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PRECIPITATED SILICA

CONTENTS

SECTION I PRODUCT CHARACTERISTICS AND SPECIFICATION SECTION II PRODUCT APPLICATIONS SECTION III INDIAN MANUFACTURERS SECTION IV IMPORT/EXPORT LEVEL SECTION V PRICE DETAILS SECTION VI INDIAN DEMAND SECTION VII BROAD OUTLINE OF MANUFACTURING PROCESS SECTION VIII RAW MATERIAL REQUIREMENTS, UTILITY

AND AVAILABILITY SECTION IX GLOBAL SCENARIO SECTION X DISCUSSIONS ON ECONOMIC CAPACITY, PROJECT COST AND PROFITABILITY PROJECTIONS SECTION XI SWOT ANALYSIS SECTION XII FACTORS INFLUENCING THE POSITION FOR

A NEW INDUSTRY AND RECOMMENDATIONS

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SECTION I.

PRODUCT CHARACTERISTICS AND SPECIFICATION 1.1. General details

Appearance White free flowing powder

Chemical formula SiO2. xH2O

Molecular weight 78.08

Specific gravity 2.1 to 2.3

Ultimate particle size 0.0126

pH 4 to 8.5

Bulk Density 4 to 10 lb per ft3

Solubility Insoluble in water or acid except

hydrofluoric acid Soluble in alkali

1.2. IS Specification

Characteristics Limit

Appearance White free flowing powder or lump Silica content SiO2 min 88 to 90% Surface area Around 170m 2 per gm(by BET-N2) Moisture at 110 deg.C 5 to 7% pH of 5% slurry 7 + 0.3 Iron content Less than 0.05% Soluble salts Less than 1% Sieving requirement Dry sieving through-200 mesh IS method

97% passing

Wet sieving through-325 mesh IS method 99% passing Loss on ignition Around 5 to 7% Bulk Density before compression

0.09 to 0.10 g per cc

after compression 0.10 to 0.12g per cc

1.3. Packaging 20 to 25 kg net in HDPE bags with separate liner inside.

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SECTION II

PRODUCT APPLICATIONS

2.1 General Details Used as a white free flowing powder in a compact form. 2.2. Important Application sector Rubber Pesticides Poultry animal feed Toothpaste/Cosmetics Food/Salt 2.2.3 Other sectors

Sector Nature of use and reasons for use Toothpaste Mild abrasive cleaner having high fluoride absorption Tableting & pelleting To aid abrasive Cattle feed As a carrier Cosmetics As an absorbent and thickening agent

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SECTION III

INDIAN MANUFACTURERS

Manufacturers Important Indian manufacturers include the following S.No. Name of the organisation Address details

1 Durga Chemical Industries

Plot No. 6801, GIDC., Ankleshwar, Bharuch-393 002

2 Famous Minerals & Chemicals Pvt. Ltd.,

3/58, Sharda Building, Topiwala Lane, Lamington Road, Mumbai-400 007�

3 Huber Chemicals India Pvt. Ltd.

Factory Plot No.754, Jhagadia Indl. Estate GIDC, Taluka Jhagadia, Dist. Bharuch Gujarat-393 110

4 Insilco Degussa Ltd., (A subsidiary of Degussa-Huls AG)

Gajraula Plant: A-5, UPSIDC Industrial Estate Bhartiagram, Gajraula, Dist. Jyotiba Phule Nagar-244 223 UttarPradesh Patalganga Plant Plot No.A-21/2 & 3 MIDC Patalganga Industrial Area, P O Patalganga 410 220, Dist.Raigad Maharashtra

5 Kadvani Chemicals Pvt. Ltd. Jamnagar-Khambhalia Road, Near Padana Bridge, Village-Jakhar, At & Post Padana- 361 280, Dist. Jamnagar. Gujarat

6 Madhu Silica Pvt. Ltd.

40, GIDC Estate., Chitra, Bhavnagar-364 004. Gujarat

7 Makson Chemical “Maps House”, 1st Floor

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(Maps Group)

Dr.Takhatasinhji Road Morbi 363 641 Gujarat

8 Prabha Chemicals & Allied Products

Factory P 9/2, IDA, Nacharam, Hyderabad-500 076.�

9. Purosil Chemicals Ltd.,

108, 8th St., Vyasar Nagar Chennai 39 Factory: Gummidipoondi

10 Regoj Chemicals Industry

Plot No. 6702, GIDC, Ankleshwar, Dist. Bharuch-393 002�

11 Shiv Silica Pvt. Ltd., Plot No. 6212, GIDC, Ankleshwar, Dist. Bharuch - 393 002

Indian Installed capacity Company Claimed Installed Capacity

In tonnes per annum

Insilco Degussa Ltd., 24000 Madhu Silica Ltd., 11000 Huber Chemicals 7000 Kadvani Chemicals Pvt.Ltd. 1800 Others 2700 Total 46500

SECTION - IV

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IMPORT/EXPORT LEVEL 4.1. Present import level Around 1770 tonnes per annum Countrywise Imports of Precipitated silica and Silica gel Period April 2001 to March 2002 Total quantity 1765858 Kg

Country Quantity in Kg

Australia 71940 China P Rep 313020 Egypt A RP 180000 German F Rep 86102 Japan 35220 Korea RP 1290 Norway 908933 Russia 30 Singapore 3000 South Africa 10200 Spain 35000 Thailand 16000 UK 3192 USA 101931

Sample of individual imports Period 2002 Name of the importer Quantity in

tonnes Value in Rs Country Date Port

Pee Aar Rubber Mills 4.5 1109834 Germany 17.1.2002 to 23.1.2002

Mumbai

Kohinoor India Ltd. 2.222 581341 Germany 08.7.2002 to 15.7.2002

Mumbai

Kohinoor India Ltd. 2.278 595993 Germany 08.7.2002 to 15.7.2002

Mumbai

Nikeon Corporation 0.75 150108 Germany 25.7.2002 to 31.7.2002

Mumbai

Premier Rubber Mills 2.4 767396 Germany 25.7.2002 to 31.7.2002

Mumbai

4.2. Exports

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Present export level Around 7500 tonnes per annum Countrywise exports of Precipitated silica and Silica gel Period April 2001 to March 2002

Sample of individual exports

UK1.30%

Turkey2.35%

Syria0.18%

United Arab Emirates

2.62% USA0.08%

Switzerland0.85%

Sri Lanka26.78%

Oman0.18%

Phillipines1.98%

Saudi Arab1.97%

South Africa1.41%

Senegal1.82%

Nepal8.94%

Korea RP0.55%

Malaysia2.26%Mayanmar

0.71%

Kenya15.91%

Japan2.83%

Jordan0.50%

Italy2.12%Tanzania Rep

1.56%

Baharain IS1.84%

Egypt A RP20.98%

Chines Taipei0.28%

Australia0.01%

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Period 2002 Name of the Exporter

Quantity in tonnes

Value In Rs.

Country Date Port

Highland International 0.3 21131 Dubai 01.1.2002 to 6.1.2002

Mumbai

Huber Chemicals India 0.2 12198 Port Kelang 01.2.2002 to 15.2.2002

Mumbai

Huber Chemicals India 2 108910 Port Kelang 01.2.2002 to 15.2.2002

Mumbai

Urai Impex 5.5 204311 Djbouti 01.5.2002 to 31.5.2002

Mumbai

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SECTION V

PRICE DETAILS Producer: Insilco Ex-factory average price of Insilco Ltd.,- Past trends Year Price per tonne

In Rs. 1997-98 33693 1998-99 35539 1999-2000 37474 2000-2001 42522 Period: November 2002

Grade Ex-factory Price Rs. Per kg

Sipernat 22(Wessalon) 40 Spiewrnax 22 Asil 314 50

Taxes and duties Extra as applicable

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SECTION VI

INDIAN DEMAND General details Indian demand for Precipitated silica is assessed for the following sector • Rubber • Pesticides • Toothpaste • Choline chloride sector • Salt • Miscellaneous Consolidated demand for Precipitated silica Total demand: 24050 tonnes per annum Sector Demand in tonnes per annum

Rubber (auto tyre, footwear, others) 12750 Pesticides 4000 Toothpaste 4000 Choline chloride industry 1000 Salt 1800 Miscellaneous 500 Pattern of consumption

Miscellaneous2%

Rubber (auto tyre, footwear, others)

53%

Pesticides17%

Toothpaste17%

Choline chloride industry

4%

Salt7%

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Growth rate Growth in demand for Precipitated silica would be related to growth in the percapita income and overall economic growth rate Precipitated silica finds applications in growth oriented sector such as rubber, pesticides, toothpaste. Based on the past trends and the likely future scenario, the estimated growth in demand in the individual application sector is provided below. Consuming sector Estimated annual growth rate in demand

Rubber (auto tyre, footwear, others) 7 to 8% Pesticides 4 to 5% Toothpaste 12 to 15% Choline chloride industry 10 to 11% Salt 4 to 5% Miscellaneous 4 to 5%

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SECTION VII

BROAD OUTLINE OF MANUFACTURING PROCESS Process outline for Precipitated silica Precipitated silica can be produced by either of the following routes Process based on Sodium silicate Process based rice husk The process based on the Sodium silicate is popular and is universally adopted 1 Process from Sodium silicate Precipitated Silica is manufactured by treating Sodium silicate with mineral acid. The mineral acid can be either Hydrochloric acid or Sulphuric acid. The process is briefly described below. Sodium silicate of correct strength is taken to an agitated reactor and Hydrochloric acid (30%) or Sulphuric acid (98%) is added to it. The reaction product is active silica solution, which is transferred to a settling tank. Silica is precipitated by adding 1% lime slurry. The pH of the solution should be kept at about 11 by adding more lime, if necessary. The content of the settler will be the slurry containing Precipitated silica and Sodium sulphate/Sodium chloride solution, which would be filtered in a filter press. The filtered cake is washed and dried on tray dryer or spray drier. The chemistry involved in the process is described by the following reaction Na2SiO3 + H2SO4 -------------> SiO2 + Na2SO4 + H2O The product would be ground in a microniser to the size of 15 microns and packed.

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2. Process from rice husk Precipitated silica can be prepared by treating rice husk with Sodium sulphate to produce Sodium silicate, which is then dissolved in water and reacted with Sulphuric acid to get Precipitated silica. The detailed process is follows. a) Rice husk is treated with Sodium sulphate to produce Sodium silicate b) Sodium silicate obtained is diluted with water c) The diluted Sodium silicate solution is brought to a certain temperature and Sulphuric acid of appropriate dilution is added in controlled condition. c) The resultant product is Precipitated silica, which is washed in a washing tank d) The washed Precipitated silica is filtered, dried and pulverised to required mesh size.

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PRECIPITATED SILICA PRODUCTION PROCESS

Sulphuric acid Sodium silicate

Precipitation

Drying

Packaging

Milling

Classification

Washing

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Source of Indian technology * Central Salt and Marine Chemicals Research Institute, (Council of Scientific & Industrial Research) Gijubhai Badeka Marg, Waghawadi Road Bhavnagar -364 002 * Indian Institute of Technology, Kharagpur, West Bengal. * Indian Institute of Technology, Powai, Mumbai-400 076. Major equipment required Name of the equipment

Name of the company

Wooden reactor Techno Filters Pvt. Ltd., 5, Business Plaza, Opp. Hotel Rosewood Tulsiwadi, Tardeo, Bombay-400 034

Sachin Filtech Pvt. Ltd., Plot No.77-4, F-Road, Phase - I, GIDC Estate Vatva, Ahmedabad-382 445

Tray dryer Richard Engineering (Bombay) Pvt. Ltd. 42, IIF, Veerabadran Street Near Valluvar Kottam Nungambakkam, Chennai-600 034 Ganson Ltd. 645, Anna Salai, Chennai-600 006

Pulveriser

ACE Pack Machines 23, V.N. Industrial Estate Bharathi Colony,Near Athiparasakthi Temple Peelamedu, Coimbatore-641 004

Frigmaires Engineers PO Box 16353, 8, Janata Industrial Estate Senapati Bapat Marg Opp Phoenix Mill, Lower Parel (W) Mumbai-400 013

Air compressors

ELGI Equipments Ltd., Elgi Industrial Complex III, Trichy Road, Singanallur, Coimbatore-641 005

K.G. Khosla Compressors Ltd., 19.8 KMS, Delhi-Mathura Road, Faridabad-121 003, Haryana

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SECTION VIII

RAW MATERIAL REQUIREMENTS, UTILITY AND AVAILABILITY

Raw material requirements Basis : One tonne of Precipitated silica

Sodium silicate 3000 kgs Sulphuric acid 460 kgs

Utility requirements

Power 600 unit Fuel 240 litres Water 30000 litres

Raw material availability Sulphuric acid Tanfac Industries Ltd., Cuddalore

Binani Industries Ltd., Kerala Soda ash Tuticorin Alkalies & Chemicals Ltd.,

Tuticorin Sodium silicate Kiran Silicates Pvt. Ltd, Chennai

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SECTION IX

GLOBAL SCENARIO Speciality Silicas Precipitated silica Silica gel Fumed silica Colloidal silica Global market Around $1.7 billion. Pattern of regionwise global demand

Growth rate in demand Through the year 2002, the global market for speciality silicas is expected to grow at a rate of roughly 4.0% a year (in real terms, excluding significant inflation) exceeding $2 billion in that year. Capacity expansion According to Kline & Co., “the years 1995 to 1997 were the most significant time for capacity expansions in speciality silicas since mid 1980’s. Production expansions occurred in all regions of the world, but were most evident in the Asia-Pacific region”. Most of the leading Precipitated silica suppliers including Rhone-Poulenc, Degussa, PPG and JM Huber all implemented significant capacity increases.

Western Europe29%

Other regions of the world including Latin

America, Eastern Europe and North Africa/Middle East

6%

North America28%

Asia/Pacific region37%

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In Precipitated silica alone, over 150,000 metric tonnes of capacity was added, increasing the industry’s total production capability by over 20%. According to Kline & Co., “as a result of these increases, capacity utilisation dropped slightly in 1997 to an average of almost 70%. Capacity utilisation was greatest for fumed silica (nearly 90%) and lowest for Precipitated silica (in the high 60% range)”. The reason for the relatively low capacity utilisation rate is that synthetic silicas are truly speciality products, with plants often producing a variety of grades for specific markets and often for individual customers. In addition, the vast majorities of plants are small in size (between 15,000 and 30,000 metric tonnes) and are scattered around the world serving different geographic needs. For instance, there are 45 plants globally that produce Precipitated silica and 31 that produce silica gel. The fumed silica business is more concentrated with only 13 plants globally. Despite the broad geographic coverage of production, European and North American producers dominate the business. For instance, Degussa, PPG and Rhone-Poulenc combined accounted for two-thirds of the production capabilities globally for Precipitated silica. In silica gel, Grace Davison accounts for about one third of production capacity with PQ a distant second. In fumed silica, Degussa accounts for almost 35% of global capacity with Cabot another one-third of the total volume. In colloidal silica, the business is more fragmented but Eka Nobel, Nalco and DuPont each account for between 10% and 15% of global production capability. Much of the recent capacity expansions have been announced in Asia. Prior to the recent economic turmoil in this region, growth forecasts for speciality silicas in Asia/Pacific ranged between 5% and 10% per year depending on the product and specific application. For example, projected demand for fumed silica in rubber applications was forecast to grow 7% per year over the next five years. It is too early to predict the effect of the recent economic turmoil on these growth rates. Precipitated silica, because of expanding rubber footwear applications in the Asia Pacific region, as well as the emerging growth in green tire applications in the Asia-Pacific and Western Europe; is expected to grow at rates of nearly 4% per year globally. Other leading applications for Precipitated silica include food and healthcare, plastics, coatings and catalysts. The global silica gel market is expected to grow at a rate of about 3.5% a year. While the major market of silica gel, package desiccants, has not grown strongly in regions outside of the Asia-Pacific, several other high value applications in food and healthcare and coatings are doing well. Fumed silica is heavily dependent on silicone rubber compounding and has an expected growth rate reaching 5% a year. Other major applications for fumed silica include coatings, plastics, abrasives and refractories and food and healthcare.

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Colloidal silica represents the smallest product of the four speciality silicas on volume basis. Colloidal silica is also projected to grow at about 4.0% a year globally, although the North American region will largely drive this growth. Its major application is investment casting, but silicon water polishing, catalysts and other niche markets are growing quite rapidly. Kline’s latest analysis of the global speciality silicas market focused on the Asia/Pacific region is based on over 100 in depth interviews. This series of reports also include a regional production cost analysis for a representative manufacturing facility for each of the four types of speciality silicas covered. Global demand supply scenario Supply matches the demand. However, there are the leading manufacturers like Degussa, who have a number of special grades catering to specific requirements. Break up of major consuming industries

Rubber Others(healthcare,

food andcosmetics and

65%

35%

0%

10%

20%

30%

40%

50%

60%

70%

Rubber Others(healthcare,

food andcosmetics and

Precipitated silica Global production of Precipitated silica 8,50,000 to 9,00,000 tonnes per annum Growth in demand 4% per annum Pattern of use Precipitated silica predominantly used as a filler for automotive tyres. Around 50% of Precipitated silica is used in tyres and rubber.

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Precipitated Silicas are being used increasingly in the manufacture of car tyres, because they lower rolling resistance considerably without affecting other performance characteristics. In anticipation of greater demand for the material, worldwide suppliers of Precipitated Silicas are marking large investments in order to expand the capacity of their plants. Consumption is currently 850,000 tonnes split evenly between Europe and North America. Major producers of Silica Degussa Hulls with its Silicas and Chemicals Catalysts reporting sales of DM1120 million in 1998. Cabot is the second larged fumed silica producer behind Degussa Huls. PPG Industries claims to be the largest world producer of Precipitated Silica. Other Precipitated Silica producers include Rhodia, Akzo-PQ Silica,J.M.Huber and Nippon Silica industrial. The colloidal silica market has a much larger number of producers. Global manufacturers of Precipitated silica include the following: * Crosfield Chemicals P.O. Box No. 26, Warrington, Cheshire WA5 1AB * PPG-Sipsy, Z.I. Rond Point Croix Cadeau, B.P.79, 49242, Avrille Cedex, France. * Degussa AG Postfach 1105 33, D-6000 Frankfurt 11 Degussa-Huls AG Specialty Chemicals Division Sivento, Chemical Catalysts Weissfrauenstrasse 9, D-60287 Frankfurt/M,Germany

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* Akzo Nobel Chemicals Inc Surface Chemistry 300 South Riverside Plaza, Chicago, Illinois 60606 * American International Chemical Inc., 17, Strathmore Road, Natic, MA 01760, USA * Seegott Inc. 10040, Aurora Hudson Road, Streetsboro, OH 44241, USA * J.M. Huber- Chemicals Division, 907, Revolution Street, Havre de Grace, MD 21078,USA * US Petrochemical Industries Inc., Galleria Financial Centre 5075 Westheimer Rd.,

Suite 675, Houston, TX 77056

* Fujimi Corporation 747 Church Road, F-3, Elmhurst, IL60126 USA. * Glassven Zona Ind. Soco, Calle Las Rosas #24, La Victoria, Edo. Aragua, 2121, Venezuela USA * Charles A Wagner Co. Inc USA. * Rhone Poulenc Inc., Agrochemicals Division Post Box No.125, Black Horse Lane Monmouth Junction, NJ 08852

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SECTION X

DISCUSSIONS ON ECONOMIC CAPACITY , PROJECT COST AND PROFITABILITY PROJECTIONS

Economic capacity : 600 tonnes per annum Project cost : Rs.117 lakhs Assessment of project cost 1. Land S.No. Description Cost

Rs.in lakhs 1.1 Cost of land of 1acre at Rs.5.5 lakh per acre 5.5 1.2 Cost of levelling, laying internal roads/fencing and

compound wall

0.55

Subtotal 6.05 2. Building S.No. Description Cost

Rs.in lakhs 2.1 Factory building of area 250 sq.m. at Rs.3200/sq.m. 8.00 2.2 Non-factory building of area 80 sq.m.at Rs.4500/sq.m. 3.60 Subtotal 11.60 3. Cost of Plant & Machinery S.No. Description Cost

Rs.in lakhs 3.1 Cost of basic plant and machinery 35.00 3.2 Instrumentation and control 2.63 3.3 Pipelines and valves 3.50 3.4 Structurals for erection 1.75 Subtotal 42.88 3.5 Octroi, excise duty, sales tax, etc.at 12%� 5.15 3.6 Packaging and insurance charges (2%) 0.86 3.7 Transportation charges (2%) 0.86 3.8 Machinery stores and spares (2%) 0.86 3.9 Foundation charges (2%) 0.86 3.10 Installation charges (2%) 0.86

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Total cost of plant and Machinery 52.31 4. Technical know-how fees Rs.2 lakhs 5. Miscellaneous fixed assets S.No. Description Cost

Rs.in lakhs 5.1. Electrification 1.00 5.2. Steam boiler and auxillaries 3.00 5.3. Water storage tank, borewell etc. 0.80 5.4. Fuel storage tank 0.80 5.5. Laboratory equipment 1.20 5.6. Office machinery & equipment 0.80 5.7. Material handling equipment, packaging machinery,

weigh balance, etc. 0.80

5.8. Diesel generator 4.00 5.9. Effluent treatment 1.50 Total 13.90 6. Preliminary & Pre-operative expenses: S.No. Description Cost

Rs.in lakhs 6.1. Preliminary expenses 0.80 6.2. Pre-operative expenses:- 6.2.1 Establishment 0.80 6.2.2 Rent rates and taxes 1.00 6.2.3 Travelling expenses 1.20 6.2.4 Interest and commitment charges on borrowings 2.50 6.2.5 Insurance during construction period 1.50 6.2.6 Other preoperative expenses and deposits - 6.2.7 Interest on deferred payment - Total 7.80 7. Provision for contingency Rs. 5.70 lakhs 8. Working capital margin Rs. 17.82lakhs 9. Total project cost Rs.117 lakhs 10. Means of Finance Promoter's contribution Rs.47 lakhs Term loan from financing institutions Rs.70 lakhs

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Total project cost Rs.117 lakhs 11. Financial statements A Variable cost

Rs. in lakhs

Raw material and utilities 135.29 Spares and maintenance 3.14 Selling expenses 12.00 Total variable cost (A)

150.42

B Fixed cost

Salaries and wages 12.00 Interest on term loan and working capital loan 22.28 Depreciation 7.02 Administrative expenses 7.20 Total fixed cost (B)

48.50

C. Total cost of production (A+B)

198.92

D. Selling price per kg. (in Rupees)

40

E. Annual sales turnover

240.00

F. Net profit before tax (E-C)

41.08

G. Breakeven point in %

54

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SECTION XI

SWOT ANALYSIS

Strength Increasing demand in multi various

application sector

Weakness Most of the units are of uneconomic capacity

Opportunity Production of products of more grades to meet specific applications

Threat Imports

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SECTION XII

FACTORS INFLUENCING THE POSITION FOR A NEW INDUSTRY AND

RECOMMENDATION

Application Precipitated silica along with rubber carbon black are important components in reducing the rolling resistance of tires. Precipitated silica is also used extensively in growth oriented sector such as rubber products, toothpaste, pesticides, nutrition industry to improve the free flow properties of feed and food. Specialised area Earlier, Precipitated silica was considered as a small scale oriented project, with the producers making one or two grades with marginal difference. The entry of Insilco in India has totally changed the situation and has also contributed to the increased consumer expectation and awareness with regard to the quality and specification of the product. Now, Precipitated silica is considered as a sophisticated area and product, with the producers focussing considerably on technology aspects, R&D efforts and setting up application development laboratories. Specifications In view of the application in divergent sector and importance of its applications, a number of new grades specifications have been developed for the product all over the world, to improve its application profile and utility value to the consumers. This trend is likely to continue in future. Gap in supply While the present supply scenario for Precipitated silica in the country is comfortable, the continued growth in demand for the product would call for fresh capacity creation from time to time in future. Growth trend Considering the nature of applications of the product in vital sectors of growth, the demand for Precipitated silica is likely to go up steadily in the coming years

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Export trend Considering the capacity already created in the country and reasonable penetration in the global market in recent times, it is possible and necesssary for the new project to focus on global market in addition to the Indian market. Indian producers of Precipitated silica cannot afford to ignore the global market, from the point of view of profitability and capacity utilisation Recommendations Considering the growth in the demand and export possibilities, the project should focus on both Indian and global market and take necessary steps to ensure competitiveness from the point of view of technology and cost.