Economic Impact Study Proposed ban of Chrysotile in Thailand

Dr. Ingwei Huang, Ph.D.

Department of Business Economics

Assumption University

Case of Chrysotile

Roofing Tiles

Outline

• Background

• Research Objective

• Characteristics of Chrysotile

• Economic Impact Analysis

• Recommendations

2

Background

3

Proposed ban on chrysotile

On April 12, 2011, the government adopted a proposal to

ban the import of chrysotile and the production of chrysotile

containing products in Thailand substituted with non-

chrysotile based alternatives.

However:

• No evidence of scientific or medical studies conducted on

the topic to date in Thailand.

• No identified record of health impacts among laborers or

users in Thailand.

4

Objective of the Study

• To study the social and economic impact from the banning

of chrysotile in high density cement roof tiles

• To evaluate the overall economic impact and cost,

focusing on the post ban environment for chrysotile

products

• To provide recommendations in order to assist in

implementing effective policies with respect to the use of

chrysotile in Thailand.

5

Chrysotile

• Chrysotile is a form of asbestos that is widely utilized as an input in the production of various industrial products.

• It belongs to the serpentine family of asbestos, which is currently not banned for use in the United States, Canada, Brazil, Russia, India, and many other countries.

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Chrysotile in Thailand

• Utilized in the production of industrial products:

• 90% of chrysotile imports are used in the construction

industry as an ingredient in high density cement products

• 6-8% of chrysotile imports is used in the automotive

industry as ingredients for producing brakes and clutches

• 2% of chrysotile imports is used in the production of

gasket, heat insulation materials and fire protective

clothing

Chrysotile roofing has existed in Thailand for more than 50

years with a total market value in 2010 of over 10.4 billion Bht

or around 0.2% of GDP.

7

Chrysotile-containing roofing tiles in

Thailand • Chrysotile-containing roofing tiles are

widely used in Thailand, especially in

rural and provincial areas, where the

product is viewed as a cheap, durable,

and suitable solution given the country’s

specific climatic conditions.

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• Some Thai commercial industries like swine farming relies on

chrysotile-containing roofing products to build pig pens.

• Chrysotile does not react to methane gases, which are

unavoidable by-products of animal waste.

• Considering the total market size, the amount of the chrysotile imported to Thailand over the past 25 years is over 3.2 million tons, covering the period from 1985 to 2010.

• From this, 90% of the chrysotile imported has been used in the production of chrysotile containing high density cement in the roof tile industry. This amount represents the production of over 2.3 billion square meters of chrysotile roofing tiles.

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0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Amount of Chrysotile Imported to Thailand

Chrysotile Import in Tons

Source: Thai Customs Departments, Import and Export Statistics; Virta (2006)

Characteristics of

Chrysotile-

containing

construction

materials

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Durability and quality

• Concerns regarding durability and quality are important in

Thailand.

• Chrysotile-containing roof products are produced from Portland

cement combined with chrysotile fiber known to withstand heat and

exhibit great strength, light in weight but large in size, rendering the

product attractive to middle to low income consumers.

• Non-chrysotile roofing tiles are made from cellulose fibre which

have the added quality of absorbing and withholding water leading

to questions about product durability when faced with heavy rain.

• Replacement of non-chrysotile roofing tiles is also difficult as worn-out

tiles make re-construction work complicated and dangerous.

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Non-chrysotile roofing materials and chrysotile-

containing materials: A comparison

According to quality test conducted by the Department of

Civil Engineering, Faculty of Engineering, KU found that:

• Non-chrysotile roofing materials have lower breakage resistance by

a factor of three times.

• Non-chrysotile roofing tiles, over time showed leakage at the

bottom surface.

• The durability to heat and rain of non-chrysotile containing roofing

tiles is lower.

• When exposed to heat and rain at the same time, non-chrysotile

roofing tiles generate several cracks at random points.

12

Presence of Non-chrysotile roofing materials

• From interviews, non-chrysotile roofing materials tend to only last approximately 2 – 8 years.

• Non-chrysotile roofing materials uses PVA instead of chrysotile. • The price of PVA is dependent on the price of petroluem, which can

fluctuate greatly, thereby making PVA and Non-chrysotile roofing materials costly.

• With differing qualities between chrysotile and non-chrysotile materials, there is a need for the government and the private sector to develop a comparable substitute that has equivalent quality and price characteristics before product is ban.

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Economic Impact

on Stakeholders

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Impact on Ban of Chrysotile

• Direct Impact

• the impact on manufacturers in the roofing tile industry, the impact on

employees in the roofing tile industry, and the impact on consumers

including households, business sectors, and government sectors

• Indirect impact

• impact on suppliers, wholesalers, and retailers of chrysotile containing

products

• Induced impact

• the government’s action in taking responsibility for the replacement of

chrysotile containing roofing tiles with non-chrysotile roofing tiles, the

provision of public announcements and services on information and

knowledge provision to people on the banned products, possible costs

of litigation in the event of damage and claims from consumers who might be affected by the use of chrysotile containing products

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Who will be affected?

A proposed ban of chrysotile generates :

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Consumers

Large direct

impact

Minimal direct

impact

Large Unexpected

induced impact

Manufacturers

Employees

Producers

Retailers

Government

Related industries

Impact on consumers

The impact on different groups of consumers include households, the business sector (as represented solely by the swine industry), and the government sector (as represented solely by the impact on the schools and hospitals)

The cost of replacing of existing chrysotile roofing tiles would be approximately 365 billion baht

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Cost Scenarios for Replacement of non-chrysotile versus chrysotile containing Roof tiles

Chrysotile

roofing cost

Non-Chrysotile Roofing Cost of Different Years of Durability

2 years 3 years 4 years 5 years 6 years 7 years 8 years

Chrysotile

Roofing

Cost of

Different

Years of

Durability

15 365.59 2741.95 1827.96 1370.97 1096.78 913.98 783.41 685.49

20 365.59 3655.93 2437.29 1827.96 1462.37 1218.64 1044.55 913.98

25 365.59 4569.91 3046.61 2284.95 1827.96 1523.30 1305.69 1142.48

30 365.59 5483.89 3655.93 2741.95 2193.56 1827.96 1566.83 1370.97

Impact on household & swine industry

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The estimated cost of removal and replacement of existing chrysotile

containing roofing tiles for the swine industry in 2012 would total

approximately 2.6 billion baht.

Number of Swine Houses Area (sq. m.) Removal and Replacement Cost

10,185 10,185,000 2,648,100,000

No. of Area Cost of Substitute

Households (Million sq. m.) (Million Baht)

17,345,308 1,734.53 450,978.01

The estimated cost of removal and replacement cost of substitute

products on household to be approximately 450 billion baht.

Impact on public schools

19

No. of

Students

No. of Schools Total buildings No. of

Buildings

Roofing Area

(sq m.) Central BKK (Units) (Classroom: Area)

1-120 12,600 12,600 8 : 669 1 8,429,400

121 – 200 7,397 7,397 8 : 669 1 4,948,593

201 – 300 4,600 4,600 8 : 669 1 3,077,400

301 – 499 3,959 109 4,068 16/18: 703 1 2,859,804

500 – 1,499 2,755 151 2,906 16/18: 703 2 6,128,754

1,500 – 2,499 441 173 614 16/18: 703 5 2,158,210

2,500 –

15,000 255 255 16/18: 703 8 1,434,120

Total roofing area 29,036,281

Replacement cost (260 baht/m2) 7,549,433,060

The estimated cost of changing chrysotile containing roofing tiles into

non-chrysotile roofing tiles in public schools would be a total of more

than 7.5 billion baht.

Impact on hospitals

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Type of Hospital Number Approximated area (sq m.) Replacement cost

(Baht) Per hospital Total

Regional Hospital 25 100,000 2,500,000 650,000,000

General Hospital 70 50,000 3,500,000 910,000,000

Community Hospital 723 5,266 3,807,318 989,902,680

Health Center 9,758 150 1,463,700 380,562,000

Community Health Center 105 150 15,750 4,095,000

Total 2,934,559,680

The estimated Replacement Cost of Roofing Tiles of different sizes for

Hospitals in Thailand is expected to be more than 2.9 billion baht.

Impact on manufacturers

0

2000

4000

6000

8000

10000

12000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil

lio

n B

ah

t

Year

Chrysotile and Non-Chysotile Roofing Production in Thailand 2001-2010

Chrysotile Non Chrysotile

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• For manufacturers, conversion to non-chrysotile production would require an

additional investment of 30 million baht per line of newly installed

production.

• Approximately 4,000-5,000 jobs lost

Direct impact of a ban on chrysotile

Summary of cost estimation on different

stakeholders 464.8 billion Baht

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Costs estimates on: Amount in Baht

Manufactures: 750,000,000

Consumers: 464,110,102,740

- Household 450,978,010,000

- Swine Industry 2,648,100,000

- Schools 7,549,433,060

- Hospitals 2,934,559,680

Minimal Indirect impact

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• Minimal impact on producers of

cement that supply inputs to

chrysotile containing roof tile

industries

• Minimal impact on retailers of

construction materials

Minimal Indirect

impact

Producers

Retailers

Large Unexpected induced impact

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Claims Litigation

Expenses

Expected Future Litigation

Cost*

United States

(2002) 730,000 $54 billion $200-265 billion

Japan (2004) 44,198 $12.6 billion 2.8 trillion yen

United Kingdom

(2002) n.a. $7.57 billion $17.7 billion

Litigation Expenses in US, Japan, and UK

Large induced

impact

Government

Related industries

• Source: US - Carroll, et al. (2002); Japan - Ikeya (2005); UK -

Saiontz & Kirk, P.A. (2010)

• Note: In US, a total of 8400 companies had become defendants

leading to 73 bankruptcies by 2002.

• * For US, this is the estimates of the expected total costs of all

claims to date. For Japan and UK, this is the estimates of total

cost expected by 2050.

Recommendations

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Recommendations

• It is important to consider the economic impact from the

proposed ban of chrysotile carefully. The ban could lead

to large costs to the economy both in the short run and

long run.

• Additional research should be conducted to estimate the

economic impact on affected industries and how long term

management of product substitution could be done.

• There is a need for the government to support the

development of substitute products that are more

comparable in quality and durability

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Recommendations (cont.)

• The material utilized in the production of non-chrysotile

roofing tiles needs to be further studied and clarified.

• There has not been any testing or research that confirms the safety

in consumption and utilization of these products in the short run

and long run.

• In light of the large economic impact of the proposed ban,

the lack of substitutability, and the uncertainty surrounding

chrysotile substitutes, a more practical solution could be

the modification for a safe utilization of chrysotile.

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THANK YOU FOR YOUR ATTENTION

Your understanding of this problem would

be highly appreciated.

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