FOREX scarcity close to claiming another victim

South Korean based company, Ekos Steel Plc which started selling bars and wires to customers    last Wednesday may stop production and close the company after one month due to a shortage of hard currency which is needed to import raw material.
Ekos, located on ten hectares of land in Dukem, asked government banks for USD 70 million to  buy raw material from global steel companies like POSCO in South Korea and Arcelor Mittal in Ukraine and Turkey. Currently it only has enough material in reserve to produce steel for one month.
Ekos, which has worked for three decades in South Korea, obtained an investment license in June 2014 and. Their plan was to produce 210,000 tons rebar and wire rod products to substitute imports and to enhance this capacity to 500,000 tons per year during the second phase.
The company makes galvanized steel sheets, hot and cold rolling mills, and steel tubes. They also operate a steel coil service center, and provide steel manufacturing management and engineering work.
Shell H. Choo CEO of Ekos told Capital that the company may not continue to operate in Ethiopia if they don’t get the hard currency.
“The construction completion has been delayed for two years because of the hard currency shortage and we have built the factory yet we face another currency shortage, we are tirelessly working to get the hard currency but if we can’t we will have to stop production and lay off employees.”
“The government should understand our problem because of our project, this country will be able to save USD 50 million annually. This will facilitate the work of the construction sector. We are also considering exporting to neighboring countries which will bring in foreign currency,” he said.
Currently the company has 100 workers and nine of them are South Koreans.
Solomon Mulugeta from the Ethiopian Steel and Metals Producers Association said that most of the steel companies are performing below 15 percent of capacity due to the hard currency shortage.
“With the right amount of hard currency in loans, the sector can produce three million pieces of rebar and wires per year. However, because of the hard currency shortage the sector is performing below 15 percent and the wide gap between supply and demand is affecting the price of bars and wires and preventing buildings from being built on time.”
“Even the dollar that is available in the banks are not properly given to the sectors due to nepotism and corruption. As an association we have asked the National Bank of Ethiopia for assistance but they have not responded.”
Currently the steel industry needs USD six billion but they have only gotten around 25 percent of this.
The sector employs 50,000 people and if the hard currency problem continues it may start firing workers.
The country annually imports 70 million tons of steel and the local capacity is around three million tons. Currently, there are around 241 small, medium and large factories involved in steel and iron production.
Recently, prominent aluminum cookware manufacturer Kaluworks Ethiopia Plc, shut their doors. Despite being in business for two decades they were recently doomed by lack of inputs.