JAGARAN CHAKMA
Although construction activities in Bangladesh usually peak during the dry season from November to March, steel millers are concerned about the reduced demand for 60-grade mild steel (MS) rods this year, according to industry people.
The average monthly demand for MS rods has fallen by about 66 percent to 2.2 lakh tonnes at present amid a slowdown in development works resulting from countrywide blockades and strikes, they said.
BNP and its allies have been calling blockades and strikes for four days each week since October 28, obstructing the supply chain of steel mills and overall construction sector in the process.
“The demand for MS rods has declined significantly as individual buyers and contractors who purchase in bulk have stopped placing orders given the current situation,” said Tapan Sengupta, deputy managing director of the Bangladesh Steel Re-Rolling Mills.
For example, many contractors are postponing their development works until after the national election on January 7.
Besides, the government has reduced the implementation of non-essential development projects considering the country’s vulnerable economic situation.
Sengupta also informed they were selling MS rods sold at the mill gate at an unchanged price of Tk 98,000 per tonne even though the international price of scrap steel has been rising.
The price of scrap steel recently hit $410 per tonne, up from $370 in July earlier this year.
Sengupta believes the price of MS rods may increase in line with higher demand when development activities resume in full-swing after the election.
Md Jashim Uddin, director of sales and marketing at Kabir Steel Re-Rolling Mills, said the demand for MS rods had fallen as people are adopting a wait-and-see approach in the face of economic uncertainty.
Also, demand from the government has reduced as almost all ongoing mega-projects in the country are nearly compete.
So, in face of lower sales, the company has reduced its wholesale price for MS rods to about Tk 96,000 per tonne at the mill gate, he added.
Uddin also said it would be difficult to overcome the situation within a short time as it might take at least until March next year for demand to recover.
Moreover, steel mills are having to settle letters of credit that were previously opened at Tk 111 per US dollar for as much as Tk 130 due to the devaluation of taka, the local currency.
Against this backdrop, Uddin said rod prices would ultimately increase despite the current downturn thanks to continuous hikes in the US dollar rate. Sumon Chowdhury, secretary general of the Bangladesh Steel Manufacturing Association, said they can only supply steel three days a week due to the political unrest.
Additionally, steel millers are struggling to receive raw materials from ports on time.
“So, their production is being hampered at a time when demand has fallen drastically,” he added.
Chowdhury said the government typically consumes around 56 percent of the total production, but most development works in the country have been postponed until after the election.
In fact, the demand for MS rods has dropped to such an extent that millers are having to cut their production capacity in half to cover operational costs, he added.
On condition of anonymity, a senior official of GPH Ispat said their supply chain was being seriously hampered by continuous blockades and strikes as they could not supply dealers and retailers on time.
“Still, the wholesale price at mills did not come down,” he added. According to him, the company is selling MS rods for Tk 98,000 per tonne at the mill gate.
He also said retailers were not thinking about profit at the moment as, at the very least, they are happy to be getting sales commission in the current situation.
As per data from the Trading Corporation of Bangladesh (TCB), 60-grade MS rods were retailing for Tk 99,500 per tonne in different markets of Dhaka compared to Tk 100,500 roughly a week ago.
TCB data shows that the price of MS rods had reached Tk 100,500 per tonne on November 24, but came down by Tk 1,000 since November 29.