Army Foundations opts for global market for rebar purchase
Army Foundation, a public institution under the auspices of the Ministry of Defense, floated a tender to purchase 23,000 metric tons of reinforcement bars from the international market. The decision made by the Army Foundation violates the privilege given to local reinforcement bar producers by the Ministry of Finance and Economic Cooperation since February, 2016, where a circular signed by the then Minister Abdulaziz Mohammed, directed all government procurement agencies to exclusively buy rebars only from local producers.
The circular was issued mainly with the understanding that there was a sufficient supply from local producers. It was also issued to incentivize local producers.
Since then, all public agencies have been procured from local producers.
Contrary to this, a couple of weeks ago the Army Foundation floated an international tender to purchase 23,000 metric tons of reinforcement bars. This is the same bid where the Army Foundation floated previously as a local bid last year but the Foundation later canceled the bid.
This new bid mainly goes against the prior incentive given to local producers, according to industry sources.
Sources also explained that given the current foreign currency shortage this bid will create more pressure on the government. It further argued that if international suppliers won the bid, the payment has be made through foreign currency.
The local producers have to access foreign currency to purchase raw material.
The latest international tender of the reinforcement bars was floated along with other building materials such as electric and sanitation equipment. According to the bid, the initial opening of the tender is scheduled for November 14, 2017.
In a related news, four local rebar producers are in competition for the supply of 20mm and 24mm of 5,882 tons, and 8,689 tons of reinforcement bars, respectively.
This particular bid, which was floated by the Addis Ababa Public Procurement and Property Disposal Agency, is a rebid of an earlier bid. The Agency decided to rebid the tender after a local rebar producer submitted its price.
The Agency attributes the rebid to a higher price listed by suppliers in comparison to the market price. At the time the bidding company gave 24.7 birr and 24.7 for one kilogram of 20mm and 24mm rebar, respectively.
The Agency by the time claimed that it found a 60 cent difference between the price floated by the company and the market price when it comes to 20mm and 24mm, according sources close to the bidding process.
The same sources, however, argued that given the fact that the international price of rebar is increasing and the recent devaluation of the birr, the Agency at this moment will at least be forced to pay 30 birr per kilogram.
Over the past couple of months, the price of steel bar has risen on the global market. According to the London Metal Exchange, on July 31, 2017, the price of steel bar was USD 460 per tons. It has now soared to USD 516. London Metal Exchange is a global platform for metal exchange and trading.