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 116-3

A. MARKET STUDY 116-3
B. PLANT CAPACITY & PRODUCTION PROGRAMME 116-6

IV. RAW MATERIALS AND INPUTS 116-7

A. RAW & AUXILIARY MATERIALS 116-7
B. UTILITIES 116-8

V. TECHNOLOGY & ENGINEERING 116-9

A. TECHNOLOGY 116-9
B. ENGINEERING 116-12

VI. MANPOWER & TRAINING REQUIREMENT 116-14

A. MANPOWER REQUIREMENT 116-14
B. TRAINING REQUIREMENT 116-15

VII. FINANCIAL ANALYSIS 116-16

A. TOTAL INITIAL INVESTMENT COST 116-16
B. PRODUCTION COST 116-17
C. FINANCIAL EVALUATION 116-18
D. ECONOMIC BENEFITS 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 22 % and a net
present value (NPV) of Birr 1.58 million discounted at 8.5%.

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 & pads
duplicating paper, tissue paper etc.

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 Quantity
998/99 1512
1999/00 2143
2000/01 1251
2001/02 250
2002/03 1275
Average 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 Imports
1997 994.41
1998 2334.86
1999 1633.56
2000 2841.65
2001 2320.11
2002 1619.03
2003 2693.69
2004 2121.23
2005 1460.05
2006 2863.63
Average 2088.22
 116-5

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 Market Share

Demand Existing Envisaged
Suppliers Plant
2007 4179.87 1880.94 2298.93
2008 4806.86 2163.09 2643.77
2009 5527.88 2487.55 3040.34
2010 6357.07 2860.68 3496.39
2011 7310.63 3289.78 4020.84
2012 8407.22 3783.25 4623.97
2013 9668.30 4350.74 5317.57
2014 11118.55 5003.35 6115.20
2015 12786.33 5753.85 7032.48
2017 14704.28 6616.93 8087.35
2018 16909.92 7609.47 9300.46
2019 19446.41 8750.89 10695.53
2020 22363.37 10063.52 12299.86
2021 25717.88 11573.05 14144.83
2022 29575.56 13309.00 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 Capacity Utilization Production (tonnes)

1 75% 157.5
2 85% 178.5
3-5 100% 210
 116-7

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. Production Qty. Annual Capacity Utilization,%

No. (%) Production on 75 85 100
(tonnes)
1. File cover 15 31.5 23.63 26.78 31.5
2. Writing paper 30 63 47.25 53.55 63
3. Greeting cards 15 31.5 23.63 26.78 31.5
4. Decoration paper 15 31.5 23.63 26.78 31.5
5. Insulating paperboard 5 10.5 7.88 8.93 10.5
6. Blotting paper 5 10.5 7.88 8.93 10.5
7. Paper board 15 31.5 23.62 26.78 31.5
Total 100 210 157.5 178.5 210
Year 1 2 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. Production Qty Cost (‘000 Birr)

No. FC LC TC
A. Raw Materials
1. Waste material 252 ton - 172.8 172.8
2. Caustic soda 6.3 t - 19.16 19.160
3. Rosin (soap) 4.3 t 7.453 - 7.453
4. Alum (non-ferric) 5.25 t 6.10 - 6.10
5. Starch (maize) 12.6 t 25.20 - 25.20
6. Titanium dioxide 2.1 t 37.8 - 37.8
Sub total 76.553 191.96 268.513
B. Auxiliary Materials
1. Formaldehyde 0.84 tonnes 4.4 - 4.4
2. Optical bleaching agent 168 kg 3.0 - 3.0
3. Miscellaneous chemicals and agents-
colours, dyes, diacol M, glue flakes As reg. 50 - 50
soda ash, etc.
Sub total 57.4 - 57.4
Customs, Bank, freight, Insurance - - 50 50
charges
Total Cost - 133.953 241.96 375.913

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. Description UOM Qty. Cost (‘000 birr)

No
1 Electricity KWh 210,000 99.456
2 Furnace oil m3 200,000 1,082
3 Water lt 900 9
Total 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
 116-12

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. Item Qty Cost, '000 Birr
No. (No) FC LC TC
A. Major Machinery
1. Vomiting type digester (5 x 4ft) 1 11.5 - 11.5
2. Chopper (10 in blade with 3hp motor) 1 15.6 - 15.6
3. Beater (24 in x 30in roll size)- motores 20hp, 960 2 73.5 - 73.5
rpm slip ring with oil immersed starter
4. Hydraulic press, 40 in x 50in plate size, double 1 34.3 - 34.3
name with 5HP motor
5. Calender machine for paper glazing (12-in x 36 in 1 26.7 - 36.7
roll size, complete with accessories) morot: 10 HP,
960 rpm, with starter
6. Paper cutting machine (42-in x 48 in, blade size) 1 27.6 - 27.6
7. Washing machine 1 24.8 - 24.8
8. Small beater of 2kg capacity and 2 auto-vats (test set 14.45 - 14.45
equipment)
9. Screw press (36-in x 42-in or 35-in x 45 in plate size 1 26.2 - 26.2
10. Agitators with pumps 2 27.8 - 27.8
11. Cylinder mould machine 1 34.6 - 34.6
12. Lifting semi-automatic vats 6 1.8 - 1.8
Sub-Total 328.85 - 328.85
B. Auxiliary Equipment
1 Chain pully block with tripad stand of 2 ton capacity 1
2 Platform weighting balance, 500 kg capacity 1
3 Pulp storage tanks for lifting vats (built of wood) 6
4 Washing cradles for pump washing set
5 Press boards for paper lifting 24
6 Zinc sheets for calender machine, 4 ftx 3ft 40 65.77 65.77
7 Woollen felts 400
8 Complete sets of carpentery tools, pipe fitting tools, etc. set
9 Small (2kg) pan balance 1
10 Towel horses for keeping felts 6
11 Sizing trays req
12 Grinder 1
13 Dusting frame 1
14 Spare parts for mould req
15 Couching tables 6
16 Stools for vats, paper separation req
17 Drying arrangement -
18 Other miscellaneous articles buckets, brushes, -
hardware stores
19 Baby boiler, 100 kg/hr, 100 ps 1 set 30 - 30
Sub-total 95.77 - 95.77
Freight insurance, bank charges, inland - - 95 95
transportation, etc.
Grand total 424.62 95 519.62
 116-14

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. Description Qty Monthly Salary Annual

No. (No.) /Wages Expenditure
A. Administration
1. Plant manager 1 1400 16,800
2. Secretary 1 400 4,800
3. Accountant 1 700 8,400
4. Sales person 1 550 6,600
5. Store person 1 550 6,600
6. Clerks 2 200 4,800
7. General services 4 160 7,680
Sub-total 11 55,680
B. Production
1. Production supervisor 2 900 21,600
2. Skilled labour 16 350 67,200
3. Semi-skilled labour 10 200 24,000
4. Unskilled 20 160 38,400
5. Technicians 4 400 19,200
Sub-total 52 - 170,400
Workers, benefit (25%) of BS) - 56,520
Grand Total 307,600

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.
 116-16

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 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
Work in progress 3 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 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. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value 120.0
2 Building and Civil Work 1,625.0
3 Plant Machinery and Equipment 519.6
4 Office Furniture and Equipment 75.0
5 Vehicle 200.0
6 Pre-production Expenditure* 283.6
7 Working Capital 144.6
Total Investment cost 2,967.8
Foreign Share 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.
 116-18

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

Items Cost %
Raw Material and Inputs 375.91 17.53
Utilities 1190.46 55.50
Maintenance and repair 56.77 2.65
Labour direct 102.24 4.77
Factory overheads 34.08 1.59
Administration Costs 68.16 3.18
Total Operating Costs 1,827.62 85.21
Depreciation 210.71 9.82
Cost of Finance 106.59 4.97
Total Production Cost 2,144.92 100

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 = 32 %
Sales – Variable Cost

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 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 % and the net
present value at 8.5% discount rate is Birr 1.58 million.

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.