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City awards 1.23 bln rebar contract to Steely

City awards 1.23 bln rebar contract to Steely

Steely yet to accept the award

Steely RMI PLC is finally awarded the supply contract of 50,084 tons of reinforcement bars at a total price of 1.23 billion birr by the Addis Ababa Public Procurement and Property Disposal Service, this week, it was learnt.  

The supply is earmarked for the public housing projects undertaken by the Addis Ababa City Administration.

“We have already sent them a letter of notification to accept the award,” Allene Gebru, general manager of the Service, told The Reporter.

However, so far, The Reporter has learnt from Tefera Lemma, general manager of Steely, that the company is still looking at the offer and is yet to make a determination whether to accept the award or not.

Though the price offered by Steely was made before the 15 percent currency devaluation, the retail market of reinforcement bars is already experiencing an unprecedented increase in the price.

It is not yet clear if Steely will request a price adjustment on the prior offers. According to the company, in addition to using insignificant amount of scrap metals sourced locally as raw materials, it imports billet which is used as a major raw materials to produce reinforcement bars from abroad.

Following the award this week, Steely is expected to sign a contract with the Agency within ten working days.

As far as the current currency devaluation is concerned, Allene told The Reporter that by law it is not allowed to make price adjustments within three months following the contract signing.

So far there is no formal request from Steely about any price adjustments, he said.

The devaluation, which is now putting pressure on the price of commodities across sectors, is expected to trigger inflation in the coming months.

In case the Company comes up with such price adjustments the decision will be up to the Addis Ababa Finance and Economic Development Bureau or the Ministry, said an official from the Agency.

If there is such demand, the Bureau will check if the products or raw materials are imported before or after the devaluation, Woubshet Adfres, communication director of the Bureau told The Reporter.

The Trade Bureau has data in this respect and will make sure that things will be done in proper way, he said.

Following a month of procurement process, it is to be recalled that Steely emerged as a winner out of four local steel bar manufacturing companies – Habesha Steel Mills PLC, C & E Brothers PLC, and Abyssinia Integrated Steel PLC.

The companies were evaluated in pre-qualification, technical and post-qualification stages where the remaining three companies failed to progress to the financial stages for different reasons. Their failure has been attributed to factors such as inability to produce renewed trade licenses and test results.

The bidders were competing for the supply of 10mm, 12mm, 14mm, 16mm, 20mm, and 24mm reinforcement bars. The amount in tones for each grade size is 12,519, 6,692, 6,994, 9,308, 5,882, and 8,689, respectively.

In this respect Steely the only competing company at the financial stage listed, 25,916.47 birr, 24,150.97 birr, 23,647.05 birr, 24,097.47 birr, 24,773.1 birr and 24, 773.1 birr for one tone of 10mm, 12mm, 14mm, 16mm, 20mm, and 24mm reinforcement bars, respectively.

According to a price list from Consumer Protection and Trade Practice Authority, three weeks ago, one Berga, a local measurement for both local made and imported reinforcement bars in Addis Ababa (Megenagna and Teklehimanot), was sold from 190 birr to 1,055 birr.

According to the same assessment the price of both imported and locally made reinforcement bars shows a 45 birr up to 155 birr increase, at the retail market.

Itiesa Demea, a director from The Authority told The Reporter that the increment of prices is irrational and that there will be consequences.

This bidding process, which is now conducted by the agency on behalf of the Addis Ababa City Saving Houses Development Enterprise (AASHDE), came a year after a controversial purchase by the latter. It is to be recalled that a local competitive tender for the purchase 222,000 metric tons of re-enforcement bars was conducted by the enterprise a year ago.

However, the controversial bid was later cancelled after financial opening and evaluation. Limited budget was said to be the reason behind cancellation.

On the other hand, industry sources were attributing the cancellation to exorbitant prices quoted by bidders.

Established in 2004, Steely is owned by Ethiopians. The factory is located in Bishoftu, Oromia Regional State.

With the growing steel demand from the economy, Steel consumption is also increasing from time to time. According to the Metal Industry Development Institute, the country’s annual per capita metal consumption reached 28.6 kg.

Over the past one month, 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 523.

London Metal Exchange is a global platform for metal exchange and trading.