Hot coal dampens businesses

Prices of some most essential construction materials, especially bricks and cement, have kept surging as the price of coal has increased by 108% on the international market over the past one year.

The end-user prices of these products would go up further if the coal market remains volatile, which may lead the construction of public and private buildings to a standstill, stakeholders say.

Fearing a further rise in production cost, the brick kiln owners' association has announced not to fire their brickfields before 15 November. They have also urged the government to reduce taxes on coal imports to lessen the price at home.

Besides in electricity production, coal is used as the primary energy at brick kilns, cement and tea factories. The annual demand for coal in the country is around 5 million tonnes.

The total demand is being met through imports from Indonesia, South Africa, Australia and India, as locally extracted coal is dedicated only for the Barapukuria Thermal Power Plant in Dinajpur.

According to Trend Economics' data, the price of each tonne of coal was $72 on 1 December last year, which has jumped to $150 now.

Syed Md Atiqul Hassan, president of the Bangladesh Coal Importers' Association, told The Business Standard that the price of coal has increased following a demand surge in some countries including China.

"We used to import per tonne of coal at $55-60, which has now surged to $150. However, we are ready to supply coal if users can afford the cost," he said.

But this abnormal price hike has appeared to be an unwelcome shock in controlling the production cost. Factory owners are hesitating to start production with expensive coal.

While other factory owners have started to adjust the prices of products to put things into perspective.

Bricks not burning

Chanchal Ghosh of Dhuldi area in Faridpur suburb usually starts burning bricks in his brick kilns in the first week of November every year, but because of the high cost of coal, he is yet to fire the brick field this year.

For the same reason, about 7,000 brickfields in different districts including Faridpur are in a similar situation. Even after taking advance money, about 20,000 workers are having to spend their days without work.

Stakeholders say last season, kiln owners bought per tonne of coal at Tk8,000-9,000. There has been a crisis in coal imports this season due to the coronavirus pandemic. As a result, the price of coal has surged to Tk19,000-22,000 in the local market.

For this reason, kiln owners are not able to start brick production in time. Bricks produced last season are also running out of stock.

In such a situation, the price of bricks will go up if kiln owners buy coal at higher prices to operate kilns.

Shukur Ali Sardar, owner of AB Bricks in the Binerpota area of ​​Satkhira town, told TBS, "Last season, the production cost of a brick was between Tk5 and Tk6.5 but the cost may rise to Tk10-11 this season. I am also worried about whether people will buy bricks at such a high price."

Khalifa Kamal Uddin, president of the Faridpur District Brickfield Owners' Association, said most of the brick kilns could not go into brick production this season as kiln owners are seeing risks in brick production after purchasing coal at Tk22,000, which previously cost Tk8,000."

If the commerce ministry does not take necessary steps right away, brick prices will go beyond the reach of ordinary people this season.

Azad Kausar, central secretary at the Brick Kiln Owners' Association, said apart from an increasing trend in its price on the global market, coal is getting costlier in the local market due to high taxes.

At present, coal business in Bangladesh is subject to 25% tax, including 15% VAT.

"We will be able to use coal at a comparatively cheap rate if the tax is reduced. We have requested the commerce ministry to take action in this regard," said Azad Kausar.

Surge in cement price

Coal is used in production of cement. In the last four months, the price of coal in the international market has increased by about 66%. As a result, the cost of producing cement has also gone up.

Mohammad Shahidullah, first vice-president of the Bangladesh Cement Manufacturers Association (BCMA), said the country has a demand for 40 million tonnes of cement per month.

As prices of clinker and other raw materials, including shipping cost, have gone up $20 per tonne in the last four months due to rising prices in the international market, the manufacturing companies are now counting a loss of around Tk40 per bag of cement.

Tea production gets costlier

According to tea garden owners, coal is used in tea production in Chattogram and Panchagarh tea gardens. Gas is used in tea gardens of Sylhet.

Ebadul Haque, manager of Baramasia Tea Garden in Chattogram, said sustaining production has now become a challenge in tea gardens as the production cost of one kilogram of tea has surged to Tk200, which was Tk180 five months ago.

On the other hand, tea is being sold at auction at Tk170 a kg, which is why most of the tea remains unsold at auction, he added.

He also said four months ago, the price of coal in the local market was Tk18 per kg but it has risen to Tk26 now. Because of the price hike of coal, the daily expenditure at their tea garden has surged by Tk1,20,000.

Owners of several tea gardens in Chattogram said the cost of transporting coal is also increasing due to rising fuel prices.

"There has also been a crisis in the transportation of goods. Coal prices will rise again in the local market due to rising transport costs. This will exacerbate the crisis."

Our Chattogram, Faridpur, Habiganj, Gazipur, Satkhira, Dinajpur, Khulna and Barisal correspondents contributed in preparing this report.