I. SUMMARY
This profile envisages the establishment of a plant for the production of nails
with a capacity of 2,400 tonnes per annum.
The present demand for the proposed product is estimated at 18,541 tonnes per annum.
The demand is expected to reach at 31,940 tonnes by the year 2017 .
The plant will create employment opportunities for 62 persons.
The total investment requirement is estimated at about USD 307000, out of which
USD 168300 is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 28 % and a net
present value (NPV) of Birr 5.89 million discounted at 8.5%.
II. PRODUCT DESCRIPTION AND APPLICATION
A nail is pin shaped sharp object of hard metal typically steel used as fastener. Nails are
driven into the work piece by a hammer. A nail holds materials together by friction. The
common kind of nail is called "wire nail" to distinguish it from other types of nails.
Tack is a short nail with a wide, flat head used for fixing carpets to floorboards and for
stretching fabric on to wood.
III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. Past Supply and Present Demand
The nail markets is supplied by import as well as domestic production. Supply of nails is
presented in Table 3.1 while domestic production is in the increase, imported nails seem
to be decreasing indicating the successful substitution of domestic products. Particularly
in the last three years the domestic production shows a significant growth of 70%.
The linear trend equation fitted for 1997-2005 total supply of nails reveals.
Y = 1,339.9 X + 3,802.3 R2 = 71.2%
Applying this supply equation, the current effective demand for nails is estimated at
18,541 tons.
Table 3.1.
SUPPLY OF NAILS AND RACKS OF IRON OR STEEL
| Year | Ton | ||
| Local | Import | Total | |
| 1997 | 3,494 | 375 | 3,869 |
| 1998 | 2,702 | 5,810 | 8,512 |
| 1999 | 2,454 | 6,449 | 8,903 |
| 2000 | 2,773 | 5,325 | 8,098 |
| 2001 | 3,817 | 7,950 | 11,767 |
| 2002 | 5,190 | 6,582 | 11,772 |
| 2003 | 5,330 | 3,282 | 8,612 |
| 2004 | 8,664 | 4,961 | 13,625 |
| 2005 | 15,335 | 4,025 | 19,360 |
Source: Customs Authority
CSA, Survey of Manufacturing Industries
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2. Demand Projection
The demand for nails is related with construction and building sectors. New as well as
renovation of buildings and other constructions are the main end users of nails. The
growing construction sector development as evidenced in the successive increase of nail
supplies is expected to consume more. Therefore in this study the linear trend equation;
Y = 1,339.9 X + 3,802.3 R2 = 71.2%
is applied to project the demand for nails. Accordingly the demand for nails in 2017 will
be 31,940 tons. Projected demand for nails is presented in Table 3.2.
Table 3.2
PROJECTED DEMAND FOR NAILS
| Year | Tons |
| 2008 | 19,881 |
| 2009 | 21,221 |
| 2010 | 22,561 |
| 2011 | 23,900 |
| 2012 | 25,241 |
| 2013 | 26,580 |
| 2014 | 27,920 |
| 2015 | 29,260 |
| 2016 | 30,600 |
| 2017 | 31,940 |
3. Pricing and Distribution
The average retail price of nails at Addis Ababa is USD 0.3 per kg. The recommended price
for the new product under study is USD 0.2 per kg.
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Distribution of the product will be through own retail and wholesale shop, the main outlet
being regional wholesale.
