Steel prices on upward curve
Steel prices in Bangladesh have been on an upward curve as millers hiked the rates in the wake of continuous spiralling of scrap metals in the international market owing to a pickup in demand and constrained supplies.
In the last one year, the price of steel has up gone by 38 per cent in Bangladesh, which will push up the construction cost of bridges, culverts, flyovers and homes, according to industry people.
The retail price of 60-grade MS (mild-steel) stood at Tk 75,700 per tonne yesterday, up from Tk 73,000 two months ago and Tk 55,000 last year, data from state-run Trading Corporation of Bangladesh showed.
The price of scrap metals, which are used to produce steel products, has increased in the international market due to the constrained supply globally after production declined in Japan and European countries due to the coronavirus pandemic.
At the same time, demand picked up after the economies began to operate in full swing in keeping with the easing of coronavirus restrictions, driving up the price of scrap steel in most markets.
"The impact of the rising price of scraps globally is being felt in the local market in Bangladesh," said Tapan Sengupta, deputy managing director of BSRM, the largest steelmaker in Bangladesh.
If manufacturers import scraps at the current rate, the cost of the finished product would be as high as Tk 83,000 per tonne, he said, adding that the millers were selling MS rod at the lower than the production cost to protect their businesses.
According to industry people, the cost of scrap steel stands at $580 per tonne, up from $300 to $350 in October last year.
Around 70 to 85 per cent of 6.5 million tonnes of melting scrap used by the domestic steel industry is imported, while the rest is produced locally.
Before the pandemic, the scrap would have been imported from the US, Canada, Australia, South Korea, and European countries. Now the millers buy the key raw material from the US only because of lower production in other sourcing destinations.
In the early months of the pandemic, the production of scrap steel had come down as the automobile and shipping industries, which generate a major portion of scrap as byproducts, came to a halt, Sengupta said.
As a result, there is a crisis of scrap steel globally. Besides, the freight cost has increased more than 300 per cent in the last one year.
Mir Nasir Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industry, says the hike in the price of MS rod will raise the construction cost of bridges, culverts and flyovers by around 15 per cent.
As a result, local construction companies will be in trouble as procurement entities don't adjust prices for the projects with a tenure of less than 18 months, he says.
"We have demanded the finance ministry adjust the project cost as the price of raw materials is increasing."
Kamal Mahmud, first vice-president of the Real Estate & Housing Association of Bangladesh, says the hike in steel prices would increase the cost of housing projects by 10 per cent.
"The construction will be affected due to the continuous increase in the price of the raw materials. But builders don't have the scope to charge customers more since they have already signed agreements."
He alleged that steelmakers were raising the price on the excuse of the rate hike of scrap steels.
According to Md Shahidullah, secretary-general of the Bangladesh Steel Manufacturers Association and managing director of Metrocem Steel, said in the past, India used to manufacture steel from iron ore instead of using scraps.
"Now, the country is buying scraps from the international market, and it has had a significant impact on the price globally."
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