263.

PROFILE ON THE PRODUCTION OF CALCIUM CHLORIDE

263-2 TABLE OF CONTENTS

PAGE

I.

SUMMARY

263-3

II.

PRODUCT DESCRIPTION & APPLICATION

263-3

III.

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

263-4 263-4 263-6

IV.

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

263-7 263-7 263-7

V.

TECHNOLOGY & ENGINEERING A. TECHNOLOGY B. ENGINEERING

263-8 263-8 263-9

VI.

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

263-10 263-10 263-11

VII.

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

263-11 263-11 263-12 263-13 263-14

263-3 I. SUMMARY

This profile envisages the establishment of a plant for the production of calcium carbide with a capacity of 30 tonnes per annum.

The present demand for the proposed product is estimated at 46 tonnes per annum. The demand is expected to reach 96 tonnes by the year 2017.

The plant will create employment opportunities for 20 persons.

The total investment requirement is estimated at Birr 3.65 million, out of which Birr 2.55 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 17 % and a net present value (NPV) of Birr 1.4 million, discounted at 8.5%.

II.

PRODUCTION DESCRIPTION AND APPLICATION

In this project the principal product is calcium chloride and calcium silicate. The former is soluble in water and alcohol. It is an important desicant (hygroscopic substance) used in different industries including petroleum refinery, concrete conditioning, paper & pulp industry, fungicides, refrigeration brines, firming agent in tomato canning,

pharmaceuticals, electrolytic cells, etc.

The by-product, calcium silicate hydrates are also used for decolourasing and purifying sugar solution, fermented beverages and mineral oil. There are a variety of calcium

silicates. Calcium silicate that has an approximate composition Ca. It should be O, not zero 0.5 Si O2. 8H2O is used in bulk quantity in the rubber industry as filler as its particle size is not suitable for rubber compounding.

263-4 Calcium silicate is also used as anticaking agent in dust formulations (mainly DDT wettable formulations), as filler in rubber industry and also as an insulation material.

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Supply and Present Demand

Calcium chloride has various applications in the manufacturing sector. It is used in glycerole production, in the conditioning of concrete, in metallic pigments, in refrigeration, paper and pulp industry, fungicide production, food processing, fire weighting, pharmaceutical and the like.

Currently there is no plant in the country that manufactures calcium chloride. As a result the entire requirement of calcium chloride is met through import. Import of the product for the past eight years is shown in Table 3.1.

Table 3.1 IMPORT OF CALCIUM CHLORIDE (TONNES)

Year 1999 2000 2001 2002 2003 2004 2005 2006 Source : Customs Authority

Import 13.4 4.4 19.3 27.9 17.1 18.2 24.9 66.6

263-5 As could be observed from Table 3.1 the imported quantity of calcium chloride during the period 1999-2002- was very erratic showing a big jump in one year and a decline in another year. For instance, the imported quantity during 1999 was 13.4 tonnes while it sharply declined to 4.4 tonnes by the year 2000. Again, a big increase has been shown during the two consecutive years, i.e. 2001 and 2002, which was 19.3 tonnes and 27.9 tonnes respectively. Similarly import has declined to a level of 17.1 tonnes in the year 2003. But after year 2003 the amount imported has shown a consistent increase. The amount of import which was 17.1 tonnes in the year 2003 has increased to 18.2 tonnes, 24.9 tonnes and 66.6 tonnes by the year 2004, 2005 and 2006 respectively.

In order to estimate the current effective demand the recent two years average has been considered. Accordingly current effective demand is estimated at about 46 tonnes.

2.

Projected Demand

The demand for calcium chloride is highly influenced with the expansion and development of the user industries. Considering the past growth of the manufacturing sector an annual average growth rate of 7% is applied to forecast the demand (see Table 3.2.). Table 3.2 FORECASTED DEMAND FOR CALCIUM CHLORIDE (TONNES) Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Forecasted Demand 49 53 60 64 68 73 78 84 89 96

263-6 Demand for calcium chloride will increase from 49 tonnes in the year 2008 to 68 tonnes and 96 tonnes during year 2012 and year 2017, respectively.

3.

Pricing and Distribution

Based on the average CIF price and other charges Birr 12,000 per tonne is recommended as a factory gate price. The product can be sold directly to the user industries without involving other channels.

B. 1.

PLANT CAPACITY & PRODUCTION PROGRAMME Plant Capacity

The annual production capacity of the proposed project is 30 tonnes of calcium chloride and 60 tonnes of calcium silicate, based on three shifts per day and 300 working days per annum. 2. Production Programme

Table 3.3 indicates the production program of the project. At the initial stages of the production period, the plant requires some years to penetrate the market. Therefore, in the first and second year of production, the capacity utilization rate will be 70% and 90%, respectively. In the third year and thenafter, full capacity production shall be attained.

Table 3.3 PRODUCTION PROGRAM Sr. No. 1 2 3 Calcium chloride (tonnes) Calcium silicate (tonnes) Capacity utilization rate (%) Product 1 21 42 70 Production Programme 2 27 54 90 3-10 30 60 100

263-7 IV. MATERIALS AND INPUTS

A.

RAW MATERIALS

The major raw materials of the project are hydrochloric acid, sodium silicate, lime and other miscellaneous chemicals. The annual raw materials requirement and cost of

chemicals are indicated in Table 4.1.

Table 4.1 RAW MATERIAL REQUIREMENT & COST

Sr. No. 1 2 3

Raw Material

Qty (Tonnes) FC

Cost (000 Birr) LC 12.60 15.5 40 Total 75.6 93.04 50.5

Hydrochloric acid Sodium silicate Lime and other miscellaneous chemicals Total

3.5 2.4

63.00 77.54 10.5

151.04

68.1

219.14

B.

UTILITIES

The utilities of the project are electricity, furnace oil and water. The annual utilities requirement and cost are indicated in Table 4.2.

263-8 Table 4.2 ANNUAL UTILITY REQUIREMENT & COST

Sr. No. 1 2 3 Electricity Furnace oil Water Total

Utility

Unit

Qty

Cost (000 Birr)

kWh Kg m3

60,000 10,000 3,000

28.44 54.1 30.0 112.54

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Process Description

Burnt lime is treated with hydrochloric acid to produce calcium chloride. The addition of the acid should be so calculated and adjusted that almost a neutral solution is obtained. The clear solution of calcium chloride is decanted from the top. A portion of calcium chloride solution is taken to the evaporator and crystallized in suitable crystallizers. The remaining part of calcium chloride solution is then treated with a clear sodium silicate solution and then calcium silicate is precipitated out. The precipitate is centrifuged, washed, dried, pulverized and packed.

2.

Source of Technology The following

Several plant machinery suppliers can be requested for their offer. company could be one of the candidate. Ravi Kiran Industries Tel. +91-22-28506569 Fax. +91-22-28506135

263-9 B. ENGINEERING

1.

Machinery and Equipment

The list of machinery and equipment is indicated in Table 5.1.

The total cost of

machinery is estimated at Birr 2,550,000 of which Birr 2,125,000 is required in foreign currency.

Table 5.1 LIST OF MACHINERY & EQUIPMENT REQUIRED

Sr. No. 1 2 3 4 5 6 7 8

Description

(Qty.) No.

Polyethylene buckets Evaporator (lead linned ) Hydro-exractor (basket type 22dia, 5 HP) Crystallizer (enameled) Tray dryer (24 frays) Pulveriser Furnace (oil tired)

25 2 1 2 1 1 2

Miscellaneous equipment such as tanks. Weighing Lumpsum scales, thermometers, etc.

Electrical installations

lumpsum

2.

Land, Building & Civil Works

The total area of the project is 600 m2 of which the built-up area is 200 m2. The cost of building is estimated at Birr 300,000. The lease value of land is about Birr 48,000 at a rate of 1 Birr/year/m2 for 80 years.

263-10

3.

Proposed Location

Butajira town is selected as the best location of the project for its proximity to infrastructure.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

The list of manpower and annual labour cost are indicated in Table 6.1. The total annual cost of labour is about Birr 258,000.

Table 6.1 MANPOWER REQUIREMENT & LABOURCOST

Sr. No. 1 2 3 4 5 6 7 8

Manpower

Req. No.

Monthly Salary (Birr) 3,000 1,500 2,000 2,000 2,800 3,200 1,500 1,200 17,200 4,300

Annual Salary (Birr) 36,000 18,000 24,000 24,000 33,600 38,400 18,000 14,400 206,400 51,600 258,000

General manager Sales officer Production head Accountant Operators Labourers Chemist General service Sub-total Benefit (25% BS) Total

1 1 1 1 4 8 1 3 20

20

21,500

263-11

B.

TRAINING REQUIREMENT

On-the-job training shall be carried out during plant erection by the experts of machinery suppliers at cost of Birr 20,000.

VII.

FINANCIAL ANALYSIS

The financial analysis of the calcium carbide 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 Raw material, import Work in progress Finished products Cash in hand Accounts payable

3 years 8% 8.5% 30 days 30days 90days 5 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 3.65 million, of which 17 per cent will be required in foreign currency.

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

263-12

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) 48 300.00 2,550.00 100 250 346.64 62.97 3,657.6 17

* N.B Pre-production expenditure includes interest during construction ( Birr 196.64 thousand ) training (Birr 20 thousand ) and Birr 130 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 1.30 million (see Table 7.2). The material and utility cost accounts for 25.44 per cent, while repair and maintenance take 8.82 per cent of the production cost.

263-13 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 219.14 112.54 115 154.8 51.6 103.2 756.28 362.4 184.96 1,303.64

% 16.81 8.63 8.82 11.87 3.96 7.92 58.01 27.80 14.19 100

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.

263-14 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

51 %

3.

Payback 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 17 % and the net present value at 8.5% discount rate is Birr 1.45 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 800,820 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.