Steelmakers reel from setbacks yet foresee rebound

Bangladesh's steelmakers face a short-term setback as a domino effect of a sluggish growth in the national economy and a draught in investment. The steel industry is passing through a gamut of adversities like higher operational costs, weak demand and tax burden, insiders say.

Yet, this downside does not darken the potential of this sector as the country has a wide range of infrastructure-development plans with its development goals to become a developed nation. There is strong hope that the ongoing sluggishness would die down soon and pave the way for giving a new lease of life to the steel-making sector. There will be more bridges and flyovers across the country and high-rise buildings especially in city areas.

The biggest reason behind the current slowdown is the overall economic pressure in Bangladesh marked with higher cost of finance, tax rises, energy-supply crunch, and periodic disruption to global supply chain. Steel mills, which import of over 80 per cent of their raw materials in the form of scrap and billets, face uncertainty in securing supplies.

Energy prices have added to the burden. Gas and electricity tariffs have been revised upwards several times in the past two years, pushing up production costs. The industry has also been hit by currency depreciation.

On top of this, demand from the domestic market has been weaker than expected. Many government infrastructure projects under the Annual Development Programme (ADP) are moving slower than planned, while private-sector construction has cooled due to higher borrowing costs. As a result, even though the country's steel mills are running much short of their capacities. According to estimated data available with Bangladesh Steel Manufacturers Association (BSMA), the aggregate installed production capacity is 11 to 12 million tonnes per year. There are nearly 200 steel mills, including 40 large-scale ones,

The growth in Bangladesh's steel industry can be traced back to early 2000s, when major groups invested in scrap-based steel production. The construction boom in the mid-2000s, driven by rapid urbanisation and a wave of housing projects, created a huge market for different types of construction steel products.

By 2010, several conglomerates had entered the market with large rolling mills and melting facilities. Over the following decade, as the government launched megaprojects like Padma Bridge, metro rail, and elevated expressways, the sector experienced double-digit growth almost every year.

Today, a few large players dominate the industry. BSRM, based in Chattogram, is the market leader with significant capacity in both billets and rebar. Abul Khair Steel has also expanded aggressively, producing a wide range of long and flat products. Bashundhara Steel, Anwar Group, and PHP Steel are other major names in the subsector of construction industry.

A 2024 study by BigMint, a commodity price-reporting and-market-intelligence platform, reveals the market share of the leading companies. Bangladesh Steel Re-Rolling Mills (BSRM) alone supplies about 25 per cent of the domestic demand, followed by Abul Khair Steel with 14 per cent, GPH Ispat Limited with 8 per cent, and Kabir Steel Re-Rolling Mills (KSRM) with 6 per cent.

Notwithstanding the achievements of the sector, the companies are now struggling with issues that are largely out of their control. A number of operators acknowledge that they are running at less-than-full capacity because demand from the market is too weak. They have delayed or slowed new investment plans due to the high cost of financing. Insiders warn that "smaller mills may not survive if the demands don't get back to their usual position".

They walk a tightrope with little or no profit margin. Prices per-tonne Mild Steel (MS) rod have declined in recent times. Data available with the Trading Corporation of Bangladesh show per-tonne MS rod selling between Tk 83,500 and Tk 86,000, depending on different brands and retail markets. The price was almost 7-percent less a year ago, when the price hovered between Tk 90,500 and 92,500 a tonne.

Demands for different types of steel products--such as MS rods, galvanized steel sheets, corrugated sheets, beams, angles, plates, rebar--hovered usually above 6.0 million tonnes a year. However, it has tumbled down to 5.0 million tonnes now, which is nearly 17-percent lower than usual estimated demand.

All this set aside, the potential of Bangladesh's steel sector remains strong. Per-capita steel consumption is still low compared to global standards, which means there is significant room for growth. According to industry studies, demand could reach 12 to 14 million tonnes by 2030, nearly double current levels.

Government commitment to infrastructure-expressways, economic zones, power plants, and metro lines-will continue to generate demand. Rising urbanisation and an expanding middle class also point to more housing and commercial projects, further lifting steel consumption.

At present, per-capita steel consumption in Bangladesh is estimated at 43 to 45 kilograms a year. This is far below India's 81 kilograms and far behind developed countries where it exceeds 400 kilograms. Closing even part of this gap would mean substantial growth for local producers.

Bangladesh's steel industry stands at a crossroads now. The future will depend on how well the government and industry can navigate the short-term turbulence.

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