus also providing coating systems of different colours

(green, white, grey, etc.). Then, coating systems composed of the developed

basecoat + top coat were extensively tested internally and demonstrated excellent

performance, with application of the top coat significantly enhancing functional

properties of the basecoat.

As discussed above and to summarise, PST was able to develop since mid-2014

alternatives covering performances currently obtained by hexavalent chromium

metallic-ceramic coating mixtures (see section 4.2).

37 US Patent 9,017,464 by Belov I. et al., Apr. 2015



4.2. Identification of known alternatives

Since mid-2014, PST corporate has developed 3 alternatives to cover different

performances:

- SermeTel CF (Chrome Free) overlay coating systems

- Sermaloy J CF (Chrome Free) diffusion coating

- 1758 lubricating coating

The head office of PST has communicated on these product developments by a

press-release in late 2014.

Praxair Surface Technologies

Introduces Advanced REACH-

Compliant, Chrome-Free Coatings for

Aviation and Industrial Turbines

Praxair, Inc. December 18, 2014 9:30 AM

DANBURY, Conn.--(BUSINESS WIRE)--

Praxair, Inc. (PX), today announced the introduction of a new line of chromium (VI)-free

ceramic aluminum coatings for the aerospace and power generation industries. Praxair Surface

Technologies’ new line of slurries sustainably produces coatings with the same high

performance of legacy chrome-containing coatings.

The company’s SermeTel™ CF and SermaLoy® J CF systems meet the stringent

requirements of gas turbine OEM specifications and preserve the surface finish of engine

components to extend the useful life of critical parts in gas turbines and industrial equipment.

The coatings are also REACH-compliant (Europe’s regulation for the Registration, Evaluation,

Authorization and Restriction of Chemicals).

SermeTel™ CF Coatings are chrome-free replacements of legacy SermeTel™ 5380,

SermeTel™ 2F-1 and SermeTel™ 6F-1 coatings. They provide protection from corrosion, heat

degradation and fouling of components.

The SermaLoy® J CF Coating is a chrome-free diffusion slurry that offers equivalent

performance to traditional Sermaloy®

J coatings. SermaLoy® J CF coatings provide protection

against hot corrosion and oxidation in gas turbine engines and other severe environments.

Praxair Surface Technologies offers a comprehensive array of high-performance coatings

and technologies to the aviation, energy and other industries. By continuously advancing

coatings technologies, Praxair Surface Technologies helps customers improve environmental

performance, decrease energy consumption, extend component life, improve productivity,

minimize downtime, reduce operating costs and produce high-quality products.

Figure 6. Press release on hexavalent Chromium alternatives by PST corporate

http://finance.yahoo.com/q?s=px

http://www.businesswire.com/



The following table summarises the links between the sectors of activity, the current

chromium trioxide mixtures used, the associated expected performances and the

alternatives developed:

Sacrificial Corrosion Protection

Inhibitive Sealant

High Temperature

Corrosion

Anti-Fouling

Lubricity at High

Temperature

High Temperature Oxidation &

Hot Corrosion

Status of Chrome Free Alternative

Development

Aviation Sector

Gas Tubine Engine

SermeTel W X X SermeTel CF

SermeTel 962 X X SermeTel CF

SermeTel 570A X X X SermeTel CF

SermaLoy J X Sermaloy J CF

SermaLube 72 X

Lubricating 1758


Airframe Components



SermeTel 570A X X SermeTel CF

SermeTel 1318 X SermeTel CF

Power Generation Machinery

Industrial Gas Turbines



SermeTel 570A X X SermeTel CF

SermSeal 134 X Lubricating

1758

SermaLoy J X Sermaloy J CF

Compressor Applications


SermeTel 1318 X X X SermeTel CF


Automotive Market

Engine Fasteners

SermaGard 1105 X X SermeTel CF

Exhaust Components



Oil and Gas Sector

Fasteners



General Corrosion Protection


Marine General

Corrosion Protection

Sermaloy J X Sermaloy J CF

Table 25. Summary of performances covered by current mixtures and alternatives developed



4.3. Assessment of shortlisted alternatives

Researchers have been investigating chromium-free and low chromium

substitutes for the traditional metallic-ceramic coatings for 20 years. Praxair has now

introduced its first chromium-free coating system (basecoat and topcoat), which is

currently being tested by several customers. In this paragraph, applicant will describe

the relationship between performances covered and alternatives developed,

separating the 3 alternatives identified, but without a comparison between the

alternatives. Applicant will not compare the different alternatives because each one

of them covers specific performances addressed by the Use-1. Consequently, the 3

alternatives together allow the covering of previous mixtures performances.

The Applicant will then present the core argument to justify the review period,

i.e. the time for customers to validate/qualify these alternatives.

4.3.1. Alternative 138 : SermeTel CF

This alternative is used to cover the “standard” performances desired for metallic-

ceramic coatings:

- Sacrificial corrosion protection property

- High temperature corrosion resistance

- Inhibitive sealant property

- Anti-fouling protection

4.3.1.1. Substance ID, properties, and availability

The SermeTel CF coating process is composed of different mixtures, which are

hexavalent Chromium free. It is used to replace the SermeTel process 2F1 and

5380DP and associated mixtures.

The mixtures are composed of several substances listed below. Not all substances

are used in all the mixtures or in the same proportions. Typical new mixtures will

contain:

- Aluminium (CAS: 7429-90-5)

- Silicic acid, potassium salt (CAS: 1312-76-1)

- Aluminium tris (dihydrogen phosphate) (CAS: 13530-50-2)

- Titanium dioxide pigment (CAS: 13463-67-7)

- Chromium (III) oxide pigment (CAS: 1308-38-9)

- 2-methoxy-1-methylethyl acetate (CAS: 108-65-6) which act as a

facilitator of the curing process

38 If the Annex XIV substance is replaced by a group of several substance and/or techniques, include the

analysis for the group as a whole in one section.



4.3.1.2. Technical feasibility of Alternative 1

These alternatives mixtures have already been developed by PST headquarter

R&D department. After internal PRAXAIR testing (table 26), these alternatives are in

testing phase by PRAXAIR OEM customers.

TEST TYPE DURATION SUBSTRATE TYPE RESULTS

Salt Spray 2,500 hrs 1010 No red rust in the

scribe

Adhesion (cross-hatch) N/A 1010 5B (excellent)

Bend (0.22” mandrel) N/A 1010 No edge spallation

Boiling H2O (adhesion & Bend) 10 min 1010 Pass visual &

adhesion

Bend (0.22”) + Salt Spray 1,300 hrs 1010 No red rust on

bend

Heat 370 ºC /23 hrs+ 580 ºC /4hrs 1010, 4130 Pass-no

deterioration

370 ºC /23 hrs+ 580 ºC /4hrs

+ Salt Spray 400 hrs 1010, 4130

No red rust in the

scribe

Cyclic Heat + Salt Spray 10 cycles 1010, 4130, 410 Pass

Cyclic Heat+ Salt Spray+ Humidity 10 cycles 1010, 4130, 410 Pass

Dry heat oxidation resistance 600ºC /1000hrs 410, 4130 Pass-no

deterioration

Lubricating Oil (Royco 500) 150ºC /100 hrs 1010 Pass-no

deterioration

Engine Fuel (Fuel B standard) 72ºC/100hrs 1010 Pass-no

deterioration

Hydraulic fluid (Skydrol 500) 72ºC /3 hrs 1010, 4130, 410 Pass-no

deterioration

Table 26. Testing of alternatives performed by PST

Internal testing showed SermeTel Chrome Free coating to present:

- Heat resistance to 450°C during 650 hours.

- Thermal shock resistance to 650°C during 1 hour then cold water

- Corrosion resistance of at least 1,000 hours to salt spray in different

conditions

- Impact resistance

The use of this alternative could be considered as not readily technically feasible,

because the clients (in particular, the OEM) still need time before full

implementation. This time corresponds to the validation/qualification process

(describe in 4.3.4) of the clients.



4.3.1.3. Economic feasibility and economic impacts of Alternative 1

PST performed an economic assessment of the known alternatives (PST’s

Chrome Free basecoat and topcoat) which revealed that, while the material costs are

comparable to the current chromium containing solutions, the application costs are

approximately 1.4 times higher.

The following Table gives a cost estimate of Use-1 Cr(VI) Free alternatives (CF 7800

Basecoat and CF7800 + 118A top coat system) vs. legacy Cr(VI) basecoats only

(SermeTel W and 962) and Basecoat + top coat legacy system (5380DP). This cost

estimate was run by one of PST EU plants.

PART TYPE CF7800 BASECOAT CF7800 + 118A

Blade 7-11 (59mm - 37mm height) 144% 129%

Compressor Disc (350mm dia) 126% 143%

Centre Casing (1200mm dia x 750mm) 137% 147%

Table 27. Comparison of differences in cost application between Cr(VI) free (CF) and Cr(VI) mixtures

These higher costs of applying Use-1 alternatives, compared to corresponding Cr(VI)

containing legacy coatings, are caused by several factors:

- To achieve a required thickness of a basecoat (customary 25 – 40

microns), two cure cycles are required instead of one to achieve the

same level of corrosion performance

- This in turn requires additional masking & de-masking step

- CF top coat is preferably applied in two cured layers also, vs. one cured

top coat layer in 5380 DP legacy system

PST is now investigating ways of improving the basecoat technology to

potentially eliminate this added step. However, there is low probability of success

given the results so far.

This drawback will however not prevent PST from implementing this alternative.

4.3.1.4. Hazard and risk of Alternative 1

Regarding the different components of the alternatives, none of them are

included in the Candidate list in its version of 15 June 2015 or have SVHC properties

(as provided by article 57 of the REACh regulation). Compared with the use of

chromium trioxide and acid generated from chromium trioxide, the level of hazard of

the new mixtures is less important.

Nevertheless, the Applicant will compare the use of these alternatives substances

with the hexavalent chromium substance.



Aluminium (CAS: 7429-90-5) (harmonised classification)

This substance is classified as a Flame Solid 1 and Water React 2 (Index Number 013-

001-00-6) and, referring to the registration dossier, does not have CMR

(Carcinogenicity, Mutagenicity & Reprotoxicity) or any equivalent harmful properties.

Moreover, the process does not lead to a dispersive use. The substance is therefore

not concerned by an inclusion in the candidate list of SVHCs (Substances of Very High

Concern).

Finally, regarding the hazard related to the harmonised classification as Water React

2, the substance is already incorporated in complex water based mixture. It does not

react with water anymore.

Silicic acid, potassium salt (CAS: 1312-76-1) (No harmonised

classification)

The registration dossier (and the SIDS assessment report)39 shows some

corrosive/irritant properties for this substance but does not demonstrate CMR


Moreover, the process does not lead to a dispersive use. . The substance is therefore

not concerned by an inclusion in the candidate list of SVHCs (Substances of Very High

Concern).

Aluminium tris (dihydrogen phosphate) (CAS: 13530-50-2) (No

harmonised classification)

No tests have been performed directly on the substance in the registration dossier.

The majority of available tests have been performed on the dihydrogen phosphate

part of the substance. The registration dossier does not show any CMR

(Carcinogenicity, Mutagenicity & Reprotoxicity) or other equivalent harmful

properties.

Nevertheless, in the ICPS-EHC40, a reprotoxic effect has been reported on laboratory

animals with no risk associated for humans. Moreover, the process does not lead to

a dispersive use. The substance is therefore not concerned by an inclusion in the

candidate list of SVHCs (Substances of Very High Concern).

Titanium dioxide pigment (CAS: 13463-67-7) (Proposition of

harmonised classification)

The proposition of classification is, Acute Toxicity 4, Eye irritant 2, STOT RE 1 for

lung, and Carcinogenicity 2. The substance is classified as class 2B carcinogenic by

IARC. Given the fact that the registration dossier studies show that the lung

carcinogenicity effect is at dose at least 5 times higher than the inhalation repeated

toxicity, this repeated toxicity is the major hazard of the substance.

39 SIDS Initial Assessment Report for Soluble silicates, 2004

40 IPCS-ECHC 194 on Aluminium, WHO 1997



A SIDS report41 on the substance concludes to a potential genotoxic effect, but

without any direct effect of the substance (oxidative stress). Moreover, regarding the

effect of long term exposure (RE and carcinogenicity), these 2 toxic effects are

probably linked to an inflammation on the lung after an inhalation exposure. The

toxicity mechanism would indicate the substance to be a threshold substance for

which the control of risk could therefore be reported. Applicant will maintain the

current RMM (for hexavalent chromium) which will allow a safe use of the

alternative substance.

Chromium (III) oxide pigment (CAS: 1308-38-9) (No harmonised

classification)

The studies performed in the registration dossier do not show any CMR


The substance is therefore not concerned by an inclusion in the candidate list of

SVHCs (Substances of Very High Concern).

2-methoxy-1-methylethyl acetate (CAS: 108-65-6) which act as a

facilitator of the curing process (harmonised classification)

The substance is classified as a Flame Liquid 3 and referring to the registration

dossier does not have any CMR (Carcinogenicity, Mutagenicity & Reprotoxicity) or

any equivalent harmful properties. Moreover, the process does not lead to a

dispersive use. The substance is therefore not concerned by an inclusion in the

candidate list of SVHCs (Substances of Very High Concern).

Regarding the hazard linked to the harmonised classification, the substance is

incorporated in a complex water based mixture and so is already formulated and

does not react with water.

Comparison with chromium trioxide (CAS: 1333-82-0)

As a reminder, chromium trioxide toxicological and ecotoxicological profile

displays the following properties:

- Ox. Sol. 1

- Acute Tox. 3

- Skin Corr. 1A

- Skin Sens. 1

- Acute Tox. 2

- Resp. Sens. 1

- Muta. 1B

- Carc. 1A

- Repr. 2f

- STOT RE 1

- Aquatic Acute 1

- Aquatic Chronic 1

41 SIDS INITIAL ASSESSMENT PROFILE on Titanium Dioxide, CoCAM 4, 16-18 April 2013



These intrinsic properties are of greater concern than the ones of the alternative

substances.

Given the fact that the quantity used and the diffusion mechanisms are similar, we

can conclude that the risk to use the alternative 1 is less important than for the

chromium trioxide mixtures.

4.3.2. Alternative 2: Sermaloy J CF

This alternative is used to ensure a high temperature oxidation and corrosion

resistance.


The Sermaloy J CF coating mixture is hexavalent Chromium free. It is used to replace

the Sermaloy J mixture. The substances used will be the same as for alternative 1 but

not in the same proportion.


As previously, chromium-free mixture was developed by PST R&D department,

at their head office. After internal PRAXAIR testing, the alternative is in testing phase

by PRAXAIR OEM customers.

Internal testing showed SermeTel Chrome Free coating to present:

- Heat resistance to 450°C during 650 hours;

- Corrosion resistance of at least 1000 hours to salt spray in different

conditions;

- Oxidation resistance of 100 hours at 600°C

Though promising, the new mixtures are not yet appropriate because they are not

qualified by the clients and certified by the authorities.


PST estimates that the additional cost of using this alternative is similar to what

is described in the alternative 1.


The same alternative substances as the ones analysed in alternative 1 section

will be used for the alternative 2.



4.3.3. Alternative 3: 1758 lubricating coating

This alternative is used to ensure a lubricity of material at high temperature.


The 1758 lubricating coating mixture is hexavalent Chromium free. It is used to

replace the SermaLube mixture.


PST has identified a chromium-free alternative and testing began in Q3 of 2015.

Based on PST experience with the SermeTel qualification process, the SermaLube PST

internal validations will likely take one year. Then, customers will validate/qualify this

alternative as for alternatives 1 & 2. Given the fact that only a small quantity of the

corresponding Cr(VI) mixtures is used currently, the validation/qualification process

will be shorter (approximately 1 year less) than for alternatives 1 & 2.

Cumulating these two information, PST estimates that the availability for this

alternative will be the same as for the other alternatives.


PST estimates that the additional cost of using this alternative is similar to what

is described in the alternative 1.


The same alternative substances as the ones analysed in the alternative 1

section will be used for alternative 3.

4.3.4. Availability of the Alternatives

Alternatives cannot be deemed available (and therefore appropriate) without going

through several testing steps, both at PRAXAIR and at the OEM’s. The timeline

needed for these tests is derived from the aerospace industry’s requirements whose

representativeness for our case is analysed under section 2.1.

Testing at PRAXAIR

At the beginning of 2014, PST informed its customers that 3 alternatives had

been tested and validated by PST to replace the hexavalent chromium mixtures for

several performances/properties. Internal tests had been performed in PST

headquarter in the US (Indianapolis). These test protocols included:

- Tests that are governed by the ASTM standard test methods, such as

corrosion test ASTM B117, and



- Tests developed by individual OEMS, such as a Pratt & Whitney test for

cyclic salt fog plus furnace cycle.

Testing times may vary, but the typical corrosion test is run for 2,000 hours. The

different internal tests performed for SermeTel W chromium-free alternative are

listed below:

Table 28. Summary of internal test realised by PST

Testing at the OEMs

Certain large OEMs in Europe and the U.S. expressed their interest in testing these

materials, which was agreed by PST. Consequently, it was the OEMs themselves who

requested PST to run their own test programs with the new coating solutions.

To do so, PST coated their substrate specimens and returned them to the OEMs for

their own testing and verification of performances. Further testing is of course

offered to any other users of slurry-based coatings.

As discussed above, it is important to bear in mind that PST is both the formulator of

the alternative mixtures and a downstream user of the mixtures in its role of OEM

subcontractor. Due to this specific situation, PST is dependent on the OEM

qualification process to use the mixtures, based on their own specifications.

A qualification process derived from the aerospace industry

To describe the general validation / qualification / certification process, the

Applicant used the aviation industry, which represents the major market of PST

hexavalent chromium coating in the EU (approximately 65% of the Use-1 business).

Moreover and as indicated in the introduction, the industrial Gas Turbines (which

are composed mainly of aeroderivative turbines) and the Oil & Gas sector (for

inherent safety reasons), are subject to comparable testing and qualification

constraints in terms of length and stringency42,43,44,45. These sectors amount to 90%

of the Use-1 PST coating activities.

42 ISO 2314, Gas turbine acceptance tests

43 ASME PTC 22, Gas turbine power plants



The following descriptions are therefore deemed representative of PST customers

problematic to substitute a new corrosion coating mixtures.

As described in the ECHA/EASA document46, airworthiness requirements are the

set of measures which allow the aircraft’s safe flight. To this end, extreme caution

must be exercised and risks understood before replacing a material which has

proven experience.

To validate the replacement of a material (or substances), the OEMs need to go

through different steps consecutively:

1. Qualification;

2. Certification;

3. Industrialisation.

The qualification step is a process by which a company validates that a substance

meets the performance requirements as described in the performance

specifications. As stressed in the ECHA/EASA document,

‘When new materials or design changes are introduced, the original

compliance demonstration will have to be reviewed for applicability and

validity, in addition to a review of potential new aspects of the new material

or design change that could affect the airworthiness of the aircraft.

Depending on the change, this review could be restricted to coupon or

component tests, but for other changes this could involve rather extensive

testing. E.g. changes in protective coatings could affect not only the corrosion

resistance but could also affect the friction characteristics of moving

components in actuators in the different environmental conditions, changing

the dynamic behaviour of the system, which in the end affects the dynamic

response of the airplane’.

The changing of engine parts corrosion coating involves therefore the necessity to

perform an engine test in addition to anti-corrosion resistance on parts.

This qualification step (in the case of PST customer) includes 2 major sub-steps:

a. OEM substances screening/testing

b. OEM engine testing (in ground or in flight)

This step, depending on the company, can take 3 to 5 years. Since the modification is

important47 (new anti-corrosion coating) in the case of PST, tests are expected to

take at least 5 years.

44 ASME PTC 46, Performance test on overall plant

45 Guideline for field testing of Gas turbine and centrifugal compressor performance, 2006

46 An elaboration of key aspects of the authorisation process in the context of aviation industry, 2014

47 define in the Commission Regulation (EC) No 1702/2003



The certification is realized by a competent aviation authority such as the European

Aviation Safety Agency (EASA) in the EU. If the modification is considered as an

important modification (for example, new coating mixture), the whole engine and

not only the part directly impacted will need to be certified. The certification

duration can take 6 months to 1 year (1 year approximately in the case of PST).

After the qualification/certification process, an industrial implementation of the

process is realized. The estimated duration could be different depending on the type

of process.

In our particular case, since mid-2014 (February to November depending on the

OEM) the 3 identified alternatives are in testing phase at several OEM shops. This

timeline is applicable to the 3 alternatives scheduled and represents the

validation/qualification/certification/industrialisation time needed by PST customers

to use the alternatives developed.

The schedule below is deemed the most representative since it applies to the

majority of PST’s customers. Non-disclosure agreements however prevent PST from

detailing all the test-programs and giving the names of the OEMs involved. PST

nevertheless presents a summary of the validation / qualification / certification

process for their OEMs based on clients‘consultation answers.

Figure 7. Time line of PST OEMs validation/qualification process

In the worst-case scenario, OEMs will need 5 years after the sunset date to

implement these alternatives (or 7 years after the beginning of the testing phase, as

described above). The Applicant stresses that this scenario will certainly be the most

realistic since the engine testing is important for the OEMs to ensure a high level of

security (airworthiness) of the material coated by the new chromium-free mixtures.

One example of a substitution of an anti-wear varnish (by SNECMA, a major

aerospace engine manufacturer and part of the SAFRAN Group, who agreed on

giving these information on the general substitution process), which describes a

timeline close to what could happen for an anti-corrosive coating substitution, is

described in the figure 8 below.



Figure 8. Example of internal SNECMA timeline to substitute a varnish anti-wear

The review-period asked for by PST is therefore based on the typical aeronautical

qualification/certification process described in the ECHA/EASA document46 and one

real example from SNECMA (figure 8) about the substitution of a varnish anti-wear.

Moreover, this timeline, for the engine test phase, is in agreement with a general

view of gas turbines engine test timeline describe below (figure 9) which show that

engine testing duration is between 4 to 5 years.

Figure 9. Time line of engine test for Gas turbines48

Moreover, due to different possible uncertainties:

- More time needed for PST’s customer to validate/qualify the

alternatives (depending on each OEM customers validation process)

- Delay in the industrialisation of alternative mixtures

- Time to resubmit an application for authorisation in case of delays:

resubmitting a dossier 18 months before the end of the review period

48 Gas turbines theory, HIH Saravanamutto, 6

th edition, 2009



(as provided by article 61 of REACh) would lead, in the case of a 5 years

review period, to do so only 3 ½ years after the granting of the

authorisation. Taking into account the time for preparing the dossier (at

least 6 months), work would need to be started 3 years only after the

start of the review period, i.e. in 2020 by the latest. At this date, it is

contended that the Applicant will not be in the position to know

whether or not a dossier must be resubmitted, therefore leading him to

either support unnecessary costs (in the case the Applicant is over

cautious and decides to be in the position to resubmit a dossier

whatever happens) or miss the opportunity to extend the review period

and therefore suffer serious economic and industrial impacts.

Based on the above, the applicant therefore finds it reasonable to add 2 years to the

time needed, in theory, for the implementation of alternatives after the review

period.

These considerations lead to request a 7-year review period, as described below

(figure 10).

Figure 10. Justification timeline Use-1 review period

4.3.5. Conclusions on Alternatives

The developed SermeTel Chromium-free, Sermaloy J CF and 1758 lubricating

coatings alternatives have proved to cover several “classical” properties of metallic-

ceramic coating, during in-house PST testing processes:

- Sacrificial corrosion protection property

- High temperature corrosion resistance

- Inhibitive sealant property

- Anti-fouling protection

- High temperature oxidation and corrosion resistance

- Lubricity at high temperature

Regarding these alternatives, customers of PST will need further time to

validate/qualify before being ready to use these new chromium-free mixtures, since



the parts coated are critical to ensure the security and the service life of their

engines. Taking into account these problematics, PST requests an authorisation

review period of 7 years from the sunset date to implement the 3 described

alternatives (table below) and make sure the OEMs have reached the compulsory

level of safety for the new materials.

Steps Described duration

Remaining duration after the

sunset date

Qualification 5 years 3 years

Certification 1 year 1 year

Industrialisation 1 year 1 year

Uncertainties 2 years 2 years

Total 9 years 7 years

Table 29. Duration of qualification, certification & industrialisation process since the beginning of the testing phase and after the sunset date

4.4. The most likely non-use scenario

As discussed in the previous paragraph, the limits to use the alternatives in an

industrial process is the time for the user (OEM = direct or indirect customer of PST)

to validate/qualify these new products. As soon as these alternatives will be

qualified, customers will use them. PST therefore only needs time to definitely

replace hexavalent chromium for this use.

From the standpoint of the customers, any change of a material or process can only

be towards an improved solution (rarely for an equivalent solution). Because of this

need of an upgraded product, especially to ensure the airworthiness of their final

products but also the safety & efficiency, PST customers will not use a non-

validated/certified alternative. As discussed previously, the changing in coating

substance is a major modification and necessitates a long and complete

qualification/certification process.

Assessment will be made for each site separately (dependence to chromium

trioxide is variable and it was chosen, for transparency reasons, not to dilute the

economic impacts) and compared to the costs avoided for keeping the substance

and exposing 2 to 26 workers (depending on the size of each site). Nevertheless, a

final global counting will be performed to facilitate the understanding of the

benefits/risk assessment.

In the end, it is contended by the applicant that the most probable non-use scenario

will be separated in 2 sub-scenarios:

- Shutdown of the Hexavalent chromium coating activities in the EU

during the 7-year review period



- The relocation of hexavalent chromium coating activities in PST shops

outside the EU during the 7-year review period.



5. IMPACTS OF GRANTING AN AUTORISATION

Should the Commission refuse to grant an authorisation, this would mainly have

the following economic, social and distributional impacts:

- Economic impacts on PST activities will include loss of benefits, cost of

implementation of the coating process outside the EU (during the

qualification/certification of alternatives) ;

- Social impacts will mainly consists in impacts on employment;

- Distributional impacts will include impacts on the supply chain, in terms of

loss of benefits and employment in the EU during the

qualification/certification of alternatives, and cost of part transportation

during the period of relocation.

The “non-use” scenario entails important impacts for PST (loss of

profits) as well as for the UK (loss of employment). Impact on direct local

SME clients of PST is also qualitatively considered. Overall, the total

economic and social impact is evaluated to € 2,506,403 a figure well

supported by the uncertainty analysis.



As the decision was made to shut the Duisburg site just before submitting this AfA

and considering that the date of cessation of activity and the final redistribution will

be precisely determined only during the year to come, the Applicant decided to use

risk and economic analysis applicable to Duisburg and redistribute them to the

Lincoln (UK) site, since it is the most likely solution of transfer today.

5.1. Economic impacts

5.1.1. Loss of revenues/Benefits

In this assessment, solely the impacts in terms of benefits due to chromium

trioxide mixtures coating activities will be quantified.

Nevertheless, please note that an estimate 10% of the Cr(VI) coating activities are

linked to other non-Cr(VI) coating activities. Because the precise costing of the

knock-on effect would be subject to too many uncertainties (though being real), it

was chosen not to take it into account in the following assessment.

Moreover, since the gross operating rate for PST is too sensitive, applicant will also

consider an 8% gross operating rate for the assessment of profits loss. This

estimation (8%) is based on a global number of manufacturing activities in Europe49.

SHOP ANNUAL BUSINESS (2014) GROSS OPERATING PROFIT

(2014)

Lincoln € 3,383,888 € 270,711

Fornovo € 181,595 € 14,528

Monte-Marenzo € 431,122 € 34,490

Southam € 421,466 € 33,717

Table 30. Annual business and gross operating amount for each site regarding the Use-1 mixtures

Based on the consideration that the CrVI market will be subject to important changes

in the years to come, not all precisely foreseeable, it was decided, in a realistic

conservative approach, not to take into account any growth of the CrVI coating

business. However, a 4% actualisation rate was used.

SHOP GROSS OPERATING

PROFIT (PER YEAR)

GROSS OPERATING PROFIT

(DURING THE REVIEW

PERIOD)

GROSS OPERATING PROFIT (DURING

THE REVIEW PERIOD, AND

CONSIDERING A 4% DISCOUNT RATE

PER YEAR)

Lincoln € 270,711 € 1,894,977 € 1,502,240

49 Structural Business overview, Eurostat, Gross operating rate within the non-financial business

economy, EU-28, 2012



Fornovo € 14,528 € 101,693 € 80,617

Monte-

Marenzo € 34,490 € 241,428 € 191,392

Southam € 33,717 € 236,021 € 187,105

Total € 353,446 € 2,474,120 € 1,961,354

Table 31. Total gross operating amount per site considering the 7 year review period and a 4% actualisation rate

5.1.2. Cost of coating process implementation outside the EU

For the socio-economic analysis and as part of the relocation non-use scenario, PST

will not consider costs associated with the implementation of the Cr(VI) coating

activities outside the EU since the sites already exist and could absorb a possible

over-activity. Nevertheless, it is important to mention that the relocation will

increase exposure and the associated risks for the non-EU workers.

5.2. Social impacts

5.2.1. Impact on employment

5.2.1.1. Loss of employment

As described in the non-use scenario, during the 7 years of relocation, PST

workers in EU will be unemployed.

PST estimates that each worker generates approximately $ 200,000 of revenues per

year.

This calculation is based on the global revenues and the number of workers:

$ 8,303,520 generated by 43 workers, hence $ 193,105 per worker (€ 173,794)

In a global calculation approach, we can consider that the non-use scenario of the

Use-1 will contribute to 25 workers’ unemployment. Nevertheless, in order to have

a more sensitive assessment, the applicant will also calculate the consequences, per

site, considering the business value for each site as shown in the Table 32 below.

SHOP ANNUAL BUSINESS CONSIDERING

THE REPARTITION (PER YEAR) JOB LOSSES

Lincoln $ 3,759,875 19

Fornovo $ 201,772 1

Monte-

Marenzo $ 479,024 2



Southam $ 468,295 2

Aggregated

Total $ 4,908,967 24

Global $ 4,908,967 25

Table 32. Loss of employment per site and in a global view considering the business related to Use-1

There is a difference of 1 job lost between the aggregated total and the global

approach due to rounded data. Eg. for Monte-Marenzo, the real mathematical value

of unemployment is 2.48 but the applicant considered 2 jobs lost in the table above.

Nevertheless, in the cost analysis, the Applicant will consider the loss of 25 jobs.

5.2.1.2. Individual cost of unemployment

In order to provide a more accurate picture of the costs associated with

unemployment, auxiliary costs have also been taken into account in addition to the

payment of unemployment benefits, in terms of guidance and administrative costs as

well as potential loss of revenue for the State:

TYPE OF COSTS Total amount in

UK(€)

Public

intervention

Unemployment benefits € 3,561

Guidance and administrative costs € 1,746

Subtotal for public intervention € 5,307

Potential loss

of revenue

Loss in social contribution of employers € 2,955

Loss in social contribution of workers € 2,539

Loss in direct taxation € 4,498

Loss in indirect taxation € 2,710

Subtotal for potential loss of revenue € 12,702

Total average annual cost of an unemployed person € 18,008

Table 33. Average individual cost of an unemployed person in UK, 201050

.

Based on these data, the assessment will be made for 2 sites in the UK (Lincoln and

Southam) and 2 sites in Italy (Fornovo and Monte-Marenzo).

As no comparable data were found for Italy, the Applicant decided to use the

lower value (UK situation) so as not to overestimate the cost associated with

unemployment. Nevertheless, it is important to keep in mind that this value could be

higher for Italian workers.

In what follows, the values of table 32 will be used to monetise the costs of

unemployment, with the following corrections:

50 Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest in

employment? A study on the cost of unemployment, 2012



- Correction for change in harmonised consumer price index: 7.5% in Italy

and 11.8% in UK over the 2010-2015 period2;

- Correction for the average duration of unemployment in Europe: 15.3

months for workers in 201451.

Taking these corrections into account, the final cost of unemployment is listed in

the table below:

SHOP COST PER WORKER IN 2015

PRICE (PER YEAR)

COST PER WORKER IN 2015 PRICE

CONSIDERING A PERIOD OF

UNEMPLOYMENT OF 15.3 MONTHS

Lincoln € 20,133 € 25,669

Fornovo € 19,359 € 24,682

Monte-

Marenzo € 19,359 € 24,682

Southam € 20,133 € 25,669

Table 34. Cost per year and for a mean unemployment time of 15.3 months (in 2015 price) per site

5.2.1.3. Total cost of the loss of employment

The overall cost of unemployment, in relation with the actual number of job

losses foreseen in the context of the “non-use” scenario and the individual cost of

unemployment are synthesised in the following table:

Shop Number of

job lost

Cost per worker in 2015 price

considering a period of

unemployment of 15.3 months

Total cost of

unemployment

(considering a

discount between

2015-2018)

Lincoln 17 € 25,669 € 433,582 €

Fornovo 1 € 24,682 € 21,942

Monte-

Marenzo 2 € 24,682 € 43,885

Southam 2 € 25,669 € 45,640

Global 25 € 24,682 € 548,560

Table 35. Cost of unemployment for each site and in a global approach for the Use-1

51 OECD stats on unemployment, 2014



5.3. Distributional impacts

5.3.1. Cost of round trip parts transportation

Due to too many uncertainties and difficulties to estimate this cost PST will not add

this impact to the calculation of the Non-Use impact.

Nevertheless, it is important to mention that this cost could be significant.

5.3.2. Impacts on territory Small & Medium Enterprise (SME)

The Applicant decided to make a qualitative description of the impacts on SMEs

related to the business contemplated under Use-1.

PST currently has several Long Term Agreements (LTA). Among these, two are in the

UK and two in Italy. These companies (SME companies) are themselves

subcontractors of OEMs. The consequences in terms of business and employment of

a relocation of PST coating activities for these companies are difficult to estimate.

Nevertheless, should they have to send their parts for coating outside the EU, this

would very likely result into an increase of the price of the final products. This, in

turn, could affect agreements between the SMEs and their customers (the OEMs)

and result in:

- At least a decrease of their gross operating rate

- A possible unemployment increase for these small companies

- In the worst-case, if these companies cannot absorb the overcost, it

could lead to a shut-down of their activities

Additionally to the direct cost for PST, the refusal to grant an authorisation could

therefore have an impact on the local territory.

5.4. Health impacts outside the EU

As discussed above, it is important to mention the fact that transferring the Cr(VI)

activities abroad could enhance the risk for non-EU workers, since the legislation for

companies outside the EU may be less protective.

5.5. Uncertainty analysis

Even though an effort was made all along the document to outline a scenario

based on a realistic worst hypothesis, the results obtained may present various

degrees of uncertainties. In order to identify and quantify such uncertainties, the

following section discusses the main assumptions of the socio-economic analysis.



5.5.1. “Applied for use” scenario

5.5.1.1. Preliminary observation: uncertainty of exposure and risk values

The assessment of exposure to Cr(VI) is based on more than 30 measures

performed during the last three years and are clearly representative of the mean

exposure. The exposure data and therefore the excess of risk of cancer used all along

this AfA for the monetisation of impacts reflect the actual exposures of workers; no

further uncertainty analysis was carried out concerning these parameters.

5.5.1.2. Uncertainty analysis of the Value of a Statistical Life-Year

Uncertainty analysis of the costs associated with mortality and morbidity was

carried out, using the lower and upper bound Value of a Statistical Life-Year defined

by NewExt52: respectively €27,240 (adjusted to local 2015 price in the calculation)

and € 225,000 (adjusted to local 2015 price in the calculation).

The total costs (combined for all the sites) associated to mortality and morbidity for

these two values amount to:

COSTS ASSOCIATED TO

MORTALITY AND MORBIDITY

Upper bound of Value of a Statistical Life-Year € 3,729

Lower bound of Value of a Statistical Life-Year € 451

Table 36. Uncertainty analysis for mortality and morbidity

5.5.1.3. Other parameters

A qualitative uncertainty analysis of the main hypothesis, assumptions and

parameters used for the assessment of the “applied for use” scenario is provided

below:

APPLICATION PARAMETER UNCERTAINTY ANALYSIS

Mortality and

morbidity

- Standard life

expectancy

- Mean age of lung

cancer death

- Mean age of lung

cancer diagnosis

Middle uncertainty, since the value of mean

age of lung cancer death and diagnosis are

extrapolated from French value

- Disability weight Low uncertainty, since the value used is

specific to lung cancer

52 NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003



Medical

treatment

- Costs of medical

treatment

Low to middle uncertainty, since the value

used is specific to lung cancer in the UK.

However, the applicant used a mean value of

the other countries and applied them to Italy.

- Survival rate Low uncertainty, since the values used are

specific of the European population

Table 37. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

5.5.2. “Non-use” scenario

5.5.2.1. Uncertainty analysis of the loss of profits

As stated in section 5.1.1, the assessment of the loss of profits associated with

the “non-use” is based on a zero growth hypothesis over the review period. In order

to carry out uncertainty analysis over this value, a secondary assessment was carried

out taking into account a positive growth rate of PST revenues over the review

period.

The average value of +2.7% for the annual growth of revenues for the aerospace and

defence sector was used53.

Considering this hypothesis and a 4% discount rate, the overall loss of profits

foreseen over the review period amounts to the values in the table below

SHOP

GROSS OPERATING PROFIT (DURING THE REVIEW PERIOD, AN

ANNUAL GROWTH OF 2.7 % AND CONSIDERING A 4% DISCOUNT

RATE PER YEAR)

Lincoln € 1,757,778

Fornovo € 94,330

Monte-Marenzo € 223,949

Southam € 218,933

Total € 2,294,990

Table 38. Gross operating rate per site considering the 7 year review period and a 4% actualisation and an inflation of 2.7%

5.5.2.2. Uncertainty analysis of the loss of employment

As stated in section 5.2.1, only direct job losses have been considered in the

assessment of the social impacts of the “non-use” scenario.

53 Deloitte, 2015 global aerospace and defense industry outloook



In order to provide an uncertainty analysis of this value, we discussed an approach

by site and globally.

Based on this assumption, the total job losses foreseen in the context of the “non-

use” scenario amount to 25 jobs in a global approach and 24 in a per site approach.

The cost of unemployment, taking into account both global and per site job losses

amounts to € 548,560 and € 545,049 respectively.

.

5.5.2.3. Other parameters

A qualitative uncertainty analysis of the main hypothesis, assumptions and

parameters used for the assessment of the “non-use” scenario is provided below:

APPLICATION PARAMETER UNCERTAINTY ANALYSIS

Loss of

revenues,

profits and

orders

- Revenues impacted by

the use of chromium

trioxide Use-1 mixtures

Low uncertainty: the values used to

estimate the loss of revenues are based on

the business generated by the use of the

substance specifically in the scope of Use-1

- Operating margin

Intermediate uncertainty: the value used is

based on the mean value of the sector of

market, because it is too difficult to

estimate the operating margin specifically

for this process

Loss of

employment

- Average individual cost

of an unemployed

person

Low to intermediate uncertainty: the values

used are specific to the UK (which are the

lowest) and are underestimated for Italy

- Breakdown of job losses

per use, based on the

share of revenue loss for

each use

Potential high degree of uncertainty, since

the loss of employment is not necessarily

proportionate to the loss of revenues. This

hypothesis, however, is considered as

underestimating the results since it does

not take into consideration synergies

between uses: one use may impact several

employees

Table 39. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

5.5.3. Uncertainty analysis - Synthesis

Quantitative results of the uncertainty analysis for the “applied for use” and the

“non-use” scenarios are synthesised in the figures below.

5.5.3.1. “Applied for use” scenario

The following figure details the results of the uncertainty analysis for the costs

associated to mortality and morbidity:



Figure 11. Uncertainty analysis for mortality and morbidity

5.5.3.2. “Non-use” scenario

The following figure details the results of the uncertainty analysis for the loss of

profits and the loss of employment:

Figure 12. Uncertainty analysis for loss of profits and loss of employment

925 €

3 729 €

451 €

0 €

500 €

1 000 €

1 500 €

2 000 €

2 500 €

3 000 €

3 500 €

4 000 €

Reference value Uncertainty analysis - Upperbound value

Uncertainty analysis - Lowerbound value

1 961 354 €

2 294 990 €

545 049 € 548 560 €

0 €

500 000 €

1 000 000 €

1 500 000 €

2 000 000 €

2 500 000 €

Reference value Uncertainty analysis Reference value Uncertainty analysis

Loss of profit Loss of employment



5.5.3.3. Conclusion on the uncertainty analysis

These uncertainty analyses show that the values taken into account in the

assessment are representative and that using the values from the uncertainty

analysis would not change the conclusion of this authorisation dossier whereby

benefits clearly outweigh the risks.

5.6. General conclusion on the impacts of granting an

authorisation

Monetised impacts of the “non-use” scenario are synthesised in Table 40 below:

MONETISED IMPACTS

Economic impacts Loss of profits € 1,961,354

Social impacts Loss of employment € 545,049

Total monetised impacts of the “non-use” scenario € 2,506,403

Table 40. Synthesis of the monetised impacts of the “non-use” scenario

As a complement, other impacts of the “non-use” scenario are synthesised in

the table below:

IMPACTS

ORDER OF

MAGNITUDE

Distributional

impacts

Parts

transportation

During the relocation of the coating activities, the

parts manufacturer will send the parts to be

coated. This transportation will greatly increase

the price of the coating activities for EU

manufacturer.

Not assessed

Territory

impacts

PST worked with local SME that could be

significantly impacted by a relocation of PST

coating activities

Not assessed

Health impacts Cancer risks

The relocation of the hexavalent chromium

coating activities will increase the risk of lung

cancer for non-EU workers

Not assessed

Table 41. Other impacts of the “non-use” scenario

6. CONCLUSIONS

6.1. Comparison of the benefits and risks

Based upon the assessment carried out in sections 3.6 and 5.6, the socio-

economic benefits outweigh the risks arising from the use of the substance by a

factor of 2,658 in a global view. Moreover, the table below describes the

benefits/risks ratio for each site separately.

IMPACTS LINCOLN FORNOVO MONTE-

MARENZO SOUTHAM GLOBAL

Use costs € 854 € 82 € 5.59 € 1.27 € 943

Non-Use impacts € 1,935,822 € 102,559 € 235,277 € 232,745 € 2,506,403

Benefits/risks ratio 2,267 1,247 42,125 183,965 2,658

Table 42. Benefits ratio calculated for each site and in a global point of view

6.2. AoA-SEA in a nutshell

APPLICATION FOR AUTHORISATION

APPLICANT:

SUBSTANCE:

Praxair Surface Technologies

Chromium trioxide and acid generated from chromium trioxide

USE: Use-1: Industrial spraying of chromium trioxide mixtures for the coating of metallic articles subject to

harsh environment, to ensure a high temperature corrosion & oxidation resistance as well as anti-fouling

properties or lubricity at high temperature for automotive, aviation, power generation machinery, Oil and

Gas and marine applications.

ANALYSIS OF ALTERNATIVES

A significant work of research carried out by PST led to identify

alternatives for Use-1. Since the end of 2014, PST’s customers have

started laboratory testing

These alternatives will require customer testing (laboratory +

engines), certification and industrialisation before being used in

lieu of hexavalent chromium mixtures

As a consequence, no potential alternative will be available before the sunset date of hexavalent

chromium on 2017/09/21 and a review period of seven years is needed to achieve substitution.

SOCIO-ECONOMIC ANALYSIS

As per Art. 60(4) concerning the Socio-economic assessment route,

evidence was provided that the socio-economic benefits outweigh the

risks arising from the use of the substance by a factor of 2,658

AoA – SEA IN A NUTSHELL

Monetised impacts of the "non use" scenario:

€ 2.506MMonetised impacts of the "applied for use" scenario:

€ 943

Medical treatment18,2 €

Mortality and morbidity924,9 €

Loss of profits1 961 354 €

Loss of employment545 049 €

Use-1

6.3. Information for the length of the review period

Because of the time period needed for the customers to validate/qualify these

alternatives, PST will need to be able to use hexavalent chromium mixtures for 7

years after the sunset date. As validation / qualification processes are specific to

each customer, the end of use of Cr(VI)-based mixtures will be progressive.

6.4. Substitution effort taken by the applicant if an

authorisation is granted

Alternatives for this use are already developed. Customers need time to

validate/qualify these alternatives before using them in different market sectors.



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8. ANNEX – JUSTIFICATION FOR CONFIDENTIAL

CLAIMS

BLANKED OUT

ITEM REFERENCE

PAGE

NUMBER JUSTIFICATION FOR CONFIDENTIALITY

Blank #1

Documents

ANALYSIS OF ALTERNATIVES and SOCIO-ECONOMIC ANALYSIS€¦ · ANALYSIS OF ALTERNATIVES . and . SOCIO-ECONOMIC ANALYSIS . Legal name of applicant(s): Praxair Surface Technologies