Manufacturers however, blamed soaring dollar rates, fuel price hikes, and high price of raw materials in the global market
September 27, 2022 8:32 PM
The prices of mild steel (MS) rods have been on a steep incline since the second week of August.
Manufacturers however, blamed soaring dollar rates, fuel price hikes, and high price of raw materials in the global market.
The price of the key construction material reached between Tk93,000-98,000 per tonne for 60-grade variants across the country based on brands and quality, fetching a 5.54% monthly hike in price and a 21.72% yearly hike.
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On the other hand, a 40-grade MS rod was sold at Tk87,500-88,000 per tonne in the trading centers of the country, fetching a 4.92% monthly hike in price and a 22.22% yearly hike.
According to market insiders, the prices of rods hiked by Tk3,000-5,000 from last week and Tk6,000-Tk9,000 last month.
However, manufacturers and traders of the steel sector said that rod prices increased due to the abnormal depreciation of the Taka against the US dollar.
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Due to this depreciation, the import cost of raw materials increased by almost 20-25%, they said.
Moreover, production declined due to a shortage of raw materials as the price of raw materials in the international market also increased relatively and was still on the rise.
The cost of transportation increased significantly due to higher fuel prices, as the government increased the price of all types of fuel by 51% on August 6.
In addition, production decreased due to the gas-electricity scarcity, eventually leading to a production cost hike of rods, said people working in the sector.
Meanwhile, the prices of rods have hiked abnormally in the country’s market compared to the global market.
According to an intelligence agency’s report prepared recently on the prices of some commodities including rods and cement showed an unusual picture of rising prices in the country’s market compared to the global market.
The report showed that the prices of rods have increased by less than 1% (0.78%) in the global market in the last month.
But the prices have hiked more than 3% in the country’s market, however, increased by 5.54% on September 26 compared to August 26.
Moreover, there is a downtrend in the price of scrap, the main raw material of rods, in the global market.
The price of scraps came down to $400 per MT, which was around $500-$700 during the March-June period, the intelligence agency report added.
Tapan Sengupta, deputy managing director of BSRM, said that if the dollar price goes down, steel prices would surely decrease and production cost would also fall.
“We have to import raw materials, but global supply is very low, that is why its prices are soaring,” he also said.
He also said that prices were hiking for two reasons, demand and supply, adding that no one increased the prices out of proportion.
“Production has reduced. At the same cost, earlier we produced 100 MT, now we produce 50MT, thanks to interruption in the supply of electricity and gas,” he said, adding that the production cost almost doubled.
If this continues, factories will go from running with losses to bankruptcy, which will be harmful for the economy, Sengupta also said.
“Now if we think about our own power plants instead of depending on the government for electricity, gas will be needed. Where is the gas?,” he questioned.
Moreover, the cost of transportation has gone up thanks to the rise in fuel prices, he added, noting that there is a declining trend in buyers too.
Regarding syndicates, he claimed it was just a myth.
“It can never happen in Bangladesh as the process of production is not the same here In Bangladesh and it is impossible in a free market economy,” he added.
Regarding the intelligence report, he said that he didn’t hear about that, although he maintained his stance, saying if anyone opened a letter of credit (LC) today, the product would arrive in the country after at least four months.
“If it comes four months after I bought the product, can I sell it at the new price after four months now? I have to sell according to the previous cost,” he added.
“What we are selling today, these had come in July-August, but we had ordered those back in February-March. If you sell at the price that is coming in July, you will lose a lot of money. Many of our owners are selling at losses,” he added.
However, Jamal Uddin, the owner of Kallyanpur Natun Bazar-based trader Jannat Enterprise, said that the prices of rods again spiked by Tk3,000-5,000 per tonne since last week.
“We are selling BSRM at Tk98,000 per tonne, AKS at Tk96,000 per tonne, and Bandar at Tk95,000 per tonne for 60-grade,” he added.
The retail prices of rods hiked by Tk3,000-4,000 per tonne compared to last week as manufacturers have increased prices, he added.
Manufacturers also said that their production was reduced by around 30% due to the electricity loadshedding.
Meanwhile, the rising cost of rods is having a direct impact on real estate, private housing, and other construction sectors by driving up building costs.
According to market insiders, construction costs have increased by around 25-30% due to the hike in road prices, although it is less for residential construction.
Bangladesh has to depend on imported scrap material and the price of imported melting scrap is currently $490-$500 per tonne, which increased sharply after a short-lived drop.
Bangladesh sources scraps from Canada, Japan, UAE, Australia, Africa, and China.
Major Bangladeshi brands are BSRM, AKS, Bandar, Rahim Steel, Anwar Ispat, KSRM, RSRM, Vikrampur Steel and GPH Ispat meet 60%-70% of the local demand and the rest are covered by non-branded companies.
Local companies meet more than 85% of demand.
Pimple Barua also contributed to this report
