116.

PROFILE ON WASTE PAPER RECYCLING

116-2

TABLE OF CONTENTS

PAGE

I.

SUMMARY

116-3

II.

PRODUCT DESCRIPTION & APPLICATION

116-3

III.

MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY B. PLANT CAPACITY & PRODUCTION PROGRAMME

116-3 116-3 116-6

IV.

RAW MATERIALS AND INPUTS A. RAW & AUXILIARY MATERIALS B. UTILITIES

116-7 116-7 116-8

V.

TECHNOLOGY & ENGINEERING A. TECHNOLOGY B. ENGINEERING

116-9 116-9 116-12

VI.

MANPOWER & TRAINING REQUIREMENT A. MANPOWER REQUIREMENT B. TRAINING REQUIREMENT

116-14 116-14 116-15

VII.

FINANCIAL ANALYSIS A. TOTAL INITIAL INVESTMENT COST B. PRODUCTION COST C. FINANCIAL EVALUATION D. ECONOMIC BENEFITS

116-16 116-16 116-17 116-18 116-19

116-3

I.

SUMMARY

This profile envisages the establishment of a plant for the recycling of waste paper with a capacity of 210 tonnes per annum.

The present demand for the proposed product is estimated at 4,179 tonnes per annum. The demand is expected to reach at 29,575 tonnes by the year 2022.

The plant will create employment opportunities for 52 persons.

The total investment requirement is estimated at about Birr 2.96 million, out of which Birr 519,620 is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of present value (NPV) of Birr 1.58 million discounted at 8.5%.

22 % and a net

II.

PRODUCT DESCRIPTION AND APPLICATION

Waste paper recycling is a process by which waste paper, agricultural residues, waste cotton, old rugs, tailor cuttings, waste jute, hosiery cuttings, are processed together with some chemicals like caustic soda, dry staffs, resin, etc., to produce file covers, greeting cards, writing paper, paperboard, filter paper, drawing paper, filter paper duplicating paper, tissue paper etc. & pads

III.

MARKET AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Supply and Present Demand

Repulped waste paper is used as a drawing paper, permanent document paper, filter paper and pads, file covers, duplicating paper, tissue paper and for exclusive greetings. Demand for the product is met both from domestic production and import. Table 3.1 presents quantity of local waste paper consumed by the paper and printing industry during 1998/99

116-4 2002/03. On the average, 1286 tons of local waste paper is consumed by the industry during the reference period. Table 3.1 QUANTITY OF LOCAL WASTE PAPER CONSUMED BY THE PAPER AND PRINTING INDUSTRY (TONS) Year 998/99 1999/00 2000/01 2001/02 2002/03 Average Quantity 1512 2143 1251 250 1275 1286

Source: CSA, Report on Large and Medium Scale Manufacturing and Electricity Industries Survey, various issues. The country also imports substantial waste/scrap paper. Table 3.2 presents the amount of imported waste paper during 1997-2006. Imports of the product exhibit fluctuations and averaged at 2088.22 during the period under reference. Table 3.2 IMPORTS OF WASTE PAPER (TONS) Years 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Average Imports 994.41 2334.86 1633.56 2841.65 2320.11 1619.03 2693.69 2121.23 1460.05 2863.63 2088.22

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Assuming supply was driven by demand, the average annual supply for the period under reference, which constitutes domestic production and imports, is considered as the effective demand for the product. Demand for the product is increasing with population growth, urbanization, expansion of education and other social services. A conservative estimate of 15% rate of growth is therefore adopted in estimating the demand for the product. The present demand for the product (i.e. 2007) is thus estimated at 4179.87 tons of which 1882.83 tons (45 %) constitute local supply and the remaining 2297.04 tons (55 %) imports.

2.

Demand Projection

For the reason stated above a rate of growth of 15% is adopted in projecting the demand for waste paper. Assuming existing local suppliers of the product will maintain their market share (i.e. 45%) of the projected demand, the market share of the envisaged plant is depicted in Table 3.3. Table 3.3 PROJECTED DEMAND FOR WASTE PAPER (TONS) Year Projected Demand 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 2020 2021 2022 4179.87 4806.86 5527.88 6357.07 7310.63 8407.22 9668.30 11118.55 12786.33 14704.28 16909.92 19446.41 22363.37 25717.88 29575.56 Market Share Existing Envisaged Suppliers Plant 1880.94 2163.09 2487.55 2860.68 3289.78 3783.25 4350.74 5003.35 5753.85 6616.93 7609.47 8750.89 10063.52 11573.05 13309.00 2298.93 2643.77 3040.34 3496.39 4020.84 4623.97 5317.57 6115.20 7032.48 8087.35 9300.46 10695.53 12299.86 14144.83 16266.56

116-6 3. Pricing and Distribution

Using recycled waste paper the plant will produce file cover, writing paper (for exercise books, pads, etc.,) greeting cards, decoration paper, insulating paper board (for electrical insulation), blotting paper, and paper boards (for cookies, shoes packages, etc).

Accordingly, for the purpose of financial analyses an average factory gate price of Birr 12,500 per ton is adopted.

The product can get its market outlet through direct sales to customers that include firms in the paper and printing industry. The plant can also appoint agents at selected locations.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

According to the market study, the demand of recycled paper in the year 2008 will be 2,643.77 tones, whereas this demand will grow to 16,266.5 tones by the year 2022. Taking in to account the availability of the main raw material and the economic scale of production, the envisaged plant will have an annual production capacity 210 tonnes of recycled paper. Production capacity is based on a schedule of 300 working days per annum and 3 shifts of eight hours per day. 2. Production Programme

Production programme will be designed in such a way that at initial year the plant will be made to operate at 75% of its capacity. Then production build-up will follow 85% and 100% of plant capacity in year two, year three and then after, respectively. The detailed production programme is depicted in Table 3.3. Table 3.3 PRODUCTION PROGRAMME Year 1 2 3-5 Capacity Utilization 75% 85% 100% Production (tonnes) 157.5 178.5 210

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The plant has the capacity to produce a variety of papers. However, for the purpose of this study the following products are expected from the plant. These are file cover, writing

paper (for exercise books, pads, etc.,) greeting cards, decoration paper, insulating paper board (for electrical insulation),. blotting paper, and paper boards (for cookies, shoes packages, etc). The production mix and programme is presented in Table 3.4.

Table 3.4 PRODUCTION MIX AND PRODUCTION PROGRAMME

Sr. No.

Production

Qty. (%)

Annual Production on (tonnes)

Capacity Utilization,% 75 85 100

1. 2. 3. 4. 5. 6. 7.

File cover Writing paper Greeting cards Decoration paper Insulating paperboard Blotting paper Paper board Total Year

15 30 15 15 5 5 15 100

31.5 63 31.5 31.5 10.5 10.5 31.5 210

23.63 47.25 23.63 23.63 7.88 7.88 23.62 157.5 1

26.78 53.55 26.78 26.78 8.93 8.93 26.78 178.5 2

31.5 63 31.5 31.5 10.5 10.5 31.5 210 3-5

IV.

MATERIALS AND INPUTS

A.

RAW AND AUXILIARY MATERIALS

The basic raw material required by the plant is a waste material comprised of waste paper, agricultural residues, waste cotton, old rugs, tailor cuttings, waste jute and hosiery cuttings. Auxiliary materials involved are caustic soda, rosin, alum, starch, titanium dioxide (whitener), formaldehyde and dyestuffs. The percentage consumption of each material

together with their costs is presented in the Table 4.1 below.

116-8 Table 4.1 ANNUAL REQUIREMENT OF RAW AND AUXILIARY MATERIALS (FOR 210 TONNES PER YEAR)

Sr. No.

Production

Qty FC

Cost (000 Birr) LC TC

A. Raw Materials 1. 2. 3. 4. 5. 6. Waste material Caustic soda Rosin (soap) Alum (non-ferric) Starch (maize) Titanium dioxide Sub total B. Auxiliary Materials 1. 2. 3. Formaldehyde Optical bleaching agent Miscellaneous chemicals and agentscolours, dyes, diacol M, glue flakes soda ash, etc. Sub total Customs, charges Total Cost 133.953 241.96 375.913 Bank, freight, Insurance 57.4 50 57.4 50 As reg. 50 50 0.84 tonnes 168 kg 4.4 3.0 4.4 3.0 252 ton 6.3 t 4.3 t 5.25 t 12.6 t 2.1 t 7.453 6.10 25.20 37.8 76.553 191.96 172.8 19.16 172.8 19.160 7.453 6.10 25.20 37.8 268.513

B.

UTILITIES

The major utilities of the project are electricity, furnace oil and water. Annual requirement and cost of utilities is indicated in Table 4.2. Thus, the total cost of plant utility is Birr 1,190,456.00.

116-9

Table 4.2 UTILITIES REQUIREMENT AND COST

Sr. No 1 2 3

Description

UOM

Qty.

Cost (000 birr)

Electricity Furnace oil Water

KWh 210,000 m3 200,000 lt Total 900

99.456 1,082 9 1190.456

V.

TECHNOLOGY & ENGINEERING

A.

TECHNOLOGY

1.

Production Process

The major operations involved in waster paper recycling are:

Raw materials sorting, cutting and dusting Digesting (Cooking) Beating Lifting and couching Pressing and drying Tub sizing Calendaring Sorting and cutting

(a)

Sorting, cutting and Dusting

The various raw materials (waste paper, rugs, waste cotton, etc) are sorted thoroughly for removal of all impurities, that is, all non fibrous materials such as nails, buttons, wood chips, etc. are eliminated. The useful materials are then cut into small pieces of

116-10 approximately 2x2 cm and dusted through a dusting frame covered with four to six mesh wire.

(b)

Digesting (Cooking)

The cooking or digestion of the rags and other materials is carried out with a mixture of 1 to 3% of caustic soda or lime and kept at boiling point for about five to six hours. Then they are washed thoroughly and sent to the beater.

( c)

Lifting and Couching

The beater is filled with the required quantity of water, and the digested materials are added gradually. Bleaching power (1 per cent) is then added. After allowing sufficient time for bleaching, the materials are washed thoroughly by lowering the washing drum. The time required for pulping is about six to eight hours where good hydration is desired. Titanium dioxide or other fillers are then added along with dyes (for coloured paper) or optical bleaching agents (for white paper). Rosin soap and alum are added later.

(d)

Lifting and Couching

From the beater the pulp is sent to storage vats near the lifting vat and mixed with sufficient quantity of water to dilute it to form a uniform suspension and free it from clumps, knots, etc. A certain quantity of diluted pulp is then lifted from vats on a wire screen, and the resulting sheets are covered by felt.

(e)

Pressing and Drying

When a sufficient number of sheets have been formed, they are put under a press to remove the water. The sheets are then separated and, to avoid shrinkage, placed under absorbent

boards and pressed again. The sheets are then hung to dry in bunches of three to six, according to thickness.

116-11 (f) Tub Sizing

For strong durable paper, tub sizing or surface sizing is carried out. The sized papers are again dried and cleaned with a brush or cotton wadding to remove dirt specks.

(g)

Calendaring

The sheets are then placed alternately under metal plates to form a "post", which is then passed to and fro in between calendar rolls to obtain the desired smoothness.

(h)

Sorting and Cutting

After calendaring, the sheets are carefully sorted and cut to size (110 x 66 cm = 0.726 m2). These sheets are taken off the machine and built up into a stack with interleaved felts.

In most cases almost 100 per cent of the input raw materials end up in the finished product. In some cases there will be a loss of up to 50% of the dry weight when the non-cellulose element in some agricultural wastes is extracted in the cooking and washing stages.

Some of the process water will go to waste. How much waste water is produced depends on the amount of washing and bleaching to be carried out. The waste water contains only very small traces of chemicals and would be safe to use for irrigation. If the cost of water justifies it, the waste water can be purified and used again.

2.

Source of Technology

The core part of the technology for waste paper recycling is the digester. The complete machninery and equipment for waste paper recycling can be supplied by manufacturers in India, China, Korea and other countries in Asia and Europe. Addresses of machinery manufacturers and supplies are given below.

a) EIMCO- K.C.P. Ltd., 2/34 Kodambakkam High Road, Madras - 34 India

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b) Tungbhadra Machinery and Tools Pvt. Ltd., 43/163 Narasimha Rao Peta, Kurnool - 518 004 India

B.

ENGINEERING

1.

Machinery and Equipment

The major machinery and equipment required by the plant are the digester, the chopper, the beater, hydraulic press, the calendaring machine, paper-cutting machine and washing machine. Besides, several auxiliary equipment are required. The complete list of

machinery and equipment required by waste paper recycling plant, together with quantity and cost is presented in Table 5.1 below.

116-13 Table 5.1 MACHINERY AND EQUIPMENT REQUIREMENT OF WASTER PAPER RECYCLING PLANT AND COST Sr. No. 1. 2. 3. 4. 5. Item A. Major Machinery Vomiting type digester (5 x 4ft) Chopper (10 in blade with 3hp motor) Beater (24 in x 30in roll size)- motores 20hp, 960 rpm slip ring with oil immersed starter Hydraulic press, 40 in x 50in plate size, double name with 5HP motor Calender machine for paper glazing (12-in x 36 in roll size, complete with accessories) morot: 10 HP, 960 rpm, with starter Paper cutting machine (42-in x 48 in, blade size) Washing machine Small beater of 2kg capacity and 2 auto-vats (test equipment)
Screw press (36-in x 42-in or 35-in x 45 in plate size

Qty (No) 1 1 2 1 1

Cost, '000 Birr FC LC TC 11.5 15.6 73.5 34.3 26.7 11.5 15.6 73.5 34.3 36.7

6. 7. 8. 9. 10. 11. 12.

1 1 set 1 2 1 6

27.6 24.8 14.45 26.2 27.8 34.6 1.8 328.85

27.6 24.8 14.45 26.2 27.8 34.6 1.8 328.85

Agitators with pumps Cylinder mould machine Lifting semi-automatic vats Sub-Total B. Auxiliary Equipment
Chain pully block with tripad stand of 2 ton capacity

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Platform weighting balance, 500 kg capacity Pulp storage tanks for lifting vats (built of wood) Washing cradles for pump washing Press boards for paper lifting Zinc sheets for calender machine, 4 ftx 3ft Woollen felts
Complete sets of carpentery tools, pipe fitting tools, etc.

Small (2kg) pan balance Towel horses for keeping felts Sizing trays Grinder Dusting frame Spare parts for mould Couching tables Stools for vats, paper separation Drying arrangement Other miscellaneous articles buckets, brushes, hardware stores Baby boiler, 100 kg/hr, 100 ps Sub-total Freight insurance, bank charges, inland transportation, etc. Grand total

1 1 6 set 24 40 400 set 1 6 req 1 1 req 6 req 1 set -

65.77

65.77

30 95.77 424.62

95 95

30 95.77 95 519.62

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2.

Land, Building and Civil works

The plant requires a total of 1500 m2 area of land out of which 650m2 is built-up area which includes Processing area, raw material stock area, offices etc. Assuming construction rate of Birr 2500 per m2, the total cost of construction is estimated to be Birr 1.625 million. The total cost, for a period of 80 years with cost of Birr 1 per m2, is estimated at Birr 1,500. The total investment cost for land, building and civil works is estimated at Birr 1,626,500.00..

3.

Proposed Location

According to the resource potential study of the region, the raw material is identified in Awassa Zuria , Arbaminch Zuria , Sodo Zuria woredas. Based on the availability of raw material infrastructure, utility and market out let Awassa town of Awassa Zuria woreda is selected and recommended to be the location of the envisaged plant.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

Manpower required by the plant consists of both direct and indirect labour.

The direct

labour are those that will be engaged in operating the production machinery and equipment, and those that will provide direct assistance to the operatives

The details of manpower of the plant together with monthly salary/wages and total annual expenditure are presented in the Table 6.1.

116-15 Table 6.1 MANPOWER REQUIREMENT OF THE PLANT AND LABOUR COST (BIRR)

Sr. No.

Description

Qty (No.)

Monthly Salary /Wages

Annual Expenditure

A. Administration 1. 2. 3. 4. 5. 6. 7. Plant manager Secretary Accountant Sales person Store person Clerks General services Sub-total B. Production 1. 2. 3. 4. 5. Production supervisor Skilled labour Semi-skilled labour Unskilled Technicians Sub-total Workers, benefit (25%) of BS) Grand Total 2 16 10 20 4 52 900 350 200 160 400 21,600 67,200 24,000 38,400 19,200 170,400 56,520 307,600 1 1 1 1 1 2 4 11 1400 400 700 550 550 200 160 16,800 4,800 8,400 6,600 6,600 4,800 7,680 55,680

B.

TRAINING REQUIREMENT

Employees have to acquire the requisite skill & knowledge to properly operate the production machinery and equipment through short term training. The production

supervisors are expected to have long years work experience in similar production activities. Other possibility is to make special arrangements with the supplier. Accordingly, the training of personnel can be part of the agreement such that all the employees involved in production activities can be trained during erection and commissioning at the project site. Thus, a total of Birr 25,000 is allotted for this purpose.

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VII.

FINANCIAL ANALYSIS

The financial analysis of the waste paper recycling project is based on the data presented in the previous chapters and the following assumptions:-

Construction period Source of finance

1 year 30 % equity 70 % loan

Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Work in progress Finished products Cash in hand Accounts payable

3 years 8% 8.5% 30 days 30days 3 days 30 days 5 days 30 days

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 2.96 million, of which 31 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

116-17 Table 7.1 INITIAL INVESTMENT COST

Sr. No. 1 2 3 4 5 6 7 Cost Items Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure* Working Capital Total Investment cost Foreign Share

Total Cost (000 Birr) 120.0 1,625.0 519.6 75.0 200.0 283.6 144.6 2,967.8 31

* N.B Pre-production expenditure includes interest during construction ( Birr 133.61 thousand ) training (Birr 25 thousand ) and Birr 125 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr

2.14

million (see Table 7.2). The material and utility cost accounts for 73.03 per cent, while repair and maintenance take 2.65 per cent of the production cost.

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Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Raw Material and Inputs Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs Depreciation Cost of Finance Total Production Cost

Cost 375.91 1190.46 56.77 102.24 34.08 68.16 1,827.62 210.71 106.59 2,144.92

% 17.53 55.50 2.65 4.77 1.59 3.18 85.21 9.82 4.97 100

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total

investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.

116-19

2.

Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection.

BE =

Fixed Cost Sales Variable Cost

32 %

3.

Pay Back Period

The investment cost and income statement projection are used to project the pay-back period. The projects initial investment will be fully recovered within 5 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 22 present value at 8.5% discount rate is Birr 1.58 million.

% and the net

D.

ECONOMIC BENEFITS

The project can create employment for 52 persons. In addition to supply of the domestic needs, the project will generate Birr 1.22 million in terms of tax revenue. The

establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.