JAGARAN CHAKMA

In the past three years, the steel business has been a casualty of economic and political crises, according to BigMint. The India-based market intelligence firm says demand for steel, a proxy for economic vibrancy and growth, may take two years to normalise.

Steelmakers say the timeline of the local steel industry adequately mirrors the major internal and external shocks the economy experienced in the past years.

First came Covid-19, then the Russia-Ukraine war-led disruptions to the scrap market. On the home front, a weakening taka, belt-tightening in public spending and other macro stresses added an extra layer to the situation.

The political changeover in August last year complicated the already tough conditions for steelmakers further as development spending nosedived. Meanwhile, prolonged high inflation, higher interest rates and political uncertainty dampened the real estate business and private sector construction.

Currently, the local steel industry can produce 1.36 crore tonnes per year, while demand has fallen to just 45 lakh tonnes, according to BigMint.

It says that despite the current slump, optimism persists. The World Bank, while projecting 4.8 percent economic growth in FY2025-26, said the rate may rise to 6.3 percent in FY 2026-27.

“Currently, all eyes are on the general elections in February 2026. Several infrastructure projects are in the pipeline, and the steel industry is waiting for execution to start,” it adds.

By 2027, another 30 lakh tonnes of capacity is expected to be added to the overall capacity. However, industry insiders say continued investment in steelmaking without demand alignment poses significant risks.

In 2025, crude steel production is forecast to fall by 11 percent year on year, following a 10 percent drop in 2024.

Industry insiders said if this downturn continues, the sector could shrink to a handful of dominant players. Such consolidation would hurt competition and push aside the smaller mills that helped shape the industry.

Recently, one of the leading manufacturers, Abul Khair Steel (AKS), has expanded its capacity with a new plant producing 16 lakh tonnes of deformed bars annually. This has raised its total capacity to 30 lakh tonnes a year, making it the largest producer in the country.

BSRM follows with a capacity of 24 lakh tonnes. Tapan Sengupta, deputy managing director of BSRM, said, “The industry is limping along.”

“Unless government spending, particularly on development projects, increases, the sector would not regain its vibrancy,” he said.

Sengupta said the BigMint report accurately reflects current conditions, adding that prolonged inactivity in construction and infrastructure has taken a heavy toll on steel consumption.

Sumon Chowdhury, chairman of RRM Steel and secretary of the Bangladesh Steel Manufacturers Association (BSMA), said, “Production has been adjusted in line with market realities due to slow construction activity and liquidity constraints.”

Chowdhury said these challenges are not unique to Bangladesh. Many developing economies are facing similar conditions.

He said excess capacity remains the most pressing threat. While annual capacity has reached 1.36 crore tonnes, demand has slumped to around 45 lakh tonnes, compared with 75 lakh tonnes during the peak of mega projects.