COUNTRY REPORT ON AEROSOL PROJECTS EVALUATED IN ALGERIA by Montfort Johnsen Consultant July 2002 1 Table of Contents 1. Context and Background ............................................................................................................. 3 1.1 Status of Ratification ............................................................................................................ 3 1.2 Status of the Country Programme Implementation with Regard to Aerosols ................ 3 1.3 Import and Consumption Figures for the Aerosol Sector ................................................ 4 1.4 Number of Approved and Completed Aerosol Projects .................................................... 4 2. Policy Framework ......................................................................................................................... 6 2.1 Government Policies ............................................................................................................. 6 2.2 Prices and Availability of LPG/HAP and CFC .................................................................. 7 2.3 Choice of Technology............................................................................................................ 8 2.4 Role of Industry Associations ............................................................................................ 10 3. Common Experiences of Companies ......................................................................................... 10 3.1. Reasons for Project Implementation Delays .................................................................... 10 3.2. Marketing Aspects .............................................................................................................. 12 4. Remaining Tasks for Full Phase-out in the Aerosol Sector .................................................... 12 2 1. Context and Background 1.1 Status of Ratification 1. Algeria ratified the: Vienna Convention in October of 1992 Montreal Protocol in October of 1992 London Amendment in October of 1992 Copenhagen Amendment in May of 2000 2. Algeria has not yet ratified the Montreal and Beijing Amendments. 1.2 Status of the Country Programme Implementation with Regard to Aerosols 3. In the Country Programme (CP) prepared in 1991, the consumption of CFCs in the aerosol sector had been estimated to be 559 ODP tonnes, representing 25,2% of the country’s ODS consumption of 2,221 ODP tonnes. 4. In 2000, consumption of 323 ODP tonnes of CFC-12 was reported for the aerosol sector in Algeria. 5. In 1989, the consumption of CFCs for aerosols was reportedly higher than 2,000 tonnes but then the largest filler (Asmidal), a public sector company, converted to HAPs at own expense in order to reduce their production cost. Their CFC consumption was huge, in the order of about 1,500 tonnes per year, and initially they had planned to open a CFC production plant, jointly with Tunisian interests. The Ozone Unit succeeded in dissuading them to realize this project, and the early conversion of Asmidal enabled Algeria to be recognized as Article 5 country (by reducing strongly its per-capita consumption of CFC). Asmidal suffered a disastrous fire in the mid-1990s. 6. During most of the 1990s, Algeria was a partly closed country due to political and economic turmoil. International visitors became concerned about their security, and many postponed their travel plans indefinitely. Consequently, there were limited opportunities to corroborate company information with visits. This was particularly true outside the relatively protected area around Algiers. Now that circumstances have largely normalised, some visits have been made, and the NOU wants to correct consumption figures reported earlier. An updated Country Programme (CP) has not yet been prepared, however. 7. In the years since the CP was undertaken, significant changes have impacted the Algerian aerosol industry. The aerosol industry grew somewhat, and their consumption of CFCs is considered to have increased to about 680 to 700 tonnes per year by about 1995. The gradual reduction of aerosol CFC consumption did not begin until 1997, and is almost completed today. 8. As of mid-2002, CFC abatement in the aerosol sector, due to MLF projects, two firms going out of the aerosol business, and other factors, is thought to be about 360 to 380 tonnes per year. The aerosol filling business has recently contracted in Algeria, due to declining consumer demand and increased competition from imports. Two fillers are operating at only 15% capacity, and others are not running at all. If the remaining CFC consumption is 40 to 50 tonnes per year, as seems likely, the CFC reduction is more than 90%, compared to the baseline. 3 1.3 Import and Consumption Figures for the Aerosol Sector 9. When asked about the aerosol production of Algeria one beneficiary manager said he had no idea, another said 28,000,000 units per year and a third said about 25,000,000 units per year. The major product is insecticides, followed by personal deodorant aerosols. 10. Rough calculations, based on the stated usage of about 5,000 tonnes of CFCs per year in 1989, and assuming an average propellant weight of about 160 grams per can, suggest around 35,000,000 units. Considering the current economic situation, the closure or non-production status of several fillers, and so forth, the figure of about 26,500,000 units per year (2001) seems fairly reasonable. 11. One manager stated that imports served 80% and domestic production 20% of the Algerian aerosol market. This is unlikely though in view of other information from fillers suggesting that European imports (especially from France) have a market share of about 20%. If this is so, and exports are at around 15% of production, the domestic consumption becomes about 28,000,000 units per year (2001), or roughly 1.0 unit per capita. 12. When two managers were asked about the legal or illegal status of imported aerosols, they had no figures in mind, but felt that at least some were illegal, to escape customs duties and/or taxation. 1.4 Number of Approved and Completed Aerosol Projects 13. Algeria has in total 28 conversion projects completed or on-going excluding 2 cancelled projects. 9 aerosol investment projects have been approved for Algeria. Implementation was expected to cost US $1,455,511 to phase-out 380.6 ODP tonnes. 14. By December 2000, 7 projects were reported as completed, phasing out 343.5 ODP tonnes of CFCs. One of them, Laboratoire Bendi, project No. ALG/ARS/20/INV/18, had been declared as completed already in December 1998 and a PCR was submitted by mistake in September 1999, reporting "satisfactory, though not as planned" project completion. The project has been cancelled by the 37th meeting of the Executive Committee. While Bendi stopped using CFC based aerosol production, they never utilized the equipment supplied by the project which remained untouched in five boxes as delivered to them. In about 2001, the owner decided to leave the aerosol filling business and get into the hotel business instead. His unused equipment with capital cost of US $53,700 now sits in his storeroom, awaiting disposition. As a possibility, it may be shipped to another project, in another country, as there seems to be no more filler of this size awaiting conversion in Algeria. 4 15. Using their own funds, Ets. Cophyd apparently ordered a complete aerosol line, plus related equipment, from Pamasol in 1992. Payments were made for several years thereafter. Over four years later, the firm was still producing CFC insecticides, using their old Coster equipment. Their failure to utilize the new Pamasol line may have been due to extensive delays in the purchase of a new, much larger production site, construction of buildings, and installation of bulk storage facilities. The new site was required to comply with HAP bulk tank regulations. Their conversion to HAP occurred in 1998. For the past few years the firm has reported to produce about 2,000,000 units per year, calculated to be equivalent to an abatement of about 320 tonnes per year. It is noteworthy that the beneficiary requested that UNIDO consign the approved US $53,024 toward the purchase of a Macromat P Gasser, costing about US $91,000, with the company paying the US $38,000 difference. This would have allowed them more capacity and flexibility. Permission was denied. Instead, COPHYD received a flammable gas sensing system, which is now in use. Other parts, however, pumps, ventilation equipment and so forth funded by the project are still in their original crates. Some are planned to be used as spare parts but were, according to the company’s owner, selected rather to use up the budget than to cover real needs. This information was somewhat surprising, since a PCR had been submitted in December 1997 without describing these aspects. 16. Another filler, Floreal, has received LPG storage and production equipment. It was mostly assembled, but the firm was awaiting a final visit from the supplier (Nimmo) to complete installation and conduct trial runs. That visit was four months overdue, with Nimmo stating that they would make the trip only after the final payment from UNIDO had been received. (Note: Nimmo is in serious financial difficulty, and is for sale). Without the knowledge of the NOU or UNIDO, Floreal had installed a small propellant pipeline into their non-ventilated production area. They explained that the Nimmo gasser could only gas one can diameter, and their business profile demanded the use of four can diameters. Therefore, they planned to use their old Coster CFC gasser, located in the production area, for the other three can sizes. UNIDO will look into its contract with Nimmo, to see if change parts were ordered for other can diameters. The beneficiary promised to install good ventilation in the production area. While Floreal is, therefore, set up to use CFC cylinders if desired, there was no indication that this had been done, or was planned. Their CFC consumption had been reported as 18.1 tonnes per year. 17. The conversion of SACO (reported as completed in February 2002 in a draft PCR) is not really complete, since the new plant site is still under major construction, the bulk-tank is not emplaced or piped, the aerosol line is incomplete, and no compounding facilities exist. “Completion” was based upon the gassing of about 100 aerosols, using a small LPG cylinder. SACO’s other plant could not be visited, but was said to include their CFC gasser. Their consumption of CFCs had been 19 tonnes per year. 5 Algerian Aerosol Project Beneficiaries and their Status (2002) ODP Project Project Status (Tones) Approval Completion Date Reported ENAD 150 Nov. 1995 Dec. 1997 Completed* Cophyd 15 Oct. 1996 Jul. 1997 Converted largely at own cost Bendi 19 Oct. 1996 Dec. 1998 Cancelled** Eta des Mohamed 23 Oct. 1996 Dec. 1998 Completed* El Wouround 47 Oct. 1996 Dec. 1998 Completed* Vague de Fraicheur 51 Oct. 1996 Dec. 1998 Completed* Eta Djadir 38 Jul. 1998 Dec. 2000 Completed* Floreal 18 Jul. 1998 Jul. 2001 HAP production not started SACO 19 Jul. 1998 Feb. 2002*** HAP production not started Beneficiary Firm * Completed in the sense that no CFC is used anymore and new production has started but old equipment has not been destroyed. ** Project cancellation at the 37th Executive Committee, in spite of earlier PCR (submitted in September 1999). *** May still produce CFC aerosols at one of two plants. 2. Policy Framework 2.1 Government Policies 18. The National Ozone Unit usually identifies projects and selects the implementing agency, requesting it to put the projects in the business plan. The Agency then sends a consultant or staff member who visits the company and prepares the project document. Due to the insecurity, the World Bank and UNDP were reluctant to come to Algeria; most projects were implemented by UNIDO. All aerosol projects have been prepared by a national consultant (Mr. Hamsa), because international consultants were not ready to travel to Algeria during the 1990’s. 19. In the early 1990’s, the Ministry of Industry was involved, but was reportedly only interested in the large national companies. Now it is the Ministry for Small and Medium Industries which is consulted for all regulations, along with the Ministry of Finance and the Secretary General of the Government. The latter participated in the preparation of the Executive Decree Number 2000-73 regulating and granting import licences for all ozone depleting substances and related equipment imported into Algeria. This Decree requires detailed information to be provided by the imported but has not foreseen advanced dates for phase-out. This means that the phase-out of all ODS until 2004 which had been planned in the country programme in 1991 has been abandoned. The principal reason given by the Ozone Unit for this change is that the difficult years after 1991 have delayed implementation of the country programme. 20. It seems that the import licensing scheme so far is not fully operational and that there is further training required for customs officers to recognise the different products. An awareness rising campaign has been conducted with the customs officials and the regional offices of the Ministry of Environment, which are all quite co-operative, although Ozone issues are not on the top list of priorities. 6 21. Reportedly substantial amounts on undeclared imports of CFC enter the country often mixed up with declared imports which makes them more difficult to detect. Small enterprises often avoid to ask for import licences because they shy the contact with government institutions and are often not registered due to the security risks for travelling outside Algiers. An update of the country programme would be needed in order to make a census of all such enterprises and to determine the remaining consumption of CFC. 22. According to the Ozone Unit, the processing of project equipment through customs is a well established routine handled by UNDP. UNDP transmits the authorization to the enterprise to get the equipment out of the port once the formalities have been settled with customs. In some projects though, there have been delays, and disputes between the implementing agency and the company arose about who will pay for the resulting high storage charges. 2.2 Prices and Availability of LPG/HAP and CFC 23. In all project documents, the cost of LPG/HAP has been assumed to be US $1.60, that means about 8 times the level of actual cost for domestically available high quality LPG at the time (about US $0.20 at the exchange rate of US $1 = 25 dinar in 1995). UNIDO applied in fact international border prices similar to those prevalent in Tunisia at the time. However, Decision 12/37, para. 62 of the Executive Committee clearly specified that national prices be used. Moreover, some fillers like Asmidal and Cophyd already used exclusively domestic LPG, like all projects afterwards, including ENAD which demanded particularly high quality standards. 24. The primary promoting factor for HAP aerosols is economics. In Algeria, LPGs are sold to fillers through NAFTAL, the state-owned sole distributor of petrol and gas for presently about US $0.05 per kg, possibly the cheapest price in the world. The CFCs are said to cost about US $2.50 per kg. With this differential, and the fact that much less of the HAP formulas can be fitted into standard size aerosol cans, marketers can sell the HAP aerosols to customers at markedly reduced prices, compared with those of the CFC formulations. How much of this is passed through the distribution chain is unknown, and any analysis would be complicated by the severe inflation that Algeria has been subjected to during the past decade. Despite the advantages of CFCs (like non-flammability), the low cost of HAPs provides a towering incentive for fillers and marketers to utilize these formulas, and never to return to CFCs. Minor exceptions might be found, such as in the example of a 20 or 30 ml cologne, where good odour is paramount, and very little CFC is needed per dispenser. Higher priced pharmaceutical aerosols (if made in Algeria) might be another minor example. In general, economics should force and sustain virtually complete conversion. 7 2.3 Choice of Technology 25. Until the mid-1990s, companies in Algeria had to import CFCs using foreign exchange quotas allocated to them. The quantity was restricted, and was allocated preferentially to larger, publicly owned aerosol fillers --- compared to the generally smaller private ones. This provided the smaller firms with an incentive to utilize local propellants, if they were to ever expand. The only domestic propellant, both cheap and suitable for nearly all aerosol uses, was and is LPG. It is extremely flammable, and has to be purified for cosmetic products, to eliminate the bad odour of naturally-occurring impurities, but was the obvious choice, nevertheless. Some supplies of LPG, in particular from a refinery in Arzew near Oran, are almost of HAP quality. 26. The more advanced countries are using a choice of 8 to 10 propellants, including mixtures, but Algeria is sufficiently isolated that these developments are essentially unknown. Two fillers experimented briefly with carbon dioxide and nitrous oxide propellants, but without knowing how to make the best formulas and valve selections. They were disappointed, and did not pursue these options any further. 27. One can predict that the domestic blend of about 25% propane, 25% iso-butane and 50% n-butane, supplied from the national monopolistic gas distributor NAFTAL will constitute the only Algerian propellant for some years to come. Some fillers might experiment with carbon dioxide, possibly nitrous oxide, as European technology slowly drifts southward, but the other propellants, such as dimethyl ether, are all higher priced and would have to be imported --making their use very unlikely in the foreseeable future. 28. It is probable that most aerosol cans and valves, used in Algeria, will continue to be imported from Europe. This means that the country will have the advantage of European packaging technology, if fillers choose to utilize it. One example of what can happen as the result of too little information: the Algerian fillers are ordering "18 bar" aerosol cans from Europe, at about 25% higher prices than the same size cans of the more common "12 bar" strength rating. There is no need for the stronger cans; they were simply advised by the supplier that it was a more preferred container. 29. Equipment selection in Algeria as in other countries has been founded on several general principles: (a) Conversion must be from CFCs to HAPs. (b) Old CFC gassers leak and cannot be retrofitted; thus new gassers must be purchased. (c) Hot water baths are needed to assure that HAP-gassed aerosols do not leak. (d) Equipment must be purchased from one of about 5 suppliers in the USA or Europe. (e) Capacity of the HAP equipment must not exceed that of the CFC equipment. (f) The equipment supplier must be the lowest bidder. (g) The old CFC gassers must be destroyed --- to prevent recidivism. (h) A molecular sieve unit must be installed, to partly purify the LPGs. 8 (i) Bulk-tanks for LPG are safer than cylinders; they should be installed whenever practical. 30. In Algeria, much of the equipment contracts were awarded by UNIDO to Nimmo (U.K.), simply on the basis that they were the lowest bidder. Unfortunately, Nimmo is virtually bankrupt (and for sale). They have delayed visits, not only due to such events as the "9/11 terrorist attack", but because they lacked the funds to send engineers to Algeria. In one case, they demanded to be paid the final US $12,500 or so, prior to authorizing a visit. In another, they wanted to combine visits to two or more beneficiaries into one trip -- to save airfares. All these factors have contributed to significant delays. 31. In at least one case (SACO), the filler apparently ran out of money, and could not continue with his site preparation activities until more funds were generated or borrowed. He blamed UNIDO for not paying certain disputed costs, and for instilling optimism and a sanguine forecast about the ease of conversion. In actuality, the filler’s expenses were greatly in excess of the original plan, and he has been out of the aerosol business for over three years. It may be an additional year or two before he can again produce aerosols. 32. According to several counterpart managers, the selection of the equipment supplier has been made by UNIDO, almost always without participation by the counterpart firm. This has been denied by UNIDO. The lowest bid supplier is not always the best supplier. Although Nimmo (U.K.) was generally the lowest bidder, and thus the supplier selected, and although their equipment was mechanically satisfactory, there were some problems: (a) Based on the "lowest bidder" premise, firms such as Pamasol, Terco and Packaging Technologies often refused to provide bids. (b) Companies, who might strongly prefer a particular supplier, from past experience and service considerations --- and who would be willing to pay the cost differential --- reported that their wishes where often discoutned or by-passed. (c) Pamasol, whose equipment almost never wears or breaks down, was never selected. It must be recognized that a significant equipment problem, in a country relatively remote as Algeria, can result in serious down-time. The "lowest bidder" equipment is probably the most susceptible to mechanical problems of all that are available. (d) Nimmo equipment was generally purchased. With this firm on the verge of bankruptcy, their long-term ability to provide change parts, replacement parts, and engineering assistance is problematical. 9 2.4 (e) The languages of Algeria are mainly French and Arabic. Many plant engineers and production workers understand very little French, especially if technical matters are being described. The Nimmo manuals and other instructional literature are only in English, according to several counterpart managers. This is countervailed by UNIDO, who propose that these same managers are making excuses for delays and errors, and also, that Nimmo manuals are available in French. In any case, the beneficiary factory people cannot make use of their literature, in the event of problems, change-overs, or other circumstances. Since people in over a dozen countries speak Arabic, a methodology and programme should be developed to translate supplier manuals into this common language. (f) Equipment suppliers whose engineers speak a local language should be given special attention in the selection process. This would enable those engineers to provide instructions to the counterpart’s engineers during visits, or telecommunications. Nimmo could not provide this. Role of Industry Associations 33. Recently, the Association of Cosmetic and Aerosol Industries (ACAI) has been founded. The objectives of the fledgling association are not clear, if they have actually been defined as yet. Their President is actually the owner of one of the MLF project aerosol fillers. He complained about the inequity of MLF funding, which he felt was more favourable to the larger, public fillers, which had a larger consumption of CFC during the mid-1990ies. 34. Actually, almost any filler embarking on a conversion project had contributed substantial counterpart funding, and in several cases, fillers have become de-stabilised financially, due to the combination of these costs, extended business interruption and increased competition, combined with low demand. 3. Common Experiences of Companies 3.1. Reasons for Project Implementation Delays 35. In many cases, fillers were obliged to move out of populated areas, in order to use the extremely flammable LPG propellants without risk to the local populace. This was actually mandatory, if a bulk storage tank for the LPG was planned. The typical 12 to 18 month project duration becomes impossible to achieve, if the beneficiary must purchase land, erect buildings, install bulktanks and equipment, conduct trial runs and so forth. Government approval is required for many of these events, and that is inevitably time-consuming. 36. The purchase and installation of bulk-tanks is a particularly sensitive issue. Official certification is required in Algeria, and the highly respected ASME supplier certification, printed on a bronze tab, is not necessarily accepted in this country. This has caused delays sometimes measured in years. 10 37. A chronic problem, in Algeria as well as in other countries, has been the installation of tanks that are too small. Such bulk-tanks may be in the order of 3 to 5 tonne capacity, whereas the tank-trucks are generally 7.5 to 8 tonnes. LPG suppliers are extremely reluctant to send halffilled tank-trucks to these fillers, due to the sloshing effect, which affects the stability of the truck when it must come to abrupt stops or negotiate sharp turns in the roads. In some cases, the oil companies have refused to supply LPG under these conditions. The delay of obtaining a second bulk storage tank may follow. 38. Once MLF project equipment arrives at Algerian ports, officials typically check items, line-by-line, against bill of lading lists. If discrepancies are found, the lot is impounded in the customs house until the anomaly can be rectified. Typically, the beneficiary is required to pay for resulting charges and storage costs. Usually, the companies have balked at the storage costs, stating that they had no part in the transportation arrangements, and UNIDO should resolve the matter. Steadily increasing storage costs occur, as negotiations continue. 39. There is a general policy that MLF project equipment should not be ordered until site preparations are completed. While this seems reasonable, it typically causes a delay of 5 to 8 months, before the equipment can be manufactured, crated, shipped and received by the beneficiary. It may be useful for agencies to have some flexibility, so that orders can be placed reasonably ahead of site completion, and simply stored at the site until the facility is ready for assembly of the aerosol production line. This flexibility would be contingent on verification by the agency and NOU that the beneficiary was doing its part, and that the site will be completed by about the time the equipment would be received. 40. Project implementation delays have been caused (mostly in the past) by the reluctance of equipment suppliers to send engineers into Algeria. This reluctance continues, in the case of site locations outside of the protected zone that surrounds Algiers. Suppliers also want to be assured that all the equipment is on site, including items purchased by the beneficiary -- so the visit could be productive. 41. There have been a few problems with the equipment, such as failure to include a key item in the shipment (causing a large delay in project completion), and a malfunction, resulting in eventual replacement, prior to production. Such problems are likely to occur from time to time in projects as complex as these. 42. The presumption that all CFC gassers leak, and are unsuitable for HAP service, should be challenged. With care, Pamasol and Coster gassers can last for decades. Any leakage is due to elastomeric gasket problems, and these can readily be replaced. In non-Article 5 countries, many ex-CFC gassers have been refurbished to virtually new condition, with only a modest expenditure, and are now gassing HAP propellants. 11 43. Molecular sieves are designed to remove malodorous organo-sulfur contaminants in LPG -- converting it to a (low-grade) form of HAP, which is generally low enough in remaining odours to be used for aerosol products. They require a specific charge of chemicals, a certain procedure for passing the liquid LPG upward through these chemicals, a fixed velocity, checking for chemical saturation with the contaminants, and other operational parameters. In Algeria, nearly all the fillers had no knowledge of how to set up and operate these devices. Molecular sieves of all sizes were seen. Several were connected incorrectly, making them valueless, and others were seen to be leaking HAP. In two plants, the special, plastic lined paper sacks of Zeolyte 13X were seen to be open to the atmosphere. This allows the material to absorb moisture from the air, ultimately making it unable to absorb the organo-sulfur compounds. None of the plants were aware of the techniques used to show that the device is (say) 95% saturated, and that the material must be replaced, lest the contaminants will get into the aerosol products. 3.2. Marketing Aspects 44. During the transition period of about 1996 to 2001, fillers and marketers had several difficulties in selling aerosols based on the use of HAP. These are rather well known and will simply be listed for brevity: (a) Light-weight dispensers. (Consumers think they are under-filled). (b) Formulation problems. (Many aerosols were of lower quality). (c) Flammability problems. (Increased consumer hazards, more insurance). (d) Odour problems. (Unsaturated hydrocarbon contaminants cannot be removed). (e) Storage problems. (Warehouses will burn completely, if any fire ignites HAP aerosols). 45. While none of these problems have been solved, consumers are now accustomed to HAP aerosol products. A greater degree of precautionary labelling, including flame symbols, should be used on the dispensers. 46. Like many Article-5 countries, Algeria has a relatively limited diversity of aerosols in the market places. The leading product is insecticides, amounting to over half the total production. Others are "fragance products", such as colognes, personal deodorants, scented body sprays, air fresheners and so forth. A small hair spray and furniture wax business exists. 47. The myriad of cleaning products, so popular in North America and Europe, are unknown in Algeria. They cannot be reasonably formulated with CFCs, but HAPs work well. With HAPs now available in Algeria, and formulations available from consultants, trade publications and other sources, perhaps the Algerian aerosol business can grow into this important area. 4. Remaining Tasks for Full Phase-out in the Aerosol Sector 48. At the 36th Meeting of the Executive Committee, funding of US $25,000 was approved for the preparation of 8 additional aerosol projects. There is no list of these companies, however, and it is doubtful that 8 such companies can be found. The NOU has stated that only one or two small fillers in Algeria are still producing CFC aerosols. 12 49. In any event, with the extremely low price of LPG in Algeria (about US $0.05 per kg) it is almost certain that the IOS would be higher than the presumed project capital cost. Further investigation seems appropriate -- perhaps starting with a better identification of other Algerian fillers through the new Association of Cosmetic and Aerosol Industries (ACAI). ---- 13