Addis Fortune (Addis Ababa)

10 June 2012

Ethiopia: Tossa Steel Factory Shortlists Trio for Plant

Photo: Brian Sokol/UN
Grinding steel (file photo): The mill is expected to play a vital role in solving problems related to steel shortage, helping to achieve the nation's development goal.

Tossa, the biggest steel factory in the making, has shortlisted two Chinese and one Italian company, for a half a billion-dollar turnkey project.

Tossa Steel Factory, which will have the capacity to produce 1.3 million tonnes of steel a year, received technical and financial proposals from nine international firms for the turnkey project, six months ago, and shortlisted three of them three weeks ago. The turnkey project embraces the engineering, procurement, construction, and commissioning of the factory.

Nine international companies, drawn from Germany, China, Italy, South Korea, and France, showed interest in executing the turnkey project in December 2011. Chinese companies are the most interested in the project. China National Building Material (CNBM) Co Ltd, Sinosteel Corporation, and Maanshan Iron & Steel Co Ltd submitted their proposals.

The state-owned Maanshan Iron & Steel Co Ltd, established in 1958, is engaged in the manufacture and distribution of iron and steel products. The company claimed that it is the third-largest steel producer in China and has taken part in the major developments of the country's iron and steel industry. Maanshan launched pioneer projects in China, such as the first train wheel production line and the first high-speed wire and rod mill of the country, according to its official website.

Like Maanshan, CNBM is also a state-owned enterprise, which is mainly engaged in producing cement, lightweight building materials, fibreglass, and composite materials and providing engineering services. Founded in 2005, CNBM is the largest cement and gypsum board producer in China and Asia, respectively, according to its website.

The third Chinese company, Sino Steel Corporation, also belonging to the state, is mainly engaged in developing and processing metallurgical mineral resources. The company, established in 1993, has 86 subsidiaries, of which 63 are in China and 23 are abroad, including in South Africa. Providing refractories for steel industries is among the services listed on its website.

Though, Tossa officials admitted that two Chinese firms had passed the final evaluation, they refused to disclose their names. However, it is already known that one of the two Italian contenders for the project, Danieli SpA, is among the shortlisted companies.

Danieli, Italy's biggest steel mill engineering company, is known for producing rolling mills for long products and special steels and steel melting and refining processors for steel production. Established in 1914, the company claimed that it has supplied 90 turnkey plants since 1967.

Tossa was evaluating the financial and technical proposals of the Italian and the two Chinese companies and was expected to award the selected firm this week. The awarded company is expected to design the installation, procure the necessary materials, and build the project, either directly or by subcontracting part of the work, according to a source close to the issue.

"The company that presents the lowest price and passes the technical evaluation will undertake the engineering, procurement, construction, and commissioning of the factory," the source told Fortune.

The Steel Factory, established by Mohammed Hussein Ali Al-Amoudi (Sheik), will be built on a location 30km from Kombolcha, 376km north of the capital in Amhara Regional State. The company, which is expected to be completed in three years' time, has plans to produce steel products, including billets, reinforcement bars, and hollow sections. The factory also plans to produce steel for railway tracks in its second phase.

There are around 14 long and flat steel manufacturers in Ethiopia. The production capacity of the 14 basic metal manufacturing companies exceeded one million tonnes in 2009/10. However, the actual production capacity of the factories stood at 372,559tn, according to a Japan International Cooperation Agency (JICA) 2010 study on Basic Metal and Engineering Industries.

The country's per capita steel consumption is to grow from 12.1kg in 2010 to 34.7kg in 2015, the study forecasted.

According to the five-year projection, steel consumption will grow by 28pc, and the demand will reach three million tonnes by 2014/15. The venture of Tossa, which received its investment license from the Ethiopian Investment Agency (EIA) in July 2011, expected to fill the forecasted supply and demand gap.

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