Tuesday, May 28, 2024
BusinessECX considers trading cement

ECX considers trading cement

Cement will be added to the list of commodities traded at the Ethiopia Commodity Exchange (ECX) if the move is deemed feasible for the 15-year-old entity and wins final approval from authorities.

The ECX is conducting a study to determine the viability of trading the commodity and to determine the most efficient means of bringing it to the floor of the exchange.

After the board and all relevant regulatory bodies embrace the study, it will become the Exchange’s first industrial commodity to be traded.

According to ECX officials who talked with The Reporter, the procedure is still in its early stages, and experts are currently reviewing the overall business to check its feasibility.

“It doesn’t mean it will be implemented because we are researching it,” said Netsanet Tesfaye, communications head at the ECX.

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His office has been researching the possibility of trading cement for over a year, as it does with other commodities. “There were a few commodities that we looked at but ultimately did not get approval,” he added.

Consultation with stakeholders, such as cement producers, is an important element of the research process since it allows the Exchange  to collect feedback and make revisions before making a final decision. The Ministry of Trade and Regional Integration will issue the final authorization after the Exchange’s approval process is completed.

Controlling the cement trade has been a headache for Trade Ministry officials in recent years, with each decision adding fuel to the flames. Illicit trade practices, complexity of the supply chain, and the reshuffling of intermediaries have all been controversial topics in the cement market recently.

A year earlier, the Ministry delegated distribution duties to a few unions and state-owned trade firms. Unsatisfied with the outcomes, the Ministry reversed the decision a few months ago through a new directive that allows factories to select their own distributors.

Manager of one of the cement factories, who requested anonymity, told The Reporter that he supports the idea of bringing cement trade to the ECX, but he asserts that isn’t a priority in the industry. The primary issue, in his opinion, is the growing mismatch between supply and demand, for which there is no apparent solution.

The manager, who is also a member of the Ethiopia Cement Manufacturers Association, urges the government to prioritize helping existing factories increase their production and ensuring that new investments are also made in the sector.

“Trading cement at the ECX might help in eliminating the sabotage and avoiding the middlemen that manipulate the market, but how is ECX going to reach all the buyers?” he asked. “About 50 percent of the demand is in Addis Ababa, and I’m not sure it will be easy for ECX to reach all the contractors, real estate companies, individuals, and everyone else demanding cement,” he said, fearing that the Exchange might face a challenge in executing the plan.

Netsanet asserts that ECX will make the cement trade transparent, while ensuring accountability and traceability of the commodity.

“Whenever we add a new commodity to our trading floor, we consult with all parties involved in its trade,” he explained.

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