Corrosion will cost the US economy over $1.1 trillion in 2016.
That’s one of the largest expenditures we make, and it’s all going down the drain. The total annual corrosion costs in the U.S. rose above $1 trillion in the middle of 2013, illustrating the broad and expensive challenge that corrosion presents to equipment and materials and is now estimated at $1.1 trillion for 2016. These estimates are based on a landmark study by NACE that estimated (direct) corrosion costs were $276B in 1998 as reported in the NACE Corrosion Costs Study. However, that report leaves out the enormous (at least as much as direct costs, according to the authors and other analysts) tally of indirect costs that the consumers experience from corrosion and the inflation increases since 1998.
From $276B to $1.1 Trillion: Understanding the Real Cost of Corrosion
The 1978 NACE sponsored report examines each industry in depth, providing discussions of the causes, costs, and results of corrosion, and arrived at a calculation of $276B in direct corrosion costs (the costs that . Indirect costs were estimated to be at least as much as direct costs. In the 15 years that have passed since the study was released, inflation has driven both the direct and indirect costs of corrosion over $500 billion annually, totalling over $1 trillion in 2013 and rising to $1.1 trillion by the end of 2016.
At over 6.2% of GDP, corrosion is one of the largest single expenses in the US economy yet it rarely receives the attention it requires. Corrosion costs money and lives, resulting in dangerous failures and increased charges for everything from utilities to transportation and more. For a more thorough breakdown of specific corrosion costs by industry, see the NACE Corrosion Costs Study (and approximately double the numbers to have a good estimate of current values).
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The Hard Numbers on Corrosion
Here’s why corrosion costs are over $1 trillion today (compared to the oft-quoted $276 billion from 1998).
First, the math:
In 1998, the direct cost of corrosion was 3.1% of GDP is $276 Billion. This is the oft-cited number referred to in the NACE cost of corrosion study.
In 2013, the direct cost of corrosion was 3.1% of the 15.1 Trillion U.S. GDP, which in June 2013 is estimated to equal to $500.7 Billion.
According to the 1998 NACE study, the indirect cost of corrosion is conservatively estimated to be equal to or greater than the direct cost. If the indirect cost is also 3.1% of GDP, then the total cost of corrosion was $1001.4 Billion annually as of June 2013.
Analysis of Corrosion Costs:
– The reality is that further study or analysis to more accurately estimate the value of the indirect cost of corrosion is needed to improve the accuracy of the total cost of corrosion estimate.
– Corrosion is one of the largest costs to the U.S. economy, only exceeded by health care and real estate in total spending per year.
Additional considerations:
– Direct costs of corrosion include the costs reported by companies that are directly attributable to corrosion, and can be split into two main components: (1) design, manufacturing, and construction and (2) costs related to corrosion management.
The design, manufacture, and construction costs include:
– material selection (using more expensive materials for improve corrosion control),
– corrosion allowance (which results in increased wall thickness or other parameters to compensate for corrosion),
– protection technologies (including coatings, paints, sealants, inhibitors, cathodic protection, and other techniques),
– and corrosion prevention application costs including labor, equipment, overhead, etc.).
The management-related cost of corrosion control include:
– corrosion-related inspection,
– corrosion-related maintenance,
– repairs that are required due to corrosion,
– replacement of corroded parts that are found during inspections or operation,
– inventory and maintenance of backup components,
– rehabilitation and refurbishment, and
– loss of productive time for operation.
Power plants provide an excellent example; and the contribution of each component described above is calculated through a life-cycle cost analysis assessment that allows determination of the annualized value of each type of corrosion. Alternative approaches to corrosion management can then be annualized into up-front capital costs and maintenance costs over the life of structures. The operator or owner can then make decisions based on the direct cost analysis with corrosion included as a factor.
The Indirect Cost of Corrosion
The indirect costs are all those incurred by anyone aside from the owners or operators of the facility. The measurement and determination of the value of indirect costs is more complex than direct costs, as there is no central entity being charged. Instead, the indirect costs of corrosion are often spread among many people or across our entire society. Risk-based analysis and other practices can be used to evaluate indirect costs, and in some cases owner/operators can be charged through penalties, taxes, litigation, and other methods for some of those costs (in which case they become direct costs). Other indirect costs, such as problems associated with the loss of electrical power (medical, traffic, and other problems) or lost electrical generation capability are difficult to accurately measure but have a substantial impact on society and the economy.
When indirect costs are also assigned a monetary value, they can be included in the corrosion management costs of a facility for analysis of the optimized corrosion control approach that minimizes both direct and indirect corrosion costs. Otherwise, designs with the lowest cost to the owner/operator may be selected without regard the impact on society overall. Such an approach is ultimately short-sighted as costs to the public can have other ramifications to companies (e.g. customer dissatisfaction, public relations, and other costs).
Corrosion Costs as a % of GDP
– Corrosion as a percent of GDP (reported to be 6.2% in the NACE report, including indirect costs) may have either gone up or down since 1998. In that time, many industries report improved testing capabilities and have implemented these capabilities into new practices that improve integrity managements (potentially lowering corrosion cost as a % of GDP). At the same time, the infrastructure in the united states continues to age, and the percentage of equipment past its designed lifespan is higher than ever before (potentially raising corrosion cost as a % of GDP).
G2MT Labs performs corrosion testing, failure analysis, pipeline inspection, and other metallurgical testing services. The g2mtlabs.com blog focuses on bringing those topics to both industry and the general public. (All analysis and website information, pictures, data, and text are property of G2MT Labs and cannot be reproduced or duplicated without express written consent of G2MT Labs management).