What are Corrosion Costs?

The cost of corrosion can be defined in different ways depending on what is included and who is affected. In past studies, different definitions of the cost of corrosion have been used, and have therefore arrived at different estimates. In the current study, the total direct corrosion cost for each sector was estimated and major components contributing to this cost were analyzed. In addition, preventative strategies for corrosion control were described for the individual sectors. The objective of the current study was to obtain a measure of the cost of corrosion for the target year 1998. The cost of corrosion is defined as the corrosion fraction of design, manufacturing, operation and maintenance, technology development, and asset value loss.

While emphasis is placed on current corrosion costs, in some cases, changes in the cost of corrosion could be addressed by examining changes in corrosion control practices over the last few decades. This allows placing current practices into perspective within the sector's history and demonstrating achievements to date.

For other sectors, the economic analysis demonstrated how the current cost of corrosion may be lowered by implementing optimal corrosion management practices. Where possible, data on alternative designs, materials, and maintenance practices were gathered and analyzed, as well as data on the service life of structures

Three important concepts that are frequently used in the analysis of the results are corrosion management, life cycle costing (LCC), and cost-benefit analysis. Corrosion management includes all activities through the lifetime of a structure, that are performed to prevent corrosion, repair its damage, and replace the structure. These activities include design, manufacturing, maintenance, inspection, repair, rehabilitation, and removal. The LCC of a structure is defined as the cost that includes all cash expenditures to the end of the structure’s life, including construction cost, the cost of maintenance, and the cost of outages. The design with the lowest life cycle cost will provide the service at the lowest cost. A cost-benefit analysis goes a step further than the life cycle cost analysis, because it includes the benefit generated by spending money on corrosion issues. In some cases, prevention of corrosion failures is justified at very high cost, while in other cases, a corrosion failure may have minimal impact and simply replacing a part at low cost is the most economical solution. Cost-benefit analysis considers both sides of this economic balance.

The annual cost of corrosion consists of both direct costs and indirect costs. The direct costs related to
corrosion are made up of two main components:

1. The costs of design, manufacturing, and construction:

material selection, such as stainless steel to replace carbon steel,
additional material, such as increased wall thickness for corrosion allowance,
material used to mitigate or prevent corrosion, such as coatings, sealants, corrosion inhibitors, and cathodic protection, and
application, including the cost of labor and equipment.

2. The cost of management:

corrosion-related inspection,
corrosion-related maintenance,
repairs due to corrosion,
replacement of corroded parts,
inventory of backup components,
rehabilitation, and
loss of productive time.

Using highway bridges as an example, the optimized contribution of each of the contributing components is calculated through life cycle cost analysis, and characterized by the annualized value. The selection of alternative approaches to controlling the cost of corrosion is therefore based on annualized values of initial or capital costs as well as the maintenance over the life of the structure and its replacement. Typically, an owner/operator will base decisions on a direct cost analysis.

Indirect costs are incurred by others than just the owners or operators of the structure. Measuring and determining the value of indirect costs are generally complex assessments; however, several methods, such as risk-based analyses, can be used to evaluate these costs. Owners and operators can be made to assume the costs through taxing, penalties, litigations, or paying for clean up of spilled product. In such cases, the costs become direct costs. However, there are some indirect costs, such as traffic delays due to bridge repairs and rehabilitation that are more difficult to turn over to the owner or operator of the structure. These become indirect costs to the user but can have a significant impact on the overall economy due to lost productivity.

Once assigned a dollar value, the indirect costs are included in the cash flow of the corrosion management of the structure and treated in the same manner as all other costs. Including indirect cost into the life cycle cost analysis of alternative corrosion control approaches is important so that the cost of corrosion to the whole society can be minimized. If only direct costs are included, the design with the lowest cost to the owner may not necessarily be the one with the lowest cost to society.