Two international companies are vying to supply steam coal which will be distributed to cement factories operating in the country. The procurement would likely cost the country close to 50 million dollars.
Glencore International AG and Heidelbergcement (HC) are the two companies contending to supply 650,000tn – 850,000tn of steam coal. The tender was floated by the Ethiopian Petroleum Supply Enterprise (EPSE) on May 23, 2018. Twelve companies responded to the initial tender by purchasing bid document, but only two firms submitted their technical and financial offers at bid opening last Friday.
The Enterprise will evaluate the technical and financial documents submitted by Glencore International, a company founded four-decade ago and headquartered in Baar, Switzerland; and HC, a two-decade-old company that operates in 13 countries. Since both companies had passed the preliminary screening process last week, their financial offers are expected to be opened this week.
“We will be announcing the winner within 10 days after the financial opening,” said Abayneh Awol, chairperson of the tender committee and manager of petroleum supply & sales department at the Enterprise.
The winning company will supply the coal for one year starting in September 2018 on a monthly bases. A company that provides the “least profit margin” or the least premium above the price of coal on the global market will be selected.
As of July 12, 2018, the price of coal on the global market was 64 dollars a ton, according to marketinsider.com, a website that provides information on economic indicators, exchange rates, global prices and stock market indexes.
Last year, Riftcot was awarded a contract to provide 100,000tns of coal at 2.74 dollars premium; and HC Trading Plc was awarded another contract to provide 600,000tns of coal for 0.19 premium. The coal was procured to supply 20 cement and three other non-cement factories.
The Enterprise has been procuring coal for local industries since 2013 with the aim of saving foreign exchange.
Currently, there are 20 operational cement factories in Ethiopia, producing 18 million tons of cement annually. The cement manufacturers heavily depend on carbon-intensive fuels such as coal. For cement, steel and metal companies, and other industries the country imports 750,000tns of coal annually where 50pc is consumed by cement manufacturers. Ethiopia locally extracts only 197.6tns of coal a year, which is far below the demand.
For a lecturer and researcher at the Addis Abeba University (AAU) College of Business & Economics, importing coal, while ignoring ample alternative resources of energy is not viable.
The country can utilise alternative energy sources such as coffee husk, weeds and other wastes, according to Gemechu Waktola (PhD).
“Beyond that, to exploit the country’s coal resource, the business linkage between the policymakers and investors should be strengthened,” he told Fortune.
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