The Economic and Financial Analysis Study for the Jute / Kenaf Pulp Manufacturing

Transcription

1 The Economic and Financial Analysis Study for the Jute / Kenaf Pulp Manufacturing Biotechnological Application of Enzymes for making Paper Pulp from Green Jute / Kenaf UNIDO POST : FC/RAS/00/153/11-51 May 2004 Techno Forest Co., Ltd.

2 The Economic and Financial Analysis Study for the Jute / Kenaf Pulp Manufacturing Biotechnological Application of Enzymes for making Paper Pulp from Green Jute / Kenaf The Content 1. Background and Purpose 2. Summary and Conclusion 2-1 Evaluation of Bio-pulping and of Bio-bleaching in Jute Chemical pulp 2-2 Opportunity of Jute Chemical Pulp production in Bangladesh 2-3 Opportunity of Jute Mechanical Pulp production in Bangladesh 2-4 Summary and Conclusion 3. Market for Wood Pulp and Jute/Kenaf Pulp 3-1 Trend in the Pulp market 3-2 Demand and Market Price of Pulp 3-3 Demand of Jute / Kenaf Pulp in Japan 3-4 Paper Demand in Bangladesh 4. Jute/Kenaf as a material for Pulp and Paper 4-1 The characteristic of the Jute / Kenaf fiber and core 4-2 Quality of Jute pulp and Kenaf pulp 4-3 Jute cultivation and Volume of Cultivation Necessary of Jute 4-4 Jute Harvesting, Transportation and Storage Method 4-5 Price Level of Jute 5 Summary of the results in the bio- pulping and bio-bleaching research for manufacturing standard 5.1 Description of Project components 5-2 Bio-pulping in chemical process with the strain 5-3 Optimization of Soda-AQ pulping 5-4 Pilot Scale / Commercial chemical Pulping 5-5 Bleaching of Chemical Pulping with and without Enzyme 5-6 Cost Reduction by bio-leaching 5-7 Jute Mechanical pulping process 5-8 Bleaching process of Jute Mechanical pulp 5-9 Design standard in Jute Mechanical pulping and bleaching condition

3 6. JUTE CHEMICAL PULP 6-1 Manufacturing Process of Chemical Pulp Manufacturing Process Auxiliary Equipment Electrical Equipment Instrumentation and Process Control Water and Effluent Buildings Employment Plan 6-2 Facility Investment of Chemical Pulp Basis for Calculating Facility Investment Summary of the Facility Facility Cost Calculation for Each Process 6-3 Profitability of Chemical Pulp Basis for Profit and Loss Calculation Variable Costs Fixed Costs Transportation Cost Sales Price and Turn-over Taxation Manufacturing Costs Profit and Loss / Cash Flow 6-4. Design Standards ( Unit Consumption ) of Chemical Pulp Pulp Cooking Pulp Bleaching Process Dry Pulp Process Chemical Recovery Process Boiler Facilities Steam, Electricity, Water Effluent Work Forces Production Cost 6-5 Supplement of Chemical Pulp Flow Sheet for Proposed Pulp mill Cash flow and Profitability Calculation

4 7. JUTE MECHANICAL PULP 7-1 Manufacturing Process of Mechanical Pulp Manufacturing Process Auxiliary Equipment Electrical Equipment Instrumentation and Process Control Water and Effluent Buildings Employment Plan 7-2 Facility Investment of Mechanical Pulp Basis for Calculating Facility Investment Summary of the Facility Facility Cost Calculation for Each Process 7-3 Profitability of Mechanical Pulp Basis for Profit and Loss Calculation Variable Costs Fixed Costs Transportation Cost Sales Price and Turn-over Taxation Manufacturing Costs Profit and Loss / Cash flow 7-4 Design Standards ( Unit Consumption ) of Mechanical Pulp Pulp Cooking Pulp Bleaching Process Dry Pulp Process Boiler Facilities Steam, Electricity, Water Effluent Work Forces Production Cost 7-5 Supplement of Mechanical Pulp Flow Sheet for Proposed Pulp mill Cash flow and Profitability Calculation

5 Executive Summary The study report was prepared for the purpose of getting a overall economic analysis on the Project of Biotechnological Application of Enzymes for making Paper Pulp from Green Jute / Kenaf, financed by the Common Fund for Commodities and co-financed by the government of France and Bangladesh, and the Project was conducted by United Nation Industrial Development Organization (UNIDO) as implementing agency from January 2001 till May 2004 with a group of the five (5) partners, International Jute Study Group (IJSG) of Bangladesh, Bangladesh Chemical Industries Corporation (BCIC) of Bangladesh, Institute of Blast Fibre Crops (IBFC) of China, Centre Technique du Papier (CTP) of France and Agrotechnology & Food Innovations (A&FI) of the Netherlands. The following is the executive summary for the reference ; With the background that Jute Industry has been suffering for years due to lowering the demand of the products from Jute, there was a necessity in finding new products by the use of Jute. Several studies had been conducted and there is a possibility of applying specific Enzymes to Pulping and Bleaching Process of Pulp manufacturing. Then the basic study was initiated as indicated above. And economic analysis become necessary for the feasibility of Bio-Pulping and Bio-Bleaching. 1) The basis of the Cost Calculation Analysis was initiated on the collection of Data obtained from the Project and applied for the calculation of the Manufacturing Cost of both Chemical Pulp and Mechanical Pulp from Green Jute / Kenaf with the assumptions of Production Flow Chart for both types of the Pulp and the green field Pulp Manufacturing Facility is expected to be constructed, though the location of Mill Site is not specifically defined. Analysis was made on Green Jute as well as Kenaf as a raw material for the Pulp. As a raw material, the Cost of Green Jute was assumed at the level of Tk 1,000/Green Metric Ton at the Mill Site, Green Jute has a moisture content of about 75% and be dried to about 15% of the moisture for the processing. And for fair comparison, the cost of Kenaf (whole plant) was also assumed at Tk 800/Green Metric Ton on the same condition as Green Jute. To process the Green Jute of 2.38 Adt is necessary for produce 1.00 Adt of the Pulp and the assumption was made that Manufacturing Capacity of 100 Adt/day is suitable for Green Jute Pulp, considering the scale of economy. And 343 days of the Mill Operation was assumed as standard working day. In the Bio-Pulping, the pretreatment of the microorganism results in cost reduction of the cooking chemicals, the shorter cooking time and the improvement of physical properties of the fiber. The experimental works on Bio-Pulping in Chemical and Mechanical process is quite encouraging. The results from such works are quite suitable for smaller scale Paper Mills. But several Pilot scale trails are necessary for larger scale Pulp and paper Production,

6 while there remain problems on the issue of 14 days of the pretreatment by microorganism in case of Production Faciloity of 100Adt/day of Pulp. According to the experimental result of biological bleaching, the consumption of Chlorine dioxide has been reduced by 10-18% when Xylanase is used for the first stage of multiple bleaching stages. And also Brightness has been improved. The results of Cost Saving from the reduction effect of Chlorine dioxide were US$3.66/Pulp Adt. The purchase cost of Xylanase is US$5.00/Pulp Adt, so that the reduction effect of Chlorine dioxide is almost off-set with such cost of Xylanase. But there is a possibility that Xylanase can be produced locally from the microorganism at the cost of US$1.50/Pulp Adt. Then local production of Xylanase is possible, there will be a cost saving of US$2/Pulp Adt. Xylanase Bleaching in the Mechanical process was not sufficiently efficient to improve the brightness. Enzymes pretreatment was not interesting because Alkali removes the Xylans in the Pulp during impregnation, The Variable Cost included Raw Material, Energy Cost and Chemical Cost and Other Cost as per Data available from the research. Wage of Work Forces was calculated according to the necessity of Pulp Manufacturing Operation and the Maintenance Cost was calculated at the total amount of US$23.00/Adt for general maintenance of the facility. Further, depreciation was calculated on the basis of 20 years for the machineries and 30 years for the Buildings, maintaining book value of 10%. The Financial interest of 0.9% was applied on the basis of Loan for LDC, subject to the approval of Japan Bank for International Cooperation (JBIC), which may be subjected for 30 years repayment term with 10 years grace. The Head Office Cost is calculated with a consideration of the interest by the finance, the inland freight cost to local market and the administrations Corporate Tax was calculated at the rate of 37.5% Also based on the research, Manufacturing facility was assumed and estimated the investment amount for both Chemical and Mechanical Pulp as follows ; Chemical Pulp Facility US$77,382, Mechanical Pulp Facility US$59,604, The Pulp Mill construction schedule was assumed to commence 2 years prior to the commencement of the Pulp Mill Operation. 2) Manufacturing Cost Since there are different price levels of the Chemicals in Bangladesh and India, the Manufacturing Cost was calculated for both Chemical and Mechanical Pulp with the following conditions 1. Case 1 Jute with the use of Chemical Cost in Bangladesh

7 2. Case 2 Jute with the use of chemical Cost in India 3. Case 3 Kenaf with the use of Chemical Cost in Bangladesh 4. Case 4 Kenaf with the use of Chemical Cost in India Estimation of the Jute Chemical Pulp Production Cost in Bangladesh (US$/ Adt) Whole Jute Whole Kenaf Case 1 C ase 2 Case 3 C ase 4 Variable Costs Raw materials Energy Chemicals Others Total Variable Cost Fixed Costs Labor Maintenance Administration Depreciation Total Fixed Cost Factory Manufacturing Cost Mechanical Pulp Manufacturing Cost Unit : US$/ Adt Whole Jute Whole Kenaf Case 1 Case 2 Case 3 Case 4 Variable CostsRaw materials Energy Chemicals Others Total Variable Cost Fixed Costs Labor Maintenance Administration Depreciation Total Fixed Cost Factory Manufacturing Cost In both Chemical and Mechanical Pulp, Manufacturing Cost of Kenaf Pulp with the use of Chemical Cost in India ( as Case 4 ) indicated most feasible and competitive among the options. Additional economic data is attached herewith for the reference. 3) Economic Analysis And Economic analysis for these cases was checked and got the economic indicators as on 2-4 Summary and Conclusion of the report. Through the analysis, Sale of Fine Paper from Chemical Pulp and Newsprint Paper from Mechanical Pulp in Domestic market of Bangladesh will be best option in case of possible reduction or exemption of the import taxes for Chemicals and several financial assistances by the government on VAT, Corporate Tax, or others. The construction of Pulp Mill in the EPZ may also benefit the Project. This report was prepared with some assumption such as Price of Raw materials, Inland freight, Interest Rate, Local Tax and sales Price of the pulp and paper.

8 It is recommended for the Project Management to conduct more realistic and detailed feasibility study with clear project assumptions, including cost of cultivation, logistics of the raw materials as well as the market.

9 Attachment Feasibility Analysis in Each Case Intrest Rate VAT Case A 0.9% 0.0 % Case1 Chemical Price BangladeshJute Case B 4.9% 0.0 % Case2 Chemical Price India Jute Case C 0.9% 15.0 % Case3 Chemical Price BangladeshKeanf Case D 4.9% 15.0 % Case4 Chemical Price India Kenaf Interest Rate of 0.9% represents the rate applicable for Project under Yen-Credit from Japan Interest Rate of 4.9% represents the rate appplicable for commercial reference in US$ Chemical Pulp Mechnaical Pulp Fine News- Case1 Case2 Case3 Case4 Case1 Case2 Case3 Case4 Paper print Case A Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case B Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case C Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case D Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Sale Price(Domestic Market) Profit After Tax (TAX 37.5%) Case A Case B Case C Case D Red Letter indicates not feasible Minimum Profit ( after Tax ) Level, Feasible for the Project 10%of the Annual return on Equity and repayment of the Loan during 20years Chemical Pulp 56 US$/ADT Mechanical Pulp 50 US$/ADT Fine Paper 50 US$/ADT Newsprint Paper 50 US$/ADT

10 1. Background and Purpose The research of Biological Application of Enzymes for Making Paper pulp from Green Whole Jute / Whole Kenaf have been done from following Objective and Scope. The project aims at developing technology for use of green jute as raw material for the production of pulp for paper. In developing such a technology, it is intended to reduce the consumption of chemical though the introduction of eco-friendly production processes, reduce energy cost and cost of production. This new technology is expected to achieve a breakthrough in opening up a sector for the jute industry, which would generate sustained demand for jute with a consequent result of stabilizing structural conditions in markets and markets for jute fiber and hence stable source of farmers income. This report has been prepared by Techno Forest Co. Ltd for the purpose of Economic and Financial analysis in pulp and paper technology according to the reports of Biological Application of Enzymes for Making Paper pulp from Green Whole Jute / Whole Kenaf which have been done by each institute. The duties of this report are: 1. Evaluate the consumption parameters of raw materials and energy for pulp production of the utilized technology. Compare with traditionally used technologies starting from other pulpable materials. Quantify comparative economic data. Related activity : Study consumption of raw materials, chemical & energy and compare with traditional technology and quantification of comparative economic data. 2. Evaluate the economic and environmental benefits of using bio-pulping technology in the conventional chemical (Soda-AQ and Kraft) and mechanical processes. Assess the industrial and market advantages. Assess the investment requirements for industrial bio pulping. Related activity 1) Assess investment requirement for incorporating bio-pulping technology in the existing chemical and mechanical pulping. 2) Saving costs in various processes. 3. Evaluate the economic and environmental benefits of using enzyme, Xylanase, in the conventional (CEH), elemental chlorine free (ECF) and total chlorine free bleaching (TCF) sequences. Evaluate economic and environmental benefits of Oxygen in the above mentioned sequences. Assess the investment requirement of Enzymatic Bleaching production lines. Related activity 1) Assess investment requirement for incorporating bio-bleaching technology in various bleaching sequences. 2) Assess reduction of chemical cost in various bleaching sequences. 3) Assess reduction of toxic material in various bleaching sequences 4. Present the complete technical and economic feasibility study including economics of scale

11 for the production of paper as well as concrete recommendations for further application of new technological development in the use of Jute/Kenaf Related activity Comprehensive report Following Economic and Financial analysis have been done 1. The consumption parameters of raw materials and energy for pulp production of the utilized technology are described in section 6-4 in Chemical pulp and 7-4 in Mechanical pulp. 2. The economic and environmental benefits of using bio-pulping technology in the conventional chemical and mechanical processes is described in section 2-1.and 5-2. Non wood fiber pulp market is described in The economic and environmental benefits of using enzyme Xylanase in the elemental chlorine free (ECF) sequences are evaluated in section 2-1,5-5 and 5-6 Investment requirement of enzymatic bleaching production lines is described in Economic feasibility study including economics of scale for the production of Jute pulp are described in 6-3 and 6-4. And rough profitability study of the paper from jute pulp is described in 2-2 and 2-3 Hoping this report will be of assistance to realize the Jute Pulp Manufacturing Project in Bangladesh. May 2004 Techno Forest Co., Ltd

12 2. Summaries and Conclusion 2 1 Evaluation of Bio-Pulping and Bio-Bleaching in Jute Chemical Pulp Evaluation of Bio-Pulping As indicated in the test results of Section 5 2, the Pre-Treatment of the Microorganism results in the cost reduction of the cooking chemicals, the shorter cooking time and the improvement of physical properties of the fibers. The experimental works on Bio-Pulping in chemical and mechanical process is quite encouraging. The results from such works are quite suitable for smaller scale Paper Mills. But several pilot scale trials are necessary for larger scale Pulp and Paper Production, while there remain problems on the issue of 14 days of Pre-Treatment by Microorganism in case of Production Facility of 100 Adt/day of Pulp. It is also necessary to clarify the method of preparing large volume of the microorganism and disinfections of the Green Jute Chips and of controlling the temperature as well as the ventilation during the cultivation of the microorganism but the Key issue is to make the Project practical, that 14 days of pre-treatment will require Stock Tank ( Facility ) capable of storing 1,400 Bdmt of Green Jute Chips, which will be 4,118 Mt with a moisture of 66%, maintaining a temperature of 32-36, with a suitable control of the ventilation and also by maintaining its consistency. To clear the storage problem, it is necessary to have a trial running of the pre-treatment in a pilot scale Mill. The investment cost of Bio-Pulping Facility with the pre-treatment of microorganism and the variable cost to carry the pre-treatment should be compared with the cost reduction by the Bio-Pulping. As the effect of Bio-treatment in the part of pre-cooking of Jute Soda AQ Pulp, Cooking chemical of NaOH has been reduced from 17% to 15% and the reduction of Cooking time of 90 minutes to 60 minutes, which is equivalent to the cost saving of US$2/Adt and US$1/Adt. On the other hands, the experiment by A&FI has indicated 20% reduction of refining energy. In case refining of APMP requires 1,100kwh/Adt, 20% of energy saving is equivalent to the cost reduction of US$8 9/Adt of Pulp from own power generation cost. On the report of Forest Service of U. S. Department of Agriculture (USDA), the effects of the Bio-pretreatment for Pulp are indicated as follows ; Product Thermo Mechanical Pulp ( TMP ) Production of TMP 600 Adt/day = 200,000 Adt/Year Fungus Treatment 2 weeks in flat pile Capital Investment US$5 7 million Energy Saving US$10/Adt (=30% saving in power cost) = US$2 million/year As indicated herewith, the effects of the Bio-pretreatment for the Mechanical Pulping is expected more favorable than the Chemical Pulping. But it is necessary to find out the cost requirement for applying this process to the Pulp Mill. The cost calculation of the process may be compared with the process applied by USDA.

13 In this study, it is not possible to calculate the variable cost as well as the investment cost for the pre-treatment facility, prior to Pulping. So that the Investment amount for the Jute Chemical and Mechanical Pulping Facility as well as each variable cost was estimated without considering the Bio-Pretreatment Process Evaluation of Bio-Bleaching According to the results of the experiments by BCIC, the consumption of Chlorine dioxide (ClO2) in the latter Bleaching Stage has reduced by 10% when Xylanase is used for its first stage in the multiple Bleaching Stages. The Brightness has been improved due to Bio-Bleaching if this Brightness Increasing can be converted to a volume of Chlorine dioxide (ClO2). The Bio-Bleaching Effect is evaluated about 15% saving of Chlorine dioxide (ClO2). Oji Paper Co., Ltd. in Japan had applied, in 1998, Enzymes Bleaching by using Xylanase and is operating at 1,300 Adt/day Hardwood Pulping Facility at its latter Stage of Oxygen Bleaching Process, as Oji Paper Co had developed to cultivate the microorganism to produce Xylanase in larger scale at the Mill site. Due to this application to Bio-Bleaching, it is reported that the consumption of Chlorine dioxide (ClO2) or Chlorine (Cl) was reduced by 25 50%. The washing water at the Xylanase Bleaching Stage can be used as washing water after Cooking and finally sent to the recovery boiler to improve its burning efficiency and to lower the effluent load. IJSG/BCIC conducted the experiment and find the reduction effect of 10% on the consumption of Bleaching Chemical by D E D Bleaching without the use of Xylanase and by X D E D Bleaching with the use of Xylanase and obtained the following results ; IJSG/BCIC Bio-Bleaching X-D-E-D D-E-D X-D-E-D Reduction Kg/Adt Kg/Adt ClO 2 % ClO 2 No ClO 2 No Total ClO CTP conducted the experiment and to find the reduction effect of 18% on the consumption of Bleaching Chemicals by D-E-D Bleaching without the use of Xylanase and by X-E-D-E-D Bleaching with the use of Xylanase as the following ; CTP Bio-Bleaching X-E-D-E-D D-E-D X-E-D-E-D Reduction Kg/Adt Kg/Adt ClO 2 % ClO 2 No ClO 2 No Total ClO With Xylanase Bio-Bleaching, the reduction of Chlorine dioxide (ClO2) was in the range of 10 18%. The reduction of Chlorine dioxide (ClO2) had led the following reduction of Bleaching Chemical Cost. Chlorine dioxide (ClO2) is produced at the Mill site so that the cost saving of

14 ClO2 was calculated on the base of ClO2 Manufacturing Chemical cost. IJSG/BCIC Bio-Bleaching Chemical Cost X-D-E-D D-E-D X-D-E-D Cost Cost Unit Price Kg/Adt US$/Adt Kg/Adt US$/Adt ClO 2 : NaClO 3 US$1,000.00/Adt ClO 2 : H2SO 4 US$138.00/Adt ClO 2 : CH 3 OH US$1,310.00/Adt Caustic Soda(100%) US$414.00/Adt Total Bleaching Chemical Cost Cost Reduction in Bleaching Chemical = 3.66 The results of Cost Saving from the reduction effect of Chlorine dioxide (ClO2) were US$3.66/Adt. The purchase cost of Xylanase is US$5.00/Adt so that the reduction effect of Chlorine dioxide (ClO2) is almost offset with such cost of Xylanase. But there is a possibility that Xylanase can be produced locally from the microorganism at the cost of US$1.50/Adt. Then if self-production of Xylanase is possible, there will be a cost saving of US$2/Adt ( annually US$70,000 ) due to the reduction of Chlorine dioxide (ClO2). In addition to a reduction of Chlorine dioxide (ClO2) by Xylanase Bio-Bleaching, several experiments confirmed that Brightness by 1 2 points and pulp viscosity would be improved. Further, due to relatively reduced use of Chlorine dioxide (ClO2) by Xylanase Bio-Bleaching, a reduction of AOX in the effluent is also expected. The washing water at the Xylanase Bleaching Stage would be re-used for washing water after Cooking and sent to a recovery boiler to improve burning efficiency and that would result in decreasing BOD, COD and SS in the effluent, which contribute to the environment. 2 2 Opportunity of Jute Chemical Pulp Production in Bangladesh Estimation of Jute Chemical Pulp Production Cost in Bangladesh Jute Chemical Pulp Production Cost was estimated at US$402/Adt by Soda AQ Process and Xylanase - D-E-D Bleaching Process. In Bangladesh, most of the Cooking as well as Bleaching Chemicals, necessary for the production of Whole Jute Chemical Pulp, are imported with an import duty of about 45% on the import cost. If duty-free is applied to such Chemicals and Chemical prices would be similar to India, Total Chemical Cost can be lowered by US$23/Adt, from US$80/Adt to US$57/Adt. For this study, Green Jute, a main raw material of Pulp, is priced, as raw material cost, at

15 Tk 1,000/Ton with 75% moisture, which is equivalent to US$62/Adt and it is said that Kenaf will be available on the same condition at the cost of Tk 800/Ton ( = US$50/Adt ) and Chemical Pulp Production Costs were estimated for both Jute and Kenaf as the followings, with an assumption that prices of Chemicals are in same price range as India. Study found there is a good possibility that such production cost of Case-4 in Bangladesh is higher than Hardwood Bleached Kraft Pulp Production Cost in Indonesia or Brasil but the cost of Case-4 is close to Hardwood Bleached Kraft Pulp in Canada or Northern Europe. Estimation of the Jute Chemical Pulp Production Cost in Bangladesh Method of Cooking : Soda AQ Process Method of Bleaching : Bio-Bleaching X D E D Case 1 with Chemical Prices in Bangladesh Whole Jute Case 2 with Chemical Prices in India Whole Jute Case 3 with Chemical Prices in Bangladesh Whole Kenaf Case 4 with Chemical Prices in India Whole Kenaf Estimation of the Jute Chemical Pulp Production Cost in Bangladesh (US$/ Adt) Whole Jute Whole Kenaf Case 1 Case 2 Case 3 C ase 4 Variable Costs Raw materials Energy Chemicals Others Total Variable Cost Fixed Costs Labor Maintenance Administration Depreciation Total Fixed Cost Factory Manufacturing Cost Profit for Domestic Sales of the Jute Chemical Pulp In addition to the Factory manufacturing Cost as on 2-2-1, Sales Cost in Bangladesh Market, including Head Office Cost and Local Transportation Cost is estimated at US$ as follows ; In case of local Pulp Sales, VAT ( 15% ) may be applicable on basis of Pulp Tariff Value but there is no study on actual transaction of Pulp so that in this study, VAT is not included in the Head Office Cost and the interest rate of 0.9% was applied, subject to approval of JBIC for LDC countries. Estimated Selling Cost of Jute Chemical Pulp in Bangladesh (US$/ Adt) Case 1 Case 2 Case 3 Case 4 Total Variable Cost Total Fixed Cost Factory Manufacturing Cost Total Head Office Cost Total Manufacturing Cost

16 On the other hand, current Market Pulp Price is generally known as follows on the base of CIF Northern Europe and the Market is in the tight condition on/from Second Quarter Market Price of Market Pulp (US$/ Adt) Mar- 03 Mar- 04 Apr- 04 Softwood Bleached Pulp Northern Hardwood Bleached Pulp Southern Price : CIF N. Eurpoe Imported Pulp Cost sold in Bangladesh, as of March 2004 were as follows, which include Value Added Tax, AIT and IDST for total of about 22% local Taxes, even though there is no import Tax on the Bleached Chemical Pulp. Bangladesh : Imported Pulp Price ( including Tax ) Bleached Pulp Softwood US$647/ Adt Tk. 37,500/ Adt Bleached Pulp Hardwood US$540/ Adt Tk. 31,300/ Adt Average US$593/ Adt Data ; March 2004 As indicated Chapter 3 on the Pulp Market, it is quite difficult to forecast the future Pulp Prices, but several Data has been forecasting the international Market Pulp Price of Softwood Bleached Pulp and Hardwood Bleached Pulp as follows ; Forecast : Market Pulp Price Softwood Bleached Pulp Northern US$ / Adt Average US$600/ Adt Hardwood Bleached Pulp Southern US$ / Adt Average US$500/ Adt The following Price Level is set as the future estimated Prices by multiplying with a factor of 1.22 over the international Market Price forecast, as 22% local taxes is charged in Bangladesh Market. Forecast : Imported Pulp Price in Bangladesh Bleached Pulp Softwood US$720/ Adt Bleached Pulp Hardwood US$600/ Adt Average US$660/ Adt The quality of Chemical Pulp from Jute ( whole ) is known in between Softwood Pulp and Hardwood Pulp and there is an opinion that such Pulp can be sold at an average price of Softwood Pulp and Hardwood Pulp. As a substitute of Hardwood Pulp, there is also an opinion that Jute Chemical Pulp should be priced at same price level of Hardwood Pulp. Since there is no specific study available on the price of Jute Chemical Pulp so that the estimated business results is calculated as the followings ; Case 1 with Chemical Prices in Bangladesh Case 2 with Chemical Prices in India Case 3 with Chemical Prices in Bangladesh Case 4 with Chemical Prices in India Whole Jute Whole Jute Whole Kenaf Whole Kenaf

17 Expected Profit from Chemical Pulp Business in Bangladesh Unit: US$/ Adt Case 1 Case 2 Case 3 Case 4 Total Manufacturing Cost Sales Price in the Market Business Profit Income Tax 37.5% Profit After Tax Cashflow ( Cashflow = Profit after Tax + Depreciation ) Profit for Export Sales of the Jute Chemical Pulp The Export Cost is calculated as follow by including the Head Office Cost, the transportation cost to the port, the ship loading cost and the ocean transportation on top of the Factory Manufacturing Cost. Jute Chemical Pulp Cost with Export Costs Unit : US$/ Adt Case 1 Case 2 Case 3 Case 4 Total Variable Costs Total Fixed Costs Factory Manufacturing Cost Head Office Costs Total Manufacturing Cost Export Costs Inland Transportation Loading Ocean Transportation Total Export Cost Total Cost with Export Cost As indicated at 2 2 2, the following international average prices of Softwood Pulp and Hardwood Pulp are estimated on CIF Northern Europe. Forecast : Market Pulp Price Softwood Bleached Pulp Northern US$ / Adt Average US$600/ Adt Hardwood Bleached Pulp Southern US$ / Adt Average US$500/ Adt Kenaf Chemical Pulp is considered in the international Pulp Market as the substitute of the Hardwood Chemical Pulp, so that Jute Chemical Price of US$500/Adt is applied for Export Sales Price and the business results is estimated as follows ; Chemical Pulp : Export Business Unit : US$/ Adt Case 1 Case 2 Case 3 Case 4 Total Manufacturing Cost with Export Costs Export Sales Price Bsiness Profit Profit after Tax 37.5% Profit after Tax Cashflow ( Profit after Tax + Depreciation ) For selling the Jute Chemical Pulp in the international Pulp Market, the profit from the export business resulted not enough, comparing with its sales to local market. It seems very

18 difficult to compete for Jute Chemical Pulp produced in Bangladesh in the export market so that the Sales of the Jute Chemical Pulp to the Bangladesh market should be promoted Estimation of the Production Cost and the Profit of Fine Paper by using Jute Chemical Dry Pulp With the use of Jute Chemical Pulp ( Dry Pulp ) as a raw material, the rough production cost of Fine Paper is estimated as the following. Practically considering the energy as well as the facility investment, an integrated Pulp & Paper Mill will be suitable but in case the Paper Mill is established at the export processing zone on the conditions where special favor for the duties or the income is expected and if the area is close to the market, the transportation cost can be lower. Whether to go for an integrate Pulp & Paper Mill or go for simple Paper Mill will be key issue for the future. The following analysis was calculated on the base that Jute Chemical Dry Pulp is transported to a Paper Mill and produce Printing and Writing Paper. The manufacturing cost of such Printing and Writing Paper is estimated at US$670/Adt. Production Cost & Profit of Fine Paper Variable Cost US$550/ Adt Fixed Cost US$ 90/ Adt Factory Paper Manufacturing Cost US$640/ Adt Head Office Cost US$ 30/ Adt Total Paper Manufacturing Cost US$670/ Adt In Bangladesh, an import duty for Printing and Writing Paper is 22.5% and a total 22.0% of Value Added Tax, Advance Income Tax and Industrial Development Surcharge is applied for the import. In Southeast Asian Market, the same product is quoted US$720/Adt in roll or US$770/Adt in sheet so that such prices will be US$750/Adt in roll or US$800/Adt in sheet CIF Bangladesh, if the ocean freight is added on top. But according to the import data, the Printing & Writing Paper in roll is imported from Korea at US$600/Adt but still imported cost get higher due to the taxes. Profit Estimation on Domestic Sales for Printing & Writing Paper Total Manufacturing Cost US$670/ Adt C&F Chittagong Sales Price including Tax Business Profit Profit Tax 37.5% Profit after Tax US$600/ Adt US$870/ Adt (US$600X1.45) US$200/ Adt (US$870 - US$670) US$ 75/ Adt US$125/ Adt Local Industries are well protected in Bangladesh with high taxes and custom duties so that Production of Printing and Writing Paper from Dry Jute Pulp is expected quite feasible.

19 2 3 Opportunity of Jute Mechanical Pulp Production in Bangladesh Estimation of Jute Mechanical Pulp Production Cost in Bangladesh Factory Manufacturing Cost of Jute ( Whole ) Mechanical Pulp by APMP Process and Bleaching by Hydrogen Peroxide ( H2O2 ) was calculated at US$306/Adt. As previously indicated, most of the Chemicals are imported with taxes of 45%. In case custom duties are exempted, the Chemical Cost can be reduced by US$13/Adt, from US$78 to US$65. Price of Green Jute in this study is set at US$62/Adt ( Tk. 1,000 ) with 75% moisture and there is a data that Kenaf is available at US$50/Adt ( Tk. 800 ) in the same condition. Manufacturing Cost of Kenaf Chemical Pulp is also estimated with an assumption that the cost of the Chemicals is same as in India. Method of Pulping APMP Process Method of Bleaching H2O2 Bleaching Case 1 with Chemical Prices in Bangladesh Case 2 with Chemical Prices in India Case 3 with Chemical Prices in Bangladesh Case 4 with Chemical Prices in India Whole Jute Whole Jute Whole Kenaf Whole Kenaf Mechanical Pulp Manufacturing Cost Unit : US$/ Adt Whole J ut e Whole Kenaf Case 1 Case 2 Case 3 Case 4 Variable Costs Raw materials Energy Chemicals Others Total Variable Cost Fixed Costs Labor Maintenance Administration Depreciation Total Fixed Cost Factory Manufacturing Cost The material costs for manufacturing Jute Mechanical Pulp ( APMP ) is almost same as Wood Bleached Chemical Thermo Mechanical Pulp ( BCTMP ). The Energy cost of APMP is about 80% of BCTMP, as refining energy consumption is set at about 50% of refining electricity and installing Self-Generation system with the use of Natural Gas, while the cost of Chemical is a double of Wood BCTMP due to the chemical consumption of Impregnation Stage need to have similar volume of the Chemicals as Bleaching Process with Hydrogen peroxide ( H2O2 ). Factory Manufacturing Cost of Jute APMP including variable and fixed costs is slightly higher than US$ /Adt, which is the factory manufacturing cost of BCTMP for both Softwood and Hardwood in the North America so that there may be a possibility to produce Jute/Kenaf APMP Pulp in Bangladesh.

20 According to CTP Report, Jute Mechanical Pulp produced by TMP is weak in Pulp strength, compared with a Pulp made from APMP process and not suitable for Newsprint. But Caustic soda and Hydrogen peroxide are necessary for APMP Process on Impregnation stage, prior to the refining, so that, the energy cost of APMP is lower than TMP by US$24/Adt but APMP Chemical Cost require US$34/Adt higher cost than TMP. Therefore Production cost of APMP is higher than TMP by US$10/Adt. There is no Chemical recovery facility in the mechanical pulp process and the Chemicals will be discharged directly to outside of the Mill and that is why Production Method of Jute Mechanical Pulp by BCTMP Process, with less Chemical consumption, is recommended for further study Profit for Domestic Sales of the Jute Mechanical Pulp Selling cost of Jute Mechanical Pulp can be calculated by adding Head Office Cost and Local Transportation Cost to Factory Manufacturing Cost shown in previous section and is estimated at US$ /Adt as follows ; ( each case in the list is same as difference in the Bleaching as well as Raw Material ) Estimated Selling Cost of Jute Mechanical Pulp in Banglades (US$/ Adt) Case 1 Case 2 Case 3 Case 4 Total Variable Cost Total Fixed Cost Factory Manufacturing Cost Total Head Office Cost Total Manufacturing Cost Imported Pulp ( BCTMP for Newsprint Paper ) in Bangladesh was priced, March 2004, at US$425/Adt or Tk. 24,700/Adt including taxes, while international Pulp Market has been indicating BCTMP ( of Aspen ) was priced at US$ /Adt in March 2003, US$ /Adt in March and US$ /Adt CIF Northern Europe. The price level is rather stable during last one year though there is some possibility to increase on/from April There are several quality of BCTMP in the market and the BCTMP quality varies according to the usage so that the prices also vary. Further study is necessary to forecast price of BCTMP, which will compete against Jute Mechanical Pulp, therefore, Profit analysis was made as follow on the sales Price of BCTMP, which will be used for the production of Newsprint. Expected Profit from Mechanical Pulp Business in Bangladesh Unit:US$/ Adt Case 1 Case 2 Case 3 Case 4 Total Manufacturing Cost Sales Price in the Market Business Profit Profit Tax 37.5% Profit After Tax Cashflow ( Cashflow = Profit after Tax + Depreciation )

21 2 3 3 Estimation of the Production Cost and the Profit of Newprint Paper by using Jute Mechanical Dry Pulp Factory Manufacturing Cost was estimated for Newsprint Paper by the use of Jute Mechanical Pulp ( APMP Dry Pulp ). Profitability is estimated, as the following rough calculation, that Jute Mechanical Dry Pulp is transported to the Paper Mill and Newsprint Paper is produced, which resulted Total Manufacturing Cost of Newsprint Paper is estimated at US$550/Adt. Production Cost & Profit of Newprint Paper Variable Cost US$430/ Adt Fixed Cost US$ 90/ Adt Factory Paper Manufacturing Cost US$520/ Adt Head Office Cost US$ 30/ Adt Total Paper Manufacturing Cost US$550/ Adt Custom duties on the Newsprint Paper is 22.5% and total 22% is further added as Value Added Tax, Advance Income Tax and Industrial Development Tax, making total tax amount 44.5%. Price of Newsprint Paper in the current Southeast Asian Market ( March 2004 ) is US$530/Adt and the imported price of Newsprint Paper into Bangladesh is slightly less than the market. Local price of imported Newsprint Paper in Bangladesh will be US$720/Adt Duty Paid and the following profit is calculated. Profit Estimation on Domestic Sales for Newsprint Paper Total Manufacturing Cost US$550/ Adt C&F Chittagong Sales Price including Tax Business Profit Profit Tax 37.5% Profit after Tax US$500/ Adt US$720/ Adt (US$500X1.45) US$170/ Adt (US$720 - US$550) US$ 64/ Adt US$106/ Adt Local Industries are well protected in Bangladesh with high taxes and custom duties so that Production of Newsprint Paper from Jute Mechanical Dry Pulp is expected feasible.

22 2 4 Summary and Conclusion The purpose of this report is to evaluate Manufacturing Cost for Jute Chemical Pulp and Mechanical Pulp and estimate the project profitability. 1) US$2/Adt (annually US$70,000) of the reduction of the cost is expected if Xylanase is produced locally. In addition to the cost reduction of ClO2 with the process of Xylanase Bleaching, it was confirmed by the experiment that the brightness improved by 1 2 points and the improvement of Pulp viscosity. Also Xylanase Bleaching results in the reduction of volume of ClO2, which will lower AOX in the effluent and washing water after Xylanase Bleaching can be re-used and sent to recovery boiler for its burning efficiency. Finally the process is expected to lower the environment load by BOD, COD and SS of the effluent. 2) There are some uncertain factors on the interest, Value Added Tax (VAT) and Local Transportation Cost in the Head Office Cost so that the Analysis was made on the interest rate of 0.9% and 15% of VAT is not considered. The analysis on the Manufacturing Cost as well as the profitability proved that Jute Pulp as well as Jute Paper Products is expected feasible in selling Pulp ( Jute Chemical Pulp and Jute Mechanical Pulp ) and Paper Products from Jute Pulp in the domestic market of Bangladesh as Pulp and Paper Products may be sold at higher prices in the local market and local market is well protected by various taxes. 3) The cost calculation in this report has been made with Fixed Jute Price US$62/Adt ( = Tk 1,000/Green Metric Ton ) at the chipping area in the Pulp Mill. And the study has not been made on the cost of Jute cultivation by farmers, drying, bundling, truck loading, transportation, storages, etc. It is therefore necessary to study how Jute Cost of US$62/Adt ( = Tk 1,000/Green Metric Ton ) can be reduced, while Kenaf is cheaper than Jute and is priced at US$50/Adt ( = Tk. 800/Green Metric Ton ), which is lower by US$30/Adt in Pulp cost so that the study on the Kenaf supply cost is also necessary for ploughing, Seeds, fertilizing, thinning, harvesting, drying, bundling, loading, transportation, storages, etc. 4) Mill site location has not yet identified, though such location may be the West of Dhaka in the area of Jute Production. Specific study is necessary to identify the location, infrastructures, water in-take, water discharge, labor forces, material transportation, interim storage, product transportation cost, etc. 5) The production of Jute Pulp as well as Jute Paper products is expected feasible in Bangladesh due to the protection of taxes as well as custom duties. But this report does not based on the actual sales prices in the market including role of local taxes, the forecast on future trends on prices and Demand/Supply situation. Market research is key factor for the development of the Project. This report was prepared with some assumption such as Price of Raw materials, Inland freight, Interest Rate, Local Tax and sales Price of the pulp and paper. In case the interest rate of 0.9% from Japan Bank for International Cooperation is not applied and 15% of VAT is applied the Profitability will be as follows:

23 Feasibility Analysis in Each Case Intrest Rate VAT Case A 0.9% 0.0 % Case1 Chemical Price BangladeshJute Case B 4.9% 0.0 % Case2 Chemical Price India Jute Case C 0.9% 15.0 % Case3 Chemical Price BangladeshKeanf Case D 4.9% 15.0 % Case4 Chemical Price India Kenaf Interest Rate of 0.9% represents the rate applicable for Project under Yen-Credit from Japan Interest Rate of 4.9% represents the rate appplicable for commercial reference in US$ Chemical Pulp Mechnaical Pulp Fine News- Case1 Case2 Case3 Case4 Case1 Case2 Case3 Case4 Paper print Case A Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case B Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case C Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Case D Factory manufacturing Cost Intrest Cost VAT Other Head offe cost Total Manufacturing Cost Sale Price(Domestic Market) Profit After Tax (TAX 37.5%) Case A Case B Case C Case D Red Letter indicates not feasible Minimum Profit ( after Tax ) Level, Feasible for the Project 10%of the Annual return on Equity and repayment of the Loan during 20years Chemical Pulp 56 US$/ADT Mechanical Pulp 50 US$/ADT Fine Paper 50 US$/ADT Newsprint Paper 50 US$/ADT

24 The realistic and detailed Feasibility Study is suggested on the raw material cost, transportation cost, the market for Pulp and Paper and demand and supply of the Pulp and Paper to realize the Project of Jute Pulp and Paper in Bangladesh. Basic data on the study is summarized as the following : Raw Material and Volume Pulp Production Adt/day Adt/Year Volume of Jute, necessary for Pulp Manufacturing Adt/day Adt/Year GT(moi75%)/Year Chemical pulp , , ,608 Mechanical Pulp , , ,814 Cultivation Area of Jute ha 7,500 4, Facility Investment Full details is indicated in 7-2 and 8-2. Investment shall be as follows ; Chemical pulp facility Mechanical pulp facility Direct Construction Cost US$56,224,000 US$41,465,800 Construction Charges US$ 8,152,000 US$ 6,012,000 Other Expenses US$13,006,000 US$12,127,000 Total US$ 77,382,000 US$ 59,604, Profitability Finance is estimated ( as on and8-3-8 ) as follows : Chemical pulp Mechanical pulp Total Investment Requirement US$77,382,000 US$59,604,800 Capital US$10,000,000 US$10,000,000 Loan US$67,382,000 US$49,604,800 Type of the Loan was assumed as follows. If the loan condition of Japan Bank for International Cooperation will be adopted in Bangladesh as LDC country. Interest Rate Loan Term Grace Period 0.9% 30 years 10 years Referring the conditions, the following results were made available : Cost Analysis for Chemical pulp and Mechanical pulp has been arranged and each Cost has been calculated according to 7-3 and 8-3, which was shows as Case A ( VAT 0%, Interest Rate of 0.9% )to be referred for details.

25 Further, Cashflow Projection, Estimated Profit & Loss, Estimated Balance Sheet were prepared for chemical pulp and mechanical pulp which are shown in the Supplement attached, in order to see the realistic Profitability of the Project. Chemical pulp and mechanical pulp Profitability Analysis, made by the use of Financial Factors, such as Cashflow, Profit & Loss and Balance Sheet, had the following Results : Profitability of Chemical Pulp Case 1 Case 2 Case 3 Case 4 A) Return of Asset 3.49 % 3.81 % 3.90 % 4.19 % B) Return of Equity 8.76 % 8.97 % 9.03 % 9.19 % C) IRR 6.93 % 7.60 % 7.81 % 8.44 % Profitability of Mechanical Pulp Case 1 Case 2 Case 3 Case 4 A) Return of Asset 2.77 % 3.06 % 3.11 % 3.37 % B) Return of Equity 7.42 % 7.73 % 7.78 % 8.03 % C) IRR 5.36 % 5.92 % 6.03 % 6.56 % A. Return on Assets ( Profit after Tax / Total Assets ) In 10 th Year B. Return on Equity ( Profit after Tax / Paid Capital + Cash Surplus ) In 10 th Year C. IRR : Internal Rate of Return

26 3. Market for Wood Pulp and Jute / Kenaf Pulp 3 1 Trend in the Pulp Market The following statistical data was obtained from FAO Year Book 2001, Forestry Edition, and Non Wood Paper Promotion Association of Japan : 2001 Movement of World Paper, Paper Board & Wastes Unit : 1,000 M/ t Paper & Paper Board Waste Paper Country Production Consumption Recovery Ratio %=Recovery/ Consumption Utilization %= Consumption/ Production Production Change Consumption Per Capta Recovery Ratio % Consumption Utilization % Import Export U.S.A 81, , , , ,556 China 37, , , , , Japan 30, , , , ,488 Canada 19, , , , ,171 3 Germany 17, , , , ,599 4,020 Finland 12, , Sweden 10, , , , France 9, , , , , Korea 9, , , , ,517 1 Italy 8, , , , World Total 320, , , , ,370 23,953 Total , , , , ,687 17,199 Total , , , , ,358 18,194 Total , , , , ,582 20,448 Total , , , , ,367 23,971 World Non- Wood & Wood Pulp Production and Consumption Year Non- Wood Pulp 1,000M/ t Wood Pulp 1,000M/ t Total Pulp 1,000M/ t Non- Wood/ Total Pulp % Production Consumption Production Consumption Production Consumption Production Consumption ,055 19, , , , , ,434 20, , , , , ,303 18, , , , , ,565 19, , , , , ,794 19, , , , , Base Data : FAO/ Year Book 2001 Forestry FAO Year Boo 2001 include statistical data up to the end of the year 2001 only and it was indicating Total World Production of Pulp was lower in the year 2001 but the world production of Paper Pulp is currently showing steady growth towards the year 2004 and Non Wood Pulp has a historical share of about 10 11% in the Total Pulp Production and according to Paper Economic Journal, April 2004, the Demand and Supply position for Market Pulp is generally showing tight supply position from last quarter of the year 2003 and early this year 2004 due to bad weather in the U.S. South, various shut down at Paper Mills for maintenance, and Wood Chip Shortages due to the closures of the Canadian Saw Mills, which resulted Norscan Inventory Position down to 1.47 million tons also resulted in price increase. Note: FAO Year Book 2001, Forestry indicates in its statistics as other fiber pulp, which can be interpreted clearly as Non Wood Pulp. FAO is only public organization, publishing statistical data on the Non Wood Pulp. Non Wood Paper Promotion Association of Japan is a NPO publishing such data for easy understanding in Japan. During the year 2003, the supply of the Market Pulp was heavily affected by SARS and due to the increase in Pulp inventory in Asia and that there were decrease in prices of the Paper Products in China Korea and Europe but Market Pulp prices had been improved towards the end of the year 2003, as there was a significant increase of Market Pulp demand in China supported by a shortage of ocean containers for the shipment of the Market Pulp.