International Workshop on Ecocoboards, 1-3 October 2007, Days Hotel, Tagaytay City

Viability of Coir Processing Plants: Philippine Experience

By: Chalito P. Dizon, Dina B. Masa, Carlos B. Carpio Philippine Coconut Authority Diliman, Quezon City, Philippines

I.

Introduction
A. Historical Background 1. Earlier Developments - Philippine Gov. Gen. Sebastian Hortado de Corcuera decreed the planting of 200 coconut trees by village chiefs and 100 by serfs. - Coir used for caulking leaking ships for both military and commercial oceangoing vehicles (Galleon Trade between Mexico & RP). - Latter part of 17th century coir was used as coir ropes/twines in fishing and farming purposes.

2. Modern Developments - Japan paid RP with coir extraction machineries as part of its war-damage reparations payment. - 60s till 80s, about 47 processing plants were established, producing even car seats. - arrival of synthetic fiber and polyurethane with cheaper prices affected the coir industry - only one (1) coir processing plant survived - estimated daily coir production amounts to 160 MT (2006)

II.

Situationer
A. Industry SWOT Analysis 1. Strengths - Enough raw materials, about 4.8B coconut husks annually (40% of 12B coconut husks) - Save the Earth/Environment Movement - Return to the use of natural fiber rather than synthetic ones 2. Weaknesses - High freight costs - High energy and labor costs - Low or unstable prices - Inefficient machineries and equipment - High lending interest rates of banks
-

Major players tend to produce baled raw fiber only

3. Opportunities - Emerging new applications of coir and coir dust products - Growing markets for coir and coir dust products - Availability of locally fabricated coir processing machines 4. Threats - Cheaper substitutes such as foam and plastics - Lack of research and development - High prices of locally fabricated coir processing machineries and equipment

B. Firm Level Analysis The viability of coco coir processing plants is affected by the following factors and how these factors are made to work positively: 1. Investments - beginning production capacities at 5 MT coir (50T CH3)/day - financial exposure of P 7M and up - enough working capital 2. Freight Costs - strategically located near international ports - good roads, communications, power and water systems - competitive freight costs.

3. Quality and Efficiency - RP shall improve on quality of its coir products - Competitors India & Sri Lanka have comparatively better quality coir products - Quality products fetch good price 4. Credit - banking system but high interest rates at most 18% (prohibitive) - Agricultural Competitive Enhancement Fund (ACEF) * interest free and collateral-free for projects of small farmers and fisherfolk * collateral-free loan, except when required by the EXECOM of ACEF * subject to equity participation by private sectors proponents

a. Mode, Credit - interest-free loans to eligible proponents with income generating projects - collateral-free loan, except when proponent is required - subject to equity participation by a private sector proponents, viz: SME Category Micro (not more than P3M) Small (P3.000001M to P15M) ACEF Loan 80% 70% Equity 20% 30% 40% Total Proj. Cost 100% 100% 100%

Medium 60% (P15.000001M to P100M)

- interest-and collateral-free loans for projects of small farmers and fisherfolk falling below the minimum of ACEF assistance of (P0.500M)

b. Loan Disbursement/Repayment Mechanism Loan disbursement/repayment mechanism shall be governed by existing guidelines, rules and regulations of the government on the release of funds to, and collection of loans from, the proponents. 5. Others - Lack of market - wrong location planning - concentration of deco plants in one (1) area - high energy and labor costs - fluctuating prices

III. Production/Supply by Region

- Last ten (10) years, coir production concentrated in Southern Tagalog averaging 1,368.38 MT - Southern Mindanao slowly caught up averaging 1,058.38 MT - Worthwhile watching are Eastern Visayas & Northern Mindanao with big processing plants put up in these areas. A. Coconut Production/Potential Coir Equivalent 1. Coconut Production Table No. 1 Coconut/Husk Production and Coir Equivalent
Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: PCA Copra Terms (million MT) 2.600 2.500 1.374 2.572 2.868 2.315 2.631 2.377 2.682 2.470 Nut Equivalent (Billion) 13.627 13.102 7.201 13.480 15.031 12.133 13.789 12.458 14.056 13.353 Husk Equivalent (Billion) 13.627 13.102 7.201 13.480 15.031 12.133 13.789 12.458 14.056 13.353 Potential Coir Equivalent (000,000 kgs.) 545.080 524.080 148.040 539.200 601.240 485.320 551.360 498.320 562.240 534.120

2. Annual Philippine Coir Production (MT) Table No. 2 Coir Production by Region

5,000 4,500 4,000 3,500 in MT 3,000 2,500 2,000 1,500 1,000 500 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Source: FIDA

Southern Tagalog Bicol Region Eastern Visayas Western Visayas Northern Mindanao Western Mindanao Southern Mindanao

Philippine Coir Production, 2006

Batanes

Southern Tagalog -2,998

Ilocos Norte Kalinga Apayao Cagayan Abra Ilocos Sur Mt. Province Isabela Benguet Ifugao La Union Nueva Viscaya Quirino Pangasinan Nueva Ecija Tarlac Zambales Pampanga Polilio Is. Bulacan Bataan Rizal Laguna Camarines Norte Cavite Quezon Camarines Sur Catanduanes Marinduque Mindoro Occ. Albay Mindoro Or. MT Sorsogon Romblon Calamian Grp. Aklan Capiz Antique Iloilo Negros Occ. Cebu Masbate

Highly Suitable (Wet) Highly Suitable (Wet) Suitable (Intermediate) Suitable (Intermediate) Fairly Suitable (Dry) Fairly Suitable (Dry) Not Suitable [mainly lowland Not Suitable [mainly lowland rice areas or high altitude rice areas or high altitude areas (600 m and above)] areas (600 m and above)]
Bicol Region - 17 MT

Northern Samar Samar Eastern Samar Leyte

Eastern Visayas - 0 MT

Palawan

Southern Leyte

Western Visayas -4 MT

Negros Or.

Bohol

Surigao Norte Agusan Norte Northern Mindanao - 0 MT Surigao Sur Misamis Oriental Misamis Occ. Agusan Sur Lanao Norte Zamboanga Norte Bukidnon Revised: (Magat, 2001) Revised: (Magat, 2001) Zamboanga Sur Lanao Sur PCA R&D, December 2001 Davao PCA R&D, December 2001 North Cotabato Maguindanao Davao Or. Western Mindanao - 132 MTBasilan Is. Sultan Kudarat South Cotabato Sulu Davao Sur

Southern Mindanao -4,764 MT

Tawi Tawi Grp.

IV. Market
A. Domestic Utilization The following directives were issued by the government to improve & promote utilization in the domestic market 1. A.O.s/Pres. MCs - DA Adm. Order No. 43, S of 2000 by Sec. E. Angara on the Usage of Seedling Containers or Receptacles Made from Indigenous Organic Materials - DA Adm. Order No. 11, S of 2002 which Recommends the Sustained Utilization of Coco Peat or Coir Dust as a Complementary Soil Amendment (Conditioner) for Optimization of Crop Yields under Normal Times and for Drought-Mitigating Measures During El Nio Years - Presidential Memo Circular No. 25, dated 2 Sept. 2002, or otherwise Directing All National and Local Government Agencies, Bureaus, and Other Instrumentalities Including Agricultural Institutions and Councils to Use Coco Peat or Coir Dust and Coconut Fiber Materials for Soil Conditioning and Erosion Control. - Department of Public Works & Highways will soon come up with a set of guidelines for use by its contractors in public works projects.

Table No. 3 - Production, Exports & Local Consumption (in MT)

Source: FIDA

B. Export a. Destination Table No. 4 Exports of Coir Fiber by Country of Destination, 1997-2006, (in mt)
Destination Australia Brunei Canada China Hong Kong Indonesia Japan Malaysia Singapore South Korea Sweden Taiwan United States Germany Chile Total 2000 14.1 1.3 1.2 268.6 13.8 299.0 2001 1.9 35.6 9.0 219.6 266.1 2002 56.3 180.5 2.0 238.8 2003 181.1 38.3 3.0 828.2 1,050.6 2004 1,669.0 521.6 214.5 2,211.8 4,616.9 2005 2,148.0 194.7 55.4 1,197.1 15.2 3,610.4 18.0 5,442.4 2006 4.1 4,042.2 63.2 58.1 11.4 74.3 27.6 1,107.5 36.0

Source: FIDA

b. Demand b.1 China - China needs 10M units of bed mattress. Each bed mattress weighs 4.5 kilos of coir equivalent to 4,000 tons per month or 48,000 tons per year; - China has an estimated 270,000 sq. km. or 2,700,000 sq. m. of desert concentrated mostly in north china like Beijing and Harbin province, among others; or an equivalent of 1,080,000 tons of coir given 1 sq. m. geo-net is 400 grams; - Desertification in China increases about 1.27% annually due to sandstorms during the months of October to December b.2 Other Markets - US - Japan - Singapore - South Korea

V. Plant Site
- consider good infrastructure systems: major road networks, international ports, communications, power supply raw material, supply from flat lowlands & price thereof - peace and order situation - lower energy and labor costs - farm to market roads - RORO cargo service will be maximized - Mindanao and islands of Leyte and Samar are suitable sites due low energy & labor costs - Freight costs of Manila vs. Mindanao - Manila Port = $500.00-$600 per 40-footer container van - Mindanao (Davao & Cagayan de Oro) Ports = $ 1,300.00 - $ 1,500.00 per 40- footer container van.

VI. Labor and Management Capability

A. Labor - tap the coconut farmers who use only about 30% of their productive time - children of coconut farmers, mostly High school graduates can be trained easily - regional wages are competitive enough B. Management - shall consider training its workers and staff - consider availability of skilled laborers particularly for downstream products in the area vis--vis contemplated technology to be used - consider availability of machine shops - responsible for product standardization in accordance w/ market requirements

VII. Technology/Process
A. Production Capabilities These 2 levels of production capabilities for coir processing, namely: 1. Primary Processing a. Decorticating - processing plants extract fiber to produce CH3 grade using a decorticating machine with capacities ranging from 500kg to as high of 5,000 kgs/8 hr operation - Decorticating machines are run by either a diesel engine or motor engine - big milling plants usually export directly while small ones are indirect exporter - Applications of CH3 grade fiber are: + stuffing materials - recovery rate is 10 husk to 1 kg of CH3 fiber b. Defibering processing plants extract fiber to produce long fibers (CH1 & CH2) through the use of spikes that work like combs.

Utilization of coir nets in Unisan, Quezon

B. Secondary Processing 1. Involves further processing of mattress and bristle fiber into high value coir products using - looming/weaving machine products: geo-textile net - twining/slivering machine products: twine, sliver, doormats - stitching machine products: stitched fiber, plant liners, filtration pads

MAJOR PROBLEMS/CONSTRAINTS IN COCO PROCESSING

lack of mechanical fiber and dust dryers; inefficiency of decorticating machines lack of high density baling press (100kg/ bale) lack of product standards for high-value coir products such as geotextile, biologs, plant liners, etc.

End of presentation

Thank you