45.

PROFILE ON PRODUCTION OF
SODIUM SILICATE
 45-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 45-3

II. PRODUCT DESCRIPTION & APPLICATION 45-3

III. MARKET STUDY AND PLANT CAPACITY 45-4

A. MARKET STUDY 45-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 45-6

IV. MATERIALS AND INPUTS 45-7

A. RAW MATERIALS 45-7
B. UTILITIES 45-8

V. TECHNOLOGY & ENGINEERING 45-9

A. TECHNOLOGY 45-9
B. ENGINEERING 45-10

VI. MANPOWER & TRAINING REQUIREMENT 45-11

A. MANPOWER REQUIREMENT 45-11
B. TRAINING REQUIREMENT 45-12

VII. FINANCIAL ANALYSIS 45-12

A. TOTAL INITIAL INVESTMENT COST 45-12
B. PRODUCTION COST 45-13
C. FINANCIAL EVALUATION 45-14
D. ECONOMIC BENEFITS 45-15
 45-3

I. SUMMARY

This profile envisages the establishment of a plant for the production of sodium
silicate with a capacity of 1,350 tonnes per annum.

The present demand for the proposed product is estimated at 1,500 tonnes per annum.
The demand is expected to reach at 2,828 tonnes by the year 2020.

The plant will create employment opportunities for 20 persons.

The total investment requirement is estimated at Birr 3.69 million, out of which Birr
990,900 is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 30 % and a net
present value (NPV) of Birr 5.31 million, discounted at 8.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

Sodium silicate is one of various water soluble substances obtained in the form of
crystals, glasses, powder or aqueous solutions by chemical fusion of silica sand and
soda ash. At present, there are 40 varieties of commercial sodium silicate, each with a
specific use.

Sodium silicate is an essential raw material in the manufacture of washing soap,

ceramic wares, flooring and metal foils, paper boards and corrugated containers, wall
board etc. Vitreous silica compounds (glass bottles and tumblers) are also produced in
a suction fed type blowing machine.
 45-4

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

Although sodium silicate has got various applications, in Ethiopia Soap and Detergent
Factories are the major consumers. The Pulp and Paper Factories also require Sodium
Silicate for hardening corrugated paper board and packaging materials. Factories
which produce pigments and adhesive and water treatment plants are among
significant users of the product in Ethiopia.

As there is no domestic production of sodium silicate, supply of the product is entirely

constituted by import ( see Table 3.1).

Table 3.1
IMPORT OF SODIUM SILICATE (1995-2004)

Year Import (Tonnes)

1995 538.6
1996 533.2
1997 183.0
1998 77.0
1999 241.6
2000 80.6
2001 800.0
2002 2,946.6
2003 557.1
2004 1,070.2
2005 2,366.7
2006 2339.9
Source: Customs Authority, External Trade Statistics annual issues.
 45-5

Table 3.1 shows that import of sodium is characterized by year to year fluctuation.
The highest import, 2366.7 tonnes, was made in 2006 while the lowest 77 tonns was
in year 1998. To estimate the present demand for the product the apparent
consumption, which is considered to be a fair approximation of demand, is used.
Accordingly, the apparent consumption of the product (i.e. import) during the last
four years, which is about 1,500 tonnes, is considered to reasonably reflect present
demand for sodium silicate.

2. Projected Demand

The future demand for sodium silicate is a function of growth of the end-user
industries, mainly soap and detergent factories, pulp and paper mills, paint, pigment
and adhesive factories. Information obtained from Ethiopian Investment Authority
give strong indication that private investment in the aforementioned industries is
bound to grow. Hence, a modest growth rate of 5% would not be unwarranted to
forecast future demand. The demand forecast executed accordingly is shown in Table
3.2.
Table 3.2
PROJECTED DEMAND FOR SODIUM SILICATE

Forecasted Demand
Year (Tonnes)
2008 1,575
2009 1,654
2010 1,736
2011 1,823
2012 1,914
2013 2,010
2014 2,111
2015 2,216
2016 2,327
2017 2,443
2018 2,566
2019 2,694
2020 2,828
 45-6

3. Pricing and Distribution

Based on current market price of the product and assuming margins for distributors, a
factory-gate price of Birr 3000 per tonne is recommended for the envisaged plant. The
product can be directly supplied to end-users.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

Based on the market study and nature of the plant, a capacity of 4.5 tonnes per day is
considered. On the basis of double shifts of 8 hours per day and 300 days per annum,
the total annual production would then be 1350 tonnes of sodium silicate.

2. Production Programme

Table 3.3 shows the production programme of the envisaged project. It is prepared
based on the selected plant capacity and expected market share to be captured by the
project. At the initial stage of production, the plant may require some years to
penetrate into the market. Therefore, the plant initially will operate at 75% of its rated
annual capacity. During the second year the plant will operate at 85%, reaching 100%
capacity utilization in the third year and thereafter.
 45-7

Table 3.3
PRODUCTION PROGRAMME

Projected Production Capacity Demand

Year Demand Programme Utilization Coverage
(Tonnes) (Tonnes) (%) (%)
2008 1,575 1,013 75 85.7
2009 1,654 1,148 85 81.6
2010 1,736 1,350 100 77.8
2011 1,823 1,350 100 74.1
2012 1,914 1,350 100 70.5
2013 2,010 1,350 100 67.2
2014 2,111 1,350 100 64.0
2015 2,216 1,350 100 60.9
2016 2,327 1,350 100 58.0
2017 2,443 1,350 100 55.3
2018 2,566 1,350 100 52.6
2019 2,694 1,350 100 50.1
2020 2,828 1,350 100 47.7

IV MATERIALS AND INPTUS

A. RAW MATERIALS

The major raw materials required for the production of sodium silicate are soda ash
and sand. Soda ash will be supplied from domestic sources and that of Silica sand is
abundant along the course of main rivers, found in the region. The annual
requirement for raw materials at 100% capacity utilization and associated estimated
cost are given in Table 4.1.
 45-8

Table 4.1
ANNUAL RAW MATERIAL REQUIREMENT AND COST

Sr. Quantity Unit Cost Cost (‘OOO

Description
No. (Tonnes) (Birr) Birr)

1 Soda Ash 1,125 1,500 1,687.5

2 Sand 675 103.33 69.75
Total 1,757.25

B. UTILITIES

Electricity, water and furnace oil are the major utilities required by the plant. The
total annual requirement at 100% capacity utilization rate and the estimated costs are
given in Table 4.2 below.

Table 4.2
UTILITIES REQUIREMENT AND ESTIMATED COST

Sr.
No. Description Units Quantity Cost ( Birr)
1 Electricity KWh 37,375 17,700.8
2 Furnace Oil Lit 100,000 541,000
3 Water M3 1250 6,875
Total 565,575.8
 45-9

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Production Process

Sodium silicate is made by fusing sodium carbonate and silica sand in an open hearth
furnace. In most common commercial silicates, the ratio of sodium carbonate to
silica, on molar basis, varies from 1:2 to 1:3.2.

Intermediate compositions are obtained by mixing, and more alkaline ratios by

addition of caustic soda. The product, upon cooling, forms clear light bluish green
glass. In all cases, carbon dioxide comes out as a by-product. Sodium silicate could
be sold as a solution where the product is ground and dissolved in water or by steam
when the ratio of silica to alkali is above two. The plant does not emit any pollutant
rejects to the environment.

2. Source of Technology

The machinery and equipment for the plant can be acquired from the following
company which is specialized in manufacturing of chemical plants.

YATAI CHEMICAL PLANTS MANUFACTURER

No. 9 Qingchun Road, hangzhou, Zhejiang, China
Tel: +86-571-87228882,
+86-571- 87228886
Fax: +86-571-87242887
 45-10

B. ENGINEERING

1. Machinery and Equipment

The list of major machinery and equipment for production of sodium silicate is
indicated in Table 5.1. The total cost of machinery is estimated at Birr 1,296,640 of
which Birr 990,900 is required in foreign currency.

Table 5.1
LIST OF MACHINERY AND EQUIPMENT REQUIRED

Sr. Description Unit Qty

No.
1 Furnace Pcs 1
2 Autoclave Pcs 1
3 Crusher Pcs 1
4 Grinder Pcs 1
5 Tank Pcs 1
6 Pump Pcs 2
7 Boiler Pcs 2
8 Generator Pcs 1
9 Weighing Hoppers Pcs 2

2. Building and Civil Works

The total area of the project is 2,000 m2 of which 850 m2 is a built-up area. The cost
of building of which at unit cost of Birr 1,800 per m2 is, thus, estimated at Birr 1.53
million. The lease value of land at a rate of 0.1 Birr per m2 for 80 years is about Birr
16,000.

3. Proposed Location

The location of the proposed project is recommended to be in Beftu Town, located in

Benchmaji zone, Guraferedea woreda relatively nearer to the source of soda ash,
which is the major raw material. The proposed place has access to infrastructure and
 45-11

utilities like electricity, water & fuel. Sand could be made available from the zone
very easily.

VI MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The total manpower required by the plant is 20 persons. Details of manpower

requirement are given in Table 6.1. The total annual cost of labour is estimated at Birr
273, 6000.

Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr. Job Title No. of Salary (Birr)

No. Person Monthly Annual
Salary Salary
1 Plant Manager 1 2,750 33,000
2 Chemist 3 1,600 57,600
3 Secretary 1 850 10,200
4 Salesman 1 750 9,000
5 Accountant 1 900 10,800
6 Personnel 1 1,200 14,400
7 Shift Leader 1 1,300 15,600
8 Operator 5 600 36,000
9 Store Keeper 1 750 9,000
10 Purchaser 1 750 9,000
11 Mechanic 1 800 9,600
12 Driver 1 550 6,600
13 Guard 2 300 7,200
Sub total 20 19,000 228,000
Employees’ Benefit - 3,800 45,600
(20% of Basic Salary)
Total - 22,800 273,600
 45-12

B. TRAINING REQUIREMENT

Nine operators and a shift leader should be given a one week on -the-job training
during plant erection and commissioning by the experts of the machinery supplier.
The cost of training is estimated at Birr 20,000.

VII. FINANCIAL ANALYSIS

The financial analysis of the sodium silicate project is based on the data presented in
the previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30days
Raw material, import 90days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
3.69 million, of which 21 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 45-13

Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value 16.0
2 Building and Civil Work 1,530.0
3 Plant Machinery and Equipment 990.9
4 Office Furniture and Equipment 75.0
5 Vehicle 225.0
6 Pre-production Expenditure* 315.1
7 Working Capital 537.3
Total Investment cost 3,689.3
Foreign Share 21

* N.B Pre-production expenditure includes interest during construction (Birr 215.03

thousand) training (Birr 20 thousand ) and Birr 80 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 3.13
million (see Table 7.2). The material and utility cost accounts for 74.23 per cent,
while repair and maintenance take 2.4 per cent of the production cost.
 45-14

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

Items Cost %
Raw Material and Inputs 1,757.25 56.15
Utilities 565.58 18.07
Maintenance and repair 75 2.40
Labour direct 164.16 5.25
Factory overheads 54.72 1.75
Administration Costs 109.44 3.50
Total Operating Costs 2,726.15 87.11
Depreciation 248.89 7.95
Cost of Finance 154.33 4.93
Total Production Cost 3,129.37 100

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.

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 = 16 %
Sales – Variable Cost
 45-15

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within 4 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 30 % and the
net present value at 8.5% discount rate is Birr 5.31 million.

D. ECONOMIC BENEFITS

The project can create employment for 20 persons. In addition to supply of the
domestic needs, the project will generate Birr 2.48 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.