INTRODUCTION TO NEPAL
Nepal is a land locked country between China and India with a population of approximately 29 million people (CIA, 2016). 28.8% of their land is used for agriculture which has contributed to 29.4% of their GDP. Their land is made up of flat plains in the south, with a central hilled region and the himalayan mountains in the northern part of the country. Their climate ranges from extremes of severe winters and cool summers in the north with warm summers and mild winters in the south (CIA, 2016).
Nepal has a strong export value of $382 Million USD of textile exports yearly (OEC, 2014). Within this $382 Million export in 2014, $65 Million of this is used for carpets of wool and fine knotted animal hair, this sector has the largest stance in the export market with 6.1%. With the total export market of $1.06B f, Nepal’s top export destinations are India, the United States and China (OEC, 2014).
TRANSPORTATION
Transportation of this product will include both sea and land transportation, from the place of manufacturing in Belfast, Prince Edward Island, Canada to Kathmandu, Nepal. This product will be shipped in a 20’ sea container from Belfast, Prince Edward Island to Kolkata, India to their port, where shipping will have to be separately arranged to the destination in Nepal (BNSF, 2016). Since this product will be used for a community of people, the location has not been confirmed, so further shipping is required outside of the provided quote. From Kolkata, India to Kathmandu, Nepal, the trip would be about 2,000 km round trip, since containers must be returned to Kolkata at the shippers expense (BNSF, 2016).
Figure 6: Transportation Pathway
Information from personal communications with BNSF logistics
This quote is based on one 20’ sea container of Agricultural Machinery and Equipment which is classified as non hazardous cargo (BNSF, 2016). This quoted rate is subject to alterations, space, booking, sailing and empty container equipment availability. The cargo being transported is subject to acceptance by ocean carrier, additional fees from arrival vessel, Indian duty, taxes, waiting time, or any other auxiliary fees. The shipper is responsible to load, stow, block and brace all cargo inside the container, with two hours allowed to load the materials onto the sea container. The cargo must be suitable for ocean transportation, with proper export packaging (meeting ISPM 15 standards) and moisture protection used. A Bill of Lading must be provided, and a commercial invoice signed by supplier, which shows the value, quantity and full description of goods, weights, measurements and details of packing specifications, with all necessary information filled out. If this container includes a sample, or any raw wool, it must have a minimum length of 10 cm, with a thickness of no more than 38 microns, with additional documentation included a health certificate and a test certificate from an authorized agency to clear customs (BSNF, 2016).
Figure 7: Container Layout
Information from Belfast Mini Mills
CALCULATION OF CHARGES
COST ANALYSIS
References:
A1 Freight Forwarding. (2016, November 23). Freight quote from Halifax to Kolkata [E-mail to the author].
American Natural Fiberworks. (2010). Services. Retrieved December 4, 2016, from http://www.americasnaturalfiberworks.com/
Belfast Mini Mills. (2009). Retrieved October 11, 2016, from http://minimills.net/
Blue Mountain Farm and Fibers. (n.d.). Fiber Mill Prices. Retrieved December 4, 2016, from http://www.bluemountainfarms.net/fiber-mill.html
BNSF. (2016, November 25). Freight cost from PEI to Nepal [E-mail to the author].
CIA. (2016, November 10). The World Factbook: South Asia, Nepal. Retrieved November 23, 2016, from https://www.cia.gov/library/publications/the-world-factbook/geos/np.html
Freelton Fibre Mill. (n.d.). Prices. Retrieved December 4, 2016, from http://
www.freeltonfibremill.ca/
Government of Nepal. (2012, December). Statistical Information on Nepalese Agriculture 2011/2012. Agri-business Promotion and Statistics Division. Retrieved December 1,2016, from http://www.moad.gov.np/downloadfile/yearbook2012_1363677455.pdf
Hustvedt, G., & Bernard, J. C. (2008). Consumer willingness to pay for
sustainable apparel: The influence of labelling for fibre origin and production methods. International Journal of Consumer Studies, 32, 491-498. doi:10.1111/j.1470-6431.2008.00706.x
Internal Revenue Service. (2016, January 15). Yearly Average Currency Exchange Rates Translating foreign currency into U.S. dollars. Retrieved December 4, 2016, from https://
www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates
Library of Congress. (2016, May 23). Nepal: Minimum Wage Increased. Retrieved December 4, 2016, from http://www.loc.gov/law/foreign-news/article/nepal-minimum-wage-increased/
McGregor, B. A., & Butler, K. L. (2007, December 17). Frequency of shearing increases growthof fibre and changes objective and subjective attribute of Angora goat fleeces. Journal of Agricultural Science, 146, 351-361. doi:10.1017/S0021859607007599
Observatory of Economic Complexity (OEC). (2014). Nepal. Retrieved November 14, 2016, from http://atlas.media.mit.edu/en/profile/country/npl/
R. (2016, October 17). Cost to set up a Mini Mill globally [E-mail to the author].
Ranch of the Oaks. (2016, January 1). Price List. Retrieved December 4, 2016, from http://www.ranchoftheoaks.com/price_list.html
Round Barn Fiber Mill. (2016). Prices. Retrieved December 4, 2016, from http://
www.roundbarnfiber.com/prices.html
Stonehedge Fiber Milling Equipment. (n.d.). Processing. Retrieved December 4, 2016, from http://www.stonehedgefibermill.com/
Stramba Farm. (2015, January 1). Fiber Processing. Retrieved December 4, 2016, from http://www.strambafarmalpacas.com/processing.htm
Vermont Fiber Mill and Studio. (2016). Processing Options and Pricing. Retrieved December 4, 2016, from http://vermontfibermill.com/fiber-processing/processing-options-pricing
Figure 8: All information received from personal communication with BNSF logistics
The final price dictated in figure 8 of $3635.00 USD does not include marine insurance, or any consular, courier or associated fees (BNSF, 2016). This final price is for the shipment using the weekly service to Halifax with transhipment in Singapore to India, in total this transportation will be 39 to 41 days approximately, with Kolkata’s standard demurrage providing 5 free days of storage before being shipped to Nepal (BNSF, 2016).
CALCULATION OF CHARGES
CALCULATION OF CHARGES
To make this machinery profitable, it would have to be owned by a community or a large organization, because of the price and transportation costs. A large organization could purchase the machinery, then look for shares taken within the machinery or charge on a per use, per pound, or a commission basis for the finished product. If this product was purchased in a community or by a large group of farmers, it would be located in a central location, with use by all that paid for a share of the machinery. This method could create a large amount of similar fibre, to reach and supply a potential demand of product if it is created. In both cases, people can be hired and educated on producing fibre, or the farmers can be educated on this. Therefore jobs would be created in Canada for Belfast Mini Mills to hire someone to educate the farmers, or potential employees on the use of these machines. As well as potentially other members of the community to create rugs, run the machines, or to collect the fibre.
To increase profitability, labour animals that create a thick winter coat should be sheared, or a group of farmers can own a flock of a fibre producing animals or crop over one plot of land, to decrease the amount of individual labour to take care of individual animals or the additional investment of a fibre producing animals or crop.
Ways to reduce the total cost over time, is to include parts that become worn out quickly the first container. The cost of shipping the container would not change, but over time when these parts break, the individual shipping of these products could be larger than the price of the part itself. Since there is a large amount of space above the machinery and in front of the crates, they could include larger items, and items to start production, as well as parts that need to be replaced on a regular basis.
BENEFITS TO THE IMPORTING NATION
The benefits to the importing nation can be seen expanding this export market, and creating this resource into an export that can be controlled by producers. One advantage to this mill would be the increase of shearing, which in turn, creates higher quality fibre, with less need for processing (McGregor and Butler, 2007) In a study performed in 2007, on mohair production was analyzed with the frequency of shearing, increased shearing led to a lower staple tip size, as well as more frequent shearing showing less entanglement with the staple fibres free and no attachments present. As well the yield of clean fleece increased by 150g every extra shearing completed, with 6mm more length in staple strands, as well as a 0.32 nanometre increase in average fibre diameter (McGregor and Butler, 2007). By providing this mill, the frequency of shearing could increase since it would be more accessible then large scale production, therefore yielding more fibre and in turn more profit.
Another benefit to this mill is that the increased labour can provide jobs. For example you can have an employee trained in working and fixing machines working full time where the mill is set up if the community is large enough. This employee could work part time on the machines, and have another source of income or work full time at the mill if the group using the mill creates a high enough demand. As well the processed fibre can create jobs for it to made into a textile, there are currently jobs for this, but if more farmers use the mini mill and shear more frequently there will be a rise in processed fibre to be made into carpets or other textiles.
With this mill, since it creates such small batches of fibre, the quality is much higher compared to factory mills. As well compared to hand processing fibre, it is quicker and easier to process with a more uniform blend and size. Since the fibre will be a better quality, more demand could be seen with the increase of export, and a flood of this product onto the market. A study completed by Gwendolyn Hustvedt and John Bernard conducted a study in 2008 on the whether consumers would pay for more sustainable appeal based on fibre origin and production. This study found that the value of organic fibre is 50 cents more than non-GMO fibres and their value of $1.35 (Hustvedt and Bernard, 2008). Tapping into this niche market can help make this fibre production system become more profitable for farmers and can provide a greater benefit to Nepal
Though this system seems ideal, this system can hurt various portions of Nepal such as the current manual labourers that process fibre. With this mill, the jobs will not be able to match the previous amount of jobs needed. Also flooding the market with this product, could devalue it, especially over a long period of time.
DISADVANTAGES TO THE IMPORTING NATION
FIBRE PRODUCING SOURCES
Belfast cites many sources as viable fibre sources such as alpacas, llama, camel, yak, goats, sheep, buffalo, dog and cat breeds, long staple cotton as well as hemp and flax (Belfast Mini Mills).
In Nepal, Buffalo, Sheep and Goats are animals that currently have a livestock population in the agriculture industry that can be used for fibre production as well (Government of Nepal, 2012). buffalo, sheep and goats are a combined 15 million head in the various regions of Nepal. Since the number of head for buffalo, sheep and goats is increasing at a notable amount, the amount of fibre available should be increasing in coming years. The population of Yak, Nak, and Chauri’s is 70,165 head and can provide a viable amount of fibre as well (Government of Nepal, 2012).
In Nepal, the cash crop sector also can fund the fibre industry. In the various regions of Nepal, during the growing season of 2011/2012, 14,424 metric tons of jute was produced as well as 133 metric tons of cotton (Government of Nepal, 2012). Though some of this commodity is used for export and milling fibres on a larger scale, this data shows that the land in Nepal is viable to grow these types of fibre. Therefore if there was an added interest in adding more types of fibre to this system, this would be a realistic way, as well as raising other types of animals that aren’t currently used in typical agricultural practices.
COST COMPARISON
Through research, there are no notable small scale mills within India or China for competition. The market is assumed to be filled with larger scaled mills, since both India and China manufacture large amounts of product to reduce cost.
Belfast Mini Mill is the only large provider of a smaller scale mill within Canada, with only one notable piece of competition in the United States. The other large producer of small scale mill production is in East Jordan Michigan, called Stonehedge Fiber Mill (Stonehedge Fiber Mill). Stone hedge Fiber Mill only provides a carder, picker and a rug yarn maker and lacks a fibre washer that Belfast produces. Their equipment are larger in size and appear to be less prevalent in this market compared to Belfast Mills. The cost of a carder from this company is $59,400 USD, a picker costs $10,865 USD and a rug yarn maker costs $7,700 USD (Stonehedge Fiber Mill, Personal Communication, 2016). In total this system costs $77,965 USD, which is $7,465 USD more than the Belfast Mini Mill without a washer (Stonehedge Fiber Mill, Personal Communication, 2016 and R., 2016). In figure 9 you can see the comparison of the prices.
Figure 9: Information consolidated from personal communications with Stonehenge fiber mill and Belfast mini mill
When looking at sheep wool, in 2011 and 2012 Nepal's population of 807,267 sheep produced 587,017 kg of wool (Government of Nepal, 2012). If half of that total wool was processed within a Belfast Mini Mill it can be compared to other milling systems. In figure 10 there is a comparison of various fibre processing companies and locations for processing fibre into rug yarn production as well as rovings.
Figure 10: Comparison of Fibre processing fees and locations, for sheep wool, information from each company listed. Using average USD to CAD exchange rate in 2015
With an approximation of 657,459 pounds being processed, if half of the wool collected was processed with a Belfast Mini Mill, the cost of processing 1 pound of wool, including only the cost of the machine would be 10.6 cents. In order to have the wool being processed with a new system be cheaper than sending the fibre to an outside company, more than 3665 pounds of sheep’s wool needs to be processed within a year. But this only attributes to 0.3% of the wool sheared as a country (Government of Nepal, 2012). But once other animal fibres are added, this mill will be much less inexpensive even if a full time employee is employed at Nepal’s minimum wage of $92 USD a month (Library of Congress, 2016). To accommodate a minimum wage of $1104 US /year, you would only have to process 3,723 pounds of sheep wool to make it more economical viable to own a Belfast Mini Mill. (Library of Congress, 2016).
In terms of transportation, this quote of a 20’ sea container from BNSF of $3635.00 USD from Belfast, PEI to Kolkata, India is a reasonable transportation cost (2016). This is in comparison to the sea freight from Halifax to Kolkata, India quoted by A1 freight forwarding of $4398.74 USD (2016). The difference between these quotes is seen as a more thorough evaluation of charges and insurances by BNSF, and a lack of land transportation by A1 freight forwarding. As well, this product having it’s own container with BNSF can be advantageous when unloading and completing land transportation in India since the container would not have to be disassembled.